Monday, 11 October 2010

Graduate taxes, university fees and all that jazz...

University funding reform seem to be the new hot topic on the web: from the news websites to the blogs and twitter, everyone seems to be discussing graduate tax, student loans, debt and whether university is still worth it. The main debate has been between the supporters of a graduate tax as opposed to the existing fees system, coupled with lengthy arguments regarding the cap on tuition fees. To judge these, we have to take into consideration 2 main points:

1. Both the fee system and the graduate tax offer essentially the same 'service': the student goes to university and only pays for it afterwards, as a part of their income. So, here's the problem: do they pay a fixed amount, as with the fee, or a percentage of income, as with the tax? And, more importantly, who pays it?

Well, the graduate tax is considered unfair, unless someone can actually prove that those earning higher incomes have actually taken more expensive degrees; but while that may be a good argument for degrees like medicine or engineering, the rather obvious example of a economics (think bankers!) can easily ruin that argument. Keeping with the idea of more expensive degrees, there is also an argument of removing the cap on fees in order to let universities charge the actual price for degrees, but that would prove to be a great disincentive to those wishing to study degrees, as mentioned above, like engineering, exactly the areas in which there is a shortage of graduates.

Yet, the fees system also has a big glitch, because the existing cap, together with the government's policy to have 50% of young people in HE has led to the provision of a lot of 'Razzle Dazzle' degrees that, while intellectually fascinating, don't really provide students with proper skills for the job market and thus fail to enable them to earn enough to pay back their loans - thus creating a big black hole in the education budget. This, on the other hand, would be, to a certain extent covered by the extra-payment of those who would pay the graduate tax throughout their whole lives. Furthermore, the main argument for a graduate tax is that it would be redistributive, making those that earn more pay more into the system, but so is the tuition fee system, through bursaries and means-testing for part of its structure. Nevertheless, the graduate tax would, allegedly, provide a lot more money to the state's coffers and, implicitly, to the university system.

But this raises the eternal problem of raising the levels of taxation for some incomes above the 50p limit could convince many graduates to leave the UK (and, hence, not pay back into the system), while also remind us of the problems of EU students going back to their home countries and never paying the money back. True though, this last problem is also obvious with the tuition fees system, but in an arrangement that would expect more money to be paid back per student (and thus a higher dependency on these contributions, together with what may be a smaller number of students given these higher contributions) it may be more damaging in its 'graduate tax' form. This is just a minor issue, but it illustrates that in many ways the two systems are more similar than the political class and the press would make us believe. Having seen this far from comprehensive analysis of some of the pros and cons to the two let us look at the second factor influencing the decision on university funding:

2. Given the country's financial situation money would be needed as soon as possible. We had it coming, and (according to the government) we only have Labour to blame. Hence, from this point of view, a graduate tax that would bring a lot of money long term would be at serious disadvantage in front of an increase in fees that could bring benefits, though smaller, in a maximum of a couple of years (in the situation in which fees would be raised for final year students).

Conclusions: it's a tricky one and probably time, together with the government's experts, will tell, but I personally lean towards keeping the fee system, but raising the cap, equally, across all degrees, in order to ensure none there isn't any form of disincentive for those with higher costs, as mentioned above (and even providing bursaries for shortage areas, as is done in PGCEs or some medical specialties). This would ensure both a certain degree of fairness, in not making some pay a lot more than others, while also ensuring a higher level of funding goes to the universities and that contributions through the repayment of loans are linked to universities, thus ensuring competition on this market. Moreover, the relatively bigger debt would provide incentives for young people to do degrees that would really prove useful on the job market.

Yet, there is a big problem that remains unsolved: the fact that, these days, having a degree has become so common-place it stopped being an advantage on the job market; nowadays you need either a masters or a proper internship to actually get a good job, things for which the educational system fails to have proper programmes. And indeed, blue-skies ideas about a 'graduate economy' illustrate the benefits of this system - it's progress in its purest forms if you'd like to see it as that. But, in an age in which going to university has symbolically replaced going to college as a step to a successful career, maybe we should be focusing on what happens afterwards, maybe the whole conversation on graduate fees is indeed a bit superfluous...


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