21 comments on “Peter Hain hasn’t noticed

  1. Everyone who thinks this is a material change should have their university offer rescinded.

    Though it also:
    – Makes the tax system more of a mess as you now have to state if you went to university after a certain date.
    – What happens to people who leave the UK under the current student loan system? What would happen here?

  2. And how exactly is this going to affect foreigners who went to university in foreign? Or is it only going to be applied to people who went to a British uni?

    And, as Tim said, the current loan system is indeed a time and amount limited graduate tax.

  3. I’ve been saying this for years. We have a graduate tax, we just don’t call it that. We could call income tax a ‘citizens debt’ that has to be paid off over your working lifetime, but only if you earn a certain amount of money. And will be written off when you get to pension age. But we don’t, we call it what it is, income tax.

    “What happens to people who leave the UK under the current student loan system? What would happen here?”

    Simple – you either repay the full cost of your education before you leave, or pay the graduate tax to the UK on your income abroad (after allowance for local taxes of course). You can do a runner if you like, but if you want to come back the back taxes will be still be due.

    “And how exactly is this going to affect foreigners who went to university in foreign? Or is it only going to be applied to people who went to a British uni?”

    The latter of course. We’re quite happy to have Johnny Foreigner educate people who then come here and give us the benefit of that education. Foreigners who come to UK universities will have to pay the full cost of their course.

    I would make the tax due on anyone enrolled on a university course, regardless of whether they finished it. That would put a stop to people trying it on a whim. Or even doing the entire course then not doing the exams.

  4. @abacab

    Someone is going to have to explain to me how a system that doesn’t limit total amount and time of repayment is fairer.

    People of very high ability in fields where ability is relatively easy to demonstrate (eg by automated assessment or by ranking/competition or where reputation and experience are relatively easy to acquire) and the important material can be learned online or in books would be better to skip uni entirely. Programmers who can build up a CV on open source projects, maths whizzes who can take part in competitions or simply ace employers’ entrance tests, writers and designers who can build a portfolio up… I know there is already pressure from fees not to go to uni unnecessarily, but if the cost of doing so for a talented person is likely to run into the millions over their lifetime that’s a huge disincentive.

    Alternatively, if graduates of foreign universities aren’t taxed, creates a very clear reason for people who intend to be high earners to do their studying abroad. Even with support for your living costs etc you’d be mad to study eg medicine in the UK unless you wanted to practise abroad. And if graduates of overseas universities are taxed, as well as (depending on system) also having to pay fees to them, then that’s a pretty horrid double taxation that would incentivise fewer Brits to go abroad to study and make us more insular.

    I’m at a loss what this drive for a graduate tax is all about really. If it is simply a way of making higher earners contribute more, general taxation (particularly income tax) seems a better way to do it – it seems unlikely to me that super high earners are enjoying that differential purely based on university education, so attributing it to their graduate status seems a mistake (that would also allow high flying non graduates to come off unscathed).

  5. Easier to not finance degrees that lead to career paths in which the chance of full repayment of loans to the government is slender. Bye bye media and grievance studies!

  6. abacab said:
    “the current loan system is indeed a time and amount limited graduate tax”

    The “amount limited” bit is different to a tax (at least as we do tax here). It might not make much difference directly to most people, but it is important at the top end. And, as we know, how we tax the top end does have important economic effects.

    Various places have shown that the limit is important. Jersey, Isle of Man, Malta, several other places, have at various times encouraged high earners to move there by offering a maximum tax, and it’s been very popular.

  7. Given the repayment terms of those loans we pretty much do have a graduate tax system

    Ah, but it misses out past graduates, who also happen to earn lots more money as they are all now 40+. Don’t think for a moment Hain et al haven’t thought of this.

  8. As an ex student who has the graduate tax I can say its pretty good.
    Many years ago my classmates at school all went to university. They had overdrafts, they had credit cards, and for a chunk of them they left university with large debts.

    20 years on I went to university, I used government financing and didn’t have any overdraft or credit cards, I also worked full time but had a family to support, unlike my old classmates.
    So I left university in 2012 with no debt. I have a graduate tax, to date I am within the tax free limit and when I retire the debt will be gone.
    From my point of view the graduate tax scheme has worked well.

  9. Rob – depends when they went to uni. I graduated at age 40 and was far from the oldest in my class. There were a bunch of 18 year olds who started my course, plenty of mature too.

  10. Trouble is, there aren’t enough disincentives in the current system.

    Graduates don’t have to start repaying their loans until they’re earning more than £21,000, and no interest is added until that point.

    A lot of people are still doing degrees that no-one but themselves really values, but they’re getting other people to pay for them.

  11. Ljh: Easier to not finance degrees that lead to career paths in which the chance of full repayment of loans to the government is slender.

    Good plan but difficult to design and implement. An alternative would be to look at what happens with students who have repaid none of their “loans” when they reach retirement age. At that point, let the principal be repaid from their state pension over, say, 21 years and the interest be forgiven.

    It does seem bonkers for the taxpayer to pay for an excess of self-indulgent uselessness by inherently feckless spongers.

  12. The Meissen Bison said:
    “It does seem bonkers for the taxpayer to pay for an excess of self-indulgent uselessness by inherently feckless spongers.”

    Yes, and that’s just the lecturers!

  13. @MBE
    There’s a very good reason for university graduation. To restrict tertiary education to the university system. You wouldn’t want all those intellectuals to have to go out & get proper jobs, would you?

  14. Doesn’t the rather high rate of interest mean that it doesn’t function like a tax? And indeed undercuts government policy to encourage STEM careers?

    6.1% in the current wider rate environment is pretty steep and means the system discriminates in favour of those students who join the City and pay off their debt quickly, rather than those who take an engineering job on 30k a year and take decades to pay off their debt.

  15. Best thing is to remove the fees cap and make prospective students pay up front, in cash. If loans absolutely have to be available then the risk of default must fall entirely on the lender, and no public money should be at risk. No threshold for repayment either. If you get behind then you lose your house or you have your wages/benefit/whatever garnished. Get university entrance down to the 4–5% or so where it belongs. If it costs £80000 for a decent degree then tant pis.

  16. @john77, if he had gone to prison, he wouldn’t have been a government minister nor would be sitting in the HoL and we wouldn’t to put up with the smarmy twat.

  17. David Boycott – but the graduates do not pay the interest, they just pay the tax.
    Unless getting highly paid jobs most won’t pay anything.

Leave a Reply

Name and email are required. Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.