Monday 2 March 2015

Miliband's unexpcted favour to the Lib Dems

The personal finance expert Martin Lewis has come out against Labour's plan to cut student fees to £6,000 a year.  He says it is is subsidy to future bankers, as he explains:

"The only people who would gain from it are those who would clear their entire loan for tuition fees plus any loans for living costs, plus the interest, within the 30 years. To do this you’d need to be a high earner.

"To see the exact amount, go to my student finance calculator and play about with different scenarios – watching the impact of reducing tuition fees. It shows that only those with a STARTING SALARY of at least £35,000 – and then rising by above inflation each year after – would pay less if you cut tuition fees (we have assumed the student also takes out £5,555 in maintenance loans per year).

"That’s a very high amount, mainly only City law firms, accountancy firms and investment banks pay that much as starting salaries. Is that really who Labour wants to target with this plan? Worse still, by cutting tuition fees it will reduce the bursaries that universities can give to attract poor students."

He is quite right about this.  It also shifts resources from existing students to future, well-paid graduates.

Because the truth about the - originally controversial - new system of university finance and students loans, that Vince Cable brought in, is that it bears few similarities to Labour's student loan system that it replaced.  It is only paid off when graduates can afford it, and those thresholds are very much higher now than they were.  It safeguards the low-paid theology graduates (I speak as one), but still provides them with the resources to study.

It provides proper funding for universities and it has underpinned a new life for universities, where a higher number of poorer students have been applying to go to university than ever before.

In fact, if Vince Cable had been a trickier customer - or longer in the job - he might have reasonably been able to claim that he had in fact abolished the old student loan system, as promised, and brought in a graduate tax with major safeguards for people who don't earn higher salaries.

Cable was too honest for that kind of Blairite spin.  But there is still a powerful case to be made for the new system, which is very much better and more generous than the old system.

In fact, it seems to me that Ed Miliband has done the Lib Dems an unexpected favour.  If he had not come up with this proposal, then the Lib Dems would have tiptoed through the general election whenever student loans were mentioned.  They would have been constantly on the back foot.

Now they are being forced to defend the current system, and therefore defend their record.  Since the current system is so much fairer than the old one, and they have a good case - this seems to me to be a heaven-sent opportunity.

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