Students back employer levy to fund English higher education

Prospective students back the idea of funding higher education through a levy on employers, according to a report on options to solve England’s funding dilemma, in which a vice-chancellor backs a graduate tax as “genuinely progressive” and a former universities minister advocates differentiating universities’ fees according to quality.

The Higher Education Policy Institute (Hepi) report includes a series of essays by former universities ministers, sector chiefs and student leaders, models the costs of a range of potential funding models for undergraduate education ahead of the next general election, and discusses the findings of a survey of more than 3,100 prospective students about their funding preferences.

Rose Stephenson, director of policy and advocacy at Hepi, told Times Higher Education that despite both universities and students seeing a significant real-terms decrease in funding, political parties are “keeping shtum” about their policy ideas.

“Proposing a rise to tuition fees is politically toxic, and yet, to maintain a world-class higher-education system in the UK, investment is needed,” she added.

Ms Stephenson said the funding of higher education, and feasible levels of financial support for students, had to be included in party manifestos and debates in the run-up to the general election.

Hepi’s survey revealed that the most popular alternative model was a graduate levy – where higher education would be funded by an employer levy of 3 per cent on earnings over £25,000 for the graduates they hire.

In this scenario, the survey found, 78 per cent of potential applicants and 86 per cent of applicants said they would apply to study an undergraduate degree.

In setting out the idea in his essay, Johnny Rich, chief executive of the Engineering Professors’ Council, writes that students would get their higher education “for free”, and their debts from a maintenance loan alone would be far lower than their current burden, while universities would get a “long-term funding settlement”.

In another essay, James Purnell, president and vice-chancellor of the University of the Arts London and a former Labour Cabinet minister, writes that scrapping the student loan system entirely and replacing it with a “real graduate tax” tied to income, “which no wealthy graduate would be able to pay their way out of”, would be “genuinely progressive” and would allow for the return of maintenance grants.

Another option Professor Purnell proposes, which he says would not require major upheaval or any money from the Exchequer, is to introduce a stepped repayment system in which the level of student loan repayments would vary according to graduates’ income.

Lily Bull, policy manager at the Russell Group, writes in her essay: “Whether or not there is the political will to enhance the current funding system remains to be seen; but it is vital that policymakers understand the negative consequences of maintaining the status quo.”

In contrast, Lord Johnson of Marylebone, a former universities minister, writes that there is nothing wrong with the current model except for “two easily fixable flaws” – the erosion of the real value of tuition fees, and the absence of any link between fees and educational quality.

He says his suggestion, of lifting the fee cap in England in line with inflation depending on institutions’ Teaching Excellence Framework ratings, is the “least bad of all available funding systems”.

However, the Hepi survey showed that such a system of raising tuition fees with inflation would not be popular with students, with 41 per cent of potential applicants and 45 per cent of applicants saying they would be likely to apply to university under that model.

In his contribution, Lord Willetts, another former universities minister, writes: “A review of the calibration of the [student loans] scheme is a way to avoid political traps now and give them [the political parties] maximum room for manoeuvre after the election.”

A proposal by the National Union of Students to dismantle the marketisation of higher education by abolishing tuition fees and reintroducing maintenance grants would cost the public purse £10.5 billion per cohort, according to modelling by London Economics for the Hepi report.

patrick.jack@timeshighereducation.com