UK Graduate Tax Gains Momentum

by Robert Lee, Tax-News.com, London

10 August 2010

David Willetts, the UK coalition government's universities minister, appears to have given his support to a proposal to replace the current system of tuition fees with an additional tax on the incomes of graduates as a means to fund higher education in Britain.

While he was careful not to frame such a proposal as a 'tax', Willetts said on Sunday that he favoured a system whereby graduates would make an additional "contribution" to university funding once in employment, noting that graduates earn on average GBP100,000 more than non-graduates over the course of their working lives.

"We're talking about a graduate contribution paid by people out of their earnings when they're in employment," Willetts commented on the BBC's Andrew Marr Show.

The graduate tax was originally mooted by Business Secretary Vince Cable, a Liberal Democrat, but is unlikely to be supported by the majority of Conservatives MPs in the coalition, making Willett's comments, as a Conservative himself, all the more surprising.

An independent review led by former BP chief executive Lord Browne is due to publish a report on alternative sources of funding later this year, and Willetts's comments suggest that some form of graduate tax is now the government's preferred option. However, according to the University and College Union (UCU), the cost of a university degree would "rocket" under a graduate tax system.

An analysis of various graduate tax models by the UCU concluded that teachers, nurses, doctors and social workers would pay "considerably more" back than under the current system of tuition fees. Under a model where graduates pay a tax of 5% over 25 years, doctors would pay back over GBP105,564 and teachers close to GBP46,046.

"Whatever scheme is proposed to replace fees, the government must ensure that studying for key professions remains attractive and that the prospect of prohibitive costs over a lifetime will not put off the next generation of innovators and public servants," said Sally Hunt, UCU general secretary.

Hunt has urged the government to reexamine a proposal to pay for university funding through an additional levy on large businesses operating in the UK.

Recommended