Labour’s plan to cut tuition fees – five things you need to know:
1. Raising tuition fees to £9,000 has been bad for students and bad for taxpayers
The decision by the Tories and Lib Dems to increase tuition fees to £9,000 means that the average student will now graduate with £44,000 of debt. That’s bad for them, because they have tens of thousands of pounds of debt hanging over them for decades – but it’s bad for the taxpayer too, because almost three quarters of students will never pay their loan back in full, and the cost of writing it off has to be met by the Government. In fact, government forecasts show that the current student fee system is set to add £281 billion to the national debt by 2030-31.
2. Labour’s plan will be fairer to students and taxpayers
Cutting tuition fees from £9,000 to £6,000 will reduce average graduate debt by nearly £9,000. And because our plan is fully funded, it means £40 billion less government debt by 2030-31, or over £10 billion less government debt over the next Parliament. We will also help students from lower and middle-income families by increasing student grants by £400, so that the full grant goes up from around £3,400 to around £3,800. More than half of students will benefit. We will pay for the grant increase by asking the highest earning graduates to pay more: increasing the interest rate on the loan from 3 to 4 per cent for those earning over £41,000. This will make the overall system of repayment fairer, but all students will be better off overall as a result of our plan – with less debt, and less to repay.
3. Students who are currently in their first year at university will benefit from Labour’s plan
We will cut fees to £6,000 from September 2016. That means that students who are now in their first year at university will see their fees capped at £6,000 in their third year. Students who start university this autumn will see their fees capped at £6,000 from their second year onwards. And students who start in 2016 will see their fees capped at £6,000 from the start.
4. Universities will not lose out
Our plan is fully funded, so we will increase the teaching grant universities receive by the same amount that their fee income from English students falls – around £2.7 billion.
5. Labour’s plan is fully funded by restricting Pension Tax Relief for those on the highest incomes
At the moment, people with incomes over £150,000 get tax relief on pension contributions at a rate of 45 per cent – more than twice that of basic rate taxpayers. This means that although they are only the top 1 per cent of taxpayers, they receive 7 per cent of all Pension Tax Relief. So we will make the system fairer by restricting Pension Tax Relief by £2.9 billion for those on the highest incomes. We will reduce the rate of relief for those with incomes of over £150,000 to 20 per cent – the same as basic rate taxpayers. And we will reduce the annual and lifetime allowances to cap the amount that people can put into their pensions tax free: £30,000 a year, or £1 million across a lifetime. This is far more than most people can ever afford to put into their pension pots.