Capping fees at £6,000 is not a fairer alternative
Keen to prove that an idea or two has been jotted down on their infamous blank piece of paper, the Labour party heads into conference with a new announcement on their approach to tuition fees. Gone is the commitment to a graduate tax and in its place is a pledge to cap fees at £6,000 with top earners paying a higher rate of interest on their loans. Not wishing to be penned in on the issue though, the party refused to rule out a further change in their stance come the next election, although what the nature of such change might entail is not made clear.
The proposal, lacking as it is in definitive commitments, leaves several key questions unanswered. Does this spell the end to Ed Miliband’s support for a graduate tax or is this merely Labour’s short-term proposal for the age of austerity? What exactly are the cost implications for such a plan and will it find favour with the student voters that Labour are so keen to win over from the Lib Dems?
On the issue of cost, the party has tried to make it abundantly clear how they intend to pay for a reduction in tuition fees: George Osborne’s corporation tax cut from 28% to 23% by 2015 will be reversed whilst graduates earning over £65,000 will have to pay a higher rate of interest on their loans. This may well protect Labour from accusations that such a measure will merely add to the overall budget deficit, but it doesn’t guarantee that the budget for higher education will be protected. The coalition’s decision to raise the cap on tuition fees to £9,000 was at least in part due to its wish to slash the overall higher education budget by 40% from £7 billion to £4.2 billion. If the extra revenue accrued from the reversal in the corporation tax cut isn’t used to pump funding back into that budget then the net result is likely to be an overall fall in funding for universities.
As to where the proposal leaves Miliband’s desire to for a graduate tax, the party have tried to reiterate today that there is a long term ambition to implement such a scheme and that they see this as a stepping stone towards it. Eager to show that they would be prepared to make tough decisions during this time of economic crisis, Labour are trying to insist this is the fairest proposal for the here and now, but also once the economic storm has been ridden out they see the graduate tax as the fairest way to move forward.
This doesn’t make any sense though. The amount raised by a graduation tax is dependent on the rates you set, just the same as any other form of taxation. If Labour are truly committed to a graduate tax, but are worried about economic credibility, then would it not be best to propose a graduate tax now with relatively high rates, especially for those who earn high wages, with the promise of a reduction in rates once the deficit has been dealt with? Today’s proposals, offering as they do a commitment to cap fees at £6,000 but with the possibility of a conversion to a graduate tax somewhere down the line, will surely just lead to confusion amongst the electorate as to where exactly Labour stands on the issue.
For students, and potential students over the next few years, there is little to cheer for in this proposal. Capping fees at £6,000 rather than £9,000 would offer some relief to students up and down the country worried by the burden of debt, but ultimately it still amounts to almost doubling the cap from its current level of just over £3,000. Far from attracting legions of new young voters, Labour’s plans are more likely to see students come to the conclusion that none of Britain’s three main political parties are willing to take up the fight for the next generation.
When asked on the leadership campaign to describe one policy that defined his bid to become Labour leader, Ed Miliband would often quote the example of the graduate tax. He would claim it exemplified his commitment to a fairer and more equal society. Ed Balls too was a keen proponent of such a system. If Labour’s two most important politicians are so drawn to the idea, then surely the party should reconsider todays proposal that will win them little support amongst the electorate and which goes against the principles they seek to define themselves on.