What’s a ‘Graduate Tax’ and Why Should You Care?

by Tom Scrivener

30 January 2015

Last week, Labour’s shadow Universities Minister Liam Byrne strenuously repeated a long-rumoured move from Labour to replace tuition fees with a graduate tax. You’d have thought this would have got more attention than it has, given the prominence of higher education funding over the past years and given that the policy would – superficially at least – abolish undergraduate tuition fees for UK and EU students. Other than a couple of niche news stories, no-one seems to have picked it up.

Is this a big deal?

Potentially, yes it is. The fact that Labour’s policy is shifting is worth something in itself, although we should be careful: all talk is currently about a ‘provisional’ or ‘long term’ policy shift.

Politically, the introduction of graduate tax would shift the debate to the left. No longer would mainstream coverage focus on a tedious back and forth over whether or not fees are just a kind of graduate contribution, leaving us to focus on the case against user contributions in principle. And within organisations like the National Union of Students (NUS), the long-running debate over whether the union should support free education would be won forever; the idea of advocating graduate tax when it was already government policy would be untenable.

Yes, but what does it mean for higher education?

Graduate tax is basically a rebranding and repackaging of tuition fees, but there are some benefits. The main effect that a graduate tax would have is in removing the ‘headline figure’ from a graduate contribution. This would arguably give a remedy to debt aversity – because there would be no debt to be put off by. Similarly, while at university, the debt-driven psychology that drives consumerism would not be so voracious: counting out how much you pay per lecture would be a thing of the past. And finally, universities would no longer set their fees – meaning that no market in undergraduate tuition fees could develop (although at present, because they are all around £9000, there isn’t an effective one anyway).

Other than that, the source of funding would remain pretty similar. Under the current system, the state fronts the costs of undergraduate degrees, while graduates pay it back later depending on their income – giving the government an unstable source of revenue whose repayments it may need to hike at a later date. All of these facts remain under a graduate tax. In fact, the objective deterrent against going to university may be worse, depending on how the tax is implemented: debt can theoretically be paid off or written off, while graduate tax could last forever.

Essentially, a graduate tax could have the potential to slow down the privatisation of the higher education system, while failing to challenge – and perhaps further ingraining – the idea that students and graduates should pay.

Why is it happening?

Two processes are at work.

On one hand, a number of acronyms, social movements and riots – NUS, the National Campaign Against Fees and Cuts (NCAFC), 2010, and the free education demonstration last term – have combined to form something approaching a ‘student movement’ in the eyes of policy makers and Labour Party hacks. This motley coalition, with all its in-fights, ideological and organisational differences, and disavowals of itself, has, just about, come together enough to influence Labour policy. Although much is made of the impotence of student politics, this policy announcement is not the first semi-victory that the post-2010 student movement has achieved: we have also seen the shelving of the Higher Education Bill in 2012 (though not its accompanying white paper) and a major U-turn on the sell-off of student debt roughly a year later.

On the other hand, fees have failed on their own terms. Report after report over the past two years has shown that the debt-fuelled model set up by successive governments cannot deliver enough return to fund the system without massive subsidy.

Which of these two factors you think is more important is up for debate. Labour’s emphasis will be largely on the economic unsustainability of the current funding system – because everything that comes out of a shadow cabinet member’s mouth hinges on reinforcing Labour’s ‘austerity lite’ credibility. But don’t let this fool you too much: politicians almost never say “we’re giving ground to a social movement because we have been shifted by pressure from below” – that would ruin the fun of it.

Who gets the credit?

Although no organisation in the student movement or on the left formally wants a graduate tax, everyone would recognise it as a minor victory. All will mix heavy criticism with claiming credit.

Both wings of the student movement have a claim. NUS and the right wing of the student movement will say that graduate tax’s adoption is essentially the product of years of internal lobbying by, effectively, senior NUS staff and Labour Students. This claim is dubious: NUS did not invent the graduate tax – in fact the policy was originally formulated by Tories in the 1990s, and was subsequently adopted and abandoned by both main parties. Given this, it is difficult to believe that the shift in policy has been the result of anything other than external pressure.

The left wing of the student movement will waste no time in providing its own narrative. NCAFC, which has organised the lion’s share of demonstrations and days of action since 2010, has come out with a line which attributes the policy shift to pressure from below. They will say, quite reasonably, that if graduate tax had not been kept on the table for so long by NUS hacks, Labour might now be capitulating to free education funded by progressive taxation – not just a more progressive graduate contribution.

A lot of the broader-picture credit can – and will – be taken by the Greens, who have managed to continue what the Liberal Democrats started in 2010: a credible challenge to Labour on the student vote.

Finally, some onlookers – especially in what I can only describe as the self-consciously cynical commentariat/blogger/sarcastic twitter milieu – will say that no one should get any credit, partly because the only reason why anything happens is because of something really complicated that you can’t understand (in this case the structure of student debt), but also because organisations and campaigns achieving things would ruin their too-cool-for-school chic.

What should left wingers do about it?

There are a mixture of things that we can do – and there a big division of opinion about how positive the left should be about the policy. But the exact line of the left’s response is not really what is at stake at the moment – because graduate tax has yet to be made official Labour policy.

So the main thing is to be really, really loud – and to attempt to force the issue to the front of the political agenda. Not only will this create a debate and force the Labour leadership come out and defend the policy (implicitly making it official), it could also create a forum in which more developed ideas – free education, democratisation of universities – can reach the political mainstream. The student movement has lost every major battle for two decades when it has relied on ‘high level’ strategies; but in the court of public opinion, free education wins every time.


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