Tory MPs look to revolt over back door graduate tax

London: Tory backbenchers are threatening to revolt over a ‘backdoor graduate tax' payable by students who go on to get good jobs.

In the latest financial blow to hit middle-class families, top-earning graduates would be asked to pay interest on their loans at a higher rate than those on lower incomes.

The move — expected to be announced later this month — will cause uproar among Conservative MPs still stunned by the Government's abolition of child benefit for higher-rate taxpayers.

Ministers are keen to reduce the cost to the taxpayer of running the universities by placing more of the burden on to the students who benefit from the system.

But the reforms have been a source of tension within the Coalition, with Business Secretary Vince Cable leading Liberal Democrat calls for a formal graduate tax — meaning students would repay their tuition costs through taxation once they started working, and higher earners would pay more.

Conservative MPs largely oppose the idea, arguing that it would be a further financial drain for middle-class voters.

Now Government sources say that agreement has been reached to introduce a "disguised" graduate tax, under which the loans intended to cover maintenance costs and tuition fees would remain cheap to repay for the lower paid, but be more expensive for higher-rate taxpayers. Last night Cable sent out an e-mail to his party's MPs which appeared to confirm the plans.

He said that while a "pure graduate tax is not the way forward'" the Government's objective was to introduce a "progressive funding structure" — code for charging more to higher earners.