Letter: Grants solution

May 11, 2001

It is hardly surprising most people think maintenance grants are better than debt ("Give students back grants, urge voters", THES , May 4). Unless asked who is supposed to provide the money for grants, most people find it hard to focus on the tax and other implications of different funding methods. But here is a solution that squares all circles other than the Treasury's aversion to sensible accounting:

  • Students are eligible for grants that cover fees and living costs, and the totals are calculated sensibly so they really cover the cost of living. The total grant available from public funds is offset by what their parents (both of them) are expected to contribute (out of both their income and their non-pension savings, such as unrealised home equity)
  • The grant becomes a tax arrear in later life and is collected by a small surcharge on basic rate tax and a larger one on higher rate tax, the amount to carry no interest but to be inflation adjusted
  • Institutions set their own fees and can charge more for courses that have no educational value but lots of future income (if there are such courses). Students can work out how they want to invest their time and future earnings
  • Students from badly-off backgrounds get a chunk of the grant as a no-strings-attached gift
  • Mature students are assessed on their own incomes and savings.

The advantages are obvious. It is not called a loan and it does not look like a debt. It gets the government out of setting fees, which would allow everyone to decide how to cover costs and discover their place in the market. It makes better-off parents - who have benefited from the halving of the top rate of tax and the run-up in house prices and the stock market - contribute according to their ability while handing out grants according to need. Eventually, it would be substantially self-financing, less the free gift made to the badly-off and non-repayment from people who decide against becoming fat-cat executives after getting an MBA.

It is pretty much a rip-off of one version of Cubie, and the various elements in it have worked in Australia and California. A government addicted to stealth taxes ought not flinch at the fact that it is a stealth tax on the well-off. Enemies of private education ought to enjoy the fact that those who can afford £20,000 a year for Eton will have to carry on paying for their children at Edinburgh. Any government should like the fact that it can rig incentives in the labour market by tinkering with tax concessions - no need to compel doctors to work for the NHS when you can bribe them by forgoing their fee repayments.

This solution is, of course, hideously expensive in the first ten or 15 years - though this would be offset by cuts in Higher Education Funding Council for England funding if fees were lumped in with maintenance. If the Treasury could think of it as running a "zero real interest" loan book, and charge public expenditure only for interest forgone, with an allowance for non-repayment and the annual bill for the free gift, we would be home free and we could all get back to teaching, and to writing the occasional book.

Alan Ryan
New College, Oxford

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