Graduate tax ‘hybrid’ fairer for all, says top-up fees architect

Economist Nicholas Barr, whose research shaped Labour’s 2006 fee policy, says mixed graduate tax and loan system can fix funding crisis

May 22, 2023
Source: LSE

University students should pay lower tuition fees but potentially repay up to 120 per cent of their graduate debt under a “social insurance” model for financing higher education, the architect of the 2006 top-up fees policy has argued.

Calling for a radical restructuring of the graduate loans system, Nicholas Barr, professor of public economics at the London School of Economics, told the Centre for Global Higher Education’s annual conference that a compromise between a graduate tax and the current loans system was needed to address inequities and funding shortfalls.

Speaking at the event in central London on 22 May, Professor Barr said it would be unfair to abolish tuition fees – at a likely cost of £10 billion, according to some estimates – because it would direct taxpayer money towards those from affluent backgrounds who are more likely to attend university.

Universities also could not expect to secure additional resources given the growing demands of the NHS and the higher costs of caring for an ageing population, added Professor Barr, an expert on higher education funding models whose research was influential in the Labour government’s decision to raise tuition fees to £3,000 a year in 2006.

“Cost-sharing is here to stay,” said Professor Barr, referring to the need to combine graduate payments with contributions from direct taxation.

However, it would be unfair to impose a graduate tax because higher earners would pay vastly more than the cost of their own education over their lifetime, continued Professor Barr, who advocated a “hybrid” model in which higher earning graduates would pay a defined premium on top of their own student loans arrears – possibly about 20 per cent more – to lower the overall costs of the student loan system.

Speaking to Times Higher Education, Professor Barr explained that his proposed system would also involve a lowering of tuition fees and higher undergraduate teaching subsidies.

“Students should also be able to borrow at the same rate as the government,” he said, adding that the raft of changes would “make it realistic for graduates to pay back their loans in full”.

“There has to be a strategy,” said Professor Barr, who described the decision to increase tuition fees to £9,000 a year in 2012 as a “horrible example” of a policy that had sought to remove the cost of supporting higher education from the government’s balance sheet.

The reintroduction of direct teaching grants would also “give a lever” to ministers to influence policy, if they wished, said Professor Barr, who also suggested that changes to the loans system could be used to encourage the recruitment of teachers, nurses and doctors.

“If you want to encourage people to work as teachers and nurses, you shouldn’t just give them bursaries – if you want them to work in British schools or the NHS, rather than go elsewhere, you should say, for instance ‘for each year you are working here, your loan will be written off by this amount’,” he said.

Register to continue

Why register?

  • Registration is free and only takes a moment
  • Once registered, you can read 3 articles a month
  • Sign up for our newsletter
Please Login or Register to read this article.

Related articles