Justine Greening’s Proposals Are Not Radical Enough - Past Generations Of Graduates Should Contribute Too

Graham Galbraith

The Government is consulting on its ‘major’ review of tertiary education and while it is seems that Justine Greening opposed the idea of a review when she was Secretary of State for Education, she certainly believes that significant reform may be worthwhile.

On Conservative Home she argues that universities should be funded through a ‘Higher Education Fund’. This would consist of future graduates’ repayments and, through a ‘skills levy’, employers’ contributions. She also suggests that all graduates should pay into the fund for 30 years – even if they have paid off their university costs before then. Twenty to thirty percent of higher-earning graduates would pay more.

Justine Greening’s recommendations are radical. Graduates would no longer owe a fixed amount; they would simply pay a fixed percentage of their salary for 30 years.

There would no longer be any ‘debt’ that could increase and there would no longer be annual loan statements – the source of much distress and resentment. Justine Greening’s recommendation is for no less than the abolition of the student loan system and the creation of a ‘graduate contribution’ scheme.

What problems would Greening’s proposal solve? Arguably the biggest problem with the current system is caused by the word ‘loan’. As MoneySavingExpert’s Martin Lewis repeats ad nausem the current system is not really a loan system.

There is no direct link between what students ‘borrow’ – more accurately what universities receive to teach them – and what graduates pay. Government could cut fees to £7,500pa but, if that is all it did, most graduates would repay exactly the same amount while seeing less invested in their education.

But no matter how many times this is repeated it does not register. The current system looks like a loan system, including the paraphernalia of annual statements, interest rates and the fact that it is administered by the Student Loans Company. Greening’s recommendation would simplify the system and make it clear that universities are funded through a graduate tax, not student loans.

Students may still object to paying 9% of their salary or to paying for 30 years especially when graduates from previous generations pay nothing (a point I return to below.) But whatever force these objections have, neither has anything to do with ‘loans’ or ‘debt’. They are about the degree to which it is fair for graduates to pay higher tax for the privilege of university.

There is also a great deal of force in employers contributing. Higher education benefits the individuals who go, society at large, and employers. In combining student repayments and public subsidy (the ‘RAB charge’) the current system involves no payment from employers. If they benefit, it is reasonable to expect them to contribute.

Asking employers to pay would be politically difficult but as they are already being compelled to pay into the apprenticeship levy, Government might need to do no more than divert some of this money into the Higher Education Fund.

Employers could be given the choice between using their levy money as they do now or putting it into the Fund. Their choices would reveal whether the Government is right that employers want more people with vocational skills or more people with general higher-level skills.

Overall, there is much to be said for Justine Greening’s proposals. But one recommendation that requires serious consideration is missing. Young people are experiencing an acute set of pressures. House prices are high, pension are becoming more expensive, wages have been slow to increase, and there is economic uncertainty.

There is an older set of graduates who have benefited from their past education and who feel these pressures less. I am one of them – you probably are too. Our tuition at university was free (to us at least).

If it is fair to tax future graduates to fund higher education, why is it any less fair to tax those who went to university for free? A tax of one to two percent on all graduates would mean we could reduce the 9% contribution rate on recent and future graduates. One to two percent is also sufficiently low to be politically acceptable, especially when you consider that many of the people affected will have children at university (or who soon will be). They will see a direct link between paying more so that the next generation can pay less.

A graduate contribution scheme, an explicit employers’ contribution, and requiring all graduates who have benefited to pay something are ideas that deserve serious consideration by the Government’s reviewers. What is certain is that the perception of mounting student debt must be tackled if we are to demonstrate fairness towards the next generation of learners.