Steve Richards: Only Tories win from the student saga

If Miliband adopts a graduate tax there will be much internal stirring. If he drops his support, the students will feel betrayed

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Once more in British politics, nothing is quite what it seems. I read or hear most hours of the day that the Coalition has won the argument on top-up fees but has lost the politics. The opposite is closer to the case. Every level of the argument is far from won, from the decision to virtually privatise universities by imposing deep cuts in spending, to the suggestion that the repayments will not deter some from poorer backgrounds.

As for the politics, this week the Liberal Democrats squirm and agonise. In a no-win situation they have cause for agony. There is no easy way through for a party that had one unequivocal policy at the election and another now. So much is obvious. The longer-term political consequences are nowhere near as straightforward.

On the substance of the issue, I note that prominent university vice-chancellors make the case for the policy only because of the spending cut, an extremely qualified and contorted defence of the Coalition's approach. Here is the vice-chancellor of Exeter University, Steve Smith, writing in yesterday's Times. He argues that the cuts in spending are an error, but then goes on to point out that as a result universities have no choice but to support the policy: "We can see no alternative, given that cuts have already been allocated to the budget ... Government spending is to fall substantially, perhaps by up to 75 per cent. The planned increase in fees may offset the reduced funding."

That is the extent to which the Coalition has won the argument. In the meantime, the opponents are protesting and will probably continue to do so up until the next election.

But while the argument is not won, the politics leads in an unlikely direction. Indeed, the probable collapse of support for the Liberal Democrats is one of the reasons why the consequences of this drama are far from clear-cut. Recently, I spent a few days in the South-west of England, including a stay in a constituency currently held by the Liberal Democrats. I kept on bumping into people cursing their decision to support Nick Clegg's party at the last election. Such experiences are totally unscientific, but they are backed up by the polls.

If there were an election tomorrow, the Liberal Democrats would be in danger of losing all of their seats in the South-west, Labour would increase its share of the vote and the Conservatives would gain every constituency in the region without necessarily adding a single new supporter to its tally at the last election. The main beneficiary, if there is a collapse in Lib Dem support, is the Conservative Party.

Park that thought as I move on to look at Labour's alternative to the steep rise in top-up fees. At the moment, the party does not have an alternative. It has a policy review. The vacuum has its advantages, but also big dangers. The question, "What would you do?" is one that will not await the outcome of a two-year review. For a party's critique of a government's policy to be heard with respect it has to offer a credible and coherent alternative. The answer "We are the opposition. It is not our job to come up with a policy" is a route to eternal opposition. Yet senior Labour figures utter variations of these two fatal sentences on a regular basis.

The speed with which the Coalition is implementing its agenda presents an opposition with opportunities. There will be big explosions in the experimental laboratory.

But such determined radicalism also poses a great challenge for a party adjusting to opposition. The "what would you do?" question recurs more than often than usual. There needs to be some definition on a daunting range of issues. Some are easier to deal with than others for Labour. The alternative to top-up fees is the most difficult of them all.

Ed Miliband is a supporter of a graduate tax. He was a private advocate when Tony Blair introduced top-up fees during Labour's second term. He and Ed Balls tried to persuade Gordon Brown to push for a graduate tax then as part of the internal battle with No 10 that was as much about policy as fuming ambition. Balls was the first candidate in the leadership contest last summer to argue for a graduate tax. On Sunday, in an interview with Andrew Marr, Yvette Cooper looked entirely at ease when declaring her personal support for a graduate tax. She is also a believer. Most of the Shadow Cabinet is not.

In particular the shadow Chancellor, Alan Johnson, is an opponent who has discovered an uncharacteristically energetic passion in relation to the issue. He has given a series of interviews in which almost casually he has argued that the graduate tax is unworkable. Some interpret his dissent as early moves to destabilise Miliband. This is not the case. The weekend before last Johnson and Labour's welfare spokesman, Douglas Alexander, had a phone conversation before they went on to give separate media interviews in which both agreed that loyalty to the leader was paramount.

In spite of his resolution, Johnson ended up uttering words that were interpreted correctly as being at odds with his leader. Miliband's allies see Johnson more as a Ken Clarke figure, someone who has reached a stage in his career when he is a relaxed and candid interviewee. This is closer to the truth than views of Johnson as a figure suddenly hungry to lead an insurrection. Nonetheless, it should be of only limited comfort to Miliband. He cannot have his shadow Chancellor articulating the opposite case on an issue as defining as this one.

In the meantime, the new leader makes only a tentative nod in the direction of the policy he favours. In Sunday's Observer he wrote there is "a strong case for moving towards a graduate tax and ... we will develop a proposal in our policy review". There are lots of get out clauses in those words.

Labour can wait a long time before giving details of its precise alternative. Figures about how it would finance a greater level of public spending on universities can wait another day. Division over the broad principles and slippery evasiveness cannot fill the vacuum without making Labour look as incredible as the Liberal Democrats.

At some point, Miliband will either have to impose his view on his shadow Chancellor and the rest of his parliamentary party or concede that top-up fees in some form will stay. Neither option is easy. If Labour adopts a graduate tax there will be much internal stirring and a thousand quotes from the likes of Johnson on why it is such a bad idea. If Miliband drops his support, the students, who support a graduate tax, will feel as betrayed as they do by Clegg. One of the few distinct pledges in his leadership campaign would be gone even before Labour had made it into government.

The Lib Dems are not the only ones in a no-win situation. At least Clegg has the excuse of power. The sweeping increases in top-up fees are terrible for the Liberal Democrats, but will prove to be as much of a nightmare for Labour. The political beneficiaries of the row will be the Conservatives, the only party that officially supports the policy that sparks such fiery opposition.

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