Raising taxes can shield universities from further funding cuts, says Vince Cable

The view of the Liberal Democrat business secretary is in stark contrast to the Conservatives’ pledge to make £7 billion of tax cuts

November 27, 2014

Vince Cable has made the case for higher taxation to lessen the impact of public sector spending cuts on the UK’s universities.

The Liberal Democrat business secretary told Times Higher Education that the consequence of not increasing taxes would be further cuts to higher education spending, which would hamper the country’s economic recovery.

The Department for Business, Innovation and Skills is thought to be modelling cuts that could affect all areas of its budget, including research. According to projections made by the Financial Times, non-protected departments such as BIS, which has a £17 billion budget, would lose a third of their budgets over the next four years if the government is to meet its present austerity targets.

Speaking to THE after delivering a speech to the annual conference of the Association of Colleges in Birmingham last week, Mr Cable set himself apart from Conservative coalition colleagues who want to make £7 billion of tax cuts during the next Parliament.

“I believe that, if we are going to have economic growth on a sustainable basis, we have got to invest in skills and science and innovation, and by skills I mean not just learning a trade but higher education and further education,” Mr Cable said.

“I’m fiercely resistant to the idea that the burden of deficit reduction should fall on these activities, and I’m fighting that corner. But have no doubt that if the next government, whoever it is, is not willing to use taxation to deal with the deficit, then these things are going to be hit.”

Higher education observers suggest that student support is the most likely area of spending to suffer, with one potential option being the conversion of maintenance grants into loans.

Mr Cable said that the coalition had increased spending on student support by more than the previous Labour government, but acknowledged that it was “going to face a problem” in future.

“Clearly, if we can’t protect the spending, then that is at risk,” Mr Cable said.

The Liberal Democrats want to raise additional revenue through measures including a mansion tax while increasing the tax-free threshold to help lower income households.

Speaking in the conference hall, Mr Cable said he believed that the policy of raising tuition fees to £9,000 had “turned out very well”, attracting increased numbers of students, including more from disadvantaged and ethnic minority backgrounds.

He added that he did not believe Labour would propose to reduce fees to £6,000, suggesting that senior opposition figures realised there were “far more important ways of redirecting resources”.

Talking afterwards, Mr Cable dismissed as “utter nonsense” a report published last week by the Higher Education Commission, which warned that the £9,000 fee system was financially unsustainable because of the amount of student debt the government would be forced to write off. “They were assuming this is a self-financing debt scheme,” said Mr Cable. “It isn’t – it operates, in effect, like a graduate tax, so the fact that 25 per cent or whatever it is of students are not paying is actually a good thing. It’s not a bad thing, because when graduates are on low income they shouldn’t be paying. People on very high incomes will be paying more, for longer.”

He added of the write-off figure: “It is not a real world concern. It is a purely theoretical, academic concern. It doesn’t affect public finances, and it doesn’t affect students.”


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