Increasing Investment in Higher Education: The Role of a Graduate Tax

Abstract

This paper contains a proposal for a remodelled system of funding for higher education (HE), incorporating a graduate tax system, together with estimates of such a system's effects on the resources available for HE, on the economic attractiveness to the individual student of pursuing a degree course and the implications for public expenditure. The proposal offers a non-means tested grant for students combined with an obligation to pay an additional low rate of tax throught their working life. This system reduces the dependence of HE on general taxation. Compared with current arrangements the suggested combination of an improved grant and additional tax raises the attractiveness of pursuing a degree course for an average student.