Graduate Tax Seemingly Back on the Table

By Political Corespondent, Leo Birch

Vince Cable must be getting used to rejection. What with years of loyal Lib Dem service as Deputy Leader, his prediction of the global economic crisis and coming out smiling after the Telegraph’s ruthless red paint splashing during the expenses scandals he might have expected a more influential role in the cabinet. But no matter, Secretary of State for Business, Innovation and Skills isn’t too bad and even in his wildest dreams he couldn’t have realistically expected to usurp Cameron’s old pal George Osborne to become Chancellor of the Exchequer.

But then, the first of the ‘painful and controversial’ cuts squeezed a whole £700m out of Cable’s department’s budget and then, just to twist the knife his ‘department for growth’ was shrunk with 25 per cent job cuts. He may have felt something of a victory on Capital Gains Tax but nonetheless the good times have been slim pickings for Vince.

Then came the graduate tax proposal. The concept has been bounded around for a year or so with the NUS calling for the abolition of tuition fees system and it’s replacement with a graduate tax last June. However, Cable’s proposal for the “variable graduate contribution tied to earnings” – he shied away from using the word ‘tax’ – would act more like a top-up to be paid after a student has graduated, tuition fees would remain in place; a notable contrast to the Liberal Democrat pre-coalition pledge to abolish tuition fees.
The tax would be linked to earnings with the highest-earning graduates paying considerably more than the cost of their course. This would thus decrease the subsidies paid by the taxpayer to see students through university. The problems with such a tax are plentiful, but the most obvious is a question of fairness. The money would be collected centrally to the Treasury before being passed on to the universities but how this distribution of funding would be decided has not been outlined.

If funding is linked to the wealth of a university’s graduates, institutions that have a focus on qualifications that lead to lower-earning but no less valuable professions, such as nursing or education, could lose out. However, if no such link is established high earning graduates could end up bankrolling other institutions at a cost to their own university. This is perhaps why University Alliance – threw their weight behind Cable’s plan as they represent universities with lower earning graduates. In contrast, the Russell Group, who represent the country’s top 20 universities with the highest earning graduates, were unsurprisingly staunchly against the plan. The 1994 group of smaller research focussed universities also rejected the proposal on the grounds that it would “break the vital link between a student’s fees and the institution”.

Of course there is also the question of academic standards. As the government would control the funding, conditions may be made on the manner in which the money is spent. Not only is this a degradation of the universities’ autonomy, it could also see institutions forced into focussing on programmes which are unsuited to their expertise for the sake of funding.

However this is all academic – excuse the pun – as, true to form, Cable’s proposal was rejected. The idea of a minister making an announcement one day only for it to be completely dismissed amongst other members of the cabinet just a few days later seems ludicrous. Indeed this is far more than an issue of graduate tax; it raises very serious questions about the Liberal Democrat role in this coalition government.

With only five members in the cabinet, it was always clear that the Lib Dems were the junior partners in the coalition, but the extent to which Vince Cable is being left out in the cold must have come as something of a surprise. Nick Clegg is now running in higher circles, “cosying up to Cameron” as the phrase seems to be. Even his little outburst on the legality of the Iraq war didn’t seem to ruffle as many Tory feathers as one might have expected. The Tories seem to have little qualms about ignoring Lib Dem proposals and Clegg is either unable or unwilling to back his own party. In fact Cameron and co pay more attention to Labour proposals, even if it is just to attack them. It would appear that the Liberal Democrats have found themselves as the third party again.