Cable floats a dubious case for a graduate tax

By Paul Goodman

Money isn't everything, but Universities need it to maintain or improve their quality.  Students and their parents often don't want to give it to them, and look to taxpayers to stump up.  Taxpayers don't want to part with it either, and look in turn to students, or to their families, to meet the bill.  They also ask whether Britain needs so many Universities in the first place, some of which are excellent, and some aren't.  Universities near the top of Britain's league hint that others lower down should go to the wall; those lower down warn of elitism from those near the top.  Government commits itself to more places and frets about access for poorer students.

In short, something has to give.  Taxpayers' patience is limited, and there must either be fewer places or higher payments, or a mix of both.  David Willetts was recently criticised for describing student costs as "a burden on the taxpayer", but it's hard to see how he could or why he should have dodged the point.  However, Willetts didn't deliver the major Government speech this morning on the future of higher education funding in England (Scotland, of course, having different and controversial arrangements.)  His boss at the Business Department, Vince Cable did - well in advance of the review of the matter being carried out later this year by Lord Browne, a controversial choice for the task.

Why Cable rather than Willetts?  Perhaps the Business Secretary pulled rank.  But it's more likely that the choice of Minister reflected political sensitivies: the Liberal Democrat position in recent years has been - as the Conservative one was during the 2001-5 Parliament - against tuition fees.  Their manifesto watered down the commitment to scrap them, pledging to phase the move in over six years.  But the Coalition Agreement allows Liberal Democrats the room "to abstain in any vote...if the response of the Government to Lord Browne's report is one that Liberal Democrats cannot accept".

In other words, there's a get-out clause in the agreement which protects Liberal Democrat MPs from having to vote for the higher top-up fees that Browne - we read - is likely to recommend.  So it's not surprising that the main purpose of Cable's speech was to float a graduate tax (he also spoke favourably of shorter courses).  Such a scheme has plenty of supporters - including Ed Balls, who argues on his campaign blog that such a tax, by transferring costs to after the years of student study rather than during them, would raise the University entry rates of disadvantaged students and and link payments with the ability to make them.

If the Government does eventually introduce such a tax, I'm sure Balls will dredge up some reason for opposing it.  But the case for it doing so is dubious.  A graduate tax might be good for some students - though the Times (£) asks pertinently this morning how many would pay more than the cost of their education - but it would surely be bad for Universities, who'd be unable to match the fees they charge to the courses they offer.  The link between student and institution would also be broken completely, and Universities would be reliant on a third party - the state - to pass on the money.

There's no reason for them to be confident that this would happen.  I may be wrong, but I find it difficult to imagine Conservative MPs signing up en masse for a graduate tax, and some are bound to ask pointedly what the relationship would be between a graduate tax, higher income tax rates, and incentives to study.  No wonder, on reflection, that a Liberal Democrat Minister has floated a graduate tax today, and not a Conservative one.  If Browne does indeed recommend higher fees in the autumn, and Cable firms up his graduate tax ideas, there looks to be another source of pressure on the Coalition.  A video of Cable's speech is posted below.