Friday, 20 August 2010

Clegg's new University policy - Tax the rich even more (yawn)

Well, well, well.  That lasted long didn't it?  Over the last few months, Nick Clegg has been wandering around pretending that he really isn't that extreme after all, and that he is really quite similar to his new chums in the Conservative Party, he had to break eventually!  I have long believed Nick Clegg to be a socialist hiding under "moderate" clothing, and sure enough - he has just broken ranks with the rest of the Lib-Con alliance to prove me right again by advocating yet another "the rich will pay for it" tax - this time its the graduate tax.

In his latest interview with Mary Riddell for The Daily Telegraph, he openly admits to supporting one of the most unfair measures that a government could pass - the "progressive" form of the graduate tax for University students.  Now, a graduate "tax" in and of itself isn't necessarily a bad thing, especially as it is not necessarily a tax.  The idea at the root of the graduate tax is as follows:

a) Students should bear the cost of their education, or at least a significant amount of it, as they are the primary beneficiaries.
b) However, only students from well off backgrounds can afford to stump up the money up front.

Therefore, in order to make sure students from lower income backgrounds can afford to go to University, the graduate tax offers a way in which a student's income post-university is taxed.  The system therefore becomes almost like an "interest-free credit" system, where one receives the education first, and pays for it later when earning.  This sort of method of paying for education is often met with a thumbs up from both sides of the political spectrum, as it lessens the forced burden on the taxpayer, and places it on the student who has chosen to go to University, and who benefits directly from the education.  Sounds reasonable right?

Well, yes, if done properly.  The graduate tax would infer that we have a set cost which the student must pay.  So for instance if a Politics degree from Cambridge cost £15,000 (just as an example), then the student would have his/her income taxed until that £15,000 is paid back, at which point the taxation would stop.  Variants on the scheme could have the student deferring payments for a few years if money was tight, or they could pay a lump sum if they come into money etc.  Depending on the job, and future economic circumstances, some students might pay less for longer, while some might pay large amounts, but pay the debt off quicker.  Again, sounds fair, right?

Well, here is the problem.  Clegg and his socialist chums don't believe in free market pricing for University degrees, or even government set prices!  They don't believe in prices at all!  So instead of paying until you had paid the costs off, under Cleggo's plan you would just have your income taxed (possibly an extra 5% of income tax) for your entire working life, irrespective of how much you earn!  Toby Young produces some nasty figures on this, showing that doctors for instance, could end up stumping up over £70,000 just for the privilege of going to University, while a humble secondary school teacher could end up paying nearly £50,000!

The idea behind this nonsense (apart from Clegg's ideological commitment to the forced redistribution of wealth) is that richer people are earning more because they have benefited more from their degrees and therefore should pay more.  Yet, the idea is flawed on two levels.  First, just because someone has made the correct choices for their state of life does not mean that they should be punished with higher costs - this is the typical socialist mentality of punishing success and rewarding failure.

The second problem is that just because one is in a high level of income does not necessarily mean that is directly proportional to the benefit they received from their degree.  So someone might receive a degree in Philosophy, find it utterly useless, get into business a few years later, earn loads, and therefore find themselves stumping up thousands and thousands of pounds for a degree that they have benefited little from.

This would also disincentivise people from making good choices for University.  A graduate tax that had you paying a set rate for your degree would make people think "Is this degree worth the £X,000 I will have to pay for it?" and perhaps therefore choose not to study a BA in Glee Studies just for the sake of it, while the person looking at a useful degree will see the price and think "Yes, this degree is worth it."  However, Clegg's scheme would punish those who made good choices and made more money.  It is yet another way of punishing those who have done well in life by forcing them to pay through the nose, while rewarding those who have failed to make good choices, with a free education.

There is nothing wrong with making people pay for their education, and done correctly it would help stem the rise of "Mickey Mouse" degrees we have seen in recent years, and would provide a good level of funding to Universities.  However, like all socialist policies, Clegg's plan simply punishes those have done well, by making them pay obscenely high prices for their degrees just because they have dared to be successful.

The Conservative Party should have nothing to do with this unfair concept - but then they shouldn't have had anything to do with Nick Clegg in the first place.

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