Times Higher Education – More on alternatives sources of funding to the state/taxpayer
Very interesting article on how university funding cuts might proceed in the UK – there are lessons for us here too, including why a graduate tax won’t work (answer politics, or rather politicians, – not economics).
According to the Organisation for Economic Co-operation and Development, in 2007 the UK invested 1.3 per cent of its GDP in tertiary education, predominantly through public funding. At 0.9 per cent of GDP, UK public funding is not materially different (plus or minus 0.1 percentage point) from public investment in some 14 other OECD countries. It is somewhat less than in most Scandinavian countries (where it is about 1.5 per cent of GDP), although these countries also have minimal levels of private funding. There are just three OECD countries that invest more than 2 per cent of GDP in tertiary education: Korea (2.5 per cent), Canada (2.7 per cent) and the US (2.9 per cent). In Korea and the US, private funding’s share of GDP given to higher education is double the share of public funding in the UK.
What should be the overall level of investment in higher education? Who knows? That is a judgment the Government makes on behalf of taxpayers and against competing priorities. One benchmark might be the OECD average of public funding, which is 1.5 per cent of GDP. To take us from present funding levels to that average would require an increase in public expenditure of almost £9 billion. That figure is not a one-off, but rather an annual and sustained increase.
A tax on graduates:
If there is to be change, it should not be via a graduate tax, which has the specious appearance of being a “fairer” form of graduate contributions. It is anything but. With income-contingent repayments, the beneficiary repays only his or her contribution to tuition; with a graduate tax, one goes on paying long after that sum has been refunded. Moreover, it is highly unlikely that universities would see the benefit of revenues from a graduate tax. Governments do not hypothecate taxes, and no government would ever do so for a graduate tax in the current climate. Thus the risk of the yield disappearing is higher than ever over the next decade.
Research intensivity has an enduring effect on earnings, so fees should be allowed to vary, and let students decide if they want to go to a (cheaper) less research intensive university or vice versa. The graduate tax of course could be limited to just lifetime earnings, and universities could be placed in bands or tiers that attract different levels of tax.
Maybe pension funds should be the vehicle, not the state/tas payer?
Lots more to think about in the article itself.