Will Labour commit to a graduate tax in England?

Labour’s leadership must make a big call on whether to adopt a graduate tax policy to fund English universities, with other options including a more cautious pledge to hold a funding review if the party wins the next general election, according to policy experts.

Opposition leader Sir Keir Starmer and shadow chancellor Rachel Reeves are expected to drop the party’s existing pledge to scrap tuition fees and fund universities through direct public spending – Labour’s signature policy under former leader Jeremy Corbyn – as part of a drive to “sound more fiscally responsible”, according to a recent report in the Financial Times.

That opens up the question of what policy Labour will now adopt to fund higher education and students.

“The obvious alternative would be a graduate tax,” said Nick Pearce, former head of the Number 10 Policy Unit under Labour prime minister Gordon Brown, now professor of public policy and director of the Institute for Policy Research at the University of Bath. “That was a position held by many during the Labour government, particularly Gordon Brown and many of his supporters.”

A graduate tax would end the language of student debt, the fees “price tag” attached to a degree and any possibility of a differential fees market under which certain universities or courses are allowed to levy higher fees, as well as allowing for a more progressive system of payments.

Opinions differ among sector policy figures as to Labour’s current stance on the idea: some say the leadership is likely to go with it; others say it has already been dismissed as not feasible.

“Although it [a graduate tax] fundamentally shifts you back to grant funding for universities, financed from taxation, and away from a fee-led model, it can doubtless be staged in such a way…that fiscally you’re not making the same big commitment as if you simply abolished fees,” Professor Pearce said.

A graduate tax plan “would appeal in as much as it would look like you had a relatively broad and bold commitment, but nonetheless wasn’t one that would entail the fiscal commitment that simply abolishing fees would mean”, he explained.

Meanwhile, Bridget Phillipson, Labour’s shadow education secretary, has previously praised the Welsh model, where a Labour-led government kept tuition fees in place, but significantly increased maintenance grants for students.

Andy Westwood, professor of government practice at the University of Manchester and a former government adviser on universities and skills under Labour, said that the party’s next step could be for “a process”, such as a “policy review before a general election manifesto or a promise of one if/when in government”, or it could “make some specific promises or areas of priority now”.

Nick Hillman, director of the Higher Education Policy Institute, said there was a “growing consensus that the most likely outcome” of Labour’s deliberations would be “some sort of fudge of the type John Major went for in the 1990s and Gordon Brown did, too [at the 2010 general election] – in other words, contracting out the decision to a third-party review”.

“But the analogy only goes so far because Major and Brown were in power and were able to bring the main opposition party on board for the Dearing [and] Browne reviews,” he added.

Rachel Hewitt, chief executive of the MillionPlus association of modern universities, said that while another funding review “would lead to further uncertainty for universities, the continued fee freeze leading to a significant decline in the unit of resource per student is not sustainable and will need to be addressed to ensure universities can provide a strong student experience”.

She added it was “also important that the conversation is not dominated purely by discussion of tuition fees”, given research showing that “maintenance [funding] is more important to students than fees, as this relates to the money in their pocket while studying”.

The examples of the Dearing and Browne reviews show that “typically the decisions about fees occur after elections, not before them”, said Professor Pearce.

But because those reviews were “used to introduce increased student contributions”, the danger would be that “a review becomes code for ‘we want to do difficult things after the election’, and people can just read that code”, he added.

“As both Corbynites and non-Corbynites would recognise, tuition fees are a very symbolic policy for lots of other things, not simply a technical issue about how you fund universities,” Professor Pearce concluded. “Those things all mean it’s a big judgement that you have to come to.”

john.morgan@timeshighereducation.com