Do the alternatives add up?

23 May 2013

Amid questions about the sustainability of the Coalition Government’s reforms to higher education funding in England, a new report from the university think-tank million+ and London Economics, Higher education funding in England: do the alternatives add up? reviews the costs and benefits of two alternative funding proposals that have been put forward. The first involves lowering fees to £6,000 and the second involves a new graduate tax system in which no fees would be levied and graduates would contribute to the costs of higher education based on a stepped proportion of their earnings.

The report concludes that both alternative proposals - lowering fees to £6,000 fee and introducing a higher education contribution or graduate tax system - would be financially viable and would cost no more than the 2012 system in real terms. Lowering the tuition fee to £6,000 would be likely to encourage more people to apply to university and bring wider benefits. Since tuition fees are included in the basket of goods used to calculate inflation, lowering fee levels would also lead to lower inflation and reduce the cost of government borrowing.

Under a graduate tax system, the Government would borrow marginally less than under the 2012 funding system. However because of Treasury accounting rules the graduate tax option appears to cost more, even though in reality it would cost no more than the 2012 funding system.

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