Thursday 4 November 2010

Punishing success.

It's something you generally associate with socialist envy, right? The harder you work, the more successful you are, the more they take from you, to keep you in your place.

Here's a scenario. Two students graduate from the same course at the same time. Both have student debts of £30,000.

One student goes on to do pretty well, earns £25,000 a year. That student will repay the loan in 30 years at £360 per year.

The other goes on to do very well indeed, works very hard, climbs the ladder and earns £45,000 a year. That student will repay exactly the same loan over exactly the same 30-year period at... £2160 per year. Because this student is a little smarter, a little more ambitious, a little better at the job, they will be charged a much higher interest rate than the average student earning an average graduate wage. So why bother?

Sounds like the standard socialist trap, doesn't it? Work harder, get further, demonstrate greater aptitude or intelligence and you will be branded 'elitist' and beaten back into line. Exactly the sort of thing you would expect from a really left-wing version of the Labour government.

Except... we don't have one of those. We have the allegedly Tory-led Cleggeron Coagulation.

At least I think we do. It's getting really difficult to tell.

Update: Mark Wadsworth explains why it's nowhere near as bad as it looks. He knows a lot more about money than me. I can barely get my head around a tax form.

I still think the government are insane though.


Anonymous said...

Stunning isn't it? they wonder why some of us take it easy for four months of the year so we don't move up a tax bracket. they will also wonder why average graduate earnings start to drop as graduates react to this type of punitive discrimination.

We really are stuffed!

northern smoker said...

this is totally off topic,but interesting none the less..a house of lords memeber basically admits to helping the IRA with their money-laundering and talks about 'foundation x' offering interest free billions to help restart the sounds like tripe,but its right there in Hansard.. wtf is going on here?

link to the actual soeech as recorded by beeb cameras in the comments

timbone said...

Hang on a minute, I have to disagree. OK, I was lucky, from 1971 to 1975, I had a full grant with no debt at the end. Times have changed. They couldn't really afford it then, and they certainly couldn't now. So who pays for higher ecucation? Does the student get a loan which is only repayable if they earn a living wage, or does the basic tax rate go up and we all pay it?

Leg-iron said...

Mud in the Blood - history tells us what will happen. The brightest and best will go abroad.

Timbone - I'm not saying they shouldn't repay the loan. Of course they should. But where is their incentive to excel, to start businesses, to discover great things, when they could easily do a mediocre job using a tenth of their capability, just to avoid paying six times as much as the average in interest?

The smart ones will do that, you know. The very smart ones won't go to university at all.

The very rich won't have loans. It won't bother them. They'll fill the universities with monocled Hooray Henries with more money than brains. I taught one once. Useless. When she was awarded her degree anyway, I nearly sent mine back.

The poor will have grants, not loans. It won't bother them either. They will get in on patronising policy rather than ability, to show that the Coagulation is 'helping the poor'.

It's targeted at one group. The ones that the socialists traditionally hate. That group risks paying an extra £2000 in tax per year for 30 years if they take their chances with university.

If they don't go to university and use their abilities to earn £45000 per year anyway, they are £2000 a year better off for 30 years.

Soon, university students will either wear monocles or shellsuits.

It's not about us paying it out of taxes. The loans already come out of taxes.

It's about the repayment of those loans at differential interest rates depending on whether the student paid attention or not. The ones who really made use of the degrees we loaned them money for are to pay more.

Seems to me it should be the other way round.

Leg-iron said...

Northern smoker - sad to say, I wouldn't be at all surprised if Cameron put a Mafia don on the cabinet.

there's a fuss over whether criminals should vote at the moment.

Why not? They'd be voting for their own kind anyway.

Anonymous said...

WTF Why go to university for 25k a year?

Disenfranchised of Buckingham said...

Anonymous said...
WTF Why go to university for 25k a year?

There aren't real graduate jobs for 50% of kids doing Uni. But they have been misled to think that a degree is a good idea.

As a businessman I mourn the lack of fairly bright kids not going to Uni. Business needs more kids with brains, experience and practical skill preferably with HNCs and HNDs not more academic know nothing graduates.

Kitler said...

I did two years of a Micky Mouse degree paid for by free money and all I did was fuck about and fail.

When I go back to Uni it will be self funded and I'll do a proper degree which I'll work my ass off for because it will be my cash on the line.

If I were in charge all fees would be payable only by those who fail their degrees. Doesn't get fairer than that.

Ed P said...

Student loan repayments are surely deducted from gross salary, so the graduate's income tax bracket is irrelevant. I do not see how you arrived at a cost of approx 8 times for the better-paid graduate.
But I'm quite interested - both my daughters have these loans hanging over them (& me)!

Ed P said...

It should have said six times!

Anonymous said...

I work in a University and I agree - students need to pay more - especially when you see how much funding for teaching has been cut. But this graduate tax is just plain barmy. What is wrong with the current loan system where you pay when you finish IF you earn over a certain amount? Poor people can still go because it doesn't matter if they can't afford it. And if they remain poor then their University qualification has clearly not helped them so they just don't pay it back.

But with the tax idea I just don't see why people should pay more for the remainder of their working lives? And why penalise people for paying it back early?

A lot of the thinking seems really garbled on this issue.

Leg-iron said...

Anon 08:08 - Take forensic science as an example. The courses are in demand, but they produce eight times as many qualified forensic scientists every year as there are jobs available.

So really, they aren't going through the course for £25k a year. They are qualified, they have a debt but there aren't the jobs for the qualification.

Nobody tells them when they start.

It's still not fair to penalise those who do get the jobs because they didn't know either. The fault is with the universities offering courses that they know won't result in employment for a load of graduates.

PhD is worse. I have one, in intestinal microbiology, which means I can charge lots for work in intestinal microbiology but am overqualified for every other job on the planet. So if nobody wants intestinal microbiology done, I'm finished.

Fortunately people keep poisoning themselves in ways that really shouldn't happen so I'll be okay for some time yet.

Leg-iron said...

Ed P - not my figures. They're from the linked article.

Leg-iron said...

Disenfranchised - I used to teach HNC, HND and degree courses as well as MSc and PhD students.

There was a running joke that went - if you start a HNC class by saying 'good morning', they'll say 'good morning'. A HND class will grunt.

A BSc class will write it down.

I saw a lot of really intelligent HND students who had worked out that for what they planned to do, a HND was enough. Later, they started to get pressured into extending the HND into a degree.

I wasn't keen on that because it made the HND look like a failed degree, when it was really an entirely different kind of qualification. Yes, I was vocal about it.

It's one of the reasons I don't work there any more.

Leg-iron said...

Anon 22:53 - the thinking isn't garbled even though it comes from garbled minds.

They don't want it paid back early because of money. If you pay it all back when you're on £25K at the start of your career, they can't cream you for higher interest when you get up to £45K. The extra doesn't go to the universities.

Mark Wadsworth said...

The Torygraph are lying.

What makes the big difference is not the variable interest rate -it's the income related payments and the waiver after thirty years that make the big difference. Because of the maths involved, teh £45,000 earner appears to come out worst (compared to a £21,000 earner or a £100,000 earner).

Mark Wadsworth said...

A belated thanks for the link.

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