Student finance is broken. A graduate tax is the only solution

Britain’s student loan scheme is the worst public-sector project in modern history. It has put the nation’s graduates £100bn in the red, currently predicted to rise to £330bn by 2044, of which three-quarters will not be repaid. The rest is dumped on the taxpayer. This cannot go on. Extravagant, distorting and unfair, the existing loans system was transformed by Tony Blair’s introduction of tuition fees in 1998, then privatised, then sent through the roof by David Cameron in 2012. It is the unacceptable face of privatisation. It has turned graduates into cash cows for loan collectors, and turned universities into fat-cat peddlers of cheap courses for inflated fees, guaranteed by the Treasury.

So far, so clear. In her speech today, Theresa May is right to criticise the “pricing” of every course at £9,000 a year, plus maintenance. She wants variegated courses, better integrated with vocational training, and variegated fees. This is fair and sensible, as far as it goes. Labour wants everything as now, but with no fees and grants for all. This would be so expensive that the Treasury would drastically curb numbers, and thus restrict access. Both paths lead in the same direction, to ever greater Whitehall control of higher education. There would be dirigiste manpower planning of courses, and endless rows over prices. Universities would be like schools, mere agencies of central government.

There is no sensible way Whitehall should be trying to discriminate between students and between courses. Like its current attempts to measure teaching quality and quantify research, it denies academic autonomy – and is chaotic. As for attempts to relate course “value” to future earnings it is absurd and obscene.

The former education secretary, Justine Greening, has finally added her name to those calling for the one fair way to finance higher education, as existed before the 1990s. Fees should be abolished and universities receive direct grants, financed by a graduate tax coding. Economists are increasingly sceptical of the real value of universities to the national economy. It is unfair for those not privileged to spend three enjoyable (and supposedly remunerative) years at university to have to pay for those who are. By collecting high graduate earnings through the tax system, interest is not spent on loan sharks. Yes, the rich would end up paying more over a lifetime, and university numbers would have to be capped. But it is fairer that way, and university is not compulsory. So why do education secretaries have to leave office before they dare propose sanity?

Either way, non-graduates should not be funding graduates, and rich graduates should not get off lighter than poor ones, as happens under loans. British income tax is not so burdensome that a graduate surtax would be a deterrent to higher education. It would be fair, and it would be simple.

• Simon Jenkins is a Guardian columnist