As I arrived early at work this morning the contractors were busy putting out sandbags and reorganising the crowd barriers around Parliament Square. They are expecting a fourth day of peaceful protest doubtless laced with extreme behaviour. Last week almost 3000 policemen and women had to be taken off normal duties to deal with the minority of protesters who thought violence the right approach to influence how we pay for higher education in future.
All of this response to the protests costs the state more money. That’s more money taxpayers have to provide, or the country has to borrow. The irony is these students will have to help repay it all once they have jobs and taxable incomes. It means less money to spend on the kind of items the students would like to see the government pay for.
We need to ask how they propose the government would pay for every student to go to university with no student contribution to the costs. They seem to have two models. One is to tax the rich more. The other is to borrow more. They probably would end up as the same policy. If we raise tax rates on the rich to higher levels today, we will probably end up with less revenue, as we have often argued on this site. So both policies in practice mean the state would have to take out a bigger loan from someone.
The price of fewer student loans is a bigger state loan. The difference between a state loan and a set of student loans is limited. The same people, the graduates from this student generation, will have to repay a bit more of the debt if they borrow it themselves as student loans , or they will have help from people on lower incomes if the state borrows it.
In the meantime, the UK will need to borrow more in world financial markets. The Chinese lowly paid worker could have the pleasure, under the rioter’s model, of making and delivering us our goods, and at the same time lending us the money to pay for them. It is, apparently, moral for the UK student to borrow in this way. The UK person can enjoy three years of university, get a well paid job and then with the help of people who haven’t had that privilege get around to paying some of the money back to the Chinese workers.
The huge imbalances in the world between the hard working and low paid east, and the high borrowing and protesting west, are not sustainable. The west is going through a painful process of getting nearer to living within its means. Violent protests make that task more difficult. The more we spend on law and order, the less we have to spend on education.
Meanwhile Dr Cable’s scheme still leaves the state needing to borrow large sums in its early years. Taxpayers will have to pay more tax to pay for the 18,000 students who will have their fees paid for, and to write off the loans of all those graduates who over the following years do not earn enough to repay in full. The Cable scheme is a fully state backed scheme, which means it too adds to public borrowing.