August 9, 2010 8:34 pm

UK graduate tax

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A muted Tory response does not mean acquiescence

Has the Conservative party swung behind Vince Cable’s idea of a graduate tax – the income levy on ex-students that the Liberal Democrat business secretary favours to pay for England’s universities? This is certainly how some comments from the Conservative universities minister, David Willetts, have been construed. Interviewed on the BBC last weekend, Mr Willetts seemed open-minded. Indeed, his suggestion that graduates should make a “bigger contribution” towards the cost of their higher education has been seen as tantamount to an endorsement.

In fact, this may be a misreading of Mr Willetts’ carefully calibrated remarks. It would not require a tax for graduates to make a bigger contribution to the cost of their eduction. Higher tuition fees would do the same. Philosophically, it is hard to see the Tories backing a tax that runs counter to their beliefs about raising standards through competition.

The biggest problem with a tax is that it would break the link between the cost of a degree and a student’s pocket. Rather than paying for the tuition they receive (generally through a student loan repaid after graduation), ex-students would have to keep making repayments even after they had covered the cost of their studies. Making students pay for some of the cost of their degrees has been the main engine for raising standards since fees were introduced in 1998.

It is too soon to conclude that Mr Willetts has changed tack. The government will not take a decision until Lord Browne’s universities funding review – which is supposed to look at all funding mechanisms – reports in the autumn. Mr Willetts’ comments, in suggesting that a tax should form part of Browne’s deliberations, can be construed as no more than a statement of the obvious.

Mr Willetts’ careful phrasing may have more to do with the etiquette of coalition government than anything else. The Lib Dems have been going through a difficult phase, marked by falling public support and grass-roots criticism about their lack of impact on the government agenda. Better for Mr Willetts to be neutral than a Tory ideologue contradicting his boss.

The review still seems unlikely to favour a tax. Not only does it have competitive disadvantages, but huge practical problems too. How, for instance, would European students be charged, and would UK émigré graduates escape paying? On this occasion, Mr Willetts was probably right to let discretion be the better part of valour.

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