Beth Cherryman: A graduate tax

Beth Cherryman Business secretary Vince Cable has proposed a “graduate tax” as a solution to university funding.  Graduates will be taxed according to some percentage of their income (once earning over £15,000 a year).  In this system higher earners will pay more tax.  Cable argues this is a fairer option than that employed currently, in which, after the threshold salary is obtained, earning power is not taken into consideration.

I question whether graduate tax is truly a fairer option.  The National Union of Students (NUS) backs Cable.  Aaron Porter, NUS president, welcomed Cable’s “recognition that those who earn most after university should contribute more back.”  He says “the fair solution is to abolish tuition fees and ensure that graduate contributions are based on actual earnings.” 

On the face of it, it does seem unfair that a teacher should make as big a contribution as a doctor, considering their respective incomes.  However, medicine is traditionally a hard degree.  Under the current system medical school graduates are compensated with their salary.  If the government cuts into this too much students may calculate that a medical degree is no longer a sound investment.  Medicine is already poor at attracting students from the lowest socio-economic groups. Surely a graduate tax will only serve to exacerbate this.  Is it not fair that university students who work hard, either by choice of degree or choice of institution, be rewarded with higher salaries?

The Russell Group representing 20 UK research intensive universities (including Oxbridge) has said it “does not agree that a pure graduate tax would be a better or a fairer system.”  It argues that “the fairest and most effective way of securing graduate contributions in order to protect the quality of UK higher education and its contribution to economic growth is through higher fees and income-contingent loans.”  That is, hike up tuition fees but maintain a threshold salary at which graduates have to start repayment. 

I think this proposal has a lot going for it.  The current system is good because I know going into it how much I will have to pay back, I can see where this figure came from, and I can make a guess as to how long it will take me to pay it back.  Transparency must be a prerequisite of fairness.  I think it will be hard for the government to select a percentage for graduate tax that will not appear arbitrary.

The Russell Group also identifies the key disadvantage with graduate tax, namely, overpayment.  They estimate that graduates in the upper 20% of earners would pay the equivalent of tuition fees of at least £16,000 per year.  This is compared to average graduate earners who would pay the equivalent of a £5,000 per year tuition fee.  Further they fear the cost of these subsidies will be transferred from lower earners onto moderately high-earning graduates, rather than the Government.

However, the Medical Students Committee (MSC) points out that raising tuition fees will dramatically increase graduate debt: “Even an increase to £7,000 would result in £57,000 debt for those outside London, while those in the capital would have £67,000 to pay back.”  Tom Foley, co-chair of MSC, describes these figures as “as shocking as they are unacceptable.”  

Maybe it is time to accept that higher education costs.

Beth Cherryman is a final year philosophy student at the London School of Economics and Political Science.  She is writing her dissertation project on evidence based medicine.