Shadow Universities Minister Liam Byrne, the MP for Birmingham Hodge Hill, has dropped a heavy hint that he would like Labour to impose a graduate tax to replace student fees.
But he also made it clear he had yet to win the argument in favour of a graduate tax with Labour colleagues.
The National Union of Students has proposed a graduate tax scheme to replace the existing system in which students receive loans to pay tuition fees of up to £9,000 a year, and repay the money once they are in work.
Under the NUS scheme, graduates would pay an extra tax of between 0.3 per cent and 2.5 per cent of their income above £15,000, for a period of 20 years, with the highest earners paying the highest rates.
Although the current scheme is also means-tested - and graduates on low incomes might pay never be called on to repay their loans - supporters of a graduate tax say it would be fairer and would prevent universities charging variable fees, so that the sum graduates pay is based entirely on their incomes.
In an interview with magazine The House, Mr Byrne said: “We’re going to nail that down for the manifesto. But there are strong arguments for a long term shift to a graduate tax.”
Referring to his days as a student union activist, he said: “This is not widely known – but when I was leader of Manchester Union back in 1992, we become the first student union in the country to publish proposals and an argument for a graduate tax. So I’ve long been a supporter of the idea.
“Turning the idea into action is complex, especially when your debt to GDP ratio is nearly 80%. So this is an idea with many virtues. But actually what people want is a plan.”
Introducing a new system could save Labour a major political headache after the party relentlessly criticised the Coalition government for raising annual student fees from £3,000 to £9,000 - after Deputy Prime Minister Nick Clegg pledged in opposition to oppose fee increases.
The difficulty facing Labour now is that it’s unclear whether it could afford to cut fees, or even avoid further increases, if it wins the next election.
Mr Byrne said: “We’ve got to see the Chancellor’s figures. [George] Osborne announced a big expansion of university places and said it would be paid for by selling the loan book. In July, Vince Cable then says he’s decided not to sell the loan book. So what on earth is going on?
“Nobody knows; it’s a mystery. That’s never going to be cleared up until the Autumn Statement.
“So we’re not going to play fantasy finances with Britain’s universities, because that’s what this government gave us. And look where it’s got us.”
Asked when an announcement can be expected, he said: “When it’s ready. I know that’s a really simple answer, but the Lib Dems were punished so badly for lying and breaking their word, and we’re just not going to make that mistake. We’re not going to go off half-cocked on university finances – we’re going to get this absolutely right.”
Asked if he can rule out any increase in fees, he said: “We’ll announce the policy when it’s good and ready.
“We’ve set out a direction of travel. We’d love to bring the cost down. But students, and their parents, as well as the university community, will ask us how we’re going to pay for it.”