One way to ensure cash for higher education is for each generation to invest in the next, argues Rob Marris
Whether top-up fees will have the positive effect on university funding suggested in the higher education white paper is open to considerable doubt.
Few extra resources will come from top-up fees unless either the £3,000 cap is soon breached or almost all courses charge the full amount.
But how will fees of, say, £10,000 a year, help to widen access? Only with a lot of government bursary money eating away the supposed increase. If everyone charges £3,000-plus, the access lever is gone.
The government has estimated that about 64 per cent of students will pay top-up fees ( Hansard , September 11 2003).
In neither of the two Commons debates on tuition fees in June did higher education minister Alan Johnson say by how much top-up fees were expected to generate. On July 29, Mr Johnson wrote that, if all (full-time) students had to pay £3,000 top-up fees, the extra annual gross income would be £1.412 billion.
But that is the gross figure. It would amount to about 14 per cent of the government's projected higher education spending of £10 billion a year for 2005-06, the last year before top-up fees are introduced. It sounds a lot, but it is not the net figure and it assumes that all full-time courses will charge the extra £3,000.
To find the net figure, one must look at both the proportion of students being charged top-up fees and the cost of assistance for poorer students - principally, the bursary scheme of £1,000 a year. In the Commons in September, I suggested to Mr Johnson that this assistance would knock £250 million a year off the gross additional fee income. His reply was most revealing: "We expect that at least one-third of the extra money coming in from fees will go to bursaries. We have calculated that around £300 million extra will go to bursaries..." ( Hansard , September 11 2003).
It follows that top-up fees will raise £900 million gross, out of a possible £1.412 billion if all students were charged. That is, the government expects about 64 per cent of students to be charged top-up fees.
Of that £900 million gross, £300 million will go on financial assistance - leaving a net increase of £600 million, on a budget of £10 billion. So, on the government's own figures, the net increase from top-up fees will be all of 6 per cent. Welcome monies, yes; but significant? Arguable.
But when, later in September, Mr Johnson wrote to clarify his bursary figures, it emerged that the £300 million bursary scheme is in fact to be introduced in September 2004 - two years before top-up fees - and the cost is included in the £10 billion budget for 2005-06.
Given that this £300 million is already budgeted for, and given that the tuition fees regime is predicted to bring in £485 million net in 2005-06, the shortfall for 2005-06 if tuition fees were abolished altogether, would be just £185 million. If about 20 per cent of students were taking two-year foundation degrees by 2005-06, each costing two-thirds of a traditional three-year undergraduate degree, there would be no £185 million shortfall in 2005-06. Above that 20 per cent, there would be an increase in funding.
So, how to increase funding, since the top-up fee regime is not likely to produce much extra? One possibility is extending another tax - value-added tax - to books. There are good reasons for children's books and textbooks to be exempt to avoid a tax on learning. Yet why should other books be exempt, particularly if the alternative is more money for learning? I suspect that graduates spend more on books than the rest of the population. Based on House of Commons library figures, I calculate that VAT on books would raise about £250 million a year net. As this amounts to only 2.5 per cent extra funding for higher education, perhaps it's not worth it.
But a tax on all graduates merits examination. Arguably, many graduates have enjoyed the fruits of a highly subsidised education, some for decades.
Perhaps it is time that they paid something back, through a National Insurance surcharge, as well as through income tax. Those graduates' sons and daughters are likely to enter higher education. Would a graduate rather pay off their child's £15,000 debt, or instead pay 1 per cent more National Insurance each year of their working life? With an NI surcharge, one generation collectively invests in the future of the next generation.
A 1 per cent NI surcharge on graduate employees would raise about £1.1 billion annually - almost twice as much as top-up fees - and this would rise as the proportion of graduates in the labour force increased. Welcome monies? Yes. Worth considering? Certainly.
Rob Marris is the Labour MP for Wolverhampton South West.