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Just an old-fashioned tax on privilege

I am usually sceptical about re-branding - particularly when schools are turned into colleges or academies as a substitute for giving them decent funding - but I hope ministers go ahead with plans to call student fees "individualised graduate taxes".

A graduate tax is what we should have had all along, and it is what we now have: in future, students will pay fees for their courses through a later payroll deduction when they become graduates earning at least pound;15,000 a year. There will be no loans and no payments up front. I can even forgive "individualised", one of those horrible words that tend to crop up in books on the Third Way, because the tax paid will indeed depend on the cost of the course the individual originally took.

What is harder to forgive is new Labour's failure to do the proper thing in the first place. The whole sorry tale of student financing since 1997 is an example of how the dictates of "spin" can distort policy. Labour was desperate to shed its old image as a "tax and spend" party. So even though it accepted the principle that students should meet part of the costs of their courses, it would not countenance anything that looked like a tax.

Instead, students had to make up-front payments and take out loans at real interest rates of zero. The level of repayments - and whether they were ever made at all - was contingent on graduate earnings.

This system had effects similar to a graduate tax, but, administratively, was more complex and expensive. It also proved at least as unpopular as a tax because, as students and their families saw it, it imposed a "burden of debt". In fact, students from the poorest homes were exempted from fees and took on no debt at all; moreover, a debt at zero interest which you don't have to repay if you can't afford it is hardly a burden. But no matter, "burden of debt" became fixed in the public mind.

Ministers gradually realised that imposing debt was even worse PR than imposing tax - hence, the decision, announced earlier this year, to sugar the introduction of top-up fees with the new system for paying them. The message failed to get across. Parents thought students were being saddled with even higher debt burdens. Now at last, ministers seem ready to use the dreaded T-word.

If they do, it will expose the opponents of fee-charging on the old Labour left for the fools they are. They will be standing shoulder to shoulder with the Tories in opposing a tax that will fall almost entirely on people from middle-class backgrounds who have moved into high-earning jobs. The graduate tax is just about the most socially progressive (even socialist) thing that new Labour has done.

But, asks the old Labour left, why shouldn't university education be financed from general taxation as it used to be? There are two very good reasons.

First, universities will be starved of money as they have been for the past two decades. In the competition for general taxation revenue, universities will always lose out to schools and hospitals. The result will be either restrictions on university entry - from which students from poor homes would be the first victims - or an even bigger shift towards a cheap, inferior model of higher education for the masses.

Second, if it is unfair to ask graduates to pay the cost of their own higher education, how can it be fairer to ask non-graduates - the majority of them on much lower incomes - to pay the cost of other people's higher education?

I don't doubt the old left's devotion to social justice. But if it wants true justice, it should demand more spending on pre-school provision and on grants to encourage poor 16-year-olds to continue at school or college. If it opposes what is now quite plainly a good old-fashioned tax on privilege, it will make itself look ridiculous.

Peter Wilby is editor of the New Statesman

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