Corb Blimey!

[Bizarre Löw Triangle]

But where will the money come from? And how is any of this going to be possible after even a really mild brexit?

Where will the money come from to pay tuition fees after a really mild brexit? The SLC is essentially a pyramid scheme. Without even assuming a downturn something like 80% of current graduates will never repay their loans. The government's assumptions about repayments are wildly optimistic. So the current funding model is essentially increasing government debt but attempting to offset that against bad debts that will never be repaid. The government writes off about £6bn in bad debts every year. This makes up part of the government deficit, but crucially it doesn't end up part of the published deficit figures.

What does this achieve? It means new graduates essentially pay a different tax rate for their entire lives than non-graduates and older graduates. It means working class are put off going to university. It means either a funding crisis in twenty or thirty years time or extracting more from the minority of students able to pay.

And of course, this gets worse when Brexit-induced economic crises hit too - as, when salaries go down, graduates are less able to make SLC repayments. But because you're not funding from general taxation, the problem has the potential to be even more acute.

At that point, we'll probably have loads more to worry about, what with global warming induced migration crises, water wars, natural disasters etc so in that case fair play it's probably a decent plan.

[Tubby Isaacs]

The government writes off about £6bn in bad debts every year. This makes up part of the government deficit, but crucially it doesn't end up part of the published deficit figures.

The most likely explanation is that the debts haven't been written off. The government's looking ahead at what debts it thinks it won't get back, and it's making a provision on its balance sheet for that.

But because you're not funding from general taxation, the problem has the potential to be even more acute.

This is the point of the government making a provision. So that it's ready for the hit when the repayments of the debt don't show up. At some point the government will decide that it's time to write these amounts off, and it'll show on the deficit then, I presume. Estimates of what will get paid have gone down lately, but they can go up as well.

[Bizarre Löw Triangle]

The most likely explanation is that the debts haven't been written off. The government's looking ahead at what debts it thinks it won't get back, and it's making a provision on its balance sheet for that.

This is the point of the government making a provision. So that it's ready for the hit when the repayments of the debt don't show up. At some point the government will decide that it's time to write these amounts off, and it'll show on the deficit then, I presume. Estimates of what will get paid have gone down lately, but they can go up as well.

So how does the government fund higher education then?

Every year, the government distributes ~£15bn to universities and students via the SLC. That isn't funded by specific taxation but it's not recorded as borrowing cos it's a financial transaction that in theory will pay for itself. So it doesn't count as deficit.

When the government writes down the value of the debt (or sells off the loan book on the assumption 50% of the debt is recoverable) it takes a hit to its balance sheet of ~£7.5bn. But that's not part of the budget deficit (as it's an asset write-down). So my understanding is, at present, university is being funded partly by government borrowing and partly by making bets about future tax receipts.

So this "how will you fund free higher education" is a red herring because higher education is already paid for out of a combination of taxes (or deferred taxation) and borrowing.

[Tubby Isaacs]

When the government writes down the value of the debt (or sells off the loan book on the assumption 50% of the debt is recoverable) it takes a hit to its balance sheet of ~£7.5bn. But that's not part of the budget deficit (as it's an asset write-down).

I just explained the difference between writing off a debt and making a provision for the debt going bad. It's a hit to the balance sheet but to the government's "profit and loss". That's perfectly normal accounting, not some sort of stroke. And because of the provision being made, the government isn't suddenly hit with an economic shock as the debt isn't repaid.

because higher education is already paid for out of a combination of taxes (or deferred taxation) and borrowing.

Nobody ever said that the government shouldn't pay some of the cost of higher education. I'd have it paying more than it does now, maybe finding some sort of international benchmark that it does with overseas aid as a starting point (I'm not making any comment on overseas aid beside the fact this benchmark figure exists, and it's the basis for bipartisan agreement on funding levels). I'd have the government funding addressing some of the major problems with the current system- the worst is the lack of maintenance grants, plus fees themselves increasingly putting off working class students, as you said, though they didn't seem to do that initially. You can make the fees progressive on parents income, very easily.

The government is underwriting the loans. They're not directly liable for the loans being repaid. So it's not really like other borrowing, even if they have to make up the write offs. It's not like the government borrowing the whole amount.

What fees, done properly, help you do is produce a progressively funded, ringfenced amount for higher education. Relying on the Treasury to keep providing that is, to my mind, a bad idea. It's even easier to squeeze than capital investment, where people at least notice infrastructure decaying. You'll quickly get cuts to student numbers, reduction of funding per course and perverse incentives whereby universities don't want home students because they can't get enough income off them.

[Nefertiti2]

Fees and loans make graduates poorer. They make education market and consumer driven with often disastrous effects. Eg the decline of language teaching and the marketisation of education. They turn the common good into private rentseeking.

[Tubby Isaacs]

Progressive taxation makes graduates poorer.

You can very easily charge lower fees for subjects where there are shortages. And choosing a subject you might earn more money from isn't anything like "rent seeking". Rent seeking is where you acquire something that nobody else can have (eg a property) and make money from literally "renting" it out.

[Snake Plissken]

Amazing how easily the idea of tuition fees became the norm, isn't it?

[Tubby Isaacs]

Anyway, modern languages has had a big decline at GCSE level. If you don't have GCSE, let alone A level, how likely are you to do a degree?

[Tubby Isaacs]

Amazing how easily the idea of tuition fees became the norm, isn't it?

They've been around since 1998. So wherever we are now- and I don't support the current system- it's not sudden.

[Nefertiti2]

Progressive taxation makes graduates poorer.
.

No it doesn’t. It makes very wealthy graduates slightly less wealthy.

One reason why GCSE language courses have declined is league tables. It’s the same rot in a different place.

[Tubby Isaacs]

No it doesn’t. It makes very wealthy graduates slightly less wealthy.

That's a Corbyn line paraphrased. Do you actually believe this idea that we can pay for everything we need just from taxing high earners more? I don't. I didn't before Brexit. But I believe it even less now, given we're mucking up our biggest market, and have Macron/Merkel/Vadrakar/Rutte all but painting arrows on the streets with "Move here" written alongside them.

You need to find ways of starting tax rises lower down to do that. University fees do that.

One reason why GCSE language courses have declined is league tables. It’s the same rot in a different place.

Same rot meaning you don't like them. They're very different.

[Nefertiti2]

It's not a Corbyn line. Progressive taxation is progressive. I think free education funded by taxes is better than fees funded by loans.

Brexit is another story altogether. In or out of Brexit I believe in free tertiary education. As in Germany.

And what they have in common is pointless marketisation and the distortion of statistics. Getting loans notionally off the books (as with PFI) usually entails the state borrowing more at greater cost, to fool no-one.

[Bizarre Löw Triangle]

That's a Corbyn line paraphrased. Do you actually believe this idea that we can pay for everything we need just from taxing high earners more? I don't.

Tuition fees are already paid for out taxation. HMRC take 9% of my salary above £25k to pay tuition fees. It's a tax.

If you added 9% to the middle and upper tax rates the only people who'd have an increased tax bill are high-earning non-graduates and those who had their education paid for by the state but are now happy to kick away the ladder. Also recent graduates earning millions. Everyone else would get a reduction in their tax bill.

That would pay for higher education about three times over. Maybe people will flee abroad because they take home more money in the short term but pay more tax in the long term idk.

[Tubby Isaacs]

Are you seriously suggesting having students pay for their own fees (subject to write offs) costs the government more than the government paying the lot, Nef?

[NHH]

Are you seriously suggesting that education is something that is at its best when marketised and individualised?

[Tubby Isaacs]

Tuition fees are already paid for out taxation. HMRC take 9% of my salary above £25k to pay tuition fees. It's a tax.

Clearly, I meant general taxation in that context.

those who had their education paid for by the state but are now happy to kick away the ladder

No ladder's being kicked away, using the ladder just costs more. Far more people are going to university than when most of them went, even with disastrous policies like abolishing mainteance grants.

Also recent graduates earning millions. Everyone else would get a reduction in their tax bill.

How many people do you think "earn millions"? IThey should be taxed more, no problem with that. But there aren't enough of them to make other people get a meaningful reduction.

[Tubby Isaacs]

Are you seriously suggesting that education is something that is at its best when marketised and individualised?

I don't fees' role in that matter to the extent of costing the Treasury £8bn a year net, no.

I think it matters more that universities get the funding they need. Fees provide that. The Treasury won't. Universities will be the first thing that gets cut.

[Bizarre Löw Triangle]

Clearly, I meant general taxation in that context.

No ladder's being kicked away, using the ladder just costs more. Far more people are going to university than when most of them went, even with disastrous policies like abolishing mainteance grants.

How many people do you think "earn millions"? IThey should be taxed more, no problem with that. But there aren't enough of them to make other people get a meaningful reduction.

You're missing the point. I don't think many recent graduates earn millions. I think most people who earn millions structure their earnings in such a way that they don't pay income tax on all of it.

I pay 9% on earnings over £25k in student loan repayments. You could take that tax and apply it to the higher-rate only (so increase the higher rate to 49% and the additional rate to 54% and decrease the tax recent graduates pay on £25k+ earnings down to the basic rate again). Coupled with student debt forgiveness, this would constitute a tax cut for graduates who are repaying student loans and equalise tax between graduates and non-graduates.

I got this wrong when I said it'd pay for higher education three times over. You'd have to also include a basic-rate increase to get that sort of return. According to figures from HMRC, this would raise £12-13.5bn - which is only slightly short of the current £14bn doled out by the SLC every year. Crucially, though, it's about £6-8bn more than even the most optimistic revenue generation stats from student loan repayments.

And most recent graduates - including young, high-flying ones who are presumably the most likely to flee overseas - would see their tax bill go down. This isn't a utopian-squeeze-the-pips-until-they-squeak suggestion. It's not radical. All it does is give recent graduates a tax cut, then equalise their tax with what everyone else pays.

[Tubby Isaacs]

I got this wrong when I said it'd pay for higher education three times over. According to figures from HMRC, this would raise between £13.5bn - which is only slightly short of the current £14bn doled out by the SLC every year. Crucially, though, it's about £5bn more than even the most optimistic revenue generation stats from student loan repayments.

Yeah, this would be a significant amount of money, no doubt.

But the principle of it seems pretty bad. The fact is higher education was free. Just because it isn't free now, that doesn't alter the fact that they did it when it was free. So they now find out (after 20 odd years) that it wasn't? Not that I'm a lawyer, but is that even going to be legal?

And if the broader argument is that those people have had a big freebie, is that even true? You'd have to look at tax rates over the years.

[Bizarre Löw Triangle]

Yeah, this would be a significant amount of money, no doubt.

But the principle of it seems pretty bad. The fact is higher education was free. Just because it isn't free now, that doesn't alter the fact that they did it when it was free. So they now find out (after 20 odd years) that it wasn't? Not that I'm a lawyer, but is that even going to be legal?

And if the broader argument is that those people have had a big freebie, is that even true? You'd have to look at tax rates over the years.

You're still missing the point. What I'm suggesting is very simple. Increase the higher and additional rates of tax by 9%. Forgive all existing student debt.

There's a rhetorical aspect of "make those who enjoyed free education pay for it" but I'm suggesting increasing general taxation in the top two bands by 9% and eliminating the 9% student loan repayment rate. That has the effect of making recent graduates pay slightly less tax (where "tax" = "tax + student loan repayments") and non-graduates and people who graduated a long time ago pay slightly more.

[Tubby Isaacs]

Ah ok.

HMRC said that brings in £13.5bn?

[Bizarre Löw Triangle]

Ah ok.

HMRC said that brings in £13.5bn?

From their Direct effect of Illustrative Tax Changes, with my assumption that, locally, tax receipts scale linearly. Felt that was a reasonable assumption as this is a lower tax rate than many people already pay.

[Tubby Isaacs]

I'd never heard of that. Got it here now, looks interesting. Thanks.

[Wouter D]

[conversation had moved on while I typed all this, so it's probably best if we'd just kept on keeping on]

[Johnny Velvet]

No ladder's being kicked away, using the ladder just costs more.

The ladder shouldn't cost anything. One of the fundamental principles of socialism, of any progressive politics, is that education should be free because it helps those in need to better themselves. Any government that disagrees or takes the opposing view might be many things, but it isn't socialist. As for discussions over where the money to pay for all of this comes from, the stories from the past couple of years detailing how the richest class of people, Brits among them, have stashed most of their money in offshore tax havens indicate just where the money can be found that should fund things like third level education. That will require a globally co-ordinated response but now is the time to do that.

If Toro was still on OTF this is the point where he'd chime in with "... And I'd like a unicorn!"