Funding: Could a higher-level skills tax be the answer?

If all loan payments were immediately written off and replaced by a higher-level skills tax, the amount raised would put post-16 education on a sustainable footing, writes Bill Jones

Bill Jones

Could a higher skills tax be the answer to FE's  funding trouble?

The final report from the Independent Commission on the College of the Future was published yesterday and contains a compelling vision behind which we can all coalesce. The marvellous further education sector has a crucial role in the economic and social recovery of the UK.

The commission claims to be "a rallying cry for radical and decisive action in order to enable colleges to fulfil their role" and its three key priorities are absolutely the right ones: a statutory right to lifelong learning; colleges placed in a strategic advice and support role for employers; and colleges at the heart of nation-specific post-16 education and skills strategies.


Need to know: 'College of the future' report revealed

More: How colleges can support the jobs of the future

Long read: 'The beginning of serious pride in the UK's FE sector'


As ever, funding is key if colleges are to achieve the vision and 11 laudable recommendations of the commission. The report rightly calls for stable funding and accountability frameworks for colleges. The three-year, block funding settlement and "trust-based strategic partnerships between colleges and governments" would liberate senior leaders to focus on curriculum planning and development, quality improvement and stakeholder engagement that we do so well. Too much of our time, however, is spent on increasingly onerous, short-term budgeting and income/cost scrutiny, the inevitable result of ever-tighter funding settlements.

The call for funding to be "equalised across further and higher education routes" would be dreamland; the effective doubling of our current funding levels. The commission calls for retraining and upskilling to be free to level 3 (currently funded by adults taking out a loan depending on age and previous level of achievement).

While I completely agree with the principle, this is where the report becomes, in my view, less than radical, with its careful wording perhaps designed for audiences of differing political persuasions: "equal maintenance support across loans and grants is available for individuals in further and higher education" and "flexibility in the use of entitlements and any associated maintenance supporting grants and/or loans".

This could be the opportunity to challenge the orthodoxy that loans are the only way forward with higher-level education and skills funding; in my view, it’s time to look again at the tax system.

The commission is spot-on: the best way to achieve the elusive parity of esteem between university and higher-level technical training is to fund them in the same way. That way, however, should be through tax. Not just a graduate tax but a "higher-level skills tax". When last seriously considered (I think by Alan Johnson around a decade ago), a 3 per cent tax on earning above a particular threshold was mooted.

A tax would remove the stigma around loans so often cited as a reason many from poorer backgrounds are reluctant to take out debt for education and training. A tax would be progressive and fair, based entirely on an individual’s ability to pay. Society has funded their skills development and ability to earn more; this would be part of their contribution back to society. This also ensures only those who benefit from higher skills development end up paying for it.

Furthermore (the best policies are not always immediately popular), the tax could be applied retrospectively to all graduates earning enough to pay it. In 1989, I marched in London against loans that were never going to impact on me. Nevertheless, I’ve always felt guilt about my free higher education and generous maintenance grants (which funded many a good night in the Mardi Gras and Hacienda) while students from the mid 1990s onwards are saddled with debt. I for one would be happy to start paying such a tax.

If all loan payments (FE or HE) were immediately written off and replaced by a higher-level skills tax, and this tax was also applied to working, high-earning graduates and FE loan beneficiaries in their fifties and sixties, the amount raised could fully fund all College of the Future recommendations, as well as the wider university and post-16 sectors. It would place it on a long-term sustainable footing and the UK would reap the benefits in improved productivity and skills levels.

A higher-level skills tax: that’s how we build the colleges of the future by 2030, as well as a world-beating education and skills system.

Bill Jones is deputy chief executive at Luminate Education Group and principal of Leeds City College

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