Edward Selwyn Sharpe is a Master of Law student. He is a descendant of educational reformer and architect of post-war conservatism Rab Butler.
When those under 30 are paying 9 per cent more from their pay packets than their older colleagues, something has gone wrong. But this is more than simply unfair, as the broken university funding system means the next generation is losing their stake in the social contract.
As I submitted my Tax Return last month, I was somewhat comforted by the breakdown of how the Government spent my taxes. The bulk on health, welfare, and servicing the national debt was part of my buy-in to the social contract. While we might complain about the rate, at least we’re in it together.
Or so I thought. Lurking elsewhere on the HMRC portal, ancillary to the amount spent on education, reminds me that I also owe the Student Loans Company £47,484.21.
This debt may be personalised to the nearest pence, but for all intents and purposes it is a tax. For most, it is taken at the same time as income tax and charged at 9 per cent above £27,295. More than 70 per cent of graduates will never pay off their ‘loans’, thereby paying for the full 30 years, while the money has already been added to the national debt.
Those who do repay will have had to pay more than the arbitrary ‘value’ of their degree as interest rates increase the debt by thousands. It works out as a 9 per cent tax for the 30 years after graduation.
But while income tax is collected and distributed equitably as part of the social contract, student loans behave completely irrationally. For one, it is not a tax on all graduates but rather a tax on those born after August 1993, or more precisely those that finished their higher-education after 2014.
Secondly, the value of the debt is an arbitrary average for every student: currently set at £9,250 a year irrespective of whether you’re spending 30 hours a week in a lab or 3 hours in a humanities seminar room. This additional 9 per cent is taken monthly out of graduate pay-packets, bringing the average monthly tax rate to 29 per cent – and to 49 per cent and 54 per cent for the higher and additional bands.
There was outcry when the SNP raised the higher rate of tax by 1 per cent in Scotland. Yet in England, under the Tories, there has been a stealth increase of 9 per cent on those who graduated after 2014.
At its core, the student loan system is irrational in nature, unconservative in amount, and fundamentally unfair. The answer can only be cutting the 9 per cent and making it a 30-year levy on all graduates.
Aside from fairness, equitable contributions from graduates are the only place to start if we are to have an open and honest conversation on solving the university crises. As universities continue to beg for more money, it is clear that the 2013 reforms have done nothing to tackle the problems they set out to fix.
They’ve arguably made matters worse, as universities continue to hold the government to ransom while getting into foreign student debt-traps. This is not to mention our world-class institutions falling down the league tables, the university spin-outs listing themselves in America, nor the growth of unemployable degrees.
While our struggling higher education system should be a concern to all, the consequences of this 9 per cent tax are far greater than just the university crisis. Already under 30s are the generation most likely to be living with their parents, as rent costs soar and the cost-of-living bites. It is also the generation least likely to buy a house, and the 9 per cent tax and £50,000 debt only further prices-out graduates.
Student loans must not be seen in isolation, but as a tax that puts the main clauses of the social contract in critical danger. Cutting the current rate and sharing it equally helps support first-time buyers, takes the pressure off the Bank of Mum and Dad, and re-affirms the next generation’s place in the social contract.
It’s time the Government called the graduate tax what it is and focussed the minds of all graduates – from 21 to retirement – on sorting out the mess our higher education system is currently in. Doing so will go some way to support under 30s in affirming their place in society. We ignore this 9 per cent tax at our peril.
The post Edward Selwyn Sharpe: Ministers must reform the student loan stealth tax on the under 30s appeared first on Conservative Home.
At its core, the student loan system is irrational in nature, unconservative in amount, and fundamentally unfair. The answer can only be cutting the 9 per cent and making it a 30-year levy on all graduates.
The post Edward Selwyn Sharpe: Ministers must reform the student loan stealth tax on the under 30s appeared first on Conservative Home. Read More