Graduates face 'higher tax than millionaires'

Plans to allow universities to treble the cost of tuition fees and leave graduates with average debts of £15,000 provoked uproar from backbench Labour MPs and university vice-chancellors last night.

The Government's long-awaited White Paper on higher education, published yesterday, would lead to students starting to repay their debts once they earned £15,000 a year – at a rate of 9 per cent on any further income.

Accountancy experts said that would lead to graduates paying a higher rate of tax (42 per cent) than millionaires (40 per cent) once they reached the threshhold. "I am a little surprised that the Government has suggested a rate as high as 9 per cent," Maurice Fitzpatrick, an economist, said.

Most elite universities – including Oxford, Cambridge, Birmingham and Nottingham – said they would introduce top-up fees as soon as they came into effect, in September 2006.

Sir Richard Sykes, Vice-Chancellor of Imperial College, London, argued that universities should be able to charge higher fees. However, many described the proposals as "madness" – and warned they would wreck plans to widen participation among students from disadvantaged backgrounds.

Professor Neil Buxton, Vice-Chancellor of University of Hertfordshire, said: "We regret very much the introduction of top-up fees which seem destined to create a two-tier university system. It's altogether wrong."