Graduate Tax – Friend or Foe?


As a graduate or current student, the words ‘tuition fees’ and ‘student debt’ may make you shudder at the mere thought of them.  You might want to add ‘graduate tax’ to this list, as the Government has revealed plans to totally scrap the tuition fee system.

Vince Cable, the new Business Secretary under the Coalition Government, gave his first speech on Thursday outlining the proposal to introduce a graduate tax to replace tuition fees.  According to Cable it would be a fairer system, whereby graduates are taxed according to their earnings, higher earners taxed considerable more than those with lower salaries.  “The problem”, he said, with the current tuition-fee system, is that “it is a fixed sum – a poll tax – regardless of the income of the graduate. It surely can’t be right that a teacher or care worker or research scientist is expected to pay the same graduate contribution as a top commercial lawyer or surgeon or City analyst whose graduate premium is so much bigger.”

The proposal comes as part of an independent review, led by Lord Browne, which is assessing how universities are to be funded in the future, with the report being published in the Autumn.  There are a number of keys issues that are going to be reviewed alongside the new proposal, including the impact it will have on student debt and how to encourage more students from disadvantaged backgrounds to get into higher education.

NUS (National Union of Students) President, Aaron Porter, commented after Cable’s proposal, stating his opinion that “the fair solution is to abolish tuition fees and ensure that graduate contributions are based on actual earnings in the real world, rather than sticker prices in prospectuses, which are based on guesswork”.

So does this mean that tuition fees, as well as a hefty student debt, will soon be a distant memory?  Cable recognised this as a major problem with our current university system – that students now expect to come out of university with huge amounts of money owed to the Government.  “Most of us”, he said, “don’t think of our future tax obligations as ‘debt’”.  However, the new tax could mean the top 20 per cent of earners will be paying the equivalent of £16,000-a-year tuition fees, according to The Russel Group which represents twenty elite universities.  Perhaps a graduate tax is the way forward – what do you think?  Is it a fairer system or an excuse to wring out more money from graduates?  Tell us your thoughts.