Forget the cuts: tuition fees will be the first test of the Coalition’s resolve

Yesterday the Lib-Dem membership received an e-mail from Vince Cable ruling out “a pure graduate tax”, adding that “while it is superficially attractive, an additional tax on graduates fails both the tests of fairness and deficit reduction”.

What this actually amounts to, is that despite the best efforts of Vince and David Willetts, the Treasury would not wear a graduate tax. It was always going to be tough to get a ‘tax’ past the Conservatives, especially one which would disproportionately affect upper middle-class families. It would have also been difficult, as there would be an interim period between tuition fees being phased out and graduate tax funding paying into the system.

Vince cited three problems of a graduate tax, which he maintains would make it unviable. Some graduates would end up paying more than the cost of their education; UK taxes would not be able to be collected from foreign students; and a graduate tax would not help reduce the deficit over the next five years.

The first two reasons do not seem particularly insurmountable. I suspect that it would only be a minority of graduates on obscene salaries who would pay “many times more than the cost of their course”. Foreign students could pay the cost of their studies, in full, upfront. However it is the last problem which has decided government policy, a graduate tax would indubitably add to government spending over this parliament - but it would be progressive in the longer term.

Quite how this fits with Nick Clegg’s speech on the 18th of August, where he said: “governing for the long-term means thinking not only about the next year or two, or even the next parliamentary term. Governing for the long-term means recognising that the decisions of one generation profoundly influence the lives and life chances of the next”, is anyone’s guess.

This announcement will be of serious concern for the 57 Lib-Dem MPs, 54 of whom including Nick Clegg and Vince Cable, signed the NUS pledge to oppose any rise in tuition fees. If a graduate tax is dismissed, then tuition fees will undoubtedly have to rise, with some reports of students being charged £10,000 a year. Each of those MPs will have to decide whether abstaining will honour that pledge, or whether they will have to vote against the government.

This is a major headache for the Lib-Dem leadership, and if it is not handled well, Nick and Vince may find their party in open revolt. The abolition of tuition fees is a policy which has support from virtually all activists and by signing the NUS pledge, the MPs have no space for manoeuvre. They will either be disloyal rebels or proven hypocrites. Either way, this will provide a large stick for their opponents to beat them with.