This House would fund the provision of higher education by taxing graduates

A graduate tax is the best way to increase access to higher education without massively burdening the government with an open-ended financial commitment. It is not a deterrent to the poorer students in the way fees and loans-based schemes are and which simply appear to block access, yet it still delivers sufficient extra capital to fund the increase of students entering university. Australia’s introduction of a graduate tax has been successful enough to allow university places to grow rapidly following its introduction with participation from both high and low income groups increasing by approximately one third. (Chapman, B. 1997). Therefore, a graduate tax removes the expensive barriers to entry that had previously kept out low-income groups, whilst not discouraging the high-income groups from tertiary education.

The prospect of life-long higher-tax status will in fact act as a deterrent to many weaker students who doubt their abilities to make a success of a university degree, or those from poorer backgrounds with no family tradition of higher education. Introducing a graduate tax will simply come across as penalizing those who want to go into higher education rather than encouraging it. The real key to improved access to higher education lies in both better secondary education, as at present many potentially able students are failed by poor schools and are unable to achieve the qualifications needed to go on to university and by providing more bursaries for those from disadvantaged backgrounds.

A graduate tax would potentially give universities more than they get from traditional funding, as a contribution would depend directly on a person’s salary rather than just being a flat rate fare for services rendered over a short time. For example a person earning £40,000 would pay about £125 per month. (Shepard, J. 2009) That over 20 years could amount to £30,000, more than enough to cover the costs of a university education in a way which is manageable. Admittedly that sum is based on a person rising like a rocket but it still hints at the possibilities of the tax and how it could bring in more money than simply universities rising their fees. Secondly, it would change as a person’s salary rises or falls over a twenty year period, being more sustainable and increasing the chance of the costs being recovered. Thirdly, rather than giving a person a required fee to pay it would be giving a person a chance to pay over a set time period, reducing the financial impact of the bill.

The main problem with the proposition argument is the belief that a graduate will be earning £40,000 immediately after leaving university, this is clearly not the case, particularly in the current economic climate, the average starting wage for a graduate was in 2009 £23,500 with only one in ten exceeding £36,000. (Milkround, 2009) The argument does in part accept this weakness however what it does not point out is that many careers which require a university degree may never pay greater than £40,000. What a graduate tax focuses on is getting a job after university, this is not always the reason that people wish to go to university, take for example a mature student who just wants to self-better themselves, could they still get access to education when the system would be built upon getting young people into work? University should not be commoditized, it should be considered sacred in its own right; introducing a graduate tax turns university into a means to get a career rather than being a place of pure education.

A graduate tax would be fairer for everyone in society. Graduates earn considerably more than non-graduates, on average over £100,000 more in a lifetime (Channel 4 News, 2010.), experience lower rates of unemployment and greater job security, they therefore benefit hugely from higher education. They should therefore be expected to pay for the privilege of having an education which has put them in that position rather than having the rest of society fund there degrees, going to university should be an honor and not a privilege. While having a degree is useful it is not necessary for getting on with life, if someone wants to go to university they should have that opportunity regardless of their background but they should be expected to contribute to that education which is why the graduate tax works as students of all social classes can join university, not be loaded with debt and can contribute fiscally when viable.

As higher earners, graduates already pay a lot more on average in taxes over their lifetime, while consuming less in welfare payments, thus more than repaying their “debt to society”. In addition, the whole of society gains from higher education through increased economic growth and prosperity, and from the social mobility and integration that open access to university promotes. If the cost of higher education is an investment in the country’s future, it is appropriate for the government to fund it out of general taxation. In any case, the argument that an individual doesn’t use a particular government service, so why should they pay for it, could apply elsewhere and undermine most aspects of government activity and the taxation that pays for it.

A graduate tax is the best way to increase access to higher education without massively burdening the government with an open-ended financial commitment. It is not a deterrent to the poorer students in the way fees and loans-based schemes are and which simply appear to block access, yet it still delivers sufficient extra capital to fund the increase of students entering university. Australia’s introduction of a graduate tax has been successful enough to allow university places to grow rapidly following its introduction with participation from both high and low income groups increasing by approximately one third. (Chapman, B. 1997). Therefore, a graduate tax removes the expensive barriers to entry that had previously kept out low-income groups, whilst not discouraging the high-income groups from tertiary education.

The prospect of life-long higher-tax status will in fact act as a deterrent to many weaker students who doubt their abilities to make a success of a university degree, or those from poorer backgrounds with no family tradition of higher education. Introducing a graduate tax will simply come across as penalizing those who want to go into higher education rather than encouraging it. The real key to improved access to higher education lies in both better secondary education, as at present many potentially able students are failed by poor schools and are unable to achieve the qualifications needed to go on to university and by providing more bursaries for those from disadvantaged backgrounds.

A graduate tax would potentially give universities more than they get from traditional funding, as a contribution would depend directly on a person’s salary rather than just being a flat rate fare for services rendered over a short time. For example a person earning £40,000 would pay about £125 per month. (Shepard, J. 2009) That over 20 years could amount to £30,000, more than enough to cover the costs of a university education in a way which is manageable. Admittedly that sum is based on a person rising like a rocket but it still hints at the possibilities of the tax and how it could bring in more money than simply universities rising their fees. Secondly, it would change as a person’s salary rises or falls over a twenty year period, being more sustainable and increasing the chance of the costs being recovered. Thirdly, rather than giving a person a required fee to pay it would be giving a person a chance to pay over a set time period, reducing the financial impact of the bill.

The main problem with the proposition argument is the belief that a graduate will be earning £40,000 immediately after leaving university, this is clearly not the case, particularly in the current economic climate, the average starting wage for a graduate was in 2009 £23,500 with only one in ten exceeding £36,000. (Milkround, 2009) The argument does in part accept this weakness however what it does not point out is that many careers which require a university degree may never pay greater than £40,000. What a graduate tax focuses on is getting a job after university, this is not always the reason that people wish to go to university, take for example a mature student who just wants to self-better themselves, could they still get access to education when the system would be built upon getting young people into work? University should not be commoditized, it should be considered sacred in its own right; introducing a graduate tax turns university into a means to get a career rather than being a place of pure education.

A graduate tax would be fairer for everyone in society. Graduates earn considerably more than non-graduates, on average over £100,000 more in a lifetime (Channel 4 News, 2010.), experience lower rates of unemployment and greater job security, they therefore benefit hugely from higher education. They should therefore be expected to pay for the privilege of having an education which has put them in that position rather than having the rest of society fund there degrees, going to university should be an honor and not a privilege. While having a degree is useful it is not necessary for getting on with life, if someone wants to go to university they should have that opportunity regardless of their background but they should be expected to contribute to that education which is why the graduate tax works as students of all social classes can join university, not be loaded with debt and can contribute fiscally when viable.

As higher earners, graduates already pay a lot more on average in taxes over their lifetime, while consuming less in welfare payments, thus more than repaying their “debt to society”. In addition, the whole of society gains from higher education through increased economic growth and prosperity, and from the social mobility and integration that open access to university promotes. If the cost of higher education is an investment in the country’s future, it is appropriate for the government to fund it out of general taxation. In any case, the argument that an individual doesn’t use a particular government service, so why should they pay for it, could apply elsewhere and undermine most aspects of government activity and the taxation that pays for it.

A graduate tax would be a very expensive scheme to put into effect, as it would require high levels of government spending on student grants before the first graduates began to repay anything through taxation. If all the 2011 English applications for university we’re accepted at the new top price of £9,000 it would cost the Government in the first year just over £3 million, and this figure does not take into account all the other grants universities receive and as time goes on and more years enter the system the figure will grow greatly. (Guardian, 2011.) It is likely then to be two decades of investment or more before the system begins properly to pay for itself. Furthermore a costly increase in government bureaucracy would be necessitated by the need to keep track of so many graduates and by the complications the system introduces to the general taxation system. With many Governments taking up austerity measures it is simply impractical to setup a new funding system which is not needed.

In the long term a graduate tax would save the state money by shifting the burden of costs to the main beneficiaries of higher education. It would also help to make the costs of expanding access to higher education more predictable and controllable, improving long-term planning. This means the early costs of setting up the system could be spread into the future by a bond issue, for example. The money saved can be spent better elsewhere in the education system, perhaps by improving secondary schooling so that more school leavers have the academic qualifications needed to attend university. Using the argument that change is not needed simply does not with students which a being saddled with debts before they even have work.

There are a number of viable alternatives to a graduate tax as a means of paying for Higher Education: Full state funding operates in many EU countries as part of an extensive and popular welfare state paid for out of general taxation; the value the state clearly places upon Higher Education has made it a common aspiration across all social classes. Other countries make individual students pay for all or most of the cost of their university education, which is widely seen as an investment in increased future earning potential. In the USA this has produced very high levels of enrollment and broad access to higher education as motivated students readily work to pay their way through college. Most also take out commercial loans, which are later paid off once the student is in employment; unlike a graduate tax these repayments are not open-ended and will one day be completed. The cost of educating a student to degree level varies widely both between and within countries, showing clear room for efficiency savings to be made in many institutions, perhaps through some focusing solely upon teaching rather than research, or by academic specialization.

The alternatives to a graduate tax are worse: Full state funding encourages many without clear motivation or ability to enter university, leading to high dropout rates, while removing incentives to complete courses in a timely manner. The USA has a philanthropic culture absent in many other countries, meaning private colleges have large endowment funds offering a very large number of bursaries and scholarships to poorer students. Nonetheless, the individual states do fund universities and few students pay the full cost of their higher education. Elsewhere in the world the absence of state funding tends to limit access to university to the children of a prosperous elite. Even in the USA students from some ethnic minorities are much more reluctant to take on high levels of personal debt, and are therefore very underrepresented in higher education. The USA’s high level of personal bankruptcy is linked to the high levels of debt built up while at university. A graduate tax then can be seen as a happy medium between the two extremes of Full state funding and No funding whereby the student pays for the benefit of having a higher education only when they are fit to do so.

If a graduate tax were introduced the money would go to the national treasury which would result in universities competing for the same money as colleges. At the moment the money generated from tuition fees goes straight to where it should go, straight to the universities bank accounts who provide the education. Under graduate tax proposals from the UK’s National Union of Students, raised revenue from the tax would go into a centralized higher education fund which could be distributed by the government through various means which could result in some universities getting unfair levels of funding relative to both their standing and student bodies. (Barr, N. 2009) This is impractical for universities to plan investments as they will never be entirely sure what funding they will have and furthermore and for many arguably most importantly universities will ultimately lose their independence from the state.

A graduate tax put into an independent trust fund could in fact conversely help universities gain more academic freedom than they have now. They would be more free from market constraints which may restrict them, for example universities could be able to offer courses which may only be taken all be a very small fringe and would not usually be financially viable to run but which are culturally beneficially to have experts in if not useful economically. The argument that the state could interfere with the running of universities under a graduate tax system is erroneous, universities would still retain current levels of freedom from the government as the trust fund would be independent from government decision making and would be controlled by the stakeholders including universities meaning that they could worry a bit less about funding and exercise more independence on academic issues leading to better universities which are concentrating on their students’ needs and not just their own.

As taxes are collected nationally there is no reason why a UK graduate could not simply upon graduating leave the country and avoid paying the education tax. If enough people exploited this obvious loophole in the system the Government could end up severe deficit in the education budget which ultimately could lead to lower investment which would have a detrimental effect on the quality of education on offer. The proposed system then is simply not a practical one seeing as this massive and clear to see loophole exists with it.

As taxes are collected nationally there is no reason why a UK graduate could not simply upon graduating leave the country and avoid paying the education tax. If enough people exploited this obvious loophole in the system the Government could end up severe deficit in the education budget which ultimately could lead to lower investment which would have a detrimental effect on the quality of education on offer. The proposed system then is simply not a practical one seeing as this massive and clear to see loophole exists with it.