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UK Labour leader Ed Miliband promised to substantially reduce university tuition fees if his party is elected into government by 2016. He means to do so by reducing the cap on university fees, so that universities are able to charge a maximum of GBP 6 000 (down from GBP 9 000) per domestic student per year. This would add up to a reduction of GBP 9 000 in average graduate debt over the course of a three-year degree. The cut is estimated to cost 2.7 billion GBP a year, an amount that would be funded by changes to pension tax relief. However the proposal, which on first blush appears to benefit students, has not been without criticism on multiple fronts.
Critics claim the cut is not truly redistributive, as it would only reward higher-earning graduates. Students in England pay back their loans according to how much they earn. Nine per cent of earnings above a minimum salary threshold, which is set at GBP 21 000 per year, normally goes toward paying back student loans. After 30 years, the debt is condoned, no matter what percentage of the loan the graduate succeeded in paying back. With Miliband’s reform, a reduction in the cost of university might not make a difference for lower-earners. They would simply have less of their debt written off after 30 years. Higher-earning graduates, by contrast, would be benefited, as they would be able to pay their debts off more quickly. For that reason, The Economist calls this Labour’s Further criticism has come from the university front. Sir Christopher Snowden, President of Universities UK, The current controversy raised by Miliband’s proposal echoes that of late 2010, when the British government some argue that the 2010 reform was actually more just and redistributive than the one being proposed today: Monthly bills for graduates were lowered, as the repayment threshold was raised. The raised fees also meant financial security for universities, who now feel understandably threatened.
Whether or not the 2010 reforms were positive in the long run is debateable. What is clear is that there are substantial doubts about the feasibility and impact of Mr. Miliband’s current proposal. We will follow future developments closely.The Guardian