Labour pledges to cut university tuition fees to £6,000

27 Feb 15
Ed Miliband has announced that a future Labour government would cut university fees in England to £6,000 from autumn 2016, funding it with a reduction in pension tax relief for top earners.

By Judith Ugwumadu | 27 February 2015

Ed Miliband has announced that a future Labour government would cut university fees in England to £6,000 from autumn 2016, funding it with a reduction in pension tax relief for top earners.

Labour estimates that the cut in tuition fees would cost £2.7bn. Miliband said he would pay for the cut in the current £9,000 fee by reducing the pension tax relief on earnings of £150,000 or more to 20%, the same rate for basic rate taxpayers.

He said the current university fee system was ‘disastrous’ for public finances, as it would add £281bn to the national debt over the next 15 years and cause £2bn in fees to written off every year by the 2040s.

Miliband told voters that he would not backtrack on his promise post-election.

‘Let me say to Britain’s young people: I made you a promise on tuition fees. I will keep my promise,’ he said. ‘I don’t simply want to build your faith in Labour, I want to restore your faith that change can be believed. I owe it to you. We owe it to our country.’

But universities minister Greg Clark attacked the idea, saying hardworking people would pay the price for a policy that ‘will cause chaos’.

‘It will mean more borrowing, higher taxes, and will punish people who’ve worked hard, saved and done the right thing – just like Labour did last time,’ Clark said.

‘As with so many other issues, Ed Miliband hasn’t thought this proposal through.’

The Institute for Fiscal Studies said the policy change would leave government debt largely unaffected in the short run, but higher in the long run.

IFS research economist Jack Britton said: ‘Labour have chosen to keep university funding constant in the short run, but the switch from fees to grants increases the cost to government in the long run, because some fee loans would have been repaid, while grants will not.

‘High-income graduates are the primary beneficiaries, as they are the most likely to repay their loans under the current system. Lower-income graduates will be largely unaffected, as their income is not high enough to repay their loans under either system.’ 

University and education unions were broadly supportive of Miliband’s idea, but said he could have gone further.

The University and College Union said it was disappointed that Labour did not grasp the opportunity to introduce a ‘business education tax’, abolishing tuition fees and increasing corporate tax.

‘Any proposal to reduce the debts faced by student entering higher education is a step in the right direction,’ UCU general secretary Sally Hunt said.

‘However, we are disappointed that Labour did not go further and opt for a business education tax. By modestly increasing corporation tax, tuition fees could be abolished altogether with most profitable businesses paying their fair share towards the higher education bill.’

Christine Blower, general secretary of the National Union of Teachers added that accessing further education was a right of all citizens and not just for those whose families could support them.

She said: ‘Reducing university tuition fees from £9,000 to £6,000 a year is certainly a step in the right direction.’

 

 

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