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University tuition fees could be replaced by a new “graduate tax” under new proposals put forward by business and skills secretary Vince Cable.  He proposed that the government would pay fees directly to universities instead of lending money to students to cover the cost and then having them pay these loans back by an extra top up graduate tax once they start working, with higher earners paying more.

The issue of University Tuition Fees is a sore point with the Liberal Democrats all of whose candidates at the May election signed a pledge to abolish tuition fees if they got into government. Of course no-one really thought they would have to deliver on that promise. The fact is that the Lib Dems have always been able to make promises to appeal to a wide range of vested interests safe in the knowledge that they would not be put to the test.

This time, however, despite coming third in the polls – and loosing several seats into the bargain – they find themselves in government with the Conservative party and it is not Conservative policy to scrap tuition fees. Indeed the Conservatives supported the previous Labour government in increasing them.

The concept behind the existing funding arrangement was always that people who had a degree would be able to get a job paying more money than a non-graduate.  If they earn more money they pay more tax, and probably at a higher rate, so it could be argued that a graduate tax is really a double whammy. Even those, like Vince Cable, who propose a graduate tax, admit it will result in graduates paying more in tax than they would under the existing loan scheme. But then the Liberal Democrats are generally in favour of higher taxation so we should not be surprised.

There is also the danger that a graduate tax would result in UK graduates going overseas to work or possibly even to study. Already it can be cheaper to get a degree in other countries than in the UK. These people would be lost to the UK economy. This country needs highly-educated individuals for the future as we are primarily a service-led country and anything that adversely affects this should be discouraged.

So Vince and his fellow Lib Dem ministers are in a quandary. An independent review of university fees and funding is currently underway, and Cable said he would ask the review to examine “the feasibility of variable graduate contributions”. Frankly I doubt he will get much change as there are too many good arguments against replacing tuition fee loans with a graduate tax.

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