Employer levy on graduate wages could replace fees, says union

England, Wales and Northern Ireland could scrap tuition fees entirely if governments imposed a 1 per cent levy on graduate employers, according to new research.

The University and College Union (UCU) said political parties should “remove the debt burden from young people accessing education and commit to publicly funding universities” as it outlined potential options for a future government to “fix” higher education funding.

A report prepared by consultancy firm London Economics for the UCU shows that a levy that functions in a similar manner to how an employer pays National Insurance contributions could remove the need for UK-domiciled students to foot the £11 billion fee bill each cohort currently pays and come at no extra cost to the taxpayer.

Employers would be charged when employing graduates on a salary over a certain threshold, with the levy varying by country, UCU said. This would stand at 1.13 per cent in England, 1.06 per cent in Wales, 0.8 per cent in Northern Ireland and just 0.07 per cent in Scotland, where tuition is currently free for Scottish students.

The union is not the first to propose a levy, with the idea growing in popularity as the UK searches for a solution to its higher education funding crisis, which has plunged dozens of institutions into deficit.

A recent survey for the Higher Education Policy Institute (Hepi) showed that an employer levy of 3 per cent on earnings over £25,000 for the graduates they hire was the most popular alternative model for funding higher education.

UCU’s own polling – conducted by the firm Savanta – shows that 62 per cent of people think students should pay less towards the cost of higher education and 53 per cent think employers should pay more.

A majority of voters who support either the Labour Party, the Liberal Democrats, the Green Party, Plaid Cymru or the Scottish National Party say they support employers paying more towards education, while only 19 per cent of Conservative voters oppose it.

UCU said an alternative system to the employer levy could see a 3-percentage point increase to corporation tax, which would mean “only profitable businesses would pay for the UK’s university system, with those making the most profit paying the most”.

The union said “political parties need to put forward a realistic higher education funding model ahead of the coming general election” as it launched a campaign to “reclaim” higher education.

This will “fight for radical reform of higher education, based on a fair funding model and an end to exploitative working practices”, the union said.

UCU’s general secretary, Jo Grady, said higher education was “one of the few sectors in which the UK is still a world leader, but when dozens of universities are using financial instability to justify making big cuts, it is clearer than ever the funding model is irretrievably broken”.

“We need radical change – not just tinkering around the edges – to put higher education on a sustainable footing, and our polling shows the public backs an employer education levy,” Dr Grady added.

“Ahead of the general election, UCU is calling on all political parties to remove the debt burden from young people accessing education and commit to publicly funding universities.

“The report from London Economics shows there are clear options for a future government to pay for higher education and that it can do so without burdening individual taxpayers.

“Either a 1 per cent levy on employer National Insurance or a 3-percentage point rise in corporation tax can replace student fees.

“Higher education adds tens of billions of pounds to the UK economy, and business benefits enormously from the highly skilled workforce our sector produces. These increases would be a small price to pay to secure such an important public good.”

tom.williams@timeshighereducation.com