27 Feb 2015

Pension changes to fund Labour’s tuition fees cut

Ed Miliband sets out how a Labour government would honour its pledge to cut university tuition fees to £6,000 a year, saying an “entire generation” has been betrayed.

In a speech in Leeds, the Labour leader said that the reduction from £9,000 from September 2016 would be paid for by cutting pension tax relief for higher earners, with maintenance grants raised by £400 a year.

He said the current tuition fees system would saddle the country with £281bn of debt by 2030, arguing that average debts of £44,0000 would “weigh down the taxpayer with more debt tomorrow”.

Mr Miliband is following Nick Clegg’s example by making a pitch for the student vote. At the 2010, the Liberal Democrat leader successfully courted students with his pledge to scrap tuition fees, but he was criticised afterwards when fees were trebled from £3,000 to £9,000 a year by the Conservative/Lib Dem coalition government. Tony Blair’s Labour government introduced tuition fees in the first place.

‘Financially illiterate’

Business Secretary Vince Cable, a Lib Dem, criticised Mr Miliband’s plans, calling them “completely financially illiterate” and warning they would “do great harm to universities and create a costly black hole in the national budget”.

He said a cut to £6,000 would “wreck the financial sustainability of universities, reduce the support for disadvantaged students and benefit only the richest”.

Labour's £400 maintenance grant sweetener. Read Gary Gibbon's blog.

Universities UK has warned that limiting the fees would create a £10bn funding gap over the next five years, while Labour’s former business secretary Lord Peter Mandelson has said any reduction in income from fees must be made good from other sources.

Mr Miliband warned that the value of student loans being written off was set to jump to £21bn a year over the next three decades.

He said: “What has happened over the last five years is more than just a betrayal of election promises.

‘Betrayal of an entire generation’

“It is a betrayal of an entire generation, a betrayal from their first steps to the time when they stride into the world of work, a betrayal from nursery to school, from college to university, a betrayal to the jobs or homes they hope to have afterwards, and even on their ability to vote.

“This used to be a country where it was almost taken for granted that the next generation would do better than the last. This was the promise of Britain. Now we are a country where it is almost taken for granted they will do worse.”

The tuition fees pledge would cost £2.7bn and would be paid for by limiting very high earners’ pension tax relief. The increase in maintenance grants would be funded by charging higher earning graduates slightly more for their loans.

Earlier this week, shadow chancellor Ed Balls denied having a “big bust-up” with Mr Miliband over tuition fees policy following reports of a rift over how a cut would be funded.