The tuition fee storm in a teacup

The Labour Party has now officially announced that it's going to abolish university tuition fees if it wins power, throwing itself into a debate that's been floating around student politics since they were tripled to £9000 in 2010. We have sort of known about this for a few weeks, and even before that everybody suspected it might happen, given the general tenor of Corbyn's politics and the passions of his base.

The main thing you need to know about the tuition fees debate is that it doesn't really matter.

Fees are nominally a way for students to contribute to the cost of their university education. But something you may notice if you're a student in England is that you do not actually pay any money to your university. You just get told about your contribution, which gets marked against your name by the Student Loans Company, and you pay it back over the course of the thirty years after you graduate.

But for all the Third Way dynamism of calling it a 'company', the Student Loans Company is entirely owned and financed by the UK government (and the devolved governments.) The cost of the 'student contribution' is borne by the government. Whether or not there are tuition fees, the government pays the entire cost of domestic students' education. There's no difference in how much money is being raised by taxation or debt issuance. The difference is just in exactly how the revenue is ultimately raised: by a mandatory repayment scheme that functions very like income tax, or in Labour's proposal by a range of taxes on high-income earners. (Even that's not quite right, since the loan repayment system actually only recoups a bit over half of the debt. The rest is already covered out of general revenue. I'm a bit puzzled by the fact that Labour seem to be quoting £11bn as the cost of this, when it should be more like £6.5bn accounting for written-off debt.)

It's not that there's nothing worth thinking about here. The benefits of a university education flow predominantly to the individual who gets it, so it's in principle preferable if that individual bears at least a fair chunk of the cost. But university graduates tend to be high earners, and the ones who aren't are also the ones who don't end up paying back their debts. It's basically the same group of people paying either way. We're talking about replacing a 9% levy on graduates whose income crosses the repayment threshold with increases in personal income and capital gains taxes. This is not a big deal: the government will be raising the same amount of money, from more or less the same people, in a very similar way.

Economically speaking, the Labour policy doesn't spend any more money or take any more out of the private sector economy. It proposes a set of tax increases on wealthy people to offset the effective tax cut of abolishing loan repayments. If that makes you think it's a policy with no real point, you should also consider the ancillary benefits. The most-mentioned one is that the fees-and-debt system discourages people in low-income backgrounds from going to university. There's not much evidence that this has happened on a large scale, but if it's happening even on a small scale that's bad. If you can fix that problem by rejigging the accounting without actually using any more money, why not do it?

The more common and strident criticism is that this is an expensive move and the money could be better spent on something else. That's only true if Labour could propose the very same tax increases without the offsetting repayment cuts and incur no extra political cost. That seems far from obvious. (Not to mention that it's a strange line for centrist critics of abolishing fees to take.) Even if it's right, it puts the debate squarely in the realm of pure politics. Looked at that way, it's surely a strong move to lock-in young voters and 2010 Lib Dems, and gives a lot of visibility and punch to the more broadly attractive 'National Education Service' programme. Maybe it's not that much of a political winner, though probably still more than increasing taxes to raise benefits would be. We should at least recognise, though, that it's not 'expensive' and, in policy terms, not much of a change.

Comments