Why the Lib Dems should end their opposition to tuition fees

It is a point of faith among many Liberal Democrat members (54% of them, according to the Lib Dem Voice survey) that university tuition should be funded out of general taxation. A report from the Liberal think-tank CentreForum, Time’s up: why the Lib Dems should end their opposition to tuition fees ought to be required reading for any Liberal Democrats entering this debate. The report argues that the old Liberal Democrat policy on fees is both regressive and ineffective.

It seems entirely perverse to me that tuition fees should be paid for from general taxation, because graduates earn significantly more than non-graduates. Going to University is an investment in your future, in the literal sense – and an investment that more often than not pays off. The Browne report suggests that the cumulative extra income of someone with a University degree is £120,000, compared to people moving into the workplace with just A-levels. The Government has also calculated that the Graduate Premium is worth £400,000 compared to the national average wage.

As most taxpayers are non-graduates, with something like £400,000 lower lifetime earnings, a policy of taxpayer-funded university involves a significant redistribution of resources from poor to rich.

Interestingly, CentreForum’s research finds that there appears to be little or no link between a graduate’s income and that of her parents. Higher education appears to have become a successful class leveller.

The problem is that there is still a disproportionately low number of students from poorer backgrounds. According to Alan Milburn’s work, in 2000 (the year I entered University), 39,900 young people from less advantaged socio-economic groups went into higher education – representing 25.0% of all young people entering higher education. Young people from less advantaged backgrounds represent half of all young people nationally. By 2007 (under a fees system), this had slightly increased to 48,900 young people, or 29.1%.

This rise was far too modest, but fees doesn’t seem to be the deciding issue. The CentreForum report shows that the old system of ‘free’ tuition did not increase the number of deprived youngsters going to University. In fact, the participation gap between the social classes grew fastest between 1977 and 1995 – three years before tuition fees were introduced.

It’s also interesting that for students with equal A-level results, the likelihood of going university cannot be predicted on the basis of their parents’ incomes, fees or not (although there is evidence that poorer youngsters are less likely to get access to Russell Group Universities, overwhelming less likely to get access to Oxbridge, are more likely to choose local HE institutions, and more likely to choose courses with lower graduate premiums). The real issue is preparing poorer pupils for university, and making sure they get the grades at A-level.

University still isn’t the destination for enough less-advantaged young people. But from the evidence, it doesn’t seem to be the fees that put them off- particularly as we’re talking about deferred fees, variable and based on future earnings.

What does seem to be unfair is to have the regular taxpayer fund largely middle class people (even if they weren’t middle class before they entered University, the statistics show that they likely will be afterwards). The money would be better spent on the pupil premium or the tax cut for low earners – getting poorer pupils into the academic position to go onto Higher Education.

The NUS pledge that our MPs signed before the election was: “I pledge to vote against any increase in fees in the next parliament and to pressure the government to introduce a fairer alternative.”

Vince Cable’s suggestions include variable fees dependent on future earnings and scrapping up-front costs for part-time students. When Vince says he is introducing “a fair and progressive policy for Higher Education”, I think he’s right.

The Alma Mater

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Published in: on October 18, 2010 at 10:20 pm  Comments (6)  

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6 CommentsLeave a comment

  1. *Sigh* Not that old fallacy again:

    “It seems entirely perverse to me that tuition fees should be paid for from general taxation, because graduates earn significantly more than non-graduates. Going to University is an investment in your future, in the literal sense”

    Wrong. An AVERAGE graduate earns significantly more than an AVERAGE non-graduate. But what makes an average case? Scientists, engineers, doctors and lawyers are often (but not always) guaranteed high-paid jobs, but what of humanities graduates? At their best, many arts degrees teach good judgement, but that’s not always reflected in pay scales. Whilst some arts graduates go on to be CEOs, many go into poorly-paid and often menial jobs.

    The beauty of paying for HE from general taxation is that with progressive taxation, the rich pay more, and the poor pay less.

  2. I don’t follow the logic of your second paragraph I’m afraid. If someone earns more because they are a graduate, they then also pay more into general taxation.

    On the figures you give, they’d pay £24k or £80k extra in income tax depending on the comparator salary used, and assuming they are only taxed at the basic rate. If their extra income from being a graduate tips them into the top tax band they pay more (though that than may be partly cancelled out by tax benefits on pension contributions).

    So given the large amounts extra that go into the general income tax system from a graduate earning more, isn’t that a good reason to use the general income tax system to pay for the graduate? (Even leaving aside the general point that you don’t have to be a graduate yourself to benefit from the country having graduates – we all benefit from the people with medical degrees who go on to staff our NHS, the people with science degrees who go on to become teachers at school and so on.)

  3. Seth, I think Browne’s increased repayment thresholds, and the variable interest rates, answer the problem of graduates who buck the average Graduate Premium.

    Apparently a 2007 PWC study calculated that arts graduates may get an average graduate premium of £34,000 over a lifetime. God knows, I curse my stupid 17-year-old self daily for not becoming a lawyer and buying future-me a lovely house by now. But I made a choice, which was fun, and has probably put me in a different class of professional employment, even if not the same pay bracket as a lawyer or doctor. I’m not sure why the average tax-payer, who didn’t go to University, and who is still earning £34,000 less, should have subsidised that choice for me, though.

    I’m also not convinced by argument that the “social value” of graduates requires subsidy.

    If there is a national shortage of a certain sort of professional- such as science or maths teachers- then there might be a case for Government intervention to tweak the entry conditions. This would apply only IF fees can be shown to be the deciding factor in people not becoming maths teachers, rather than, say, the tedium and the children. It requires further evidence, rather than being self-evident.

    But as Doctors get the top range of the graduate premium, as well as social status and the title, it’s not clear that society wouldn’t get just the same number of doctors even with a pure market in Higher Education.

    We could probably do with fewer lawyers.

  4. Firstly – as Seth and Mark both point out low earners do not pay for higher education through their taxes. In fact nearly all low earners are net beneficiaries of the tax and benefits system (and rightly so). Higher Education is paid for by the extra taxation paid by those who end up earning more because they are graduates. Those low earners do, of course, rely on graduates to be their doctors, teach their children etc.

    Secondly – how depressing that so many Liberal Democrats seem to view higher education as being primarily a personal investment in one’s future earning potential. Surely we beleive that higher education is a good in its own self, as well as having wide social benefits (as the Browne Report itself sets out). Graduates are likely to be healthier, less likely to commit crime, less likely to be unemployed and more likely to contribute to society through volunteering etc.

  5. Just spotted this one:

    “Young people from less advantaged backgrounds represent half of all young people nationally.”

    Did you know that half of all people earn less than average too?

  6. Another gem:

    “What does seem to be unfair is to have the regular taxpayer fund largely middle class people (even if they weren’t middle class before they entered University, the statistics show that they likely will be afterwards).”

    Bless. I think you’ll find that’s because most definitions of what class you are take account of the level of your educational acheivement.

    You’ll be telling us next that bears do, in fact, s##t in the woods.


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