Higher education, loans and progressive taxation

I saw David Willetts speak last night. I always find him one of the most interesting and thoughtful members of the current Government and so I enjoyed hearing him talk. The topic was widening participation to higher education and the occasion was the launch of some new research from the Strategic Society entitled Access for All. The research was interesting and used data from the longitudinal study of young people to look at young people’s attitudes to debt, university and to explore how this related with their demographics and social and cultural capital. I plan to look at the report in more detail and so hopefully I’ll blog on it in more detail then.

Back to Willetts. Inevitably the discussion turned to the Government’s position on fees and loans for higher education. Willetts made a very interesting manoeuvre where  he argued that we shouldn’t be talking about current government education policy in terms of loans and debt. These terms have negative connotations and may put people off. In reality, he argued, it was more like a tax. What is more it is a progressive tax where those who tended to earn more tend to pay more.

This is a very seductive argument and one which makes the Government appear far more progressive than they actually are. So I think that it is worth nailing this argument.

  • The current policy is very odd because it at once provides a major government subsidy to higher education in the form of the loan, at the same time as it makes the rhetorical point that government should not have to subsidise higher education. Higher education is positioned as solely an individual good, but government are willing to help individuals out.
  • The loan system also makes the argument that we should pay for the services that we recieve rather than pay for the opportunity to recieve them. I’m happy to pay for the NHS even if I don’t use it, because I want the opportunity to use it and I also want the opportunity for my friends, neighbours and even people I don’t know to also use it. The same is true of the 4-18 education system, we pay for it in order to have the opportunity to use it. However, the current policy on higher education makes the argument that you pay for what you get, rather than for the opportunity.
  • The loan system is not progressive. However, it does have a threshold for payment. This threshold is undoubtedly motivated by concern about forcing people into poverty, but it is also presumably motivated by a desire to avoid the challenges of extracting money from very poor people.
  • The tendency of graduates to earn more is real, but it is not absolute. What this means is that we have created a taxation system that is based on the average performance of people with a particular type of qualification rather than on actual earnings. This is problematic enough even if graduate salaries were a standard bell curve, but it becomes more problematic because we know that different subjects and different institutions offer different premiums and that accessing those with the high premiums is often strongly related to socio-economic status.
  • The loan system is not progressive because it is linked to what you have recieved rather than what you earn. Everyone above the threshold has to pay it back, even if their salary may be low in in relation to the national average. On the other hand those who have not been to university, but are very rich, do not have to contribute. You may believe that this is a good system but it is not progressive.
  • Finally the loan system is not progressive because it is set up so that rich graduates can pay it back quicker than poor graduates. Poor graduates look forward to a longer period of repayment than those who are rich and also to seeing a greater percentage of their life time earnings being used to pay for something that has delivered them less benefit.

So we can conclude that the current system is not progressive. This doesn’t mean that it necessarily should be made so. However it is important that we recognise it for what it is. It is also important to remember that progressivity is the basis of our taxation system, not some radical socialist pipe dream. While we are seeing an increasing number of arguments being made against both progressive taxation and the provision of universal services this remains the way that most of our public services are organised. We pay tax depending (to some extent at least) on what we can pay and we recieve services (health, police, fire, ademinstration etc.) depending on what we need. When things are taken out of this approach to taxation and we are told that they require a special form of funding arrangements I think that we should be sceptical and ask why this is so different from everything else.

For my money I’d like lifelong learning (not just higher education) to be available to everyone throughout life. I think that there are strong reasons for the provision of universal access to education in terms of developing the skills and capacity of the population, supporting happiness and the opportunity to access the good life, using it as a redistributive tools that can support income equality and fairness, and as a way of underpinning democracy with a critical and informed populace. To achieve this it seems to me that we need an education system that allows people to engage with it throughout life without being financially penalised. I also, for what it is worth, think that we need a strong system of career support to enable the linkages between learning, life and work. However, that is another story, and one that I’ll return to on this blog in the future no doubt.


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