A Graduate Tax? Qs that need answering...

In his first speech on Higher Education as Secretary of State for Business, Innovation and Skills, Vice Cable announced that he will look at the possibility of introducing a graduate tax. With the debate on how a graduate tax might work now under way, million+ has posed some key questions on how a tax might work.

Pam Tatlow Chief Executive of the university think-tank million+ said: “In principle a graduate tax linked to earnings would be more progressive but it does raise some complexities including how to hypothecate the tax properly and whether or not to have a differentiated or a flat graduate tax.

“The Government would also have to decide whether a graduate tax was a general contribution by graduates to the cost of higher education or whether it was intended to cover the cost of tuition or tuition and maintenance as well as to which cohorts of current or future students such a tax would apply. If a graduate tax did include maintenance this could be very complicated. Maintenance loans and grants for students while they are studying at university are crucial to participation so it is likely that this support would still have to provided by the state with loans repaid by students when they graduate in addition to any requirement to pay the new tax.

“The Treasury would also have to consider what policy could be put in place to recoup taxation income from non-UK and EU citizens although to some extent that problem exists now in respect of the current graduate contribution scheme.

“Finally, all political parties have said that they wanted a fairer deal for part-time students. It would be unjust and unfair if those studying part-time and on a flexible basis found themselves yet again having to pay fees upfront or being disadvantaged while everyone else was able to defer their contribution to higher education through a graduate tax linked to earnings.”