Graduate tax is an elementary error
A hoary old chestnut has been exhumed. Vince Cable is the latest British politician to be seduced by the idea of a graduate tax: an income levy on ex-students to pay for
At the moment, English undergraduates are given loans with which to pay for tuition. When their earnings later break a threshold, the government takes a share of their income until they have repaid the debt. The system has two crucial advantages: it makes students pay a portion of their degree costs while allowing needs-blind admissions.
A graduate tax would differ in that ex-students would keep making repayments even after they had covered the cost of their study. The main attraction of this tax to Mr Cable is that it would require high-earning graduates to pay more for their education. But the distributional effects would be paltry, and the damage to the university sector could be enormous.
So the logical conclusion for the university finance review is that the tuition fees payable by students, which are currently not allowed to rise above £3,225 per year, should be allowed to reach at least £7,000. The extra money would help cash-strapped universities, but also allow competition between institutions on price. Competition would be sharpened, driving up standards.
By contrast, a flat graduate tax would break the link between the cost of a degree and the student’s pocket. All degrees would cost the same. Institutions would depend less on the good will of its students than of the Treasury. So a graduate tax would erode university autonomy and damps the pressure on universities to respond to their students’ concerns.
There are, furthermore, formidable practical difficulties to such a tax. How will university drop-outs be charged? Will Britons be able to leave the country to escape paying for their education? Will Europeans coming to the
Source : http://www.ft.com/cms/s/0/c47706d0-9049-11df-ad26-00144feab49a.html
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