Today (29 Nov) the Higher Education Policy Institute (HEPI) published Fairer Funding: The case for a graduate levy (Policy Note 10) by Johnny Rich, which outlines a radical new approach to funding higher education.

In order to balance the cost more fairly between students, taxpayers and employers, the paper proposes that, instead of students borrowing money to pay for tuition, businesses should pay a levy for each graduate they employ. The amounts would be equivalent to the student loan repayments made under the current funding system in England.

Revenue from graduate levies would be paid directly to the higher education institution where each graduate studied. Institutions would be financially sustainable because they would share an investment in the future employability of their students, rather than because they maximise their student intake.

The paper comes in advance of the Augar Review’s report in the new year on the future funding of Post-18 Education and Funding. It also comes as the Office for National Statistics prepares to announce possible changes to student loan accounting rules that could create a black hole in the Government’s budget deficit plans.

The paper has been written in a personal capacity by Johnny Rich, a higher education specialist who is also Chief Executive of Push, a not-for-profit outreach organisation, and the Engineering Professors’ Council.

Rich also argues for a redistribution of funds between higher education institutions based on their ability to attract and support students from poorer backgrounds. This would give institutions an incentive to support social mobility and ensure access money is spent more effectively.

Johnny Rich said:

For too long, higher education funding has been a battleground of competing interests between taxpayers, students, employers and universities. Over three decades, students have come off worst. A graduate levy would mean that everyone shares the same interests: students having opportunities to do high-quality courses, becoming well qualified for good jobs, filling the nation’s skills gaps.

The proposal is designed to minimise student debt, but also to ensure employers don’t pay more than they contribute now, unless they get more. The same goes for taxpayers.

Nick Hillman, Director of HEPI, said:

We are at a crucial moment for the funding of higher education and this paper wrestles with the challenge of securing greater support from employers.

It is a challenge no one has been able to solve adequately since the Dearing report called for higher education to be a shared endeavour between government, students and employers over a generation ago.

We hope it will serve as a useful contribution to the debate on an under-studied but crucially important area.

The Higher Education Policy Institute’s mission is to ensure that higher education policy-making is better informed by evidence and research. We are UK-wide, independent and non-partisan.

Amatey Doku, Vice President Higher Education, NUS, said:

We frequently hear about the premium imparted by education onto the individual, but not always as much about the contribution it makes to wider society. This report is therefore a step in the right direction: a recognition that business benefits significantly from the skills provided by tertiary education, and the start of a serious conversation about how those beneficiaries should contribute properly to that investment.

We need to broaden the debate in this fashion if we are to find a new funding settlement that works for students, the public, and the economy, particularly with the findings of the Post-18 Funding Review due in a few weeks’ time.

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