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A better plan for a better future: fairer for young people, fairer for taxpayers

Ed Miliband has today unveiled Labour’s fourth
election pledge including a clear, fully funded commitment to cut tuition fees
which are causing rising debts for graduates and the taxpayer.

Labour’s pledge for young people:

 

Build a country where the next generation can do better than the last: tuition fees reduced to £6000, an apprenticeship for every school leaver who gets the basic grades, and smaller class sizes for five, six and seven-year olds

 

The Government’s £9,000 tuition fee system is bad for graduates by loading them up with an average of £44,000 debt each.

 

But it is also disastrous for the public finances, adding £281bn to the national debt over the next 15 years and with £2bn being written off every year by the 2040s.

 

Labour’s Better Plan is built on the idea that Britain succeeds when working families succeed. That means giving young people the chance to succeed by equipping them with the skills and knowledge needed for Britain to succeed.

 

Our reforms of Higher Education will be introduced earlier than expected so that from September 2016, the next Labour government will have:  

 

  • Reduced the tuition fee cap from £9,000 to £6,000
  • ·         Increased student maintenance grants by £400 – benefitting half of all students

 

Labour’s Better Plan is built on a strong economic foundation so these changes are fully funded. They will:

 

  • Reduce the national debt by more than £10 billion over the next parliament and £40 billion over the next 15 years.
  • Ensure our universities remain world leaders with increases in the teaching grant matching pound-by-pound the reduction in fee income.

 

The reduction in tuition fees will cost £2.7 billion. It is fully funded by:

 

  • reducing the tax relief for people on very high incomes paying into pension schemes so it is set at the same rate as for basic rate taxpayers.
  • capping the total eligible for tax relief in a lifetime at £1m.
  • limiting the annual sum eligible for tax relief at  £30,000 but with greater protection for those in defined benefit schemes.

 

The increase in maintenance grant is fully funded by making the system of graduate repayment of loans fairer with the highest-earning paying slightly more.

These are fair choices for young people and for taxpayers - cutting debts for graduates and cutting the national debt too.

 

Key Quotes:

 

Mr Miliband attacks the Government for betraying its election promises on tuition fees and betraying the Promise of Britain.

 

“What has happened over the last five years is more than just a betrayal of a promise. It is a betrayal of an entire generation: a betrayal from their first steps to the time they stride into the world of work; a betrayal from nursery to school, college to university; a betrayal of the chance of a job and the hope of a home. And even of their ability to vote. It is not just bad for young people themselves. It is a disaster for Britain - because a country where the next generation is doing worse is a country in decline.”

 

He declares Labour’s reform of student fees is part of a better plan for young people.

 

“These are fair choices, fair choices that allow a better future for our young people, a better future for Britain. Britain must not penalise the young, if we’re going to prosper in the future. Our economy and our country can’t afford to waste the talent of any young person.”

 

He says Labour will keep its promises:

 

“Let me say to Britain’s young people: I made you a promise on tuition fees. I will keep my promise. I don’t simply want to build your faith in Labour, I want to restore your faith that change can be believed. I owe it to you. We owe it to our country.

 

And he appeals directly to parents and grandparents to help turn around the prospects for the next generation.

 

Today is about our responsibilities to the young. And that is the concern of every generation, every parent, every grandparent, every person in our country who cares about the future of our young people. Today is the day we say: we will not make the young pay the price of hard times.  I am a father of two young boys, and I appeal to every parent and grandparent in Britain, every concerned citizen: let’s together turn around the prospects of young people; let’s restore the Promise of Britain; let’s make ourselves again a country where the next generation does better than the last.”

 

Ed Miliband’s full speech is available here: http://press.labour.org.uk/post/112217705819/a-better-plan-for-a-better-future-fairer-for

 

Extracts from Ed Balls’ remarks:

 

Ed Balls MP, Labour’s Shadow Chancellor, said:

 

“This government’s system is not only bad for students it’s bad for the public finances too.


“Students are graduating with a bigger burden of debt and our Zero-Based Review has exposed how it is leading to higher national debt too.

 

“David Cameron, George Osborne and Nick Clegg’s system will add £16bn more to net debt by the end of the next Parliament than was expected and billions more after that. 

“As I said last month, this system isn’t working, it’s not sustainable and we need to fix it. 

 

“We need a better plan.”

 

“Our plan is fully costed and fully funded.

 

“It means we can continue to back our world class universities, who won’t lose out from what we are announcing today.  

 

“Unlike the Tories we won’t make promises without saying where the money is coming from.

 

“And unlike Nick Clegg and the Lib Dems we will not make promises we cannot keep. 

 

“We will pay for it in a fair way by limiting the tax breaks which go to the richest in society.”

 

“Our fully funded plan will cut the debt burden on students.

 

“And it will reduce the national debt by £40bn by 2030.

 

“It’s the right thing to do – for students, graduates and taxpayers as a whole.”

 

Ed Balls’ full remarks are available here: http://press.labour.org.uk/post/112217840524/ed-balls-mp-labours-shadow-chancellor-remarks

 

POLICY DETAIL:

 

1. Legislation in the first Queen’s Speech to reduce tuition fees from £9,000 to £6,000 from September 2016 – meaning first year students now will pay less in their final year.

The increase in tuition fees under this government has left students paying the highest rates anywhere outside the United States.

 

Cutting the tuition fee cap will reduce graduate debt by nearly £9,000. Around a million full time students will benefit each year

 

2. Increase in student maintenance grants by £400 – benefitting half of all students

The full grant will increase from around £3,400 to around £3,800. More than half of students – those from families with household income below the higher rate of tax – will benefit.

 

3. Labour will reduce the rate of pensions tax relief for those with incomes over £150,000 to 20 per cent – so it is the same rate as for basic rate taxpayers.

 

Tax relief on pension contributions currently goes disproportionately to those on the highest incomes with those on income over £150,000 a year – the top one per cent – receiving seven per cent of all subsidies.

 

Those with incomes over £150,000 currently get tax relief at a rate of 45 per cent. This is more than twice the rate of basic rate taxpayers.

 

4. Labour will reduce the lifetime allowance to £1m from £1.25m and the annual allowance from £40,000 to £30,000.

Savers would still be able to pay £1m into a pension with tax relief – but not more than that. This will still be 25 times higher than the average defined contribution pension pot.

The reduction in the annual allowance to £30,000 is still nearly ten times higher than the annual average pension contribution.

 

We will protect lower income earners in defined benefit schemes by letting them roll over unused annual allowances - and we will consult on increasing the period when they can do this from three to five years. This would give them an overall cap of £150,000 - better protection than under the Government’s approach, which only gives an overall cap of £120,000.

 

5. Labour will require the highest-earning graduates to pay a slightly higher rate of interest – rising from three to four per cent

This will make the repayment system fairer and make it more like a graduate tax in which those with the broadest shoulders carry more of the burden. But everyone will benefit from the fee reduction so no-one will pay more than the current system.

The entire programme is fully costed:

 

Restricting   Pension Tax Relief

+£2.9bn

Higher   Interest Rates for High Earning Graduates

+£0.2bn

Corporation   Tax Surplus after Cutting & Freezing Business Rates

+£0.5bn

Total

£3.6bn

 

Cutting   the Fee Cap from £9,000 to £6,000, reimbursing universities and Barnett   consequentials

 

 

-£3.1bn

Ongoing   costs of the Jobs Guarantee

-£0.3bn

Higher   grants and funding Apprenticeships

-£0.2bn

Total

-£3.6bn

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