Wednesday 12 December 2012

Equal Marriage - Contact your MP

My MP John Robertson (Labour) - are
you in support of equal marriage?
Please check the Coalition for Equal Marriage website to find out if your MP has indicated how they intend to vote on the extension of marriage to include same-sex couples in England and Wales. If they have not publicly ventured their opinion, please write to them and ask them to publicly state their support for Equal Marriage, or otherwise state their reasons for not doing so. I noticed today that my MP has not made clear his intentions, so I contacted him using this website and hope to receive a reply soon. I also asked him to take action to ensure proper representation of transgender issues in this new piece of legislation, something regrettably and all too easily neglected when dealing with these questions. What I said is included below.

Dear John Robertson,

I write to you both in a personal capacity as one of your constituents and in my capacity as President of Glasgow Liberal Youth and Glasgow University Liberal Democrats. As you will be aware, the House of Commons will be voting on a Bill which proposes to extend marriage to same-sex couples, both for civil ceremonies and for certain religious ceremonies (but in the latter case only where that religious denomination is not banned from doing so and where they wish to do so, thus not compelling any unwilling celebrant).

Although this legislation does not apply to Scotland, which is dealing with this matter through its devolved institutions, this is fundamentally a question of civil rights, and the recognition in England of same-sex marriages entered into by people in Scotland and vice versa remains a very important issue, especially given that it is quite common for people to have family both sides of the border.

As I understand it, you have not made your views on this matter public, and groups such as the Coalition for Equal Marriage are unaware of your voting intentions. It is a matter of vital interest for your constituents, many of whom will be an LGBT minority group that we know your intentions on this matter, so that they may maintain confidence that you stand firmly in support of their civil rights. I was hoping, therefore, that you could confirm both to me and publicly, that you intend to support these new measures when they come before a vote in the House of Commons, so that we can make the whole United Kingdom a more free, more fair and more equal society.

I have an additional concern I would like you to raise with the government at Westminster in relation to this legislation, insofar as it affects those seeking to have a change of gender recognised under the Gender Recognition Act 2004. As things stand, if someone seeks to change their gender and they are in a marriage or a civil partnership, that "contract" ceases to be valid, since both marriage and civil partnerships expressly exclude (under law) same-sex and opposite-sex composition respectively. If the opportunity is available to you, please ensure that an amendment is put in place that guarantees that no marriage or civil partnership will become invalid by reason of gender reassignment. In practice this may require that civil partnerships are extended to heterosexual couples, or that civil partnerships are to be abolished and all existing such partnerships converted into civil marriages.

If you could possibly attend to these matters I should be most grateful.

Yours sincerely,

Graeme Cowie

Sunday 9 December 2012

Scotland's Free Tuition Scam

Yes. That's right. Scotland's student funding model is fundamentally disingenuous. The profoundly political decision to impose no notional or actual levy on the tuition component of University study for Scottish domiciled students is a move which only serves to help those with relatively affluent parents. This might seem anathema to the great body of "progressives" within Scotland, but it's true. And here is why.

Student debt is not real debt in the UK. Under both the Scottish system (where you receive a student loan from the Student Award Agency for Scotland) and the English system (where you receive a student loan from Student Finance England) you are given that support on fundamentally different terms from a normal loan. You repay in proportion to your income, pay nothing for earnings under a certain threshold, and your debt is written-off by SAAS or the SLC after a fixed number of years. The particulars are as follows:

So it's not a real debt in the sense that it will not affect your credit rating (or eligibility from a mortgage). It is recovered from you in a very similar way to income tax, and might be seen as somewhat of a time and contributions limited graduate tax.

What about maintenance debt?

The next thing to look at is how much debt students will actually take on. The common component of debt north and south of the border is maintenance debt, which is the component of maintenance support that is a loan, rather than a grant. The two schemes offer broadly similar levels of support. The only significant differences are that bursary support in Scotland falls away far more sharply (no bursary support for those from households with incomes higher than £35kpa, compared to the English system, which hits that cliff at £42kpa), and that English loan support for those from high-earner families (more than £55kpa) is noticeably lower.

There is also a slight additional weighting for students studying in London, which over three years would add about £6.5k to the maintenance component of the total debt owed to the Student Loans Company. I have included two tables below, the first coming from the SAAS website, and the second is from (but is a derivative of a table from the Student Finance England website) which demonstrate the broad equivalence of the two maintenance schemes.

There are several things to take into account at this stage. English Universities typically operate 3-year undergraduate courses, whereas Scottish Universities operate 4-year programmes. The typical maintenance debt arising from being a Scottish student at a Scottish University, therefore, will be higher than for an English domiciled student in an English University. A Scottish student will accrue somewhere between £18k and £22k debt in maintenance, whereas an English student will accrue anything between £10.5k-£16k in maintenance debt.

What about tuition debt?

The next step is to consider the impact of tuition debt. English Universities may charge anything between £6kpa and £9kpa for their courses. This adds between £18k and £27k to a three-year undergraduate debt. For generosity of comparison, we will assume £9k fees across the board, giving the typical debt on graduate in England a total of between £37.5k and £43k. Superficially this seems like a massive difference. Notionally, English domiciled students going to English Universities are in twice as much debt as their Scottish counterparts. But what do they actually pay back?

This is the point when our first table really begins to matter. Those going through the Scottish loans system have to start making contributions back when they are earning considerably less money, and under the new funding arrangements, will only have their remaining debt written off after 35 years, compared to the 30 under the new English scheme.

So what do people actually repay?

For a Scottish graduate, if they earn about £16k as their starting salary, and their average salary over 35 years is about £22k over the course of 35 years (in today's money), they will have to pay back their student loan virtually in its entirety over that period. In other words, they will have paid about £18-22k to the SLC in exchange for their whole university experience. Virtually every student earning over, on average, £22kpa in Scotland will repay their loan in full. The only meaningful difference is that higher earners will pay it off a lot more quickly. By way of example, someone with 35-year salary average of about £35k in today's money will have paid off their student loan within 11-12 years.

For an English graduate that earns the same amount, they will start paying their loan back a lot later (because of the higher repayment threshold) and when they do, their payments will be smaller. This, combined with the 30-year write-off, makes it even less likely that an English graduate will repay their loan in full. If they earned the same amount as the low-earning graduate above (£16k starting salary, £22k career average) they would repay... £2700 in today's money. Yes. That's right. About 13.5% of what the Scottish graduate pays. The amount that is actually repaid then continues to rise the more successful the graduate is.

The tipping point (i.e. the point at which the two schemes lead to you actually paying back roughly the same amount) is when someone has 30-35 year average earnings of about £28500 in today's money, or roughly the equivalent of someone who gets a career starting salary of £22k. From that point onwards, it is absolutely true to say that English students at English Universities will be paying more. The peak cost under the English system will fall on earners with career average salaries at around £50k in today's prices, and they will pay about £75-80k towards the cost of their education if they took a £9kpa course.

But what can we learn from this?

What does and doesn't matter?

There are a number of important lessons we can draw from this comparison. Firstly, it is virtually irrelevant for modest graduate earners (those earning up to £28500) whether they are or are not charged tuition fees. The fact that maintenance loans and tuitions fees are combined under the same loan for repayment purposes means that one type of debt is indistinguishable from the other.

It also means that the terms of repayment matter a lot for all income brackets. The level of maintenance support north and south of the border is broadly equivalent in terms of the up-front support it gives to students to live-off. It is certainly the case that the schemes are not identical, and that both countries (but especially England) could show greater regard to the difference in living costs from city to city. What we see though, is that maintenance delivery has a much bigger impact on what Scottish students have to pay back than it does for English students.

This matters from the perspective of allocation of resources as well, however. In both absolute and relative terms, Scotland's system demands a greater direct contribution from graduates earning typical graduate salaries. This can be attributed almost exclusively to the repayment threshold that is applied, but also to some extent to the 35-year write-off period (for extremely low-earners). Further, we should consider what kind of student is most likely to take out a maintenance loan in the first place.

Who is most affected by debt attaching to maintenance rather than fees?

Students more likely to take out maintenance loans are those who a) come from less affluent families b) are living away from home and c) do not have an alternative source of revenue. Though it is certainly true that the loan component of the maintenance payment is lower for lower earners (under both systems) it is only marginally so. In practice, this means that the children of the affluent in Scotland are less likely to need or seek support from the loans system in the first place, and in consequence will be called upon to contribute absolutely nothing towards its upkeep over and above the general taxation burden they face, which is identical north and south of the border.

Now clearly it's a bit of a false economy even if these affluent students continue to take out these loans. One classic strategy of students was to take out the maximum (interest-free) loan and to place it in a high-interest savings account before repaying in full without penalty. That scheme is broadly circumvented nowadays by very low savings rates and in England by the closer-to-commercial interest rates on the loan amount, but what they're paying back is broadly what they took in terms of maintenance.

Redistribution: when does more of it happen?

Self-styled progressives, left-wingers, social liberals etc. should ask themselves whether such a system really improves access and tackles inequality to a meaningful extent. The Scottish student support system, particularly now that the SNP have reduced the bursary component, is less redistributive than the English student support system. By charging fees, you do two things. Firstly, you make it far more likely that the children of the affluent will tie themselves into the contribution system. They are more likely to take the calculated gamble that their earnings post graduation will not be high enough to make it worth their while having their parents pay it up-front. If they are, by the time they notice, they'll be sufficiently affluent as it will make little material difference to them. Secondly, by charging above RPI inflation for higher earners, you facilitate a far greater redistributive effect, lowering the burden for those from disadvantaged backgrounds and low graduate earners. This has the effect of making the disadvantaged not simply better-off in terms of the education you provide them, but also in raw cash-terms as well, given their maintenance benefit far exceeds what they pay back in terms of loans.

What are our real options to increase access to University?

University of Glasgow
The real lesson in this, however, is that access to education is not determined by the notional price-tag of that education, but by the manner in which that burden is levied upon society. For as long as we tolerate part of student maintenance taking the form of a loan, we have no principled objection to university tuition fees. There is often a call for a return to grants-only systems, but we have to bear in mind that they were possible back in an era when 5-10% of school-leavers went to University. Now that figure is closer to 40-45%. If we are serious about removing all loan components from tertiary education, we have to explain, in explicit economic terms, how we are going to pay for the maintenance of that extra 30-40% of school-leavers. This system also has no regard to the relative lack of part-time and post-graduate state support in Scotland compared to England, funded out of fees. Post-graduate degrees, in particular, receive very little (if any) state loan support, meaning that they are only accessible to those who are affluent or can find an external source of support. Our real options are to increase taxation yield (successfully) or to reallocate considerable expenditure from elsewhere.

Our choice is that, or that we admit considerably fewer students to University. Alas that probably is not a silver bullet either. Unlike 30-40 years ago, we no longer have the option available to us to allow a large number of school-leavers to go straight into apprenticeships or work. As things stand youth unemployment is considerably higher than unemployment as a whole. The demand is increasingly for skilled workers, and that means preserving more of our Further Education Colleges for those who cannot or do not want to entertain an academic or professional career.

Short of a revolutionary and mass-scale redistribution of wealth of the like we have never seen, the most progressive option available to us seems to be to ask successful University graduates to contribute more over and above our progressive tax system. It is in this context that free undergraduate tuition for Scots domiciles is a con. Not only does it not actually make University cheaper for our students, but it also makes it less accessible to the disadvantaged than could be achieved with a tuition-based funding model.