Today brings a rejuvenating era of change and optimism. The new Labour administration in the UK has to shake off the past blunders of government and renew the economy. There is little money left to work with and only economic growth can improve things. This is a massive task that will take hard work and dogged persistence. There are no easy ways out and there will be disappointments. However, the hope is we will create a new society that is fair and equal and throws off the burdens of patronage and corruption that weigh down opportunity. The role of universities and their graduates in growing the economy will be crucial and we must maximise the impact through fair access and equality. Our future lies with the efforts of all, not just those who can pay.
When the Conservatives woke up from the parties they had in government this morning, they had the biggest political hangover in history. The electorate have inflicted a massive humiliation. The duplicity and false messages of levelling up have been rumbled. Running down our universities and deterring the least advantaged students in a policy of ‘social engineering’ has angered younger voters. Everyone expects ‘change’ and will not accept anything less.
A negative campaign.
The election campaigns were generally in agreement in acknowledging that the UK is in deep trouble, both financially and socially. The incumbent government was immediately at a disadvantage since most of the trouble lay at their door over fourteen years. Trying to say things were getting better did not convince many voters. Claiming credit for reducing inflation that was solely down to the Bank of England setting high interest rates was a foolish claim. This all led to a highly negative campaign whereby voters were encouraged to vote tactically against what they mistrusted the most. Clearly the Conservatives were the main target of the other contenders. Their response was to concoct a brutal and disingenuous attack on the Labour Party. Their social media and other reports led some to believe they had written the Labour manifesto and not the Labour hierarchy. The Conservative version departed from the official version with wild claims on taxation and pensions that were simply untrue. We definitely needed change.
The challenge of higher education.
TEFS has concentrated on what might lie ahead for universities and students. The various manifesto offerings from a series of posts were summarised with ‘Polling day looms: the only Higher Education promises that matter are Labour’s’. While the Conservatives promised no change, and a road that inevitably leads to fewer students, courses and university closures, Labour had a vision of bold change (see ‘Labour’s manifesto reveals a bold plan for universities’) however, there was no indication of how this was to be funded other than within the current fiscal limits.
The challenge will now be to deliver on those promises and the main ones are,
“Labour will continue to support the aspiration of every person who meets the requirements and wants to go to university”
and,
“Reworking the present system gives scope for a month-on-month tax cut for graduates, putting money back in people’s pockets when they most need it.”
These are tall orders made all the more difficult by further aims in previous statements that promised,
“Reworking the present system gives scope for a month-on-month tax cut for graduates, putting money back in people’s pockets when they most need it”
and,
“We will build on the legacy of the last Labour government’s target for 50% of young people to go to university”
The promise to work with universities opens a new era and a window of opportunity for rational debate to replace the prevailing open conflict between universities and the government.
“The current higher education funding settlement does not work for the taxpayer, universities, staff, or students. Labour will act to create a secure future for higher education and the opportunities it creates across the UK. We will work with universities to deliver for students and our economy”.
It is hoped that students and employers would be involved in working through a new system that distributes the repayment between the beneficiaries and not falling on the shoulders of students alone.
Funding and sharing the costs.
There are clear aims and promises in the manifesto and these are predicated on the assertion that there would be a “month on month tax cut for graduates”. They are currently tied into loan repayments for all of their working lives covering all of the costs. This is a very unfair non-progressive ‘tax-like’ payment through the HMRC system. The interest rates are extending the loan burden and repayment term and deterring new students other than those whose families can contribute.
TEFS has argued for some time that a fairer system would be genuinely progressive and spread the costs between all of those who benefit. These are, the graduates, their employers, and wider society. Making room for the reestablishment of maintenance grants and higher ‘fees’ to protect universities from inflation is also possible within current financial limits.
Calling for a National Insurance Graduate Levy.
The simple fact is we need a more progressive repayment regime with students paying less per month. The way to do this easily and efficiently would be to transfer the current loan repayments across to National Insurance contributions and spread these between the graduate employee and the employer.
If an incoming government is also to achieve its objective of funding universities at the right level and cut tax/loan repayments for an increasing number of students, then it would appear to be an impossible task. If fees rise, as they must do, then repayments would rise for students under the current system. The crisis in universities is mounting and they are crying out for stability so they can plan not panic.
How it could be done.
TEFS has looked closely at the simplest option that could be introduced quickly. This is a ‘National Insurance Graduate Levy’ that is inherently index linked. It simply protects universities from inflation pressures as it tracks pay inflation of graduates. TEFS has advocated this for some time and explored the advantages (see latest post TEFS 5th June 2024 ‘Funding students and universities and the election vacuum: addressing an urgent need with a National Insurance Graduate Levy’). It could also be presented to the Scottish voters as a no-fee option.
This would have progressive payments built in and would not represent a ‘new tax’ as it is simply a redistribution of the current student loan repayments. It would work within the ‘social contract’ like a reverse state pension (TEFS overview). It could be done quickly through consultation with universities, students and employers. TEFS would expect to see this built into a comprehensive spending review and starting in 2025. It would stabilise a rocky system and help all in planning across students, universities and employers.
There is no doubt that a new funding model is needed urgently for universities and students alike. There is a possibility of ‘change’ and the government should grasp the opportunity firmly.
The author, Mike Larkin, retired from Queen’s University Belfast after 37 years teaching Microbiology, Biochemistry and Genetics. He remains optimistic.