Labour will cut tuition fees to £6,000 and raise grants by £400
The incoming Labour Government will cut university tuition fees from £9,000 to £6,000 a year, and provide additional annual £400 grants for students from lower and middle income backgrounds. This will be funded by restricting Pension Tax Relief for those on the highest incomes – a change for which I have argued for over ten years; politics can be slow. I’d prefer a Graduate Tax, but this is a big step forward.
Labour’s goal is a country where the next generation can do better than the last, with tuition fees reduced to £6,000, an apprenticeship for every school leaver who gets the basic grades, and smaller class sizes for 5, 6, and 7 year olds.
The current university tuition fee system is bad for students and bad for taxpayers.
The decision by the Conservatives to increase tuition fees to £9,000 was made with the connivance of the Liberal Democrat MPs – who had all promised in writing to vote against any increase. So much for their much vaunted principles – disappeared at the first whiff of power… That decision meant that the average student will now graduate with £44,000 of debt. Almost three quarters of students will never pay their loan back in full – after having had tens of thousands of pounds of debt hanging over them for 30 years.
By 2030-31, the current student fee system is set to add £281 billion to the national debt.
Labour's better approach is fairer for all. We will tackle spiralling student debt by cutting the tuition fee cap from £9,000 to £6,000 for all undergraduates from September 2016, and by providing additional grants for students from lower-income backgrounds.
Cutting the tuition fee cap will reduce graduate debt by nearly £9,000. Labour will also increase student grants by £400, so that the full grant increases from around £3,400 to around £3,800. This increase will benefit all students with an annual household income of up to £42,620. More than half of students will benefit.
Because our policy is fully-funded, it is fairer to universities and taxpayers too.
Universities will not lose out, because we will increase the teaching grant they receive by around £2.7 billion; i.e. the same amount that their fee income falls.
This policy will reduce government debt by £40 billion by 2030-31. Just over the 2015-20 Parliament, it will mean over £10 billion less debt.
This policy will be funded by raising £2.9 billion by lessening Pension Tax Relief for those on the highest incomes. At the moment, people with annual incomes of over £150,000 get tax relief on pension contributions at a rate of 45%, which is more than twice the 20% rate for Basic Rate taxpayers. This means that the Labour leadership has at last recognised that, although the richest are only the top 1% of taxpayers, they receive 7% of all Pension Tax Relief. How fair is that? So Labour will reduce the rate of relief for those with incomes of over £150,000 to 20%; i.e. the same as basic rate taxpayers. The annual and lifetime allowances for pension contributions will be reduced. Thus the amount that a person can put into their pensions tax free will be capped at £30,000 a year, or £1 million in their lifetime. This is fairer – after all, how many people could ever afford to put such a huge amount into their pension pot?
Rob Marris, Labour Candidate for Wolverhampton South West