In last Thursday’s edition of the Evening Echo Dr. Michael Murphy of UCC, whom I enjoyed working and debating with over the last year, stated that cuts in 3rd level funding and staff embargoes would hamper economic recovery and our competitive position internationally when the recession eases. I agree utterly with Dr. Murphy, but he like many others are guilty of a smattering of economic hypocrisy due to his support of 3rd-level fee re-introduction.
At the heart of this debate is, obviously, money and the question of ‘who is going to pay’; the state, the taxpayer, or the student? These are seen as the 3 sources of income for Higher Educational Institutes, excluding private contributions. To any sensible person this riddle is hardly the Mystery of the Divine Trinity: they are the same entity. The answer lies in Dr. Murphy’s own quotation: “I do not know of any western country where graduates do not earn more after graduating [than before].” Students were/are/will be taxpayers, and on average graduates pay 70% more in tax than those who do not graduate from a 3rd level institution. Surely then it makes sense to have lots of graduates to fill the state’s coffers? So how can we incentivise for more graduates, or to put it better, how can we not dis-incentivise potential college-goers & graduates?
Various research studies has shown Direct Fees at point of entry to college are the greatest psychological and economical disincentive to potential college goers, favouring directly those on higher incomes who can afford to pay while penalising those on lower incomes. 4% of UK students, equivalent to all of CIT, dropped out instantly in the year they introduced Tuition Fees in the UK. Further it creates a ‘cat and mouse’ game between the HEI and the State, with the state cutting funding and the HEI forced to drive entry fee charges up (a medical degree in Australia costs $250,000). This is happening currently in Ireland with the Registration Fee going up by €600 to combat the 10% cut in University budgets, and the 4% cut in the Core Tuition Fee grant per student from the State. Direct Fees are a method of ‘squeezing’ families and students at both ends- pay upfront and pay 70% more in taxes later.
A graduate tax is possibly the most idiotic in the current environment, bluntly because there are few jobs in Ireland for graduates and few on the horizon. Increasing numbers of students are emigrating to ride out recession, or in search of jobs, or just going on the Dóle (thus increasing the State bill). A debate on even the merits of this is pointless for another 5 years, but I caution against it as it makes us less competitive in retaining graduates in the Irish economy (bye-bye tax revenue) over others.
The Australian-style Loans scheme however is possibly the worst of them all, it is the educational NAMA. It has all the bad and none of the good of all the schemes, and is the most difficult to operate. The State takes one a massive debt burden (€32,000 by 250,000 students per annum = €8billion) on top of our growing debt, with no real guarantees of repayment by the student as there exists no method of stopping students who owe the state from skipping out on repayments by emigration; one Stena-Line later and I’m a graduate living in the UK and I don’t have to pay the Irish State a penny.
Who then will administer the loans if not the State? We can hardly trust Irish Banking Inc, and if we did would there be an interest rate charged, and when would loans need to be repaid by? It is effectively a mortgage on education, and fittingly ‘mort gage’ means ‘grip of death’ in English. There are also the psychosocial and socio-economic knock-on effects of introducing a Loans Scheme; graduates in the UK can expect a personal debt burden of at least £10,000 upon graduation, which currently they cannot repay, and an average household debt of £21,000. So for middle/lower/working class families in this already debt-laden climate, the age-old choice of ‘who gets to go to college’ resurfaces.
What is the solution? It’s incredibly simple, easy to administer, and conveniently they just published a 500-page document on it; taxation reform, specifically income tax and ending tax-breaks. Ending the €300million tax-breaks along would add huge funding to the education sector, more than the re-introduction of fees for those families earning over €100,000 (<€150million Minister O’ Keeffe told us).
A third rate of income tax for those earning over €250,000 per annum (sorry Dr. Murphy) would bring in much more general revenue for a variety of investments, and if you were really clever you’d introduce a once-off Wealth Tax on those earning over €1mllion per annum of 5% (1% per annum over 5 years) which would see us net €16.8billion. Easy to administer and collect? You bet.
The Fees debate takes place in a bubble wrapped in a vicious cycle. You need jobs for taxes, you need an educated workforce for jobs, and you need taxes for … well… everything! Whether it is taxes or borrowing, investing in large-scale job creation is the solution to this mess.
