How should we fund universities?

Discussions about student funding don’t have to revolve around tuition fees, argue Josie McLellan, Richard Pettigrew and Tom Sperlinger. Instead we should start by asking fundamental questions about the purpose of a university education


Debates about higher education in the UK are often dominated by questions about student funding. There is a risk that this becomes a debate that splits too easily along different sides of a single question – are you for or against tuition fees? – and that equally important issues about the form and function of universities are obscured.

In our book, Who are universities for?, we imagine a different model of universities, with something close to full participation in further or higher education – and with no point of graduation, so people could participate across their lives. In our proposal, part-time study is the norm, and admission to university is no longer determined by A-Levels. This means that people can dip into university throughout their lives, allowing them to fit study around paid work, caring responsibilities, and health needs. It also means that people can easily access higher education to retrain in response to a changing economy and job market.

We believe this will result in a university that is fairer, healthier, and more responsive to the needs of both students and society


A new approach to paying for university

As we developed these proposals, we quickly realised that a different funding system was required. The current system of student loans would not work for our model of lifelong education. We therefore propose a different way of paying for university, that makes it easier to access study as and when it is needed:

  • Initial study would be free for all. The first 60 credits of study (equivalent to half of one full-time year) would be free as well as open access (i.e. anybody could participate, regardless of prior educational achievement).
  • University teaching would be funded by a participatory education tax. The fees and loans system would be replaced with an all-age graduate tax, called a participatory education tax (PET). It would be paid by all past graduates and all those who, in future, accumulated more than 60 credits. An individual would pay a slightly higher rate of tax after accumulating 240 credits of study.


How would a participatory education tax work?

As Green and Mason (2017) have shown, an ‘all-age’ graduate tax – applied to past undergraduates as well – would be more equitable and sustainable than the existing fees system in the UK, which puts all of the cost on to current and future ‘graduates’ and in which high levels of non-repayment are increasingly predicted.

Green and Mason estimate that in their model a student would make the same repayments they owe in the current system (when earning over £21,000) only once they are earning £60,000.

We propose a slightly amended version of this model and would rename it a participatory education tax (PET). It would work like this:

For people who have accumulated between 60 and 240 credits:

a. 0.5% added to the basic rate of income tax

b. 1.5% added to the higher rate of income tax

For those who have accumulated 240 credits and upwards:

c. 1.0% added to the basic rate

d. 2.0% added to the higher rate

We propose that the taxation continues into retirement, whereas Green and Mason propose that the tax is levied only from the age of 20-64. We estimate that this would raise at least £2.6 billion in annual revenue based on the current number of graduates in the UK who received subsidised education, which is considerably more than the £1.8 billion raised during 2015-16 by repayments through the student loans system.

Of course, if our proposals generate the higher levels of participation intended, the number of those who fall within the ‘all-age’ PET tax will increase. Our modelling suggests that with 90% of people dipping into higher education at some point in their lives, the PET tax would generate around £18.4 billion, meeting an annual cost of higher education around £18.1 billion.


Another kind of conversation

There is much more to debate about proposals of this kind. How would they change the nature of university study? What kinds of academic labour and working conditions would emerge? How would local communities start to think of universities? And what might be the downsides of a new tax, with all the bureaucratic complexities it might bring with it?

However, what we hope these proposals do show, above all, is that another kind of conversation about higher education is possible.

Who are universities for? is published by Bristol University Press.