Graduate Tax: Taking a shit idea and making it worse

Vince Cable appears to have been replaced with a total moron since he joined the government.

To recap' briefly, according to this, the present situation for English students attending an English university can borrow money from the government to pay for tuition fees of "up to £3,290" per annum and a further amount of between "up to £3,838" and "up to £6,928" per annum for living costs.

When they finish university, the total loan is subject to interest set the same as the normal inflation rate (in other words, it is quite low for an unsecured loan) and the government collects it by adding 9% to your tax rate on earnings above £15,000.

So if your total loan when you finish university is £18,000 and you earn £25,000 a year, you pay an extra £900 in tax for twenty years (ignoring interest). In other words, we already have a kind of graduate tax, it's just that it is a fixed maximum amount - after so many years, you have paid it off.

Vince's party, the Lib Dems have always opposed tuition fees but never thought they'd be in government so didn't worry about how universities would be financed, so today's offer is to scrap tuition fees but have an open-ended graduate tax instead. I am wholeheartedly in favour of tuition fees of course, because that's the free market way, because this encourages people only to take courses which increase their earnings potential.

What Vince is proposing would significantly reduce these 'market signals' as students will be comparing a zero cost with a lower post-tax earnings potential in future. And if they choose a degree in something completely pointless which won't help them get a job they will pay very little.

My personal highlight from the BBC article is this: "[Vince Cable] is also expected to say that universities which perform well should get a "reliable stream of income" but be less dependent on the state." Dude, WTF? How is "being funded by a tax collected by the state on a randomly selected group of people" not being "dependent on the state".

As to the last bit: "But Mr Cable's department, like most others, is expected to find cuts of 25% in four years to reduce the budget deficit.", as UKIP always say, the most painless way of doing this would be to get away from the idiotic 'target' set by the previous government that 50% of all 18 year olds should go to University. If we reduced the number of student places*, then the department's budget would probably be sufficient to be able to scrap tuition fees entirely.

* Remembering always that large (but as yet unquantified) number of people who have attended university fail to qualify, or to find a 'graduate' job, but under the present system they all end up with these huge debts at age 21 or 22 - i.e. the 50% target makes a lot of people a lot worse off!. Feel free to add"Serve them right, they ought to shun those loans and get themselves a weekend or evening job instead", which is my view as well.

UPDATE: VFTS points out, The Daily Mash has explained this far more succinctly.