Cable: “We can do better than a pure graduate tax – and we will”

I’ve just received an email from Vince Cable. He writes:

Dear Timothy,

As you know, one of the most urgent tasks facing the Coalition Government is to reform the funding of Higher Education. Our objectives are clear: high-quality university teaching and research; fair access for all, regardless of background; and a progressive funding structure.

At the same time, we are delivering a tough deficit reduction programme, necessary to save the economy from a major financial crisis centring on the country’s credit worthiness. If we are to avoid substantial cuts in higher education more money must be found.

Next week, Lord Browne will publish his report, with recommendations for reform. The Government will respond shortly. But I can say now that I want a system that meets all of our key objectives for HE, and that helps with our deficit reduction programme.

I can also say now that it is already clear that an additional tax on graduates – a ‘pure’ graduate tax – is not the way forward. While it is superficially attractive, an additional tax on graduates fails both the tests of fairness and deficit reduction. There are a number of objections to such a tax – which is why the Labour government rejected it – including:

First, since a graduate tax is open-ended, some graduates would unfairly find themselves paying many times the cost of their course. This is not fair.

Second, foreign students could end up paying less than some UK graduates, because taxes cannot be collected from people living in other countries. This is not fair either.

Third, a graduate tax would do nothing to reduce the deficit over the next five years. Indeed, it would add many billions to public spending, meaning that further cuts would be needed in other areas of government spending. We have looked hard at possible ways of bringing forward tax revenue from graduate tax revenues – but they don’t work.

A strong university sector is very important for future national prosperity and for social mobility. We need a system for funding universities that is fair and robust. As a Government, we have therefore looked in detail at all the options for reform. A graduate tax has some attractive features – especially in-built progressivity [sic]  in repayments – which is why we have looked at it from all angles.

But Labour was right when it rejected a graduate tax as an option, and would be wrong to support it now. Indeed, there is a very useful publication – entitled ‘What’s Wrong with a Graduate Tax’ – published by the last Labour Government. I feel sure that Ed Miliband, when he considers the options carefully, will cease to support a graduate tax.

As I have said on previous occasions, I am entirely committed to a progressive system of graduate contributions, the details of which we will be able to confirm shortly. And I have been open-minded about the possibility of a pure graduate tax. But it is clearly not the right vehicle. We can do better – and we will.

Vince Cable
Secretary of State for Business, Innovation and Skills

Leaving aside that he uses a made-up word – “progressivity”, it’s an interesting statement.

However, if Vince’s “progressive system of graduate contributions” still results in future graduates paying “many times the cost of their course” then I’d agree with Vince, it wouldn’t be fair. But the very fact he rules an open-ended contribution (or tax) out suggests to me it won’t be like this.The detail is still needed of course, but I’m now hopeful that the proposal might just be (a) fair and (b) workable.

I’m also very keen to see what it might mean for students who pay their fees in advance at institutions like the OU. There’s still not been a peep about how these proposals will impact this increasingly popular way of gaining qualifications, both instead of attending a traditional “brick” university at 18+ and also for those of us who are much older and combining study part time with work (or retirement).

There’s no doubt we live in both interesting and difficult times.

Cable damage revisited

Much of the media fuss about Vince Cable’s speech today has been about his view on bankers and the need to regulate capitalism. All good knock-about stuff. However, what seems to be getting less attention at the moment are his views on higher and further education. I’ve reproduced parts of his speech below. He said:

There has to be a revolution in post 16 education and training. We are making a start. Despite cuts, my department is funding 50,000 extra high level apprenticeships this year – vital for a manufacturing revival. My Conservative colleague David Willetts and I want to sweep away the artificial barriers between universities and FE; between academic and vocational; between full time, part time and continuing life long learning; between the academic and vocational. I was the first person in my family to stay on at school beyond 15. I want everyone to have the chance to continue their education.

There are some unhelpful, cultural, prejudices and vested interests to overcome. The belief that only A-starred A levels count; not apprenticeships. Or a gold standard as defined by the Russell Group not good teaching institutions like Teesside University or Liverpool John Moores. Or the assumption that top Oxbridge maths brains should go to Goldman Sachs or hedge funds not to Rolls Royce or into teaching. Wrong. Completely wrong.

So far, so good. There’s nothing here to object to – quite the opposite – it makes perfect sense to me. But then, distressingly, he returns to his theme of a graduate tax:

I realise that there are people in the hall who believe that education at all levels must be free and the taxpayer should pay up, regardless of the bill. In reality the only way to maintain high quality higher education with less government money is for the graduate beneficiaries to make a bigger contribution from the extra earnings they enjoy later in life

I am doing everything I can to ensure that graduate contributions are linked to earnings. Why should low paid graduates – nurses, youth workers or science researchers – pay the same as corporate lawyers and investment bankers? We have to balance higher contributions with basic fairness.

Well, sorry Vince, but to me a progressive and fair taxation system is one that is linked to wealth (and wealth alone, whether that’s based on income, property or consumption) and should not include arbitrary additional taxation based simply on educational qualifications.

You fought on a manifesto that committed the party to look at how FE/HE could be funded from general taxation over a period of years, as and when finances permitted. In the meantime, the fairest way of funding FE/HE is through the current system of tution fee loans and general taxation. A graduate tax was not part of the deal. After all, under your scheme Vince, some well paid business people without a degree (quite often, some of the spivs and gamblers you appear to so despise) would pay proportionately less in tax than, say, a headteacher on the same salary.

That can’t be right – or fair.

It annoys me immensely that it’s the Lib Dems in government who look as if they are going to be responsible for introducing an even more regressive tax than anything the Labour Party managed in the Blair/Brown years.

I’m hanging on to see what the coalition government’s final proposals are in this area, just in case sense prevails. But sadly, I think my 25 year membership of the Lib Dems (and the SDP before that) is slowly but surely drawing to a close.

Update 23/09/2010: My earlier post on this subject (Cable damage) is here.

Cable damage

Vince Cable is a politician that I’ve admired for many years. It seemed to me that he was in that great tradition of Liberal politicians who were not afraid to be different and to speak out. His track record surrounding the banking crisis was second to none. If you believe that Gordon Brown saved the world economy, then it was Vince that told him how to do it. I can’t help but believe that had Vince been chancellor in the run up to the crisis and during it, we’d be in a far better position as a country today.

But his track record so far in the coalition government in respect of higher education funding is about as bad as it could be. If he succeeds in his ambition of imposing a graduate tax (or contribution as he prefers to call it) in the form that he appears to be proposing, then he is likely to wreak far greater and lasting damage on the UK economy than anything we’ve seen from the actions of a mendacious few in the financial services industry.

The problem so far with the debate about a graduate tax is that it has been woefully short on detail. The underlying premise also appears to assume that the way that everyone achieves a degree is when they’re aged 18 or so through a place at a full-time, bricks and mortar university.

Those of us who struggle to juggle family, jobs and study later in life and pay our fees in advance for courses through institutions like the OU ought to be very concerned indeed about this blinkered and increasingly inaccurate world view, as it appears that we’ve been forgotten. In the current febrile climate of spending and job cuts, being forgotten about is definitely not a good thing. Being forgotten and having no voice means that you’re likely to get the axe swung in your direction, rather than quietly avoiding it.

And in all honesty, it’s not just the growing band of ever more youthful part-timers who ought to feel concerned about the prospect of a graduate tax. Everyone who strives to achieve academically ought to be.

I supported the Liberal Democrat manifesto committment of working towards a way of removing, over time, tuition fees and replacing them with funding through general taxation. This was clearly going to take time, but if accompanied by the removal of artificial targets, chief of which was the aim of putting half of all school leavers through degree courses of sometimes questionable value, then it ought to have been achievable. And progressive in terms of who paid for the benefits an educated workforce brings to the country.

What isn’t progressive, or fair, is the imposition of a potentially unlimited call on future earnings through the taxation system (and probably easily avoidable if you choose to emigrate), simply because someone has the ability and dedication to learn. Compared to such a scheme, the current regieme of tution fees (either payable in advance or through a loan, which is written off after 25 years should someone be unable to pay it – so it’s not even really a debt) is almost enlightened.

Arguing for a gradute tax is about as sane as making an argument that GB medal winners at the 2012 olympics should pay an additional tax, forever, to offset the cost of the infrastructure being built for the games, because they will benefit most from their medals and enhanced earning power in the future. I can’t wait to see Vince trying to suggest that one – he’d be laughed out of office, and rightly so.

The whole of the UK benefits economically from having a better educated workforce. Would it really be fair in future for someone earning a modest salary as a headteacher in a tough school to have to pay a higher marginal tax rate, forever, compared to amazingly wealthy non-graduates including Lord Sugar and Sir Richard Branson? Who of course, benefit substantially from the brainpower of the graduates they employ at all levels within their businesses.

The devil is in the detail of this proposal and I’m looking with trepidation to what Lord Browne’s report on higher education will bring forwards this autumn. If I can be convinced that the scheme that is eventually enacted will genuinely benefit individual graduates and the UK economy as a whole, then I’ll be prepared to eat a large slice of humble pie and reinstate my membership direct debit to the party I’ve been a member of for nearly 25 years. If not, then I’m not sure what I’m going to do. I’m a Liberal – but the coalition has in this particular matter, which is a “red line” for me, robbed me for now of the party I love.