Will there be a Conservative revolt over the Government's hybrid student finance plans?

by Paul Goodman

Question: if you're running a Coalition, and one part of you is committed to oppose tuition fees, and the other is against a graduate tax, what do you do?

Answer: you introduce both.

That's my reading of the Government's student finance plan, at any rate, which provokes the following points -

• The plan involves higher tuition fees.  This morning's papers concentrate on that aspect of the proposal, partly because of the coming Liberal Democrat revolt against it, and partly because it can be illustrated with figures.  For example, the Independent claims that fees could rise to £15,000 a year.

• But it also involves a graduate tax.  Philip Hammond confirmed yesterday that higher earning graduates will pay higher interest rates on their loans to cover the lower interest rates paid by lower earning graduates on theirs.  This is a graduate tax by any other name, since the first group will pay more than the cost of their courses, and government (not the Universities) will presumably track the details.  It's also a door that a future government (especially a Labour Government) can open wider by raising the interest rate.

• Liberal Democrat MPs won't like the higher fees element - especially if they represent University seats.  The Independent quotes the MPs for Cambridge, Leeds North-West and Bristol West as being strongly opposed.  I don't know the latter two constituencies, but suspect that, like Cambridge they've a large proportion of student voters.  Sir Menzies Campbell will probably lead the Liberal Democrat backbench revolt to oppose the proposals outright.  The paper also quotes a few Conservatives as having previously voiced opposition to higher fees, and quotes a cautious response from Lee Scott, the MP for Ilford North.

• Conservative MPs won't like the graduate tax element.  Higher fees have been a real possibility both before and since the current £3000 or so cap was introduced.  The Liberal Democrat MPs thus have an established view on the matter.  A graduate tax of any kind is a more recent proposal.  Conservative MPs are thus still taking in the idea, but my sense is that they don't like it, and are asking some necessary questions.  Who will track graduates' earnings?  What's to stop the interest rate on higher earnings being hiked?  What happens if graduates simply go abroad?  Isn't this element of the plan a tax on aspiration and achievement?

• The proposal shows up the curiousities of governing in Coalition.  The Coalition Agreement says that "arrangements will be made to enable Liberal Democrat MPs to abstain in any vote" if the Government's response to Lord Browne's report (due this week) "is one that Liberal Democrat MPs cannot accept".  But Sir Menzies and others will probably go the whole hog and vote against the plan.  Will Liberal Democrat Ministers vote for it?  Or will they follow the letter of the Coalition Agreement...which would mean Vince Cable abstaining on his own policy?

• Labour will vote against the proposals, and the Government could lose... Miliband will see a chance of defeating Cameron.  So you can be sure that Labour, the party that introduced top-up fees, will find reasons to vote against the plan: they'll argue that the fee increase element is too high, or that the graduate tax element is too low, or whatever.  I doubt if any Blairites will vote with the Government, and wonder if there will be a Tory revolt - and, if so, how big it will be and who will lead it (if anyone).

• ...Although the Coalition can survive a defeat.  The Coalition Agreement deal over student finance was essentially a means of getting the Liberal Democrats off an opportunistic policy hook from which the Conservatives had freed themselves after the 2005 election.  All in all, it's a bit of a mess - and proof, I'd argue, of Goodman's Coalition Dilemma.  Losing a vote on it wouldn't mean the collapse of the Government.  Brown lost several Commons votes as the last election loomed.  But such an outcome would be destablising, given its context - namely, the huge public spending scaleback.  For this reason, I believe that Conservative MPs should relucantly support the hybrid proposal...although it once again shows that the Coalition's in danger of being as weak on tax hikes as it is strong on deficit reduction.