Tuesday, 18 July 2017

Student fee and loan wibble.

From Fullfact.org:

"[The Labour] party’s education spokesman has admitted that the tuition fees policy has a £100 billion…She has admitted that there is a £100 billion black hole in Labour's student fees policy.”

Damian Green MP, 12 July 2017

Fullfact then explains that the net cost will be a lot lower than that, bearing in mind write offs and so on.

The point is surely that student loans are the worst of both worlds, they have the characteristics of loans and of a super-tax on income (9% of income over £21,000 p.a.). So writing them off or down is not an upfront 'cost' the government but a reduction in tax revenues.

The best way of looking at govt tax revenues is the annual amount. The best summary I have found is by the Institute for Fiscal Studies. Page 22 suggests that expected the extra revenues from the 9% surcharge will be about £6 billion a year, covering two-thirds of the £9.7 billion upfront cash cost of higher education. That's not nothing, but only about one per cent of UK govt revenues/spending.

Here comes the real wibble, and article by somebody from the (right wing/supposedly free market) Institute for Economic Affairs in City AM:

Moreover, deeply regressive policies are finding their way back to popular status, with very little push back. That Labour has been able to get away with linking the abolition of tuition fees to “fairness” is shameful; expecting workers on the minimum wage to subsidise students attending Oxbridge – whose career prospects are likely to earn them a much higher salary in the future – is anything but fair.

As our Lord and Saviour said on Twitter recently:

Education is A Good Thing (up to a point, I'm not talking about Mickey Mouse degrees) for the nation as a whole, so I've no objection to the taxpayer chipping in as that's the best way of ensuring that everybody has an equal-ish chance in life. It's like a non-cash citizen's dividend. We'd expect those that go to uni to end up earning more than they otherwise, that's sort of the whole point isn't it?

For sure, the 7% of kids who went to private school have a better chance of going to uni, but is that really so unfair? Their parents have waived a state education place (cost to the taxpayer approx. £70,000 per child) and they have pissed well over £100,000 up the private school wall, most of that goes to teachers or suppliers, so that generates a minimum of £40,000 in tax revenues per child (PAYE, irrecoverable VAT, corporation tax on suppiers etc), more than enough to cover the cost of a normal three year degree of £35,000-ish.

The only reason for tuition fees is that government spending on higher education has remained constant but student numbers have doubled. If we halved them again and kept net spending constant, we wouldn't need tuition fees. If student numbers were slimmed down to a sensible level, say 25% of school leavers, and all private school kids went to uni, that still means that one-in-five state schools kids would get to go to uni "for free" on top of the "free" state education they have already enjoyed [sic].

If their is any "unfairness", it is that a lot of the 'professions' are really just leeching off the fact that the government lays down stupid and complicated rules which the layman can't fathom. So we have lawyers (if judges weren't so useless, we wouldn't need barristers on £5,000 a day to explain things to them), auditors etc. What they earn is just rent, it is an appropriation of other people's earnings or wealth without adding to it.

And as it happens, most people in these 'professions' went to uni and have a very middle class background. I'd be all in favour of stemming this flow of rent by radically simplifying the rules, having judges who apply common sense and abolishing the audit requirement. Or imposing price caps on them. Or failing that, subjecting their income to a higher tax rate. In an ideal world there's be a flat income tax of no more than 20%, but a higher rate of 50% for the 'professions' seems fair and reasonable to me.

That levels out the only real unfairness that I can see - that some high earners didn't go to uni, or did but do something useful and made their way in the productive economy. So a tax on the 'professions' would be a much more sophisticated version of the graduate tax.

And with a Citizen's Income system, student maintenance grants/loans would not be an issue, of course students would get it.



Sobers said...

Just because someone is not a net tax payer does not mean they are not subsidising someone else's education though. As long as they pay some taxes(and everyone pays VAT, duties etc even if not income tax or NI), even if those are more than compensated for by benefits received, they could be in an even better position if the taxes they do pay were lower. So greater spending by the State to provide a free tertiary education system would indeed fall on all taxpayers, regardless of whether they were net tax payers or not.

mombers said...

Simple solution to student loans. Abolish them in exchange for eligibility for state pension being pushed out by 3 years. Only problem is that the state pension is not funded so this will have no impact on public accounts. We pretend that the £3.8tn deficit doesn't exist. No Philip Green to pressure into making good on that I'm afraid...

Mark Wadsworth said...

S, we shall have to agree to disagree.

M, exactly.

Steven_L said...

My plan:

1) Say the loans will not be cancelled
2) Sell the loans
3) Aggressively hike the income threshold at which repayments start by £5k a year until it is at £75k or so.

Graeme said...

The universities have expanded massively. King's London seems to own most of the Aldwych and South Bank. Ucl owns everything around Kings Cross and Euston. If you reduce the number of students that's a lot of property freed up

Shiney said...


Slightly off topic (but only slightly)... I have a daughter at Uni right now. A f***ing farce.

As far as I can tell its all a bloody racket run for the benefit of the Unis and their superannuated employees - lecturers are shite in general, pastoral care/non-academic support is non-existent, IT and 'services' are a shambles. And this is a Russell Group uni not some upstart provincial FE college pretending to be something it isn't.

Plus it seems to me that the 'inflation', whereby some jobs that never needed a degree in the past now do, is mainly a public sector phenomenon (nursing being a good example).

Not sure if the way its funded has anything to do with any of this but just my 2p worth as a frustrated and angry parent.

Bayard said...

S, when I was at uni back in the early 80's, a lecturer told me that the university was run for the benefit of the Senior Common Room, i.e. the teaching staff and the university management. A slight acquaintance with the history of Oxford University leads me to think that it was ever thus. "This would be a great job if it wasn't for all those f*cking students" as one of the teaching staff was reputed to have said.

Agreed about degree inflation: that was an inevitable result of doubling the number of students entering tertiary education. If you have x vacancies, a lazy HR department and more than x number of applicants with a degree, then the job, de facto requires a degree, whether it is relevant or not.

The elephant in the room, of course is the fact that an awful lot of the post Tony Blair's bright idea degrees are completely useless, but no-one wants to publicly admit that thousands of young people have been ripped off to the tune of £20,000 or so.

Mark Wadsworth said...

S and B, that's not off topic and agreed, it's a stupid arms race. Even ten years ago somebody told me that his kids had done maths and got good degrees etc but if they wanted to get a better job they had to have an MSc at least.

To go on the safe side I saved up and did a BA (Hons) full time, then after I'd done ACCA and ATII, I tacked on an LLB part time in the evenings and occasional afternooon off :-)

Mark Wadsworth said...

SL, good plan!

G, exactly.

Bayard said...

Sobers, your point would be valid if there was any connection between government income and government spending, but there isn't. Both are governed by political constraints, that's why we run a deficit.