Saturday, 23 March 2013

Neither surprising nor particularly relevant

From The Daily Mail:

Around one in five European students have disappeared without paying back millions of pounds in loans to study at British universities.

Twenty-two per cent of students from EU member states have not be 'traced' after graduating - leaving UK taxpayers to pick up the bill. A study by the House of Commons library, reported by the Daily Telegraph, revealed that EU students were much less likely to repay their loans at all and more likely to go missing...

These students can apply for the same government support as British students to complete courses here, but critics do not believe the repayment of their debt is as vigorous in their own countries. The UK system of repayment means students reduce their debt with direct payments to the taxman through PAYE when salaries are over £21,000 a year.

There are fears that hundreds of millions of pounds in loans to EU students may be written off and the bill is likely to rise with the introduction of tuition fees of up to £9,000 for the first time last September.

Correct. The British taxpayer spends a lot of money on healthcare and education of foreigners. What the likes of the Mail overlook is that British people benefit from much the same if they are treated or educated abroad.

Assuming that all these agreements are entirely reciprocal (which they aren't, the UK government is useless at negotiating or enforcing these things), then it is just as silly for the UK government to try and collect the tuition fees for attending a UK university from an individual e.g. French student as it is for the French government to try and get money back from a British citizen who studied in France and then goes elsewhere.

What governments ought to be doing (and I believe they actually do this with healthcare up to a certain extent) is for the UK government to bill the French government directly for the tuition fees for French students and the French government to bill the UK government for the tuition fees for UK students. And we can do the same for healthcare costs for non-residents (i.e. tourists), parking fines etc incurred by non-residents and so on and so forth.

Then at the end of the year, all the inter-country charges can be netted off (so the UK might 'owe' France £900 million and France owes the UK £1 billion) and each government pays (or receives) the net balance payable or receivable (i.e. France now pays the UK net £100 million). The more types of charges are included in this exercise and the more countries are involved the better, because that means that the actual net cash payments at the end of the year are a small fraction of the gross amounts.

For example (plucking figures out of the air to illustrate the point), at the end of the year:
- UK owes France £900 and owes Germany £500;
- France owes UK £1,000 and Germany £200;
- Germany owes the UK £300 and owes France £800.

The gross amount owed is £3,700. But once it's all netted off, Germany pays France £400 and the UK pays France £100 and there is no need for there to be a payment between UK and Germany. See if you can work this out for yourselves with a 3 x 3 grid.

If an individual country then wants to chase its own citizens or residents for cost of education, healthcare or parking fines incurred in another country, then that is entirely up to them.



Sackerson said...

Good idea, now lump in social security and housing benefit etc in the Great Netoff.

mombers said...

Will be interesting to see how many Britons laugh off their loans by working abroad. Repayment via PAYE is a graduate tax, and is easy to evade as the supply is mobile

Mark Wadsworth said...

S, the more we include the better, so why not include welfare payments?

M, relatively few, I guess, besides that is a separate topic. For some reason, people object more strongly to foreigners evading the graduate tax than to UK citizens evading it.

A K Haart said...

That's a neat idea. Sounds relatively cheap to do.

Mark Wadsworth said...

AKH, thanks. As I said, this system already exists in rudimentary form in some areas, it's just taking a good idea to the logical conclusion.

Graeme said...

Mark - given how many multi-national companies use this kind of offsetting when setting intra-group transactions, there is plenty of software out there to automate it.....without the Gummint needing to re-invent this particular wheel and emplying hundreds of people to list the numbers.

Bayard said...

Graeme, nothing can be done by the government without them needing to re-invent the wheel and to employ hundreds of people to list the numbers. That's how the government thinks and works and it all makes work for the working conslutant to do.