‘Impossible’ for Sunak to save on tuition fees without favoring well-off graduates | University funding
According to the Institute for Fiscal Studies, Rishi Sunak will find it “essentially impossible” to save money on university tuition fees in England without hurting graduates on average incomes in favor of their wealthy peers.
Instead, the IFS says the chancellor should use the income tax system rather than student loan repayments as a way to generate income from top-paid graduates.
The IFS comments come as the government prepares to release its report on financing higher education ahead of the full spending review next month.
The report will suggest changes to England’s student loan scheme which has been in place since 2012, but has so far been stalled due to battles between the Treasury, No 10 and the Department of Education over the cut. undergraduate tuition fees of £ 9,250 per year. year.
IFS researchers built a calculator showing the options and costs available to the treasury. It shows that any substantial change in the loan system means that the wealthiest graduates pay less, while those who earn on average have to pay more out of their income.
Lowering the income threshold at which loan repayments begin – currently £ 27,295 – would see more graduates face a 50% effective marginal tax rate on their salary and employers’ national insurance contributions when the new tax on health care and social benefits will come into force. Non-graduates would face an equivalent rate of only 42%.
“With a series of adjustments to the student loan system, successive chancellors have found themselves in a corner,” said Ben Waltmann, senior research economist at IFS.
“The system is expensive, but there is essentially no way to make more money out of it without hitting borrowers with higher average incomes than those who earn the most. Yes [Sunak] wants to raise more of the highest incomes, the Chancellor will have to use the tax system. “
Researchers estimate that each group of years of domestic undergraduate students costs the government around £ 10 billion. About 80% of students will never repay their loans in full, with IFS modeling suggesting that 44% of the value of the loans will be amortized.
Nick Hillman, director of the Higher Education Policy Institute and architect of the 2012 scheme, said the IFS analysis confirms that many of the suggested changes would make the system less progressive.
“However, it is absolutely crucial not to lose sight of the fact that half of the people still do not have a higher education. So any assessment that focuses only on graduates does not show the true distributive impact on the country as a whole, ”Hillman said.
Former Prime Minister Tony Blair said more students from disadvantaged backgrounds would be encouraged to attend university by reinstating maintenance grants instead of loans. Blair wrote in The Sunday Times that there was also “a strong case for lowering tuition fees for students from low-income families.”