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27.09.11

Tuition fee changes would benefit rich -Centre Forum

Labour’s proposal to lower the cap on university tuition fees has been criticised by liberal think tank Centre Forum, which suggests the change would be “regressive” as it would disproportionately benefit the richest graduates.

Labour Leader Ed Miliband suggested that if the party was in power now, they would only increase fees to a maximum of £6,000 a year, instead of £9,000 as the Coalition has chosen to do. The current average for fees starting in 2012 is £8,393 per year, with over a third of all universities charging the maximum of £9,000.

But under both the Coalition’s scheme and Labour’s alternative, monthly repayments are linked to income, not total debt, meaning new graduates would pay exactly the same at first – it would only be after years of work and repayments that the differences would be felt.

Centre Forum, which has links to the Liberal Democrat party, said: “The gains of Labour's proposal go, in short, overwhelmingly to some of the richest people in Britain. The largest reductions in monthly loan repayments occur 28 years after graduation.

“It is at this point that reasonably significant numbers of graduates – around one in six – would still be paying under coalition proposals, but escape paying under Labour proposals. This group has an average income of £72,509.”

However, Gareth Thomas MP, Labour's higher education spokesman, said: “Centre Forum has missed key parts of Labour's proposal. Their calculations, and their claim that the package is regressive, are incorrect.

“Analysis carried out by the House of Commons Library, using the Department for Business, Innovation and Skills' own model, found that our package would benefit the lowest 10% of earners the most. They would be 16% better off than under the Government's plans. The highest 10% of earners, those with incomes of £65,000 or more every year of their working lives, would be 2% worse off.

“This is because under Labour's proposals the highest earning graduates would pay more. All graduates would benefit from lower fees. But those who pay off their loan within 20 years and are earning £41,000 or more at the time, would make additional payments for two years. Combined with the increase in the interest rate for this group, it means that while 90% would be better off, for those in the top 10% the benefit of lower fees would be more than offset by their overpayments.”

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