Students back employer levy to fund English higher education

Hepi report on funding options, aimed at stopping politicians from ‘keeping shtum’, sees v-c back a graduate tax as ‘genuinely progressive’

April 11, 2024
Wall Graffiti of a man with a finger to his lips at the Northern Quarter Art in Stevenson Square Manchester, UK to illustrate Students back employer levy to fund English higher education
Source: Tony Smith/Alamy

Prospective students back the idea of funding higher education through a levy on employers, according to a report on options to solve England’s funding dilemma, in which a vice-chancellor backs a graduate tax as “genuinely progressive” and a former universities minister advocates differentiating universities’ fees according to quality.

The Higher Education Policy Institute (Hepi) report includes a series of essays by former universities ministers, sector chiefs and student leaders, models the costs of a range of potential funding models for undergraduate education ahead of the next general election, and discusses the findings of a survey of more than 3,100 prospective students about their funding preferences.

Rose Stephenson, director of policy and advocacy at Hepi, told Times Higher Education that despite both universities and students seeing a significant real-terms decrease in funding, political parties are “keeping shtum” about their policy ideas.

Proposing a rise to tuition fees is politically toxic, and yet, to maintain a world-class higher-education system in the UK, investment is needed,” she added.

Ms Stephenson said the funding of higher education, and feasible levels of financial support for students, had to be included in party manifestos and debates in the run-up to the general election.

Hepi’s survey revealed that the most popular alternative model was a graduate levy – where higher education would be funded by an employer levy of 3 per cent on earnings over £25,000 for the graduates they hire.

In this scenario, the survey found, 78 per cent of potential applicants and 86 per cent of applicants said they would apply to study an undergraduate degree.

In setting out the idea in his essay, Johnny Rich, chief executive of the Engineering Professors’ Council, writes that students would get their higher education “for free”, and their debts from a maintenance loan alone would be far lower than their current burden, while universities would get a “long-term funding settlement”.

In another essay, James Purnell, president and vice-chancellor of the University of the Arts London and a former Labour Cabinet minister, writes that scrapping the student loan system entirely and replacing it with a “real graduate tax” tied to income, “which no wealthy graduate would be able to pay their way out of”, would be “genuinely progressive” and would allow for the return of maintenance grants.

Another option Professor Purnell proposes, which he says would not require major upheaval or any money from the Exchequer, is to introduce a stepped repayment system in which the level of student loan repayments would vary according to graduates’ income.

Lily Bull, policy manager at the Russell Group, writes in her essay: “Whether or not there is the political will to enhance the current funding system remains to be seen; but it is vital that policymakers understand the negative consequences of maintaining the status quo.”

In contrast, Lord Johnson of Marylebone, a former universities minister, writes that there is nothing wrong with the current model except for “two easily fixable flaws” – the erosion of the real value of tuition fees, and the absence of any link between fees and educational quality.

He says his suggestion, of lifting the fee cap in England in line with inflation depending on institutions’ Teaching Excellence Framework ratings, is the “least bad of all available funding systems”.

However, the Hepi survey showed that such a system of raising tuition fees with inflation would not be popular with students, with 41 per cent of potential applicants and 45 per cent of applicants saying they would be likely to apply to university under that model.

In his contribution, Lord Willetts, another former universities minister, writes: “A review of the calibration of the [student loans] scheme is a way to avoid political traps now and give them [the political parties] maximum room for manoeuvre after the election.”

A proposal by the National Union of Students to dismantle the marketisation of higher education by abolishing tuition fees and reintroducing maintenance grants would cost the public purse £10.5 billion per cohort, according to modelling by London Economics for the Hepi report.

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Reader's comments (2)

The current funding model is unsustainable but shouldn't questions also be being asked about University costs and whether the educational model itself is still relevant ? Numerous commentators on this site constantly criticise the numbers of administrative staff being recruited and what they actually contribute to the overall success of Teaching and Research objectives. We have seen a massive rise in Project Management whose frameworks necessitate as much, if not more resources being devoted to documentation and administration than achieving an actual outcome. We also have seen the rise of the transient middle manager whose purpose defeats most people they work with, but who never stay in post long enough to be accountable. Then there are the VC vanity projects (fancy a trip to China new starters ?) and of course their pay. Is the front loaded educational model still relevant to the needs of students and employers ? Why accrue debt studying Philosophy only to end up an accountant, or master current programming languages only for them to be replaced by AI within a few years of graduating ? Wouldn't a lifelong learning model funded by employers be much more useful. Learning would then be current and relevant to the job and students would not have to saddle themselves with debt impacting the formative years of their lives. Online learning has improved massively and we have seen the decline of students attending in person lectures evidencing a change in preference of learning style. Massive cost savings could be made without the need to maintain a campus at their current sizes, particularly if staff who can do their jobs just as well from home were allowed to do so. Learning is obviously not just about employability, but if I want to do an MA in the Rolling Stones I would fund it myself but would not be any worse off financially than in the current funding model. Such courses may disappear, but lets be honest, they were only ever offered by the need to generate income anyway. Change in the HE sector is notoriously slow but the bigger picture should be considered if we want to meet the needs of students , employers and even the taxpaying public going forward. I think one of the biggest hurdles that needs to be overcome is that our senior leaders are making decisions based on the way things were rather than the way things will be.
Indeed - no management competence/imagination nor governor stamina/inclination for any kind of radical restructuring of an anachronistic medieval teaching academic year. And, if ever such emerged, the UCU would be obliged to strike so as to protect the current hopelessly uneconomic delivery model of 25-30 teaching weeks over 3/4 years. Need GoogleU or similar to bust the existing producer-oriented paradigm…