Monday, 6 September 2010

Beware the Slingshot: Grad Tax vs. Migration

What defines the HE sector in the coming decade is less a battle of David and Goliath and perhaps more Vince and Richard.

And I’m torn. Which side to pick?

Vince Cable is set to re-open the public discussion on ‘Graduate Contributions’ – a system he (and the NUS) claims will make the fee’s paid to go to university vastly ‘fairer’:


“What we are trying to inject into the argument is that if you become a very highly paid investment banker you finish up paying more than if you’ve gone off and become a voluntary worker or become a physicist in the National Physical Laboratory, or whatever. I want to make it progressive in that sense.”
I support this idea wholeheartedly. Why wouldn’t any logical, do-what’s-best-for-the-people type person, think any differently? The only time we should question this type of motive is when it is at stake of what is best for the entire country. And here is my difficulty.

Today Richard Lambert, Director of the Confederate of British Industry (CBI), has openly criticised the notion of a graduate contribution/tax by using an argument that I hadn’t yet thought about:

"If we had [this tax], UK students would have an incentive to work overseas to escape paying, especially when the top rate of tax is 50%," he said. "And how would you get EU students to pay for their degrees?"
Well – graduates leaving the country to avoid paying tax? Get a free education then leave as soon as you can afford it to avoid hefty fees? It makes sense. We only need look 2 years ago to see that emigration has long been considered to be a more prosperous way to live your life post-HE.

Varying degrees of extremism have been proposed on the graduate tax/contribution but this ‘valley of death’ scenario that Lambert is predicting needs to be strongly considered by all proponents of Cable’s suggestion.

If we think realistically – not all economically useful graduates will leave Britain should they be faced with a tax on their degree. Some will have familial commitments, some will not be fiscally stable enough to stay in the UK and some may just love the country and not want to leave. Those that do leave have no such ties, or are able to sever those ties freely.

Immigration minister Damien Green has today announced that student immigration levels are ‘unsustainable’. Whereas Green is focusing on the issue of student visa’s, he has inadvertently introduced another facet of the tax argument.

1. We have lots of international students coming into the country, paying high fees to learn from Britain’s best minds.

2. We could (according to Lambert) face large numbers of British graduates leaving the country due to the grad tax.

3. These British graduates will act as overseas ambassadors. The more that leave the country, the more international students will want to come to the UK to study HE.

So in terms of international reputation – British graduates leaving the country could be the best thing politically for British economic and diplomatic affairs.

In terms of sustained UK economy however, if we presume that a large number of those that are international students leave Britain post-HE – then we will have a long term deficit of graduates contributing to Britain’s GDP.

Politically it is best for graduates to leave the country – this will provide us with good international repute and increased sector return in the wake of HE cuts. But economically it may be a risky strategy to play in the long term, forcing ‘useful’ graduates out of a country that needs all the brains it can get.

I don’t envy Cable. It’s a lose-lose situation.

1 comment:

Martin - TheUniversityBlog said...

I can't imagine a mass exodus. There's no perfect solution and you will always find some highly paid individuals who wish to circumvent the system. That's not a new prospect.

Your penultimate paragraph makes a good point about the 'lose-lose' situation. Finding a balance is almost impossible because you cannot predict the future. So do we risk losing graduates, or do we celebrate a distinguished position around the world? No easy answer!

Whatever the case, it's natural to see the CBI argument because it's in their interest to make that point. It's worth being aware of their concern, but the reality is unlikely to be so extreme.