NUS Graduate Tax will not work

14 June 2009
A short while ago, the NUS released their blueprint on education funding. Although it is a departure from the NUS's previous free education stance, it still has clear socialist roots. It is also flawed in several aspects. In particular:

Companies won't fund degrees outside their industry
Income will not allocated per-student
For some paying overseas fees would be cheaper

Employers will not pay into the up-front fund

Part of the fund is one in which employers will pay up-front into the scheme. The problem is that since this is aimed at building up the 'pot' there is no clear link to where funds end up. Companies that have an interest in subsidising university education are ones that currently have contacts with specific departments. BAE and Rolls-Royce will not spend money on English degrees; they will only want to support engineering degrees, and they will want a more hands-on approach to where it is spent.

Now guess why employer contributions are not quantified in the 'balancing the books' section (point 33).

Fee income is allocated centrally rather than direct

Under the current system, universities get tuition fees more or less directly. Under the NUS scheme it will be allocated via the Higher Education Funding Council. The problem with this is that HRFC allocation is somewhat political, where allocation of funding bears little resemblance to the number of students attending a university.

Those with means will go private

The report states that someone in the top 20% earning an average of £60,000 per annum will pay back £30,000 over the 20 years. £30,000 divided by 3 years is £10,000. In other words total payback is in the same ball-park as overseas fees. This is an incentive for those home students with the means to opt to be treated as overseas students for fees purposes.

There is no guarantee that said students would actually end up better off, but since the scheme relies on subsidiary from high-end earners any significant exodus of them destabilises the system. Since graduate tax income would be allocated centrally (see previous section) whereas overseas fees are paid direct, there is an incentive on the part of the universities to encourage take-up of private (i.e. overseas) fees. Unless specifically disallowed I suspect a lot of universities will go as far as allowing students to go private for some of the 3-5 years they study.