Shifting the burden: How an employer levy could transform Higher Education financing in the UK

Higher education contributes over £70 billion to the United Kingdom's economy. However, despite this significant contribution, the current funding model relies heavily on student debt repayment over up to 40 years, often resulting in government losses.

In the UK, Higher Education is primarily funded through a system where students are required to pay tuition fees for their university education, often resulting in substantial debt. This debt is typically managed through government-backed student loans, which students begin to repay once they start earning above a certain income threshold. The repayment period can extend for up to 40 years, depending on the amount borrowed and the students’ income level. Originally aimed at making higher education accessible without immediate financial burden, the financing model has led to high default rates and significant administrative costs for the government.

Against this backdrop, Education International’s affiliate, the University and College Union (UCU) has launched the Reclaim Higher Education campaign, advocating for a fair funding model and putting an end to exploitative practices in Higher Education. This initiative is part of a broader effort to address financial instability at numerous universities, which has led to job cuts and department closures.

With the UK general election approaching on 4 July, UCU has urged all political parties to prioritise removing the debt burden from students and commit to publicly funding universities. This election presents a crucial opportunity for political leaders to support a sustainable and fair funding model for higher education, ensuring that future generations have access to quality education without the heavy financial burden currently placed on students.

Exploring alternative funding models

A new report by London Economics, commissioned by UCU, suggests that a 1 per cent levy on employer National Insurance contributions for graduates could eliminate university tuition fees across the UK without additional costs to the government.

The proposed levy would operate similarly to current National Insurance contributions in the UK, which are payments employers make to fund social security benefits. The new levy would specifically apply to graduates' salaries above a certain threshold, meaning only employers with graduate employees earning above this threshold would be required to pay. This approach could replace the £11 billion in tuition fees paid by UK-domiciled students each year, shifting the financial burden from students to employers.

The report also suggests that a three-percentage point increase in corporation tax could fund higher education, ensuring that only profitable businesses contribute.

Public support for change

Polling conducted for UCU indicates strong public support for shifting the financial burden:

• Sixty-two per cent of the public surveyed believe students should pay less for higher education.
• Fifty-three per cent support employers contributing more.

Support for the employer levy is widespread across various political affiliations:

• Labour Party: sixty-one per cent
• Liberal Democrats: sixty-two per cent
• Green Party: fifty-three per cent
• Plaid Cymru (Welsh nationalist party): fifty-five per cent
• Scottish National Party (SNP): fifty-seven per cent

In this context, Jo Grady, UCU General Secretary, emphasised the need for a new funding model: "Our polling shows public support for an employer education levy, and the London Economics report provides clear options for the next government to fund higher education without burdening individual taxpayers. Whether through a 1 per cent employer levy or a 3-percentage point rise in corporation tax, investing in higher education is crucial. It adds immense value to our economy.”

The UCU’s initiative aligns with Education International’s Go Public! Fund Education campaign, which calls for governments to invest in public education and adopt sustainable financing models. By advocating for an employer education levy, UCU seeks to create a fair and effective funding system that supports the long-term sustainability of higher education in the UK.