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Graduate tax bad for business, says IoD

22nd Sep 2010
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The Liberal Democrats are calling for a new graduate tax to replace to tuition fees, but it could result in a ‘brain drain’ from the UK, warned the Institute of Directors.

The Liberal Democrats passed a motion at their annual conference this week calling for leaders to build a cross-party consensus for a graduate tax system to replace tuition fees.

The tax would mean that graduates on lower salaries pay less for their degrees, while high earners would pay more than at present.

In a speech to the Liberal Democrat party conference today, business secretary Vince Cable said: “I am doing everything I can to ensure that graduate contributions are linked to earnings. Why should low paid graduates - nurses, youth workers or science researchers - pay the same as corporate lawyers and investment bankers? We have to balance higher contributions with basic fairness”.

However, if passed, the regulations could have a negative effect on business, warned the Institute of Directors.

A graduate tax would increase marginal tax rates and could encourage the most able domestic students to study and work abroad, it said, thereby depriving the economy of vital skills, universities of income and the Treasury of receipts.

“Introducing a graduate tax would be extremely impractical,” said Miles Templeman, director general of the Institute of Directors. 

“It makes no sense to create a funding model that encourages a brain drain, puts new cost burdens on employers and financially penalises students who work hard at university and demonstrate merit.”

It also said a graduate tax would present a burden for employers, as graduates would expect higher salaries to compensate. “It might seem to be fair to charge employers for the benefit of having highly-educated employees - but to the extent that education is commercially worthwhile, that is already reflected in higher salaries”.

“There are legitimate criticisms of the existing system of funding, and these need to be addressed. But it is surely easier, and more logical, to build on the system we have already than uproot it and start all over again,” added Templeman.

Despite this criticism, the National Union of Students appeared to back the plans, saying they presented a “golden opportunity to achieve on their most popular and longstanding policy aims”. However the lecturer’s trade union, the University and College Union called for the Liberal Democrats to offer more detail on how the tax would work in practice and who would be directly affected.


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By mikewhit
23rd Sep 2010 12:31

Progressive common good

I seem to remember the Lib Dems suggesting a 1% (higher) education tax.

I for one (maybe the only!) would not disagree if the higher rate were raised from 40% to 41% to fund a properly regulated "higher" (and maybe "further") education system.

Then those who could afford it (presumably including graduates) and everyone who benefits from a society containing university education (not just the graduates themselves), would pay a share - as with the NHS.

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By Democratus
23rd Sep 2010 17:18

Graduated Tax / Graduate Tax

If, a University education is suppose to enhance one's earnings over a lifetime then our graduated tax system already taxes graduates when the reach the 40% threshold which presumably they  reach earlier and stay in longer than non graduates.

No need for an additional tax.

Any puns are unintended


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