Labour’s Fees Policy Is Worse Than A Joke
“Labour’s new university fees proposals are regressive and will only benefit the wealthy.”
When the coalition announced their plans to let universities charge fees of up to £9000 a year, I was livid. Livid because the Lib Dems had made a promise they knew they couldn’t keep; because it wasn’t clear that the money from higher fees would fully replace the money lost through cuts to teaching grants; and because the fees were a lot of money and would discourage poorer students from applying.
A lot has changed since then. The unreasoning militancy of sections of the student protests took me aback, and made me reassess whether the policies really were as dreadful as they sounded. Turns out, the new system really is more progressive than the old one.
By raising the starting salary for repayments from £15,000 to £21,000, correctly tapering interest rates, and giving part-time students the option of taking out loans rather than forcing them to pay fees upfront, the coalition made the system fairer and more open. Under the new system, low earning graduates will repay less than they did under the old system.
Moreover, if you buy into the idea that the people who pay for higher education should be those who benefit from it, then a system that stops their education being subsidised by taxpayers who’ve never been to university is a good one. Personally, I don’t buy into that idea. To me, saying that only those who benefit from university should pay for it is a lot like saying if you’re a woman, your taxes shouldn’t have to go towards testicular cancer operations.
Ed number 1
And so, I’ve been waiting to see what alternatives the other parties would offer. In particular I wanted to see what the two Eds could produce when banged together. The Labour conference gave them a chance to offer an alternative to the coalition’s model. As such, I was gobsmacked when Miliband announced that Labour would keep the current regime pretty much intact, save for capping fees at £6,000, making up the funding difference by increasing interest rates for graduates earning over £65,000 and reversing the planned cut in corporation tax.
How on earth are they going to pay for this? By the time the average graduate is earning £65,000, they contribute more per year and have relatively little left to pay back – the average graduate will have paid back their loan within two years of starting to earn £65,000. And the money’s not going to come from high interest rates.
So the rise in corporation tax becomes essential. Undeniably, those with the broadest shoulders should shoulder the biggest burden, but we cannot ignore the fact that a 5% difference in corporation tax will make it harder for banks to lend money, and will mean there will be fewer graduate jobs available. Raising corporation tax should only be considered if it will benefit the worst off.
Do Labour’s proposals benefit the worst off? Fat chance. Those who would benefit are the high earners. A recent report by thinktank CentreForum found that the bottom 10% of earners would save just 50p a month under Labour’s new plans, while the top 10% would benefit by 40 times that.
And it gets worse. Under Labour’s plans, the government will have to ‘top up’ the £3,000 difference between Labour’s fees and the coalition’s fees to universities. The cost of paying this difference for the educations of the 140,000-odd each year who are wealthy enough to pay their fees upfront would be a staggering £335 million. Under the coalition’s system, whatever its other flaws, that £3,000 per student is paid for by those students themselves.
Labour’s policy is not just unimaginative, it is downright regressive. The only people to benefit are those who go on to be wealthy. The benefits won’t even come until near the end of the repayment process either – low-earning graduates in first-time jobs will save less than a pound a month in repayment. If this is Labour’s excuse for a graduate tax, it is a pitiful one, and a real missed opportunity to take the fees debate in new and exciting directions.