Cable proposes a graduate tax
One year on from the debacle of the Student Loans Company’s (SLC) handling of loans to last year’s intake of graduates, Business Minister Vince Cable has put forward a novel way to solve the problem and at the same time cut more public sector jobs – scrap the SLC and introduce a graduate tax instead.
Cable proposes that the government pay universities directly for tuition fees and then recoup the money through the imposition of a higher rate of tax for ex-students. Cable said he has asked former BP boss Lord Browne, who is leading a review into student funding, to look into proposals for a graduate tax. The review is due to report to Government in the autumn.
Employers would therefore be managing the run-off of student loan deductions for those still repaying them, plus identifying a new group of ex-students to apply a different rate of tax to, or more than one rate. As one could argue that graduates should end up in higher paid jobs one assumes that they will be paying a premium on top of the higher (or even additional rate of tax). With the SLC consigned to history, who would monitor when the fees had been repaid to instruct employers to cease the student rate of tax?
The SLC has had enough problems predicting the repayment end dates for loans and to this end recently started to take loans on to direct debit for the last 23 months of the predicted repayment period. With earnings fluctuating as they do and the multiple job scenario one wonders how such a system could be responsive enough? But perhaps I detect some joined up thinking here, is that why the PAYE review announced in the Budget talked of more ‘real time PAYE date’? If we were submitting earnings information on a monthly rather than annual basis this would allow HMRC to respond to the student’s repayments – that’s assuming that HMRC have any people left to mage their IT systems once the spending review is announced in October!
Kate Upcraft
Payroll writer and lecturer
ISIS Support Services Ltd
kateupcraft@btconnect.com
