3 May 2023

Why Keir Starmer is right to u-turn on tuition fees


If you ever want to experience the digital equivalent of roundhouse kicking a hornet’s nest, saying something that appears to support the continued existence of tuition fees is about as close as you can come.

So when Keir Starmer this week confirmed he was backing down on a 2019 pledge to scrap tuition fees, the howls of outrage were as noisy as they were predictable.

The thing is, however, Starmer’s approach is almost certainly the right policy, for two reasons. The first (and less important) is that scrapping tuition fees is really not that good a way to achieve what people claim they want from the policy. The more important reason, though, is that tuition fees are a long, long way from the most urgent issue facing the country.

Let’s have a look at the less important issue first. The state still somewhat subsidises the cost of higher education, but since the introduction of fees, students pay the majority of the costs of their education – and with recent changes to repayment thresholds, reductions of interest rates, and the extension of the repayment terms from 30 to 40 years, most graduates are expected to repay all of their debt.

That means that scrapping tuition fees would likely cost the state somewhere between £8bn and £9bn a year, which is serious money (for context, 1p on the basic rate of income tax raises £5.5 bn). If our rationale for scrapping fees is to help students from lower-income families study, we should note that in Scotland – where tuition is ‘free’ but places limited as a result – disadvantaged students are even less likely to make it to uni than their English counterparts, thanks to middle-class children taking most of the places.

We could bring back targeted maintenance grants, increase maintenance loans to match the cost of living, and reintroduce support at 16-18 (the stage lots of disadvantaged students drop out) for better results at lower cost on this front.

The philosophical argument raised is that society benefits from higher education, and so it should be willing to pay for it. This is true, and why society subsidises it – but it’s much less true for higher education than it is for primary or even secondary education. Most of the benefit of a degree goes to the person taking the degree – why should society pay for that, and when should it stop? Do we really think taxpayers should fund, say, MBAs?

In practical terms, the earnings question is a complex one. People argue that graduates pay more tax as it is – because they earn more – and so they are being doubly charged. In reality, this is complicated: the state has spent much more on you than a counterpart on the same salary who left school earlier, and they have earned and paid tax longer than you.

Back-of-the-envelope maths illustrates this: a 2017-18 analysis by the ONS implied the median salary for a worked who left school after A-levels was £19,188, versus £30,524 for a university graduate. That means the latter pays £3,600 more in income tax and national insurance than the former – but with £27,000 less contribution towards a three-year degree, even in this simple scenario it is about nine years before the state sees any benefit at all from those extra taxes.

In reality it would be even longer: graduate salaries take time to increase, the A-level leaver paid tax for extra years, and so on. When the status quo is graduates paying an additional 9%, that money has to be replaced – you can’t shrug it away with higher earnings.

All of which takes us to the bigger problem: the next government will inherit a nightmarishly difficult situation. The maths of Labour’s 2019 manifesto were questionable, but there were some easy tax wins from which they could promise extra spending – most promisingly, reversing Conservative corporation tax cuts.

The difficulty is that the Conservatives have now already reversed that, and will leave their successors with the highest tax take since World War II, a fragile economy, and crumbling public services.

Against that backdrop, every penny will count. There are more than 7 million people on the waiting list for NHS operations, and almost half are waiting over 18 weeks. The charge rate on crimes has dropped from 16% in 2015 to under 6% now. There is a sense that the state is failing – and that’s before worrying about long-term challenges like social care, productivity, and more.

To find £9bn a year (let us not forget confidence in UK debt is not what it used to be, thanks in part to Liz Truss) and then use it on student loans instead of these other challenges would just be gross negligence.

Keir Starmer is right to shift tuition fees right down the priority list – though he should consider measures targeted lower-income students. It is self-indulgence of the worst sort that his logic is not immediately obvious to self-proclaimed progressive activists.

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James Ball is Global Editor at the Bureau for Investigative Journalism.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.