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This article is an opinion piece and should be taken as such. It is highly likely to be biased, but either the article itself or the ensuing discussion will probably be entertaining. Live! takes no editorial line on opinion pieces.

Top-Up Fees - What's the Alternative

Nov 01 2002 14:15
Stuart Davis
If we don't introduce top-up fees, how can we fund the Higher Education sector?
If we don't like the idea of fees, we need a credible alternative.

Apologies for the length of this article.

There has been a lot of debate on Live! and elsewhere about the pros and cons of introducing top-up fees. My personal belief is that they are a very bad idea, ultimately detrimental to students from all backgrounds, as well as harming the reputation of the College. But that’s a debate for elsewhere. What I’d like to do is to explore the ‘What if …?’s. What if the idea of top-up fees is scrapped? What happens instead?

Clearly, the higher education sector generally is facing a massive funding crisis, due to a combination of chronic underfunding under successive governments and New Labour’s dream of expanding access. I don’t think there are many people who would dispute that. So the government has to plug the gap somehow. Assume top-up fees have been permanently ruled out as a means of doing that. What options are left?

Firstly, the government could insist on cost-cutting measures. Universities can streamline bureaucracies, introduce more efficient structures, cut waste and merge together to introduce economies of scale. This would save a large amount of money. To a point this is already happening (especially at Imperial) and it doesn’t seem to be releasing as much cash as we’d like – certainly not enough to cover the £3K Imperial loses on each student per year – and there’s only so far you can go before your super-efficient system is unable or unwilling to be improved further. In any case, any savings are more likely to be bulldozed into research in order to attract more funding in the future rather than to pay for education today.

Secondly, the government could encourage more entrepreneurship within universities. In Imperial, this is particularly successful, with one spin-off company starting up every month or so. But companies take a lot of time – and a lot of money – before they start to return hard cash to the university and not all of them survive to the profit- making stage. Although such entrepreneurship should be welcomed as an additional income in the future, we shouldn’t be expecting it to fill the gap for a long time, if at all. In the short term, it could even exasperate the problem, as funds are diverted into the fledgling companies.

So universities can’t really be expected to foot the entire bill by themselves. This means the government has to lend a hand, through the imposition of fees, a graduate tax, a hike in general taxation or the diversion of funds from other areas of government spending.

We’re assuming that fees are ruled out. It is also unlikely that, after many years of doing the opposite, any government would suddenly divert funding from other areas into higher education. Besides which, they would have to decide which area to divert it from. Hospitals? The Police? Primary Schools? It’s not a decision I would relish taking and I think most politicians would rather avoid the issue as well.

So we are left with two possibilities, both of which involve the word ‘tax’ and as such will not sit happily with MP’s election managers. But lets assume that the spin doctors can help to introduce a graduate tax without actually using the ‘T’ word – it is possible, as with National Insurance (or Health Tax, as it isn’t otherwise known). Could a ‘Higher Education Beneficiary Levy’ or the like do the trick?

Well, yes, assuming you charge as a percentage of gross income above a certain level in a similar way to income tax. That way, only those who do actually benefit from having their degree will pay for the privilege, and the more they privilege, the more they pay. That sounds fair. It also removes the scattergun approach of fees, which would depend on the parents’ earning potential rather than the student’s.

The money raised should eventually be enough to bridge the funding gap, as least for the foreseeable future. As access increases, more people will graduate, more people will earn more as a result and more funding comes back to the HE sector, in theory.

Yet a graduate tax will not bring in cash overnight. It is something that would need to be phased in over several years – a bit like fees – so the funding problem will continue in the short term. There is also the problem of graduates going overseas after university – how do we tax them?

The other alternative is a hike in income tax for everyone. Again, this could be politically damaging, but from the opinions I’ve seen expressed on news and discussion programmes, it certainly isn’t as damaging as top-up fees.

It is an idea that returns to the roots of free education for all at the point of use, which holds well with many people’s principles, fitting nicely into the welfare state framework. Yet should we, who are expected to be amongst the top earners in the country, really expect people who are earning the minimum wage to contribute to our education? That doesn’t really hold well against socialist principles. Asking people to pay for everyone to be healthy and survive if they don’t have a job is fine; asking them to pay for someone to earn a huge amount more money than them seems almost perverse. Then again, you could argue that these high earners will pay more tax anyway and so will contribute more to higher education.

As usual, the ineffectiveness of the NUS has helped to exasperate the situation. They have helped with the introduction of top-up fees, campaigned against a graduate tax and then protested against student debt. This apparent schizophrenia has led to a lot of confusion in the minds of the government and the general public about what the best way forward would be. With the media spotlight firmly on Imperial and ICU’s independence from the NUS, Imperial students have a chance to come up with a credible alternative to top-up fees and to get that alternative onto the political agenda.

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Discussion about “Top-Up Fees - What's the Alternative”

The comments below are unmoderated submissions by Live! readers. The Editor accepts no liability for their content, nor for any offence caused by them. Any complaints should be directed to the Editor.
Nov 01 2002 17:28
 

Well done, you have done an excellent job of para-phrasing DR's comment from yesterday on the "Top- up fees are bad" forum!

Nov 01 2002 17:42
 

Well, DR did suggest that a debate should be started, so it seemed a good idea to take DR's comments as a starting point and flesh them out a bit. And it only seemed fair, since DR had used my earlier comments in that posting.

Have you got anything to actually contribute to the debate, or do you want to nitpick further?

3. DR   
Nov 01 2002 17:47
 

Jasper - I feel a hint of sarcasm in your comments. Stuart does indeed mention many of the points that I also mentioned as you correctly point out. However, I think it is good to bring all of these ideas together, as Stuart has done, so that we can move the debate on in order to come up with some solid and coherent alternatives. That can only be welcomed.

4. DR   
Nov 01 2002 19:04
 

OK, here it goes...what would my alternative package be?

1. Re-think the 50% target of school leavers going to univerisity. We do not need 50% of the population having degrees. All this will lead to is a watering down of degrees. This would result in people having to do a second higher degree (masters or PhD) in order to make an impact on the job market. I do agree that we need a knowledge based society but I suggest that putting 50% of the population through uni isn't the best way to do it. Knowledge can be gained in many ways. I point people towards the excellent apprenticeships programmes that are run in this country. The problem is that there are few of these about. The advantage of these is that they are very cheap to run for the government, the student gains 'on the job' experience (making them more employable in the process) AND gets paid a modest salary during their training. I think by doing this a subtantial amount of money could be saved.

2. However, I recognise that this would not fill the entire higher ed black hole. Therefore, I suggest income taxe should be increase for everyone who earns about a particular threshold. Yes, some people will have to pay these taxes who don't go to university but isn't this the case for many areas of public spending? For example, everyone pays taxes for schools - but not everyone has children, everyone pays taxes for welfare support - but some people don't claim a penny of benefit in their life, I could go on but I won't. The point is taxes go on things that we consider to be generally beneficial to society. The amount of money needed to fund the higher ed shortfall is substantial but is not nearly in the magnitude of the shortfall in health spending of yester year so would not require as large as hike as we saw with the increase in NI contributions.

This said I realise tax increases of any sort and of any magnitude (no matter how small) are not going to be popular with the public and particularly with The Sun so this policy is not going to be a vote winner. Taking this into account I think it would be extremely difficult to persuade the government to adopt this policy. I therefore have an alternative to my alternative:

That is, of course, a gradaute tax with the following caveats: (1) it was only payable when peope earned over a particular threshold (we can talk about what that threshold would be later if people think that the idea is good); and (2) the money raised by the gradaute tax went to the university that the graduate studied at, rather than being divided into one large pool and divided out evenly. I see many benefits to this system. For instance, universities that produce the best graduates would be rewarded fairly for their endeavours. This in turn would lead to competition for places at those universities. Competition is good and is the best way of raising standards both personally and in a system as a whole. People may argue that some graduates go into worthwhile jobs that are not well paid so would this be fair? This may be the case for individuals but I think on average we can make the generalisation that graduate from the top universities tend to earn more than those from the 'not-so-top' universities. This is certainly the case for Imperial - over the last few years it has been ranked as 2nd or 3rd in most teaching league tables (depending on which one you read) and 2nd in research league tables. So it's a fairly safe bet to say that Imperial is very good academically. It is also the case that Imperial graduates earn more (on average) than graduates from any other university in the UK. Yes, some Imperial graduates don't earn a huge amount, for example, those who decide to stay in academia. However, as I've mentioned already we're not talking about individuals but in general trends.

I do not have an answer on how to make it a fair system in the case of graduates who seek employment overseas after graduation. Perhaps we students could have a choice - either pay up front fees OR pay a graduate tax on completion of studies. Students who leave to work overseas could then be asked to pay fees in arrears. I'm really thinking off the top of my head now...but it's an idea!

Nov 01 2002 19:46
 

I'm still in two minds over whether the 50% target is praiseworthy or insane. The principle of extending education to all and allowing people to stretch themselves as far as they can is extremely laudable. But, as has been pointed out elsewhere, there aren't 50% of jobs that require degrees and that vocational courses may be better suited.

Yet this smacks of elitism, of which many people - quite rightly - are trying to rid the education system. But then it precisely the elitism of a degree that makes it worth having.

Hmmph. I'll leave other people to debate this one. But we can't escape the fact that 50% is the government's aim, so when we consider the alternative to fees, we need to assume that this will become a reality, whether we like it or not.

Certainly, some form of taxation is a viable solution. Yet I don't think a simple rise in income tax is best, as you will inevitably end up with people without a degree paying for someone to get a degree and earn a large amount of money. Whether the former is in a high tax band or not, this is basically what seperates higher education funding issues from the other education sectors.

I have a lot more time for a graduate tax based on a percentage of income above a fixed level. Although I wouldn't like paying it, it would be fairer in the long run. Only the person who benefits from a degree pays for it, when they can afford to pay for it, and the more they benefit, the more they pay. In principle, it's extremely fair. And that goes for academics and other graduates in very worthwhile yet poorly paid jobs - they simply won't pay as much as those who earn more than them.

Of course, as DR points out, there would have to be an income level at which people start paying. This level would be set quite arbitrarily by the government, just as the threshold for fees is now. This will inevitably lead to a point in the future where this level is low enough for people to have to start paying the tax before they are really able to, just like student loans now.

Plus, it will take time before a graduate tax starts paying its way and plugging the funding gap. What should be done in the meantime?

As for DR's suggestions about giving this money directly to the univerities - I find this intriguing. On the face of it, it sounds like a good idea. But it could lead to a lot of universities putting up their entrance grades to the highest level in order to attract only the best students who will earn them the most money. This could mean that people with quite good A-levels (or whatever they will be next year) can't find a place, completely destroying the governments 50% target. And that's before we've even considered the bureaucratic nightmare of implementing such a system.

As for those who depart overseas - hmmm ... Pass.

6. Seb   
Nov 06 2002 13:47
 

Appologies for the C/P but I thought this might be relevant.

The ICU fees working group has published some of our analysis on the website http://www.union.ic.ac.uk/no2fees

the full report will go up some time later. In the mean time a quick guide to fees (PDF of a pamphlet that will be out in hard copy next week) is now available on the website.

7. yt   
Nov 07 2002 21:04
 

Just curious. Are overseas students currently subsidising the home students because the current fees for overseas students are still higher (12,000+) than the proposed top-up fees for home students (about 10,000).

8. Seb   
Nov 07 2002 22:23
 

Yes, they probably are.

Closed This discussion is closed.

Please contact the Live! Editor if you would like this discussion topic re-opened.

 
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