I see the coalition is beginning to favour the graduate tax solution to funding universities. I have grave doubts about it even though the principle of a graduate contribution or graduate tax is a welcome development on the surface. It has the support of students and student leaders and on the face of it is a more progressive tax than the fee model.
The principle behind a graduate tax is that students should be able to decide what to study and where without worrying about the different costs involved and after graduation they should be able to work at their chosen field without worrying about having to pay back debts quickly. Those who are subsequently able to contribute more towards their education will do so while those that are unable will not.
On the face of it this is attractive, but it has a serious drawback for universities. Many people feel uneasy about the obvious alternative, which is to move to a market in fees where certain universities cost considerably more than others. Ignoring the fact that certain universities do indeed cost more than others to run and there is considerable difference between the quality of one course and another. But for me it is an inequitable centralist solution with the following disadvantages.
a) It breaks the link between the individual and the institution they attend. The centralist solution provides no guarantee that the money raised centrally would go to the institutions most valued by students. It perpetuates higher education institutions’ dependence on the state instead of freeing them from it. What is more, for many years until the graduate tax kicked in, universities would be left with debt financing and uncertainty. The positive benefit of top-up fees, that is an increasingly assertive attitude from students demanding better quality teaching, would be lost.
b) The graduate tax proposal would make it harder to create the market in competition and choice that needs to emerge in higher education. More universities need to reposition themselves on vocational and professional teaching. They will only do this if the fees they can charge concentrate their minds on their real strengths and potential.
We moved part way to a USA type university system by deciding that a very high proportion of young people should go to university, but we failed to understand that a US student can apply to the university of his choice knowing that his place will be allocated blind with regard to his personal family wealth. Fees will be assessed on his/his parents’ wealth (as grants used to be here) and that if he is unable to pay a bursary system will meet the full cost. Universities are not all the same and we need to encourage students to discriminate more between them just as employers in reality do now. A graduate tax won’t solve this problem.