Shadow chancellor Alan Johnson U-turns on graduate tax

Shadow chancellor Alan Johnson says he has changed his mind about a graduate tax and believes there is now a "strong case" for the policy.

Mr Johnson has previously said the idea - which is backed by the Labour leader Ed Miliband - is unworkable.

But Prime Minister David Cameron said it was a "disastrous policy" which "doesn't work" and could lead to a "brain drain" as graduates move abroad.

MPs are set to vote on plans to increases tuition fees on Thursday.

Deputy Prime Minister Nick Clegg said the proposals, drawn up by the Conservative-Lib Dem coalition government, were fairer than the existing system of fees.

He and fellow Lib Dem ministers have said they plan to vote in favour despite the fact they signed a pledge before the election to vote against any tuition fees rise.

Mr Clegg cites the fact that the new system would raise to £21,000 the level of graduate earnings before repayments start, and other help for students from poorer homes.

Mr Johnson was the Labour minister who took the original tuition fees legislation through the Commons in 2004, and he said six weeks ago he thought it would be "very difficult" to get a "workable" graduate tax.

His difference of view with new Labour leader Ed Miliband has been exploited by opponents who said it showed Mr Miliband's lack of authority.

Writing in The Times newspaper on Wednesday, Mr Johnson said the tax "may offer a fairer way of sharing costs between individuals and government".

In his article Mr Johnson said Labour's priority "this week is to defeat the government. If we fail, our priority will be to offer the country a fairer alternative for stronger universities and a better deal for our young people".

He said the situation was now "very different" to when he brought in tuition fees and he accused the government of "abusing the legacy I left them".

"We are now seeing how casually the variable fees system can be distorted with such damaging effects. It is in these circumstances that there is a strong case for a graduate tax, which may offer a fairer way of sharing costs between individuals and government."

There is no mention of what form a graduate tax may take, or how different it might be to the proposed new tuition fees system. In both cases students would not have to start repaying fees until they graduate and are earning above a certain level.

However in a speech on Wednesday, Mr Cameron said anyone who had looked at the option of a graduate tax for any length of time "has realised this just doesn't work".

He said a "pure graduate tax" was "simply not affordable" - and the Browne review had shown it would take until 2041 to raise enough money to "fully fund higher education in this country" - which would leave the government having to "make up the shortfall, adding billions to public spending and borrowing".

The money would go straight to the Treasury - and ministers and civil servants would decide how to spend it, not students or universities. "This gives the students no real say in how things should be done, this is bad for students and bad for driving up standards."

He added that a graduate tax could not be collected on those who moved abroad - and would encourage a "brain drain" - "creating a system where we put the money in as a country, time and effort to educate our best and our brightest and then it is other countries and other economies that will benefit. That is completely crazy".

He said while the highest earners would pay more - the lowest earners on just over £6,000 a year would have to start repaying fees too. And he said foreign students could end up paying less than UK students, because taxes could not be collected abroad, - while an "open ended" tax meant people would pay until they stopped working.

"This means some people would find themselves paying many, many times more than the cost of their course."

"This system would send out the very worst kind of message at a time when we desperately need to drive enterprise and growth in our economy - anti-aspiration, anti-success, anti-people who want to get on and make the best of their lives."