Labour is planning to lower university tuition fees: a populist move or a needed reform?

University tuition fees have been a touchy topic in the past years, often linked to issues of class and privilege. Universities currently charge up to £9000 per year, after the Conservative/Liberal Democrats coalition government raised the tuition fee cap in 2012.

London, United Kingdom Demonstrators pass the Houses of Parliament during a protest against student loans and in favour of free education, in central London November 19, 2014. REUTERS/ Peter Nicholls
Thanks to devolution Scotland has been able to abolish undergraduate tuition fees for Scottish and European students (excluding students from England, Wales, and Northern Ireland, who do have to pay tuition fees). Already in 2011 the Labour Party had promised to cut university fees from £9000 to £6000 but until this past week the party had not presented a strategy to pursue this goal if elected in the next general elections.

Because of Labour’s vagueness, many have accused the party to try to win votes with a populist move that lacks consistency, while universities opposed the cuts fearing a loss in funding. Now the party’s leader Ed Miliband has finally revealed that the cuts would be funded by reducing tax reliefs pensions for higher earners. Miliband has made it clear that he is committed to fully fund universities while also making education accessible and preventing students to finish university surmounted by debt. The reform would enter in force in September 2016 and it has been welcomed by Universities UK, the body representing Britain’s universities.

The opposition has criticised the reform on multiple fronts. Business secretary Vince Cable has argued that the current system is proportional, fair, and well functioning. The student loan system comprises a basic student repayment structure whereby students have to repay 9% of earnings above £21,000 for up to 30 years. Once finished their degree, students pay accordingly to their income, if they are not earning anything within the first twenty months after graduation they do not pay anything at all. It is somewhat curious that Cable, a Liberal Democrat, is opposing the reform given that in the previous elections the Liberal Democrats were supposed to be the champions of protecting fee rise and faced a great political price after having to give up when entering coalition with the Conservatives.

Moreover, the opposition has tried to argue that the rise in tuition fees has not discouraged poor students from attending university. However, Labour claims that the rising non-repayment of loans is storing up a long-term problem for the public finances.

The Institute for Fiscal Studies, an independent research institute, calculates that a cut in fees of £3000 will not help significantly graduates who will be in the bottom 50% of earners. Instead, the reform would benefit those who currently pay their debts off rapidly because they are on high earnings. Labour intends to solve this by raising the interest rate on loans for wealthier graduates earning £47,000 a year or more and increasing the maintenance grant by £400 a year for students whose family income fell below £25,000.

Chancellor of the Exchequer and Conservative George Osborne has argued that the cuts in tax reliefs pensions would not only affect the very rich. On the contrary: “Far from hitting only the richest as Ed Miliband claimed, his new tax on pensions will hit many people on middle incomes including nurses, teachers and firefighters. So a tuition fees policy that only benefits better off students is being paid for by hardworking taxpayers on middle incomes.”

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