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Report shows 'employer education levy' could replace university student fees

9 May 2024

A levy of around 1% on employer National Insurance contributions for graduates could support the scrapping of tuition fees at no cost to the Exchequer.

The new research, by London Economics for ʵ, shows student fees across the UK could be abolished and replaced by a levy on graduate employers. This would remove the £11bn per cohort in fees paid by UK domiciled students, with a corresponding increase in public teaching grants that would be funded by an employer levy. This levy would function in a similar manner to National Insurance employer contributions and would be paid based on graduates' salaries over a certain threshold. It would only apply to the earnings of graduate employees and is estimated to stand at 1.13% in England, 1.06% in Wales, and 0.8% in Northern Ireland. In Scotland, the levy would only cost 0.07% due to the nation's current funding model. 

Alternatively, the report shows that a 3 percentage point increase to corporation tax could be used to fund higher education instead of a National Insurance levy or student fees. This would mean only profitable businesses would pay for the UK's university system, with those making the most profit paying the most.

Recent polling conducted for the union by Savanta shows most people think students should pay less towards the cost of higher education (62%) and employers should pay more (53%). Importantly, a clear majority of Labour (61%), Lib Dem (62%) Green (53%), Plaid Cymru (55%) and SNP (57%) voters support employers paying more towards education, while only 19% of Conservative voters oppose it.

Higher education adds over £70bn to the UK economy, according to a recent House of Lords . Yet it relies on domestic students paying back debt for up to 40 years with the government still  a loss on the loan. 

ʵ said the poll shows political parties need to put forward a realistic higher education funding model ahead of the coming general election.

The union's Reclaim Higher Education campaign launches today and will fight for radical reform of higher education, based on a fair funding model and an end to exploitative working practices. The campaign comes as dozens of universities across the UK are threatening redundancies, risking thousands of jobs and the closure of entire departments.    

ʵ general secretary Jo Grady said: 'Higher education is one of the few sectors in which the UK is still a world leader, but when dozens of universities are using financial instability to justify making big cuts, it is clearer than ever the funding model is irretrievably broken. We need radical change - not just tinkering around the edges - to put higher education on a sustainable footing, and our polling shows the public backs an employer education levy. 

'Ahead of the general election, ʵ is calling on all political parties to remove the debt burden from young people accessing education and commit to publicly funding universities. The report from London Economics shows there are clear options for a future government to pay for higher education and that it can do so without burdening individual taxpayers. Either a 1% levy on employer National Insurance or a 3 percentage point rise in corporation tax can replace student fees. Higher education adds tens of billions of pounds to the UK economy and business benefits enormously from the highly skilled workforce our sector produces. These increases would be a small price to pay to secure such an important public good.' 

Last updated: 9 May 2024