Sunday, 25 September 2011

A quick post on Ed Miliband's £6k fees proposal

There is a lot of bewildering gubbins going around about Miliband's pledge to cap tuition fees at £6k instead of £9k. I can't say I'm any great fan of the idea. He could have gone a lot further (to say, £3-4k) if he'd simply said he'd limit or reverse cuts to HEFCE's budget, which is what gave rise to £9k fees in the first place - instead, his proposals work within those cuts (I assume because he didn't want to be dragged into an argument on deficit reduction).

In any event, that doesn't stop me from scratching my head at some of the accusations being levelled at the proposals. Chief among them is that they only benefit the very rich. To my knowledge this argument first made by Graeme Strachan Cowie, and was later taken up by Stephen Tall. It has since proved very popular among journalists and Lib Dems in the Twittersphere.

Roughly it seems to go like this, deep breath now:

Student A and student B are graduating from University. Student A earns a starting salary of £25k, rising to £140k after 30 years - the point at which the debt is wiped. Student B has a starting salary of £50k, rising to £200k after 30 years (my guess is the number of people this applies to is negligible, but it's the example of a high earner given by the author, so fine). Under £9k pa fees system, the total sum of money owed at the end is such that, because of the way repayments are structured, student A will never repay it all before the 30 year wipe-out point. However, student B will earn enough to pay all of his total debt back before the 30 year limit kicks in. Therefore, high earning student B will ultimately end up paying more back to the Treasury than lower earning Student A, who will hit the 30 year brick wall (It's in this rather dog-eared, round-about way that people argue the new system is akin to a graduate tax).

Cutting fees to £6k, however, does not reduce the overall amount owed enough to stop Student A from hitting the 30 year limit at the same amount paid as under £9k - £24,940, using the MoneySavingExpert calculator. High earning student B, however, still pays it off before 30 years (as with 9k) but this time he pays less in sum to the Treasury because he owes less. this way, Miliband's proposals are just a cut for the richest. Goddit?

Except I may be missing something, but this argument strikes me as completely missing the point.

Firstly, it is a total red herring anyway to look at the absolute amount paid. Under either £6k or £9k, low earners will be saddled with fees deductions from their payslips for the bulk of their working life, while the highest earners may be free of them in 15 years, for instance. For this reason, the system is not the same as a graduate tax. The fact that most will hit the 30 year limit is not a sign of how progressive the system is, it is a testament to how unaffordable the total amounts are for most people under any kind of reasonable repayment system.

Secondly, and most importantly, the internal logic of the argument is barmy. If followed through it can only lead, somehow, to the strange Orwellian position where members of a party who used to oppose all fees end up arguing that the higher the fee, the more progressive. Afterall, given repayment rates are linked to salary rather than the amount owed, and apparently it's the absolute amount paid back by different earners that matters to Graeme, why stop at £9k per year fees? Why not raise them to £10k, £12k, £18k, for instance? That way, lower earners (student A above) will hit the 30 year limit at the same amount paid, but top earners (student B) will end up paying even more in absolute terms to the Treasury. I'm sure Universities would welcome the investment, too!

The answer is, or should be, because fees that high will likely deter people from applying to University in the first place. And that's my point: Graeme's entire argument is the definition of looking down the wrong end of the telescope. It is based on the faulty pre-supposition that "...the headline figure [of debt] is of zero relevance to the majority of graduates, for whom repayment matters". Most research shows this is rubbish, especially when it comes to kids from working class backgrounds.

Whatever way those defending the Coalition's changes spin it and blame the NUS/Labour (delete as applicable) for confusing prospective students, the headline fee of money owed will always matter under a loan system. People will always be able to tot it up beforehand, and they will always consider it debt - even if the repayment system is structured differently. The scale of the sum will always be weighed up against the perceived benefits - and indeed the Government's whole marketised language around fees being an 'investment' encourages this. The higher the fee, the more working class parents will likely come down on the side of discouraging their kids from going to University - especially those more prone to ambivalence because there is no family history of individuals going to University, which is a lot of them.

To my mind a proper graduate tax (with lots of caveats and strings attached which I won't go on about now) is the only way to avoid or limit this, outside of funding HE entirely through general taxation. But unlike Graeme's post, Miliband's proposals are based on the right assumption - that headline amounts matter in terms of attracting students, and cutting it is therefore a slight improvement on the Coalition's plans if ultimately unambitious, and a retreat from his previous position.

As for many of the others citing Graeme's post approvingly, burying their head in such minutiae seems like just the latest attempt to avoid seeing the wider picture, and the horrific Tory cuts that form its backdrop.