Vince’s Latest Cable

Written By: - Date published: 12:25 pm, July 17th, 2010 - 12 comments
Categories: education, International, uk politics - Tags:

I’m on holiday in the UK at the moment, which means I end up catching the politics here: Lord Mandelson’s new book dishing the dirt on his Labour colleagues a good few weeks after they lost power; crowdsourcing the deficit (by far the most popular option: cutting foreign aid); and the interesting dynamics of the UK’s first coalition in a couple of generations.

The coalition has a fairly large second party, and quite significant philosophical and policy differences, but is being brought together by a common foe: debt.  Britain has an even bigger private debt per capita than New Zealand; unlike New Zealand, however, the government debt is also massive.  Partly this was because they bought the banks, rather than letting them fail; partly this was because instead of saving for a rainy day Gordon ‘Prudence’ Brown started spending his way to the prime-ministership, when he became desperate to make the move from the Chancellory (Finance Ministry).  So now the cupboard is bare, and all must put their promises to one side.

If this sounds much like 1984 in New Zealand, hopefully at least the Liberal Democrats might halt the Conservatives fully going down a Rogernomics line.  Still, cuts of 25-40% in all departments but health and foreign aid are distinct possibilities – today is D-Day for departments to say how they could achieve their required cuts.  Whether the austere Conservatives, and the 100s of thousands of public sector job losses they with their LibDem allies propose, will drive Britain back into recession is an open question.

But this backgrounder leads me to the point of my post!  Vince Cable, the former LibDem Deputy leader who predicted the Great Recession and the need to break up and regulate the banks etc, has been given the Business, Innovation and Skills ministry in the new government.  Part of his remit is tertiary education, so he has just come up with his proposal for how to fund universities in these times of austerity.

What he proposes is a variable Graduate Tax.  A ring-fenced amount that all who benefit from university education pay back over their lives as they receive the financial side of that benefit.  At the moment it’s a very rough proposal – what rate it would need to be set at to cover the costs is unknown; but grabbing numbers from thin air could imagine a 1-2% addition to graduates’ middle income tax rate, and 3-4% to a top rate, or something along those lines.  This would create a large pool of money that could be allocated to universities, probably best done in a manner that Rob proposes.

This being a Tory dominated government it’ll be interesting to see if radical ideas are allowed to come through.  Cable’s previous ideas like his Mansion Tax (a land tax on properties valued over £2million) have been scrapped, as has the LibDem’s pre-electon promise of scrapping tuition fees.  The more likely option may well be a more than doubling of tuition fees to £7000/year, introducing 2 year degrees, and continuing the student number capping that will see about 1/3 of applicants (or 225,000 students) turned away this year.

However I’d like to see a Graduate Tax, if not in Britain, then certainly in New Zealand.  We shouldn’t burden the working poor with the costs of the middle and upper-classes.  But we shouldn’t put university fee barriers in their way if they wish to improve themselves.  A ring-fenced tax that funded the universities to improve the pay, quality and size of their staff without tuition fees; which could be combined with improved rights to a full student allowance, to truly remove barriers to increasing the education and skills of our workforce for a more innovative, high-tech society.

12 comments on “Vince’s Latest Cable”

  1. Mr Shennanigans 1

    Interesting idea. I guess the question would be whether it would disincentivise going to university because you know you’ll be pinged with an extra tax, but it something’s at just a couple of percent then it might not make all the difference in the world.

  2. Nick C 2

    If the aim is to make those who recieve tertiary education pay the cost of that education then why not just make it user pays and cut the government out altogeather? People can get loans to fund their study and then pay back those loans as they start reaping the financial rewards of their degree.

    • Sam 2.1

      You mean after they have left the country to take their expertise somewhere they can earn enough money to pay back the enormous mountain of debt and interest they would accrue in a very short time under your system? Yeah, real smart.

      RWNJ are so predictable. If it sounds like a good idea, it should be killed. If it will ruin the economy some more – go for it!

      • Nick C 2.1.1

        Wow if thats the level of response you think is nessessary to summararily declare me an idiot then you really arent very clever.

        1) Under the system proposed by Vince they can leave the country to avoid the higher marginal tax rates, meanwhile the government has already paid for their education, and they wont get anything back
        2) Under a govt funded system with progressive tax rates there is already a massive incentive to leave. I.e. if we have to jack up the top tax rate to 50% to ensure everyone can get a cheap tertiary education then why would I stay once im earning a 6 figure salary but paying half my money to the government? Under a user pays system there is no need to increase tax rates to pay for the education so its actually far more beneficial to stay (in fact we can attract graduates from countries with higher tax rates)
        3) Even if they do leave the country, under a user pays system it doesnt matter as much as its not like we’ve given them anything for free which they now owe to the country

        BTW Sam have you ever studied economics? With that level of responce I doubt it. Some of us have.

        • loota

          The incentive to leave NZ has nothing to do with taxes. It has everything to do with low incomes, uninteresting jobs, being badly led/managed, and no career development prospects.

          You think lower taxes on a shite second world income earnt doing low value uninteresting service sector jobs in low priority branches of overseas multinational corporations is going to keep our best talent in NZ? And do you think that losing our best talent overseas will be OK ‘once they’ve paid for their education themselves’?

          My friend you may have studied economics but they obviously didn’t ask you to study strategic reasoning along with it.

          • Nick C

            Errr, the point is that tax affects your (disposable) income.

            Also yes the loss to the country is greater under govt funded system. Under user pays you lose the person, but under govt funding you lose the person AND all the money you invested in their education. Im not saying the loss is OK, just that its less.

            Beyond that I dont get your arguement. It seems you are just broadly generalising that qualified people in New Zealand can only get shit jobs working for multinational companies, and are therefore driven to leave. I dont see how this affects the debate over user pays tertiary education. I also dont see why this would eventuate or how anything you are proposing would stop it from eventuating.

            • Pascal's bookie

              Under user pays you lose the person, but under govt funding you lose the person AND all the money you invested in their education.

              I assume you are talking about some sort of private loan rather than than a government one then?

              Do you think the banks will line up to offer those loans? What will the interest rates look like on that sort of risk? How happy do you think the banks would be about people that owe them 10’s of thousands of dollars pissing off to Europe for a couple of years? Do you think they will be keen to loan people money to do a teaching degree that will take decades to pay off? Do you think people will be prepared to borrow at the rates banks demand to study teaching, science, nursing etc?

              Or would that just be an indication that the market had decided that we don’t need those professions?

              Do you think we would end up with the same amount of people choosing to get educated, or far far fewer?

              And seeing you’ve studies economics, I guess you were being deliberately wrong when you equated a top rate of 50 percent withhalf your income.

            • Pascal's bookie

              You may also note that just as tax effects disposable income, people negotiate salaries while being aware of their tax status. It’s one of the more salient and easily available pieces of information out there.

  3. Jake 3

    Creating a graduate tax will be a great policy to incentivise more highly skilled people to leave. Our current student loan scheme doesn’t drive people off shore, but I would certainly consider leaving permanently to avoid ever having to pay back my fair share for my tertiary education!

  4. Rich 4

    Personally, I think we should have a “stupid tax” on people *without* degrees.

    • loota 4.1

      Sorry Rich, but I feel that a “stupid tax” could also be correctly applied to some people *with* degrees.

      And maybe even at a higher rate.

  5. Carol 5

    What about those of us who got a degree (or more than one degree) without being funded by very much “tax payer” money? I did this, in NZ and the UK, by working (mostly full time) and doing courses part time. Are we to be taxed the same high rate as those who got degrees with the support of lots of tax payer money?

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