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Call For UK 'Degree Tax'

Friday, March 5, 2010

The UK corporate income tax rate should be hiked in line with the G7 average of 32.87% in order to fund higher education, a representative body for the country’s universities and colleges has said.

The report, released on March 3, 2010 by the University and College Union (UCU), advocates that the government increase the corporate tax rate to raise enough money to abolish all university tuition fees, effectively passing the financial burden of a highly skilled UK labour market to the businesses that benefit.

The union says the move would mean that the UK's main corporation tax would remain below that of France, Japan and the United States, but would leave 96% of companies in the UK unaffected by the change.

The union says its plans for a 'Business Education Tax' (BET) are “the first coherent attempt at making business pay its way for the numerous benefits it gets from UK higher education.”

At the beginning of the debate on fees for higher education, the landmark Dearing report in 1997 listed the three beneficiaries of higher education as the individual, the state and the employer, and said the key was finding a fair way to get all three to pay their share.

The UCU notes that since the Dearing report, fees and top-up fees have been introduced, the state has continued to invest, but the employers' contribution has been "negligible."

The union also said that despite benefiting from more generous business tax arrangements than other countries, UK employers spend less on employee training and development and invest less than the global average in supporting university research and development. However, should the BET to be introduced, the investment required from students would still be considerable, the unions notes, to meet the cost of rent, food, bills and books.

The UCU said the report is a "radical and pragmatic response to a pressing problem for the UK." It cited Conservative Mayor of London Boris Johnson's 2p in the pound tax on central London businesses, to fund the Crossrail project, as evidence of an emerging consensus that business must pay its fair share for public services from which it benefits.

Graduates, the UCU points out, generally enjoy higher productivity than other workers, at the same time benefiting the companies that employ them. On average, the Times Top 100 graduate employers will employ 138 graduates each in 2010, and the union argues that companies like these are benefiting from the plentiful supply of graduates without paying towards them. The union said its plans would favour tax breaks on the BET for companies who fund their employees to learn new skills, thus creating “a virtuous cycle of positive practice”.

UCU General Secretary, Sally Hunt, said: “Our proposals are based on fairness. The future for the UK is as a high-skilled knowledge economy and that requires business to pay its fair share towards something which benefits us all.”

“We are asking that the UK government increase corporation tax to the G7 average, which would still leave it lower than the rate when the Conservative Party was last in power.”