Labour wrestles with higher funding

6th January 1995 at 00:00
Some taxation options look more open than others as the Opposition seeks a student support strategy. Nicholas Pyke reports. The taxation monster is at the heart of many Labour dilemmas, not least the question of what to do with higher education.

Although camouflaged amid technical talk of expansion, modularisation and interactive learning, the central concern is the need to raise vast amounts of money - up to Pounds 4 billion - from some or all taxpayers.

This may be one reason that Jeff Rooker's green paper on higher education, which dared to suggest that a source of large-scale revenue was needed, was so unceremoniously dumped by the party policymakers 18 months ago. Mr Rooker, then the higher education spokesman, eventually lost his job.

Now, for whatever reason, the central points of his paper have re-emerged - this time with the apparent approval of the leadership.

There is a haze of uncertainty around the issue: all options are under consideration, says Bryan Davies, Labour's higher education spokesman. But he concedes that the objectives set out by the MP for Perry Barr, Mr Rooker, are at the heart of them.

As a starting point, Labour believes that the current system of quick-repayment loans is unworkable. But beyond that, it now seems to accept that the expansion of higher education should not be arbitrarily cut off at 960,000 places (notionally one in three school-leavers), as dictated by the Government.

Instead, higher education should work alongside further education, expanding to cater for every adult wanting to study.

At the same time, FE should be brought into the same net of state support that currently protects the children of the university classes - which means they should be entitled to the same grant or loan.

This would lead to an increased use of modular courses, part-time study, night-time teaching, independent learning and a blurring of the distinction between further and higher education. Not to mention a thirst for money: both start-up capital and yearly revenue.

While all options are still open for Labour, some appear more open than others. A return to the pre-1991 position, for example, remains implausible. This was the point at which the Government legislated to freeze the student maintenance grant and create a system of student loans to cover the shortfall.

A return, that would be, to the days when student living costs were met through a means-tested government grant: the sort of position favoured by some on the Left of the party who in recent weeks have been moved to criticise the suggestion of a special graduate tax.

Re-activation of the old grant system to support the vastly increased number of students would be extremely expensive and would suggest either a limit on those receiving the money, or a large hike in direct tax. Writing in The Times Higher Education Supplement, Nicholas Barr of the London School of Economics, an authority on student finance, described such a move as "dead in the water".

In 1989-90 there were roughly 600,000 higher education students in Britain, consuming Pounds 809 million in maintenance grants. The latest figures (for 1992-93) show that the number of students has risen to 958,000. If the existing loan debts were written off, Jeff Rooker believes that the total cost of re-introducing the grant system would approach Pounds 2bn.

The system is, incidentally, still under pressure to expand despite the Government's efforts to hold the participation rate level. The latest figures show that 347,000 people have applied for next year's places - 2 per cent up on last year.

More likely is a system based on the Australian graduate tax - the Higher Education Contributions Scheme - whereby graduates repay about 20 per cent of their tuition costs through the tax system. Once they have done so, their liability is ended.

Some form of graduate contribution to the cost of higher education has influential backers, including the Royal Society of Arts, the National Commission on Education, and most recently the Labour party's Commission on Social Justice.

Using the sort of analysis drawn up over the past few years by Nicholas Barr, Jeff Rooker - now returned to Labour's front bench as shadow Deputy Leader of the House - argues that a system of expanded higher education could be self-financing.

He does not favour the sort of quick, five-year-repayment system now being operated by the much criticised Student Loan Company. This notion of debt is, he believes, likely to frighten off potential students, particularly those from poorer backgrounds.

Instead, he says, it should be possible to use the notion of a "liability" incurred not for a fixed amount of money, but for a fixed period of time - say 20 years - with repayments linked to ability to pay.

Such a scheme could also avoid the frightening prospect of a "lifetime debt" raised in the tabloid press this week.

Nicholas Barr's figures suggest that a scheme to fund 75 per cent of the total expenditure on higher education would cost between between Pounds 1.5bn and Pounds 4bn.

The Government could immediately save Pounds 1bn by shedding the current burden of student support.

The National Insurance system would be a reliable way to collect the money, with comparatively few defaulters. But left to itself, the build-up of funds would be extremely slow.

To counter this, it may be possible to involve the private sector, which could finance immediate loans in return for long term Government guarantees.

One of the less palatable options under consideration is a straight rise in general taxation. This would, understandably, be sensitive. Yet Labour's aim of mass repayment after mass involvement may not, in the end, be such a wholly different thing. Except, says Jeff Rooker, that the taxpayers will be paying for what they have chosen.

This is particularly the case given that many people still feel excluded from further study. "I think it would bring home the importance that the state attaches to learning," Mr Rooker said.

"People will be able to see the results of their spending, without that element of compulsion."

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