Graduates 'should pay a higher rate of income tax'

GRADUATES should receive larger grants, which they would repay through a higher rate of income tax, a university vice-chancellor told the House of Lords yesterday.

Speaking during a Lords debate on the growing problem of student poverty, Baroness Perry of Southwark, vice-chancellor of the South Bank University, urged ministers to consider the Australian system under which graduates repay part of their grant through a 2 per cent tax on income.

'Higher education is a private as well as a public benefit,' Lady Perry said. Acknowleding the Treasury's dislike of hypothetical tax revenues, she said repayment would be a 'user payment' administered through the tax system. Payments would cease entirely if a person was unemployed or at home raising a family.

Lady Perry said the real hardship facing many students was beyond dispute, but she joined several other peers in pointing out that they were also a privileged group who would become the higher earners in society.

She illustrated the problem with the case of a student in Plymouth who ran up an overdraft when she could not get work for the summer vacation. All her grant was taken by the bank and her credit stopped. 'Her tutor found her recently begging in the streets in order to be able to continue her course.'

Supporting a graduate tax, the Bishop of Guildford, the Rt Rev Michael Adie, said it was necessary to re-establish that higher education was not a right but a privilege. 'Because it is a privilege people should be ready to contribute towards the cost of it.'

The clearest evidence of student impoverishment was the fall in student union bar profits, the bishop said.

Opening the debate, Lord Addington, a Liberal Democrat, said the Government had expanded ways into university without providing students with ways of eating when they got there. The system, replacing a grant backed up by housing and social security benefits with a grant and top-up loans had 'failed miserably'.

A typical student now had less guaranteed income than he or she would get on social security, less than the sum regarded as the bare minimum for living, Lord Addington said. A student outside London could expect an income of pounds 57.30 a week compared to pounds 77.45 a week on benefit.

Baroness Blatch, Minister of State for Education, said everyone knew of individual students who were in financial difficulty. 'Twas ever thus,' she said. 'Some students do run out of money faster than others.'

Emphasising that one aim of the new system was to 'increase students' economic awareness and self-reliance', she maintained hardship was not widespread. Just under half of eligible students had taken out loans. Far from being hard-up many did not seem to need all the resources the Government had provided.

Rejecting a graduate tax, Lady Blatch said the difficulty was in distinguishing between those graduates who had received public support for their higher education and those who had not. A system which did would be extremely complex.