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Wednesday, 7 September 2011

Reclassifying Tuition fees as a Graduate Tax: Update...

I blogged the other day about why I couldn't quite work out we hadn't called the new arrangements on HE Student funding a graduate tax.

It's been suggested that this was prevented by the Treasury - and I've submitted a Freedom Of Information request to the Department of Business et al to see if this is true. They have acknowledged the request and said I will have a reply by 3rd October - watch this space!

Meantime it's also been suggested that the new scheme can't be called a graduate tax because...

It isn't a graduate tax because a) it is time limited, and b) it is only on future graduates not all graduates

Well I've checked a feew classical definitions of a tax - the one I've printed below is from 'Investor Words'. And on this basis, I think we'd be fine in technical terms.

A fee charged ("levied") by a government on a product, income, or activity. If tax is levied directly on personal or corporate income, then it is a direct tax. If tax is levied on the price of a good or service, then it is called an indirect tax. The purpose of taxation is to finance government expenditure. One of the most important uses of taxes is to finance public goods and services, such as street lighting and street cleaning. Since public goods and services do not allow a non-payer to be excluded, or allow exclusion by a consumer, there cannot be a market in the good or service, and so they need to be provided by the government or a quasi-government agency, which tend to finance themselves largely through taxes.

However, let's see what advice was given to the department - could be illuminating!


  1. wouldn't it be a kind of hypothecated (higher education) tax? As a tax raised on income from graduates to pay off their educational costs. Infact it's personally hypothecated, isn't it? PHHET, commonly known as ......

  2. It is clearly not a graduate tax as graduates are not treated equally under this system -
    1. Gradutes who earn very high salaries quickly will pay off the loans very quickly and will consequently pay far less.
    2. Similarly - middle income gradutes will pay hugely more due to the effects of compound interest
    3. Those whose parents can afford the fees upfront will pay nothing.

    It is very depressing that most liberal democrats appear not to see these rather fundamental problems. The party seems to believe that they have created a 'progressive' system (when they obviosuly have not).