Tuition Fees: Q&A

Is this setting generations off against each other – young vs the old?

  • Not at all – we think we can protect everyday pensioners without doing what this government has done which is to load all the costs onto the young generation.
  • This package is really about dealing with the huge problem of student and taxpayer debt that the Government’s botched tuition fees increase is leading to.
  • Pensioners will be unaffected. This will mean that people who are working and on the top incomes get less generous relief.
  • But they will still be able to save up to £1m and get tax relief on it.


Why spend so much on this age group?

  • Graduates will benefit from lower debt throughout their lives, and all taxpayers will benefit from the reduction in national debt.
  • This is part of a whole range of policies we’ve set out including childcare for 3 and 4 year olds and apprenticeships.


Doesn’t cutting the tuition fee cap only help higher earning graduates?

  • This package will mean cutting the amount of debt loaded onto all graduates by up to £9,000. That’s the right thing to do because it’s not fair that students leave university with £44,000 of debt.
  • We will also be making the system fairer by increasing grants by £400, benefitting more than half of students who are from households on middle and lower incomes.
  • And we will be asking the top earning graduates to pay back more through a higher interest rate to pay for this grant increase.


Will this benefit graduates who have already paid £9,000 in fees?

  • We will cut fees in September 2016 for all students at that point – even if they are going into the second or third year of a course.
  • That means even students that started courses last September will benefit from this change.


Does this need legislation?

  • Yes we will legislate in the first Queen’s Speech for this reduction in fees.


What about a graduate tax?

  • As we have said on many occasions, we think that a graduate tax has attractions.
  • Indeed our reforms move in that direction with the highest earners paying a small amount more under our reform package, to help lift the debt burden on all graduates.
  • But, unlike Nick Clegg, we will not make promises we can’t keep. Our commitment for the next parliament is a fully-funded package for cutting tuition fees to £6,000.


Are you promising to protect university funding in the next parliament?

  • We’re announcing a package to fully fund an increase in university grant funding that fully compensates universities for the reduction in fee income.


When will the higher interest rate for graduates start?

  • It will affect no-one earning under £42,000.
  • And because everyone will also benefit from the lower fees all graduates will still be better off.


Will the grant increase reduce the size of loans people can get?

  • No, the grant increase will be in addition to existing grants and loans.


What is the breakdown of the £2.9 billion revenue raised between the pension tax relief changes?

  • A significant majority of the revenue comes from the restriction on people earning over £150,000 to basic rate relief on pension contributions.
  • The remainder comes from the reductions in lifetime limit and annual allowance


How many people will be affected by these changes to pension tax relief?

  • There are around 300,000 taxpayers with incomes over £150,0000 who would be affected by the reduction in tax relief to 20%. These are the top 1% of taxpayers.
  • Tens of thousands would be affected by the lifetime allowance in a given year.


Will this hit pensioners?

  • No, pensioners will be unaffected. This will mean that people who are working and on the top incomes get less generous relief.
  • But they will still be able to save up to £1m and get tax relief on it.


Hasn’t the funding from restricting pension tax relief already been spent on the funding the Jobs Guarantee?

  • The bulk of the Jobs Guarantee funding comes from the Bankers Bonus tax.
  • While some of the revenue from restricting pension tax relief will continue to pay for the ongoing costs of the Jobs Guarantee, the majority will be used to cut tuition fees. That is why we have announced additional measures today that go further to restrict pension tax relief.