Fees are the answer. Now, what was the question?

What is it with student finance that makes politicians break their promises?

First Labour in 2001 promised not to raise tuition fees. Nine years later it was the Liberal Democrats, not only opposing higher fees in their manifesto but signing personal pledges to vote against any increase in the House of Commons. For which most of them are now going to vote. There are two possible explanations.

Explanation A is that politicians are liars. Explanation B is that the issue is difficult and humans are tempted to believe that there must be a simple andpainlesssolutiontoit. MostpeoplegoforoptionA.Mytaskistotryto explain why I think that explanation B is the right one.

I believe that it was the making of these promises that was the mistake, not the breaking of them. The easy way to win votes is to promise hippie student paradise paid for by the tooth fairy; but anyone who has looked at the issue with a view to designing a system that will work on planet Earth realises that the options are limited. They are even more limited when public spending is being squeezed. But let us remind ourselves of recent history, given that few people know much about the system of student funding apart from the three years they were at university or the year or so before their children are.

Long ago, when we last had a Conservative government, it brought in a system of loans to pay students’ living costs, in order to save money on grants as student numbers increased. The Blair Government then brought in means-tested fees of £1,000 a year, paid in advance by two-thirds of students, the amount depending on their parents’ income. Tony Blair then broke his 2001 manifesto promise, by raising fees to £3,000, but charging them to soft loans paid by students once they were earning after graduation. This was actually a much better system, and despite all the scaremongering about loading up a generation with debt, student numbers, including students from low-income homes, continued to rise.

Then, in 2009, as it became apparent that, whichever party was in government, public spending would have to be cut deeply while still more young people would want to go to university, John Browne of BP was appointed to look at the options again, to check that the tooth fairy was still not available and to make himself very unpopular.

At this stage, two real-world options were ruled out. One was to reduce the number of students going to university.

That had been popular with a certain kind of Conservative before David Cameron became leader. He rightly put an end to such state-sponsored snobbery, that the man in Whitehall knows best how many people should be entitled to take degrees.

The other option was to increase funding for universities out of general taxes. That would not be popular at the best of times, and now is not one of those times. But more than that, it would not be right. To ask all taxpayers to pay more for an education enjoyed by perhaps half of young people – an education that, on average, increases that person’s earning power – is wrong in principle.

That is why it was brave of Wes Streeting, president of the National Union of Students until last summer, to persuade his members to maintain some contact with the mother planet and drop the union’s long demand for ‘free education’ – that is, education paid for by someone else.

The price of that victory was that he persuaded his members that an extra income tax on graduates was the solution, because that was a way of wishing away the difficult words ‘fees’ and ‘debt’.

So the NUS drew up a plan for a graduate tax and got Liberal Democrat MPs to sign a pledge to vote against any attempt in the House of Commons to increase fees. And we all know what happened next. Liberal Democrat MPs found themselves, rather unexpectedly, in a position of responsibility.

On planet Earth. Where the options are few.

In last month’s Spending Review, George Osborne, the Chancellor, at last put a figure on the cut in university funding. The taxpayers’ contribution will be reduced by 40 per cent over the next four years. As David Willetts, the universities minister later admitted, although not in quite so many words, that means that humanities degrees will no longer be subsidised by the taxpayer at all.

Now, you could argue that it should not be cut so deeply, but Labour would have cut too, and so the argument is one only of degree. The immovable object is that more money has to come from students, either before or after they graduate. Finally, we are down to two options: a graduate tax or higher fees paid for by bigger loans. Nick Clegg, Vince Cable and Danny Alexander came down in favour of higher fees, not because they are bad people (explanation A) but because it is the right answer (explanation B). But they are weak people, because they knew that before the election, and had tried repeatedly to change their party’s policy. When they failed, they still signed up to the NUS pledge.

Listen to Alexander squirm when asked about it by The Independent on Sunday: ‘Look, we had a debate within the party, I argued for changing our policy, others did too, on all sides not just the leadership. As a party we concluded that we wanted to go into the election with the policy in our manifesto, as a collective process, we all signed up to that quite rightly so too. The pledge that we signed reflected that policy.’

The main feature of a graduate tax is that it separates payment from the product being purchased, namely tuition.

Instead of receiving a fee from the student, the university would receive a grant from central government, paid for by a tax that would not produce revenue for a while. And it is a tax that could not be levied on foreign students, including those from other European countries.

So the Lib Dems decided to support a scheme based on Lord Browne’s report, which retains an element of progressive taxation from the idea of a graduate tax by charging high-earning graduates more than they borrowed, or a penalty charge if they pay their fees early. It is not exactly the worst of all worlds, but it is intellectually unsatisfactory and therefore rather hard to explain.

The problem arose because Lord Browne was asked to do something about the fear of greater debt putting off potential students from low-income homes. His terms of reference asked him to take into account ‘the goal of widening participation’. This was defined, among other things, as ‘the avoidance of the creation of barriers to wider access’ (not a model of syntax that I would commend to my students) and ‘promoting fair access to all institutions’.

This is a foolish confusion. There is no evidence that the prospect of debt deterred working-class students from applying in greater numbers to go to university so far – indeed the evidence is that it did not. It seems a mistake to ask the system of student finance to do two separate things. One is how to pay for universities to expand when funding from the taxpayer is going to fall; the other is to take from the rich to give to the poor. The system of fees and loans should do the first job; the tax and benefit system should do thesecondtask,separately. However,giventhatthecoalition’spolicyis primarily a fees-and-loan system, with a bit of decorative confusion on top dressed up as ‘added fairness’, it is broadly the right answer. No wonder nobody likes it.

John was debating: Everyone benefits from education. So why make students pay?