A keynote policy speech by Keir Starmer earlier today, and at the Scottish Labour Conference over the weekend, renewed the party toward electoral success across GB and especially in Scotland. There is an atmosphere of ‘cup fever’ as the inevitable Labour success across Britain (Labour do not stand candidates in Northern Ireland, so it is not across the UK) was tangible. Debate about the needs of education and young people is being discussed in earnest. Yet there is an elephant in the room as debate about how it is to be funded is being avoided. The issue of a ‘graduate tax’ solution was not broached. Yet Labour must answer this question sooner rather than later.
Labour and its five missions.
Earlier today the Labour leader, Keir Starmer, made a speech in Manchester laying out the five ‘missions’ that a Labour Government would seek to achieve when in power. The speech mirrored a lot of what he said at the weekend at the Scottish Labour Party Conference. Media reports have been a bit patchy and focus on the apparent lack of detail on how the aims could be achieved in practice. Starmer insists all would be fully costed and he and colleagues have a lot to do to finance these.
The full speech was published by ‘Labourlist’ later this afternoon.
The five ‘Missions’ are:
“Secure the highest sustained growth in the G7, with good jobs and productivity growth in every part of the country making everyone, not just a few, better off.
“Make Britain a clean energy superpower to create jobs, cut bills and boost energy security with zero-carbon electricity by 2030, accelerating to net zero.
“Build an NHS fit for the future by reforming health and care services to speed up treatment, harnessing life sciences and technology to reduce preventable illness, and cutting health inequalities.
“Make Britain’s streets safe by reforming the police and justice system, to prevent crime, tackle violence against women and stop criminals getting away without punishment.
“Break down the barriers to opportunity at every stage, for every child, by reforming the childcare and education systems, raising standards everywhere and preparing young people for work and life.”
Breaking down barriers to opportunity at every stage of education is a bold aim. Yet it is a basic principle that eludes the current government who seem to add more barrier layers at every stage. Reforming university finance will be crucial to achieving this and the role of a graduate tax may come to the fore soon. However for now it is the ‘elephant in the room’.
Football supporter Starmer could not resist deploying a football analogy at the outset, likening a simple mission to a team setting out to win a cup or league championship. Its apt and there is a buzz of ‘cup fever’ permeating the party at all levels.
Cup fever.
The Scottish Labour conference in Edinburgh last weekend took part against the backdrop of the party surging ahead in the opinion polls. The release of intended voting figures for Scotland on the first day galvanised those present. This was a poll by the most respected political polling organisation in Scotland, the academic run Scottish Election Study. Their latest survey, done earlier this month with YouGov, puts Labour within 2% of the SNP and rising fast in Scotland. With Labour putting clear water between themselves and the Conservatives in England, there is a genuine feeling that a seismic change is coming.
It is not often that one can almost touch success in the arena, but it was there this last weekend. Cup fever happens when an underdog team starts to exceed expectations as it rises to the challenge. You know it when you experience it. I felt it in late 1986 months before Coventry City won the 1987 FA Cup in a classic game. Anyone who saw the team play months beforehand knew they would win that year. It was a given right up to the final minutes and the final whistle. A similar feeling permeated the conference. But there are several rounds to go before the result. Success in Scotland will inevitably fall into place after a big win in the general election that comes first. The message was clear about first supporting Labour at Westminster to oust the Conservatives.
Avoiding the elephant.
A packed fringe meeting at the Scottish Labour conference was organised by the Royal Society of Edinburgh and asked the simple question, ‘What’s next for Scottish Education?’ This triggered many different views with an attentive shadow spokesperson on education and skills, Michael Mara MSP, sitting on the panel. They focussed on numerous challenges ranging from skills, demography and a falling population, STEM shortages, changes driven by AI and new technology and critical thinking shortfalls.
There was only a brief nod to access and participation. However, help for the least advantaged was called for by Liz Connolly, Principal of West College Scotland. The panel were then bombarded by questions related to equality and access from those attending who clearly had different priorities. Mara promised that, “something will be done”. But afterwards ducked the issue of funding, fees, number caps and a graduation tax. A debate on ‘The change our young people need’ also avoided the funding dilemma.
In another fringe event organised by ‘Labour Friends of Scotland’, panellist Pat McFadden, MP and Shadow Chief Secretary to the Treasury, was also put on the spot about the “inevitability” of a graduate tax . He did not reveal anything but importantly there was no denial. Between Mara and McFadden, TEFS found out that there are advanced and detailed discussions ongoing between Scottish Labour and Labour in the rest of the UK. One might expect a common system of funding to emerge under a Labour regime.
Elephant, Elephant, Elephant.
It seems the past cry of ‘Education, Education, Education’ has been muted across the board so far by the presence of several elephants hanging around.
The issue of ‘fees and graduate tax’ present at the Scottish Labour Conference is only one from whole herd of elephants. Their friends are dispersed around many other political and policy forums. These include the Labour Party Conference and Conservative Part Conferences last year. It means Labour must reveal its position sooner rather than later or risk the accusation of being evasive.
Is a graduate tax inevitable?
Bearing in mind the current Labour promise to abolish fees still holds, it would appear so. It would be the only alternative with a no fee regime. But introducing fees in Scotland would be a major blow to Labour’s chances in Scotland. ‘Rocks melting in the sun’ was the SNP promise on this and it seems to have stuck in the electorate’s minds. Aligning with the rest of the UK on a taxation solution is thus inevitable if fees are to be avoided. The relationship with Scotland is crucial.
Would a taxation solution be fairer and remove inequality and barriers to opportunity?
This is still an open question and it’s a difficult balance. There are two overarching things to contend with.
Firstly, there is the tax itself. Restoring the finance to a progressive tax solution instead of loan repayments could have many advantages. But only if it was highly progressive in taxing those on the higher earnings more. There will also be an imperative to expect employers of graduates to contribute some. This might be via additional corporation tax or a higher employer contribution to national insurance for graduates employed.
Secondly, and importantly, there is the problem of students still subject to an existing unequal system and exclusion. The move to T-levels in England is designed to divert would-be university students down a technical route directly to employment. They might not expect to contribute other than in general taxation. But those taking on a university place would expect to receive a means tested maintenance grant to level the playing pitch (another football analogy). Under the current system, they can only get a loan and have to pay it back. Those with family support avoid this and the greater payments. Under a graduate tax every graduate would contribute.
Pros and cons.
Those against a graduate tax cite one major potential problem. It revolves around a deep mistrust of all governments and how they operate. The current fee and loan system at least sends money directly to the universities pro rata. But with the fees capped, this is now inadequate. Under a graduate tax regime, a future government might divert funds elsewhere and continue to starve universities. Worse still, begin to interfere in the autonomy of institutions and display favouritism.
This can be avoided firstly through a well drafted Higher Education Finance bill. Then by reforming regulation to become genuinely independent and with powers to ensure institutions benefit from funding directly. It is not impossible.
But there are many other things to consider and it will take consideration of multiple modelling of scenarios and questions will remain.
Could employers avoid employing UK graduates to avoid any levy associated? Would graduates avoid paying by moving offshore or employers deploying some offshore avoidance scheme? The issue of how long it would take for the initial investment to yield a return was a major hurdle to jump in earlier plans. However, bearing in mind the miscalculation about loan repayments and the rising cost to the taxpayer, this is no longer a real issue. But dealing with those currently paying back loans could be like playing a football match in a minefield (sorry).
Phasing in a graduate tax on top of existing loan repayments would not be popular or even possible. Instead, loan repayments would have to be suspended as a transition to the graduate tax emerged. The cost to individual students would somehow have to be lower than, or at least match, the existing burden. Those earning more would naturally resent having to pay more overall through a tax, but those on lower incomes might appreciate that change.
Capping student numbers.
This would be a major hurdle to overcome if there were no fees and with the general taxpayers bearing the full cost. There is a cap on numbers in Scotland and Northern Ireland. But full fees paid for through student loans in the rest of the UK was a major driver in increasing more access and avoiding a specific cap. But the government is now trying to deter students from taking up places by other means. TEFS view is that a planned number cap is sensible. The only question that remains is how generous the cap should be. Certainly, greater numbers than currently allowed in Scotland and Northern Ireland would be needed. The instigation of a graduate tax would remove the need for fees and allow more flexibility around setting a number cap.
How old is the idea of a graduate tax?
It is certainly not a very new idea and has been rattling around all of the main political parties. It first appeared in earnest in 1992 from Gordon Brown who was the chancellor. The idea of a mechanism for student loans emerged in 1990 from the dying embers of the Thatcher Government. By the time of the Blair administration of 1997 the idea of fees and further loans was taking shape. The Dearing Report of 1997, ‘Higher Education in the learning society’ told the government that, “We conclude, therefore, that graduates in employment should make a greater contribution to the costs of higher education in the future”. Tuition fees emerged in the Higher Education Act 2004.
In a push to go further, The Browne Review ‘Securing a sustainable future for higher education: an independent review of higher education funding and student finance’ was set up by the Labour government in 2009.
It was attractive to the incoming Conservative government in 2010 in concluding that, “A graduate tax has some attractive features, but it is unworkable and it weakens institutional autonomy as well as the role of student choice”. This was considered to be a difficult challenge to the independence of universities, which would become entirely dependent on the government for funding. Yet universities minister, David Willetts, indicated that a graduate tax was the preferred option very late on in 2010 stating it was “by far the best option to go for in tough times”. This aligned with the view of his coalition partners who were getting understandably jittery about fees and loans. It didn’t happen and the seeds of betrayal were sown.
But the graduate tax idea did not go away. Education Secretary, Justine Greening, was ousted from her position in 2018 and departed the Conservatives in 2019 (TEFS 6th September 2019 ‘Justine Greening…Greening… Gone!’). Although she held the torch for disadvantaged students and social mobility, her plans for abolishing fees and replacement with a graduate tax were going too far for the advantaged establishment. It smacked of Labour policies and its a wonder she didn’t cross the floor to Labour.
The same is still the case and the argument rumbles on (see Times Higher Education June 2022 ‘Will Labour commit to an English graduate tax?). The House of Commons Library also provided a comprehensive review of the issues back in 2010. However, these problems are not insurmountable and a fairer system that is tax driven can emerge in time.
The author, Mike Larkin, retired from Queen’s University Belfast after 37 years teaching Microbiology, Biochemistry and Genetics.