Labour has re-announced a policy to cut tuition fees to £6,000. Last time they did this, Tim Leunig an economist at Centre Forum showed just who the beneficiaries would be:
Since no student has to pay upfront under either system, the proposal makes no student better off or worse off while they are studying.
Over half of the gain to former students goes to the richest 20% of graduates: those with lifetime earnings of over £2m in today’s money.
The winners are also disproportionately old. Less than 1% of graduates will gain from this proposal within 10 years of graduation. The typical winner will have graduated 28 years earlier, and will earn £72,500 at the point at which they benefit from this proposal.
In addition, there is a significant gain to students with well-off parents who pay their fees upfront, rather than borrowing from the government. European students also benefit, as they must make repayments under the loan system but would not be liable for a UK tax.
The proposal is clearly regressive.
Since this proposal leads to an increase in the number of people who repay their loans in full, it also represents a step away from a graduate tax.