 Wysłany: Pią 3:33, 29 Paź 2010 Temat postu: Browne is right |
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“a graduate tax does not produce sufficient levels of revenue to fund higher education until ca. 2041-2042. With a graduate tax set at a rate of 3 per cent of earnings over the income tax threshold, revenue would not start flowing until 2015-2016 (when the first students in the new system graduate) and would only build up very gradually over 25 years.” With a graduate tax, the government pays the university ?7000 up front, and recoups its expenditure from students after they graduate and start paying income tax. Government expenditure rises by ?7000, as does the public sector borrowing requirement (PSBR), and the proceeds of the graduate tax are not recognised in the public sector’s accounts until they flow in. The graduate tax proceeds are accounted for in the same way as any other flow of tax revenue. The intention to remove all public subsidies for most degree courses has no economic justification. Higher education, across all subjects, has social returns as well as private returns; which is the rationale for sharing costs between the taxpayer and the graduate. The new regime would be rational if there were social returns to degrees in mathematics, botany and Italian, and not to degrees in economics, history and law, but this is simply not the case. * There is more detail on the public accounting of student finance in section 4.3.3 of Nick Barr’s submission to the Browne Review. ft.com/economistsforum News An economist reading the report might in particular be puzzled by an element in the comparison offered between a graduate tax and the proposed ‘student finance plan’. The report says that: The recent report of the committee chaired by Lord Browne, former BP chief executive, on UK higher education funding and student finance should raise concerns about policy being driven by accountancy rules, rather than by rational argument. Lord Browne is right to be radical — FT editorial Alasdair Smith is a research professor of economics at the University of Sussex and was formerly vice-chancellor of the university One might quibble about Browne’s use of the word ‘revenue’ to describe an accounting accrual, but the more important issue is the role that the Browne proposals play in the expenditure plans of the UK’s coalition government. On the back of Browne’s proposals,nfl sports jerseys, the government plans to cut the teaching grant to higher education in England by ?3.2bn, 70 per cent of current expenditure. Teaching in most subjects will receive no public subsidy. No other major area of government expenditure is making a contribution of this order of magnitude to the fiscal consolidation. By Alasdair Smith Browne is right: there is an important difference between the flows of revenue in the two schemes, but it is an accounting variation,cheap jerseys, not a real difference.* But why stop at higher education? Could the same accountancy rules not be used to help with the deficit in other areas? Why not fund the replacement of the Trident nuclear submarines by a ‘nuclear finance plan’? For every year in which the Trident replacement successfully deters nuclear attack, citizens could be required to make an income-contingent payment for this service, calculated as a suitable percentage of their taxable income. This would be a payment for service, not a tax, and like the graduate loan repayments, it could be accrued in the RAB accounts at the time the replacement submarines are being constructed. Problem solved! However, if universities raise their fees to compensate for the removal of the grant,cheap nfl jerseys, there will be little or no real contribution to deficit reduction in the period of the UK’s comprehensive spending review. The change will eventually bring additional revenue to the Treasury, but not for decades. If the UK deficit has not been dealt with by then,nfl store, the government will have more to worry about than the funding of higher education. Under the ‘student finance plan’, the university charges a tuition fee of ?7000 which is paid by the government and then recovered from the individual students after they graduate and have an income above a particular threshold. Under Resource Accounting and Budgeting (RAB) rules, government expenditure and the PSBR do not increase if all of the ?7000 plus interest at the government borrowing rate is expected to be repaid eventually. The graduate contribution is recognised immediately in the public accounts; the obligation of the graduate to make the contribution is a government asset which offsets the borrowing needed to cover the gap between payment and receipt, so the PSBR does not increase. October 22, 2010 12:17pm in Economics, UK economy,football jersey, UK politics | Comment Search within: News Quotes The cash position of the government is the same in both schemes: a cash outflow now which is balanced by a cash inflow at some point in the next 30 years. Consider alternative ways of covering the teaching cost of about ?7000 per year for a typical English university student in a chalk-and-talk subject. The independent review of higher education funding and student finance Time to discount Vince’s argument on progressive student fees — FT Westminster blog There are important differences between a graduate tax and a deferred tuition fee (and Browne is correct to opt for the latter). But they also have features in common: just like a graduate tax, Browne’s ‘student finance plan’ has no up-front fees, and collects the payments from graduates through the income tax system, so revenue would not start flowing until 2015-2016 and would only build up very gradually over 25 years. It may therefore seem odd that he argues against a graduate tax on the basis of features which are shared with his preferred system. It is hard to escape the conclusion that policy is being driven by accountancy rather than by rationality. Cutting the teaching grant to zero for most subjects is the easiest way for the Department of Business, Innovation and Skills to make its contribution to deficit reduction. The cut has real and unjustifiable implications for the funding of higher education; but most of its contribution to deficit reduction is a matter of accountancy - or to be blunter, an illusion. |
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