The Call for a Graduate Tax: A Former Vice-Chancellor's Reflection on UK Higher Education Funding
In the midst of escalating financial pressures on UK universities, Rama Thirunamachandran, the former vice-chancellor of Canterbury Christ Church University (CCCU), has voiced a poignant regret. Speaking to Times Higher Education, he stated, "We should have fought harder... to say ‘no, it’s not a 40 per cent cut or tripling of the fees’ and putting all the burden on the future graduate; there’s got to be a balance somewhere." This candid admission highlights a growing consensus that the current funding model for higher education in the United Kingdom is fundamentally broken, prompting renewed discussions about alternatives like a graduate tax.
Thirunamachandran's comments come at a critical juncture. Nearly half of UK higher education providers are projected to run deficits in 2025-26, with ongoing challenges from stagnant domestic fees, declining international enrollments, and rising operational costs. As universities grapple with these realities, his advocacy for a graduate tax—a system where graduates contribute a portion of their earnings post-graduation to fund higher education—revives a long-debated idea that could reshape the sector.
Who Is Rama Thirunamachandran and Why Does His Voice Matter?
Professor Rama Thirunamachandran, OBE DL, served as vice-chancellor and principal of CCCU for 13 years until early 2026. A Cambridge University alumnus with a background in geography and natural sciences, he previously held roles as deputy vice-chancellor and provost at Keele University. During his tenure at CCCU, a modern university focused on widening access and vocational education, he navigated challenges including a meningitis outbreak, regulatory scrutiny from the Office for Students (OfS), and Brexit impacts.
CCCU exemplifies institutions hit hardest by the funding model. Ranked outside the global top tier, it relies on teaching domestic students who generate losses per head, subsidized by international fees now curtailed by visa restrictions. Thirunamachandran's leadership emphasized social mobility, making his critique particularly resonant for post-1992 universities serving underrepresented groups.
The Evolution of UK Higher Education Funding: From Grants to Loans
Understanding Thirunamachandran's regret requires revisiting history. Pre-2012, UK universities received block grants covering much of teaching costs. The Browne Review warned of a 40% real-terms cut without reform, leading to tuition fees tripling to £9,000, student number controls lifted, and government-backed loans introduced. This marketized higher education, positioning students as consumers and universities as competitors.
Fees rose modestly to £9,250 by 2017, frozen since amid inflation, eroding value to around £6,500 per student in real terms—a two-thirds drop over a decade. Plan 2 loans (for 2012-2023 entrants) morphed into a de facto graduate tax: 9% of earnings above £27,295 for 30 years. Plan 5 (post-2023) lowers the threshold to £25,000, extends to 40 years, with fees at £9,535—further regressive, as lower earners repay proportionally more.
The 2026 Funding Crisis: Deficits, Closures, and Desperation
Today, the model falters. Universities UK (UUK) estimates government policies will slash £3.7 billion from English providers' income by 2029-30, including £9 billion in costs from visa curbs (42%), pensions (24%), and a new international student levy (6-20%). OfS forecasts 45% of providers (124) in deficit for 2025-26, up from 34%, with £437.8 million shortfall; 16% risk liquidity under 30 days.
In 2024-25, 29% (30/104) posted £365.7 million deficits, stable proportion but higher totals than prior years. Cash flow improved (£2.3 billion net), buoyed by recruitment agencies, but core activities like domestic teaching fail cost recovery. Examples: Coventry (£59m loss), Sussex, UEA. Half anticipate deficits; up to 50 closures loom without intervention.
Factors: 8% international fee drop, 8% staff cost rise, 4% ops increase; preferences shift amid £20bn annual loan write-offs. Access unis like CCCU suffer most, unable to compete on research prestige.
Defining the Graduate Tax: A Progressive Alternative?
A graduate tax (GT) levies earnings-based contributions from graduates—e.g., 3% on £12,570-£50,270, 5.5% above—collected via PAYE, replacing fees/loans with grants. No debt, interest, or caps; lifelong until retirement/low income. Modeled by NIESR/London Economics, it minimally raises Exchequer costs (£42m/year) while sustaining uni income. For details, see the NIESR proposal.
Unlike Plan 5's regressivity (4th decile pays 3.3% lifetime vs. 9th's 1.1%), GT is progressive: top deciles bear more, benefiting women/low earners disproportionately affected by career gaps.
Pros and Cons of Implementing a Graduate Tax in the UK
- Pros: Fairer (earnings-linked), removes debt stigma/wealthy opt-outs, simplifies admin, progressive redistribution.
- Cons: No ringfencing guarantee (funds diverted to NHS?), emigration losses, disincentivizes high earners/mobility, retrospective unfairness, 'tax' stigma.
Thirunamachandran notes 2012 rejection stemmed from funding certainty fears; leaders prioritized loans' direct appeal. Critics warn it wrecked FE funding historically.
Stakeholder Perspectives: VCs, Students, Government, and Unions
VCs like Thirunamachandran decry 'lose-lose'; UUK pushes fee uplifts. Students face demoralizing debt (£50k+ average); unions (UCU) eye employer levies. Government cites £20bn write-offs, levy on intl fees. Ex-regulators call loans 'doomed'.
Read more on UUK's analysis in their financial impact report.
Case Study: Canterbury Christ Church University Under Pressure
CCCU, Thirunamachandran's former charge, embodies access struggles. Merged medical school with Kent, faced OfS scrutiny, meningitis crisis canceling exams. Widening participation mission yields losses on domestic students, now visa-hit intl shortfalls exacerbate deficits.
Alternatives to Graduate Tax and Policy Pathways Forward
Besides GT, options: £2-3.5k fee hikes (politically toxic), employer levies, Augar Review 2.0. OfS urges 'right-sizing', collaborations. Labour's levy risks £1.6bn hit by 2029-30.
Thirunamachandran calls for 'political courage' to redefine HE purpose beyond commerce.
Implications for University Staff, Students, and the Sector's Future
Deficits mean job cuts, strikes (e.g., Scottish unis), course closures. Students: distorted choices, mental health strains. Staff: precarious adjunct roles. GT could stabilize, prioritizing access over prestige.
Outlook: Without reform, more insolvencies; with GT/politically viable hybrid, sustainable equity. Explore opportunities at AcademicJobs UK listings amid transitions.
Towards a Balanced Future: Lessons from Thirunamachandran
Thirunamachandran's hindsight urges sector unity against short-termism. A graduate tax, ringfenced and progressive, merits serious review to salvage UK's world-class HE for all. As deficits mount, the debate intensifies—will leaders fight now?
Photo by Qingqing Cai on Unsplash