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Labour’s fees cap is flashy and definitely flawed

David Willetts

Despite introducing student tuition fees in 1998 and then tripling them in 2006, Labour have spent most of the past year opposing the concept. Yet, last week, Labour leader Ed Miliband told his party conference that he now plans to double fees to £6,000. They have belatedly accepted the logic of the independent Browne review, which found higher fees were necessary to “enhance the strengths of the higher education system, while enabling the widest number of students to benefit”.

Despite this change of heart, the policy quickly fell apart. First, its status is unclear. Although it was the single biggest announcement of Labour’s conference, Ed Miliband was unable to say whether it will be in the next Labour Party manifesto. Since then, Ed Balls and John Denham have restated their commitment to a graduate tax.

Second, the idea was spun as a way of helping people from less well-off families. But it has become clear that there is nothing in the proposals for them. There is no increase in the income of less well-off students, nor any reduction in the monthly repayments of graduates.

Indeed, those who earn the lowest salaries or who are not in paid employment—perhaps because of caring responsibilities—would not gain a penny. This is because their remaining debt is written off after 30 years, irrespective of its size. According to the president of the National Union of Students, Labour’s policy “would benefit the richest the most”.

Third, the costings are implausible. Labour have said that graduates on higher incomes will repay for two years after their loan has been extinguished, and that some will also face a higher interest rate. It is claimed such measures will raise up to half a billion pounds. These figures are wildly optimistic. It is not at all clear how such large sums could be raised.

For example, how do they propose to stop richer students avoiding the more expensive repayments by shunning a loan in the first place? How would they discourage students from private borrowing, which would look relatively more attractive? And how would they enforce the extra repayments from graduates who are overseas, when they have no relationship to the amount originally borrowed or the education provided?

When we announced our student-finance package last year, Labour shadow minister John Denham criticised us for not putting our workings in the public domain. In fact, we put a ready reckoner on the Department for Business, Innovation and Skills website which allows anyone to do their own modelling—and to replicate ours. According to CentreForum [download from http://rsrch.co/q5RKnj], this is “commendable, and allows both government and opposition policies to be subjected to evidence-based scrutiny”. In contrast, the Labour Party have yet to publish any detail on their own proposals.

This makes it hard to provide a complete assessment of Ed Miliband’s announcement. But some things are nonetheless emerging from the fog. In particular, it seems likely that the additional payments could lead to the loans being classified as a tax under existing accounting rules. They are not linked to the cost of higher education. They are just a compulsory levy on some graduates.

I am proud that our proposals incorporate the strengths of a graduate tax, such as the progressive repayment mechanism. An independent assessment of our policy found it to be more progressive than the current system and more progressive than the Browne proposals. But we explicitly rejected the negative elements of a graduate tax, such as the breaking of the link between graduates and universities. In a pure form, a graduate tax reduces student accountability, weakens university autonomy and messes up the public finances. Perhaps that’s why no country in the world has yet adopted one.

No wonder Alan Johnson, the Labour minister who introduced the current system of student finance, has warned the Labour leader: “don’t pursue a graduate tax. We should be proud of our brave and correct decision to introduce tuition fees…with the money going where it belongs: to universities rather than the Treasury.”

I sympathise with Paul Wellings, the vice-chancellor of Lancaster University, who complained last week of ‘flip-flopping’ on policy and called instead for “a policy framework that is sustainable and enduring”. That is what we are aiming to deliver via our recent White Paper. We will wait to see whether the next Labour Party manifesto retains its conference policy of accepting fees, or shifts even more decisively in favour of a graduate tax. But until we know which it is, people should treat the opposition’s higher education policies with a huge dose of scepticism.

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David Willetts is Minister for Universities and Science.