Letter: Universities and supermarkets

Sir: Discussion of a 'graduate tax' is confused because the term is used by different people to mean different things. A true graduate tax is levied for life or until retirement. Richer graduates repay more than they have borrowed; in effect, graduates pay a super-tax (Peter Jay, Letters, 25 June).

An entirely different approach is for students to take out a loan for a specified sum; to repay through an addition to their income tax or National Insurance contributions; and for repayment to be 'switched off' once the loan has been repaid. Under this arrangement, no one repays more than they have borrowed. It is not a tax, both because it is voluntary (no one is forced to take out a loan), and because it is directly related to the sum borrowed. All that is happening is that loan repayments are collected in a way that reduces the risk faced by individual students (thereby assisting access) and is administratively cheap.

The great advantage of the second approach is that since repayment is secure, it would be possible for students to borrow from the private sector, producing additional resources for an over-stretched system of higher education at minimal cost to the taxpayer.

Yours faithfully,

NICHOLAS BARR

Department of Economics

London School of Economics

London, WC2

25 June