Graduate tax should be 5%, says National Union of Students

Union calculations scaled to earnings over £15,000 presented to Lord Browne
University Of Birmingham Degree mortarboard
Under National Union of Students proposals, a graduate who became a trainee teacher would pay much less than one who became a trainee lawyer. Photograph: Christopher Furlong/Getty Images

The National Union of Students has passed calculations on how a graduate tax might work to Lord Browne, the former BP chief executive who is charged with reviewing student finance.

It may be a very different model to the one the government picks but it gives some idea of how much graduates might have to pay.

The NUS proposes that graduates earning over £15,000 should contribute 5% of their gross earnings over that figure to pay for their university education. This would mean a trainee teacher on £23,000 would pay £400 a year and a trainee lawyer on £45,000 would pay £1,500 a year.

Graduates should only have to pay the contribution for 25 years of their working lives, the NUS argues. It says that in the later stages of a person's career the degree they studied for counts for less than the experience they have built up in the workplace. The funds would go into a trust that would be controlled by a board. The board would decide how to distribute the money to universities.

Universities receive £2.7bn in revenue from fees each year. Under the NUS graduate tax they would receive just under £6bn each year after the system had been working for 25 years.
The problem with this system is how to fund universities before money is paid into the trust. The NUS says that the trust could issue bonds in anticipation of how much the revenue from the contributions would be in the long term.

Most students borrow the money for their fees from the government through the Student Loans Company and this sum is added to the debt they must pay off. Graduates pay around 9% of their salaries towards their debt once they are earning over £15,000.