A Labour minister has just tried to explain on LBC why U.K. society requires young people who attend uni to pay a graduate tax

[EvangelicalAboutButteredToast]

And I’m confused. He was trying to say it was a student loan and then accepted it was a graduate tax and that society deemed that the right thing because they were more likely to out earn those who didn’t attend uni.

I thought that was what income tax was for alongside all the other taxes. Are uni courses subsidised by the government. Is it that?

Basically, they’ve used it to fudge unemployment for the last 20 years
5% of the population usually young people initially would normally be unemployed
They haven’t been unemployed because they’ve kicked the can up the road and they lived on borrowed money literally and time and they should’ve been paying down them mortgages and investing in pensions.

I think the principle of a graduate tax is fine.

What I disagree with is the mis-selling.

The way this product has been advertised, and its terms, would be clearly illegal if the govt were a normal financial institution.

It also introduces yet more cliff-edges and bizarre cases into our already irrational tax system.

Nope, UK student numbers are on par with pretty much all Western countries & in the worlds largest economy, the USA, over 40% of 18 to 24 are in Higher Education, with 62% of 18yo enrolling in further education.

All of Western Europe has similar % to the UK, the difference is they do not charge students such large amounts as UK does.

If we want a world class economy, its time to cut fees and change the courses offered, to more match the evolving work place, whilst still offering culture/arts etc

My university town would die without the university. It’s not just the students, but it’s the fact the university is one of the largest local employers. If not THE biggest.

I’m originally from a non uni town and can see the difference having a university makes to the local economy.

Few universities in the UK have significant endowments, only a handful of elite universities. Assets are things that are used every day - buildings, equipment. Staff, of course, are easier to get rid of - a lot are being laid off at the moment.

No they don’t, only a very, very small number of elite universities are in this sort of position.

What bothers me about the system is that middle earners may pay the most. Low earners don’t make enough to pay or pay little. High earners will pay off their loans. Middle earners will simply pay for decades and never clear their debts.

Yes Plymouth Uni has laid off many staff, its very short sighted of the Govt, the Uni sector is or rather was, World class, now we are just Good.

The focus and costs on tuition fees will put people off and this means less nurses, physio's etc engineers, scientists .....

Labour said the burden would fall on the "Broadest Shoulders" but Reeves has just said "The system is fair and we need more investment in the NHS...." so the burden falls, yet again, on the young, meanwhile those on a joint household income of 75k can claim WFA.....

Fwiw This will change who i vote for at the next GE and it wont atm be Labour.

If you have children who have no idea what job they want to do and they haven't even managed to get a Saturday job as they don't seem to exist anymore, the only option after 18 is uni.

@CactusSwoonedEnding

Agree with the diagnosis of the problem, but not the solution.

The reality is that kids who have fully researched their degree, worked hard and made an effort to get relevant well paid employment will just be subsidising people who haven’t done a good job at this process. I came from a background in which I didn’t get lots of help from school or contacts and trained in a degree and a job I didn’t love hugely because it was lucrative (and paid off my £16k of debt within 4 years) what’s the benefit if I am taxed even more on that?

Now, I would say that the market is broken and that students are not getting enough information about what is in their best interests or access to good courses and jobs, but that’s a market failure that requires government action, not just penalising the successful. We should be closing a whole range of courses that are not delivering value and requiring better grades to get on university courses. At the same time, we should be providing good technical options, with the option to live at home or to live away and have a “university” experience whilst training as a plumber etc - if we converted one university that is not delivering good paid employment per region so that you could attend training within an hour or two of your employment, we could train lots of people for technical jobs of the future.

The student loan system has always been a graduate tax with a lifetime limit on how much you pay. The only reason it was not set up as a graduate tax is that we were in the EU at the time, so the UK would have been required to provide free tuition to any EU students attending UK universities with no way to tax them if they went back to their native country after graduating.

Those who are in low paid work - their interest accumulation will be greater than the amount they pay off - impacting their finances for their whole working life.

Those who are in low paid work will not pay anything. The threshold for repayment varies depending on which plan the student is on, but the student definitely won't pay anything on a loan for a first degree until they earn at least £25k a year, and may be able to earn up to £32,745 before they pay.

A student loan does not appear on the student's credit record and will be written off eventually. So no, this will not impact the finances of those who are in low paid work. There will, of course, be an impact on the finances of those who earn enough to start paying and, if they don't earn enough to pay off the loan, it will do so for 30 or 40 years (depending on which plan they are on). So, for example, a student on plan 5 (the current plan for students in England) earning £30k will pay £450 a year until the loan is written off.

Borrowing money for the loan to pay for their university education that they can pay off when they starting earning is one thing. tPaying a small amount of interest on top is reasonable. Paying extortionate amounts of interest is not!

For most students, the interest rate is 3.2%. The exception is students who have a postgraduate loan and students on plan 2, where the interest rate can be up to 6.2%. Compared with commercially available unsecured personal loans, this is not extortionate.

I'm not saying the system is without problems, but misinformation doesn't help. When the government raised tuition fees to a maximum of £9k, the expectation was that this would create a market, with different fees being charged by different universities and, indeed, by different courses at the same university. That hasn't happened. Instead, all universities charge the maximum allowed.

@EvangelineTheNightStar The loan students get is underwritten by the government. Fast approaching £250 billion. So yes, the uk government funds HE! In more ways than this too.

We enlarged our university sector in the 60s and 90s. This meant we tripled the number of dc gojng. It became unsustainable for students and grads not to contribute as they have always earned more. As universities expanded we’ve ended up with lots of grads not earning as much as they should and too many degrees are not high quality.

So yes, I believe there are issues and perhaps we need to reduce undergrad numbers and boost other routes of learning for 18 year olds? If we went back to 10% doing degrees there would be a massive outcry though. We have expended the sector and found students to fill it.

The issue with plumbing, electricians etc is that you need to have a fair bit of academic ability to complete the course. Also, to make money from it, a lot have to be self employed and have a head for business etc. It's not for those of us who aren't academic

Having seen how the Pillar 2 students have been treated, I have decided that I don’t want my children’s’ futures to be treated as a political football and am saving to fund their fees myself so that they don’t have to take out loans. We have made choices to sacrifice other things so that we can do that. It’s the plan, anyway. But I’m very aware of the fact that a “graduate tax” that doesn’t tax the wealthiest isn’t very fair or morally justifiable.

@WutheringTights How will they then afford a property? It’s actually not very sensible to take that approach and spend £60,000 on uni costs. Assuming they move away. Surely those savings are more use elsewhere?

It also makes NO odds about what the total loan looks like when it’s based on earnings. Lower earners pay lower amounts and that’s fair enough. Repayments are not based on size of loan so interest doesn’t make much difference. Paying it off immediately can be useful if you have the money spare but most people put housing above doing this unless they are high earners or inherit money. Paying up front when your dc might end up on £30,000 is just financially not astute.

We have their house deposits sorted already, thank goodness. We don’t have family wealth, both grew pretty poor, just made deliberate choices to pursue lucrative careers and have prioritised saving for pensions, house deposits and university fees.

In that case, saving and paying isn’t an issue for you and I assume you aren’t in London? However most parents don’t have £60,000 plus house deposits lying around. Our DDs house deposits were far in excess of £60,000. Multiples in fact.

We could say this about schools as well, though. Why should society pay for every child to be educated completely free, rather than giving their parents the figures - costs and repayments for that education over the next few decades - and leaving them to decide if they think it's worth it to them/their child when grown up or not?

Obviously, we all know how we would end up if we did that, and saw most children priced out of education. Why does this magically stop at 18? Don't we want any graduates to do all of the graduate-level jobs that society needs anymore - or maybe just keep it a closed club for the richest people and their children, and their children?

I agree with OP: if the government are so convinced that going to uni is a guaranteed route to riches that will make tens or even hundreds of thousands invested in going seem like back of the sofa change once you're earning... well, that's exactly what income tax is, isn't it? Higher rate tax paid on a lifetime career on six figures or even more makes state funding of university a very good-value investment, eh?

This is exactly how they will scrap the state pension completely before long - certainly for those approaching pension age, even if they keep it for the rest of existing claimants' lives.

The self-righteous anger hurled at students: "Why do YOU think that the taxpayer should have to pay for YOUR university education?" Swap 'university education' for 'retirement' and people retiring will face exactly the same vitriol and hatred for daring to want a state pension after working hard and paying taxes all their lives.

Also, the level of taxation - ostensibly to cover a whole system of state pensions - will mysteriously never decrease, even once state pensions are a thing of the past and those billions of obligations have now disappeared forever from the government burden.

@AntiqueBabyLoanSmurf That’s ignoring the fact that universities expanded by 300% in fairly recent times. It’s also a choice to go for many. Getting old isn’t and government policy could address taxing richer pensioners. If we continue with no growth, everything is under threat. Maybe pensions should be means tested? I don’t get free travel, or free tv licence or winter fuel - I’m 70. These are area or income dependent or age dependent. They are not universal for those getting a state pension.

Of course it will! “Don’t you know how LUCKY you are working and paying tax?! There’s people who have had to ever live only off of UC and they’re the ones who will continue getting gov financial support from your taxes and if you don’t think that’s wonderful you are just evil!!”

The taxpayer is still funding higher education in a number of other European countries. It sees it as investment.
Here we chose benefits and the NHS instead.
The idea is that a better educated population would make better health choices and would also less likely end up on benefits or top ups.
The idea is it becomes a more productive society in the long run.

Labour in its current form are clearly quite anti higher education as otherwise they would not be imposing a deterrent on international student fees in the form of a levy.
They clearly are actively discouraging the higher education progression made as they want young people to do jobs now so they can get re-elected and claim some sort of economic short term progress.
Covid cost a lot and Labour want nothing more than to be re-elected.

I would be taking all of the shenanigans with a large pint of salt.
Just like I never listened to Martin Lewis and saved into my kids ISAs from an early age. £100 a month will get you there. Instead in wasting money on expensive presents at Christmas all our relatives topped up too.

Fact of the matter is that this society here has been convinced that debt is good and it really is not. It traps people.

Also we do not produce much anymore. There is no point incentivising people to buy shite produced in other countries or cars produced elsewhere.
Higher Education is what we are good at. Makes far more sense to incentive our own to partake of that.

Agree though that the compound interest is a problem.
Lower interest rates and never write them off? They kept extending the term anyway.

The difference is that education up to age 18 is compulsory. It then becomes a choice.

A graduate tax would cause chaos. Can you imagine someone who has spent 20 years paying off a student loan or paying back family or a commercial loan (or however they have funded) suddenly also then having to pay a graduate tax? that would certainly not be fair.