Cable rules out graduate tax plans

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Business Secretary Vince Cable is on a collision course with his party after ruling out a new graduate tax to replace university tuition fees.

Having previously promoted the idea of a graduate tax, the Liberal Democrat minister has accepted Tory criticisms of the scheme and admits it is not the answer.

He said the coalition Government would shortly be able to announce a new system featuring a "progressive system of graduate contributions".

That is expected to mean introducing variable interest rates on student loans so that higher-earning graduates pay more towards the cost of borrowing their way through university.

An increase in the cap on tuition fees, possibly to as high a threshold as £10,000, now also seems likely.

Such a move would be deeply unpopular with the Lib Dems, who campaigned during the general election to scrap tuition fees altogether.

Lib Dem leader Nick Clegg, now Deputy Prime Minister, said in April that increasing tuition fees would be a "disaster".

The Lib Dems reaffirmed their commitment to replacing tuition fees and loans with a graduate tax at their party conference only last month.

The Department for Business, Innovation and Skills - which is responsible for higher education - refused to comment on the Government's plans before the publication of a review of student finance next week.

But Mr Cable renounced the idea of a graduate tax in a letter to Lib Dem and Tory MPs, saying it was "not the way forward" and adding: "While it is superficially attractive, an additional tax on graduates fails both the tests of fairness and deficit reduction."

PA