Treasury Minister Alan Maclean conceded yesterday that under the proposals, which were a surprise announcement during the 2018 Budget debate at the end of last year, there were some families who would suffer financially if the current system was scrapped and the plans, as they stand, went ahead.
Explaining why, he said that under the new system, despite tuition fees being covered and students receiving a full maintenance grant, the families in question at the lower end of the income spectrum would suffer because of the proposed removal of the higher-rate child tax allowance, currently worth up to £10,400 over four years to parents of those in higher education.
The money raised from removing that tax break would be used to help pay for the new grant system.
However, in response to questions by the Education and Home Affairs Scrutiny Panel, the minister said that his department was aware of the issue and was working to address it.
‘We are aware that there is likely to be a small group who are disadvantaged by this and we need to understand what that means,’ he said. ‘Out of every single taxpayer there are 200 individuals who might be negatively impacted on a net basis.’
He added: ‘We already are looking at it to try to mitigate it.’
Following further questions from the Deputy, the minister added that under the changes, all families would see their tax bill increase as when a child turned 18 and went to university, they would no longer be entitled to the normal child allowance.
Under the proposals, a public consultation, which closed yesterday, the States would pay tuition fees for all families with a household income of less than £150,000, while families with a combined income of more than that amount would have half the cost of tuition fees covered.
In addition, the maximum maintenance grant would be increased by £500 to £6,500. This would remain a means-tested grant, but eligibility would be based on annual household income of up to £95,000.
The cost of the tuition fees would be covered from existing revenues in 2018 and 2019, but beyond that an
additional £4 million per year would have to be found. Senator Maclean added that the scrapping of the higher-rate child allowance would provide a £3.5 million saving from 2021 to go towards covering tuition fees.
However, he admitted during yesterday’s Scrutiny hearing that after 2019, when the current Medium Term Financial Plan runs out, funding the shortfall the new scheme would create would be up to the new States Assembly.
A total of 3,300 online responses have been received by the public consultation on the plans, and more than 100 people attended public sessions to share their views.
Senator Maclean is due to lodge the final proposals – which could still change following the consultation – with the States on 2 February for debate at the Chamber’s penultimate sitting before the election.