The Secretary of State for Education and Science (Mr. Kenneth Baker) : With permission, Mr. Speaker, I wish to make a statement about the arrangements for administering top-up loans for students. The House will recall that on 9 November I announced the Government's proposals for introducing non-means-tested top-up loans. I said that from 1990, in addition to their grant, all home students in full-time higher education-- except postgraduates--would be eligible for a top-up loan averaging over £400 in a full year. I explained that it would be offered at a real interest rate of zero, and that repayments would be deferred when a graduate's income is low. In that statement, I made clear the Government's view that the top-up loan scheme would be best administered by the financial institutions. The scheme will of course be subject to the necessary legislation and, as I told the House, the Government will bring forward a short Bill to provide legislative authority for it. I am glad to be able to tell the House that, following discussion with representatives of the Committee of London and Scottish Bankers, a scheme has been designed which is agreed to be a cost-effective and feasible means of introducing top-up loans in September 1990 as planned.
Under the scheme there will be a private sector loan admistrator, in the form of a company established and wholly owned by participating financial institutions, under contract to the Government. Participation in the company will be open to a wide range of financial institutions. It is clear from my discussions with members of Committee of London and Scottish Bankers that--subject to the satisfactory outcome of the contractual negotiations--a sufficient number of financial institutions will wish to participate from the outset to ensure that the company will be viable.
Under the arrangements students who wish to benefit from top-up loans will obtain a certificate of entitlement from their university, polytechnic or college. The certificates can be presented to the branches of the banks and other financial institutions that own that company, or to the company itself, which will make the resources available to the student and maintain a record of the transaction. The Government will fund the company for the administrative costs of the scheme and, of course, for the loans themselves.
The Government have carefully considered the repayment system, in the light of the responses to the White Paper "Top-up Loans for Students". We have concluded that repayment should be on the basis of equal amounts, adjusted annually for inflation, being repaid over a standard period. The obligation to repay will be deferred when a graduate's income falls below given levels in relation to average national income. Deferment will be arranged with the company on the basis of self-certification of income and subject to audit. In order to minimise any default on repayments, there will be a financial incentive under which the company will earn a proportion of its fee through securing a high repayment rate.
The Government will meet the costs of detailed preparatory work by the Committee of London and Scottish Bankers and by the company in the period from
Column 22now onwards. Parliamentary approval will be sought in an additional Supplementary Estimate, to be presented shortly. We shall start immediate negotiations with the interested financial institutions to conclude a contract to cover the operation of the scheme, and that will of course be conditional on the Royal Assent to the Act. The range of costs indicated in the preparatory work is from £8.3 million to £11.5 million for start-up costs, and from £10.4 million to £14 million for annual operating costs. I am glad to say that those are many times smaller than the amounts that I have been reading about in the press over the last few months.
It is right that this scheme should be administered in the private sector, as our financial institutions possess skills in information and banking systems that are not readily available in the public sector. I am satisfied that the arrangements offer an efficient scheme and good value for money, and I commend them to the House.
Mr. Jack Straw (Blackburn) : If this is good news, as the Secretary of State appears to suggest, why did he hide away this announcement from the voters until after the European elections? Why did he consistently block all our requests for statements and why have the Government welshed on their promise of a debate?
Is the Secretary of State aware that under this grotesquely incompetent scheme the nation ends up with the worst of all worlds, in which the taxpayer pays much more while the student is given much less? Will he confirm that with inflation at 8 per cent., instead of the 3 per cent. forecast in the White Paper, and with the abolition of housing benefit, almost every student will be worse off from next year?
The right hon. Gentleman's statement says, in carefully crafted weasel words, not that there has been an agreement with the financial institutions but that a scheme has been designed
"which is agreed to be a cost-effective and feasible means of introducing top-up loans".
Will the Secretary of State say precisely what has been agreed with the financial institutions, or has nothing bankable been agreed with those institutions?
Will the Secretary of State confirm that he has come close to giving a false impression about costs by specifying costs which relate only to the early years of the scheme when there are relatively few debtors? What will be the cost per student and the cost per outstanding advance once the scheme is fully operational? What figure was advised by Price Waterhouse? Why is there no reference to interest rate subsidy in the statement or, indeed, to its cost, in the White Paper? What are the costs of the preparatory work that the taxpayer is now supposed to meet?
Is the Secretary of State aware that on the most conservative estimates, the administrative set-up and write-off costs, once the scheme is fully operational, will not be less than £100 per debtor? What kind of bloody-mindedness is it that persuades the Secretary of State to give £100 to moneylenders, bureaucrats and bailiffs when instead he could use that £100 per student to restore the real value of the grant? Is he aware that in the United States the cost of defaults on loan schemes such as this is now running at $1.8 billion, one third of the total cost of the scheme? What does the Secretary of State expect the defaults cost of this scheme to be? Will he confirm that it will cost the Exchequer more while giving
Column 23students less until decades into the next century and that there is even a prospect of this scheme never breaking even?
Why has the Secretary of State said nothing this afternoon about his earlier grand claims that a loans scheme would increase access and opportunities--I thought that that was the argument in favour of the scheme --or has he now accepted, in the light of the 95 per cent. of representations that he received against the scheme, that it will put students off going into higher education and damage the opportunities of those from low-income homes?
Is the Secretary of State aware that his ministerial career is littered with wheezes and gimmicks which seemed a good idea at the time but which turned out to be half-baked and unworkable? Does he intend to see this barmy loan scheme through, or is he going to cut and run to another Department and leave the mess to someone else--as he did with his previous great invention, the poll tax?
Mr. Baker : I am delighted that the spirit of the hustings still survives. I advise the hon. Member for Blackburn (Mr. Straw) not to be too cocky about last Thursday's results. We shall expose the fact that the Labour party, despite its new proposals in its new manifesto, is still Socialist in tooth and claw, and that its proposals on education are totally negative, in that the hon. Gentleman wants to abolish schools and reverse our reforms. [Interruption.] I do not know whether this is the first skirmish in the opening campaign for the general election in two or three years' time, but I am quite confident that if it is we shall eventually win. [Interruption.]
Mr. Baker : I was provoked shockingly, Mr. Speaker. The hon. Gentleman said that next year students will be worse off, but that will not be the case. We estimate the disentitlement to benefit next year to be about £65 million and the increased additional resources available through top-up loan schemes will be £167 million. [Interruption.] I wish that the hon. Gentleman would listen for a minute. In addition to the £167 million there will be £15 million of access funds.
The hon. Gentleman asked me about bank participation. We have had discussions with a number of banks and other financial institutions. I am clear that there will be substantial interest in participation in the scheme, subject to the negotiation of the final contract. In particular, it is clear that major clearing banks will be ready to participate in the scheme. It is for individual banks and other financial institutions, including building societies, to say whether they will take part in the scheme. That must be their decision, but I am confident, from assurances given personally to me, of substantial interest in participating in the scheme.
The hon. Gentleman talked about those students who will be worse off. As a result of top-up loans, 120,000 students who currently receive no maintenance grant whatsoever, because they are means tested out of it, will have the availability of a top-up loan of about £400 a year on average. Similarly, 160,000 students who receive a reduced grant as a result of parental contribution, but whose parents do not make it up, will also benefit from the
Column 24top-up loan facility. In addition, some 50,000 students in higher education who have no entitlement to an award at the moment will benefit from top-up loans.
The hon. Gentleman asked me about default. We always include provision for the cost of default in our arithmetic. Annex E of the White Paper on top-up loans shows an illustrative figure of a default rate of 10 per cent. Some default is inevitable, but I do not expect it to be as high as 10 per cent. Some default is inevitable by the nature of the scheme. For example, we will require the loans to be made available to all students who are taking higher degree courses, irrespective of their credit rating. If a graduate unfortunately dies after graduation, the debt of that person will not be taken into his or her estate ; it will be written off. Similarly, the scheme allows any outstanding debt to be written off by the age of 50. Those are unusual characteristics of a banking operation, so we have to meet them.
We have always assumed that the Government will have to stand behind the cost of default, as illustrated in the White Paper, but the operating company will earn a proportion of its fee through securing a high repayment rate.
The hon. Gentleman asked about default rates, particularly in America. I remind him that the rate of default in Norway is 1 per cent. and 2 per cent. in Sweden and Japan. In America, the default rate is high for two reasons. First, there are no proposals for deferment while American graduates are earning, so those on low incomes are expected to repay and they default. We are allowing for the obligation to pay to be related to income. Secondly, in America the loan scheme has been extended to those whom we would call further education students and it has proved very difficult to track them as they move all over America.
As I said in my original statement, costs will be between £8 and £12 per student account. In 1995 we estimate that the operating costs will be between £10.5 million and £14 million. That gives the £8 to £12 per student account in 1995. As for what that represents as a percentage of the money outstanding, by 1995 we estimate that there will be an outstanding amount of £1.2 billion and administrative costs of £10 million to £14 million, which is a very small proportion--about 1 per cent. That is all set out in the original White Paper in annex E-- [Interruption.] I wish that the hon. Gentleman would read the White Paper and be familiar with his figures. Once again he shows that he has not done his homework. He has no ideas ; he does not even have ideas about our ideas.
Mr. James Pawsey (Rugby and Kenilworth) : Does my right hon. Friend accept that his statement will be widely welcomed by Conservative Members and by the country? It will increase the degree of access to higher education by providing a source of cheap funding. Will he confirm that it will be just about the cheapest money in town? In response to the hon. Member for Blackburn (Mr. Straw), I should like to draw two further points from my right hon. Friend. First, will he confirm that the incidence of default in Scandinavia is between 1 and 2 per cent.? Secondly, on access funds, the original figure quoted in the White Paper was £15 million. Does my right hon. Friend agree that many Conservative Members consider that £15 million is inadequate and would like him to endeavour to improve that figure?
Column 25Finally, when we introduce legislation in this matter, is it intended also to have some reference to the funding of student unions and to freedom of speech in higher education and in universities?
Mr. Baker : My hon. Friend asked various questions. I can confirm that the default rate in Norway is 1 per cent. It is 2 per cent. in Sweden and 2 per cent. in Japan. My hon. Friend asked also about the level of access funds. The access funds in the White Paper were stated to be about £15 million--that is, £5 million for the universities and polytechnics, £5 million for postgraduates and £5 million for the FE sector. There have been representations during the consultation process that those figures should be higher. I note carefully what my hon. Friend has said. Those decisions will be taken next year in the PES round.
My hon. Friend asked whether it is the cheapest money in town. Certainly, it does not bear a real rate. It is a real rate of zero. It means that the outstanding amount is uprated by the rate of inflation each year. Many students will find that an attractive deal.
My hon. Friend asked about student unions. I recognise the concern on behalf of those students who do not wish, through their own student unions, to be affiliated to the National Union of Students. I am considering various options for change in the present arrangements, and I will bring forward proposals in due course. I will also publish shortly the report of the survey on the student unions and the NUS.
My hon. Friend asked also about freedom of speech. I recognise a real concern that some visiting speakers have been unable to secure a fair hearing, or any hearing at all, on certain campuses. I have consulted the Committee of Vice-Chancellors and Principals, the Committee of Directors of Polytechnics and the Standing Conference of Principals on how best to strengthen the provisions of the 1986 legislation. I am now considering the way forward, and I will bring proposals forward in due course. If necessary, we shall consider further legislation.
Mr. Simon Hughes (Southwark and Bermondsey) : Does the Secretary of State deny the statement by one of the bank officials whom he met last week to the effect that they were still all at sea about who would pay for the scheme, who would run it, and so on? Does he deny that he cannot say today that anybody has unconditionally agreed to participate in the scheme?
Is it not already the case that, on previously projected figures, it would cost £750 million over 10 years, on the Secretary of State's basis, before the scheme breaks even at the end of the decade? That is on the basis of a 3 per cent. rate of inflation, which is clearly, under his Government's administration, a wildly inaccurate estimate. The additional costs announced today will total at least £150 million. Is it not the reality that the scheme will cost at least £1 billion or more to the Treasury? At the moment, that is not a cost that the Government are having to finance at all, but will involve extra Government money under their scheme of public expenditure.
Mr. Baker : The hon. Gentleman must refer to annex E in the White Paper. I am sure that he is familiar with the figures. He will know that it will cost the Government money until the break-even year. As a result of the outlined cost figures that I have given today, it is possible that the break-even year may move about half a year forward, from 2001 to 2002--no more than that. The
Column 26Government are committed to reducing the rate of inflation. That remains the Government's unremitting target.
Mr. Robert Rhodes James (Cambridge) : As my right hon. Friend and the House are aware, I am not exactly an enthusiastic supporter of the scheme, either in principle or in practicality. Although, of course, I shall look carefully at my right hon. Friend's statement, in view of what happened last November, I advise the House to look at the statement carefully and to question some of the figures. As it is now grimly evident that the cost of the scheme will primarily be borne by the taxpayer, before drafting legislation will my right hon. Friend consider whether the figures could be rather more precise, whether the implications could be made rather clearer, and whether the House could have a debate on these matters?
Mr. Baker : The hon. Member for Blackburn (Mr. Straw) referred earlier to the question of a debate. I should welcome such a debate and I hope that my right hon. Friend the Leader of the House, who is in his place, has registered my expectation that there will be one because it would be helpful. I am happy to give the figures. Indeed, the figures that I put forward this afternoon take us much further forward in our discussions with the banks. Coupled with the figures set out in the "Top-up Loans for Students" White Paper and in annex E, they mean that the figures are before the country and the House. I am happy to consider what my hon. Friend has said. I do not know whether I can convert him to support this scheme, but I believe that he has something of an open mind.
Mr. Merlyn Rees (Morley and Leeds, South) : Is the Secretary of State aware that I have not needed to read the White Paper or to listen to the statement about this type of loan because it was available before the last war? Indeed, I went to university on such a grant and paid it back out of my gratuity at the end of the war. Therefore I understand the nature of the grant and its effect on students without guessing about it. When I read in the White Paper that the aim is to save public expenditure, that reinforced my view--which is strongly felt because I represent an inner- city area where practically nobody goes into higher education--that all that this will do is to make it doubly difficult for the sort of people that we want to get to university actually to get there. If that is dyed-in -the-wool Socialism, count me a dyed-in-the-wool Socialist.
Mr. Baker : It is just as well that the right hon. Gentleman does not live in Australia these days, where the Socialist Government have introduced charging for tuition costs and fees at universities. I am not implying that the hon. Member for Blackburn would seek to follow that, but simply wish to point out that, associated with that proposal in Australia is the graduate tax, a proposal that has won support from some Labour Members. Indeed, the Labour spokesman in the House of Lords favours a graduate tax and I believe that the hon. Member for Durham, North (Mr. Radice), the immediate predecessor of the hon. Member for Blackburn, also favours a graduate tax. There is a lot of new thinking in the Labour party in this area--
The right hon. Member for Morley and Leeds, South (Mr. Rees) raised the question of access. We are the only developed country not to have some form of loans system for students. In the other countries that have top-up loans alongside grants, a higher proportion of the population of young people goes to college, university or the equivalent of polytechnics, especially in America, where there are extensive loans systems. I am often told that such a system will discourage women, but in America women now constitute well over half the student population. The system has not proved a deterrent. I advise the right hon. Gentleman that I am committed to the expansion of higher education. The Governments of whom he has been a leading member, and Conservative Governments, have always been constrained by the high cost of higher education in our country. The right hon. Gentleman served in the Cabinet that cut higher education significantly, both in numbers and in capital. Student loans will represent a new flow of funds into higher education and will broaden the financial platform.
Mr. David Madel (Bedfordshire, South-West) : How will discretionary grants fit in when the scheme is under way? Will my right hon. Friend assure me that when all the details have been worked out the greatest care and sensitivity will be exercised towards those students with long courses, such as medicine or veterinary medicine?
Mr. Baker : Discretionary grants will, of course, continue, as will the normal mandatory grants. It will be up to the local authorities to decide exactly what the position is and whether they give grants. Those people who are not successful in obtaining a discretionary grant--there are many tens of thousands each year--will be eligible for top-up loans, which will be non-means tested. That represents a guaranteed and assured source of extra available funds.
Mr. Peter Shore (Bethnal Green and Stepney) : The Secretary of State should know that his announcement will have been greeted with great disappointment, if not dismay, by the great majority of students in British universities who were hoping that the Secretary of State's statement this afternoon would announce that he had had second thoughts about this mean, paltry and damaging scheme. Is the Secretary of State not aware that medical students, who have five-year courses, three of which are taken up with clinical studies, lasting 46 weeks of the year, have had and will have no opportunity of supplementing their inadequate grants with extra earnings during the long vacation and other periods? Is he not aware that the average medical student today in London is having to borrow from banks up to £3,000 over the length of his course to meet the present deficiencies in his student grant? What effect will this additional burden of loan have upon medical students and especially upon those who have been recruited from rather less affluent circumstances than the Secretary of State normally considers, and on women students, who now form so large a part of our total student intake for medical purposes?
Column 28Labour Cabinet that substantially cut higher education. In general, there were substantial cuts in higher education in 1976, because the Labour Government ran the country so badly. I believe that many students will welcome the proposal for top-up loans. I have already indicated the large numbers of students--the 120,000 who receive no grants at present ; the 160,000 who have their grants reduced and the 50,000 who are or who are not on discretionary awards in higher education-- who will benefit by having an available source of money, at a cost lower than the costs that the right hon. Gentleman suggested medical students would pay.
Medical students can look foward to a high income but, if they do not achieve that high income, they will be protected by the deferment arrangements. I recognise that the medical students' extra years of study will lead to extra debt, and the repayment term may need to be extended for them.
Sir Philip Goodhart (Beckenham) : Can I press my right hon. Friend on the question of medical students? In the United States the average doctor starts his medical career with a debt of $50,000. We do not want to see that happening here.
Mr. Baker : It is highly unlikely that there will be any figure of that scale. If my hon. Friend looks at the figures, the average loan is £400 a year in the first year, building up slowly over a period of years. We do not, therefore, envisage that scale of indebtedness for medical students. The point I would make again is that, if there is extra debt, the repayment period, which we have envisaged would be five years for a normal student, could be extended to recognise that fact.
Dr. Dafydd Elis Thomas (Meirionnydd Nant Conwy) : If the Secretary of State was meditating on the statement during his sponsored walk in my constituency on Friday, I doubt whether it has done him any good. Will he address himself specifically to the effect of the scheme on mature students? Is he arguing that the introduction of such a top-up loan scheme will benefit and increase access? Where is the evidence of that in the statement beyond that which he was saying in the White Paper?
Mr. Baker : I very much enjoyed going on a sponsored walk in a very beautiful part of the hon. Gentleman's constituency on a lovely day. I thought that it was quite a good day for a leading Conservative politician to be walking in the Welsh hills.
If the hon. Gentleman looks at the availability of student support in other developed countries as compared with this country, he will see that what stands out in this country is its very high level of student support, and that has had an inhibiting effect on the expansion of higher education over the years. In the United Kingdom, for example, in 1984 prices, student support per student is £750 ; in West Germany £70 ; in France £180 and in Japan £30. We believe that it is reasonable to expect students to make some contribution towards their upkeep costs while they are studying.
Mr. Anthony Nelson (Chichester) : In acknowledging that my right hon. Friend has worked extremely hard to come forward with a viable scheme, may I put to him the concern that perhaps some of us have, which is that unless one means-tests the availability of the loans, they may end up as a subsidy to middle class families? The people who
Column 29will benefit are those parents on good incomes, with high tax rates, who will make sure that their children apply for the grants, which will be at very low cost, because it is money that they would otherwise have to find. Far from encouraging access from students from low-income familes, it could end up being a subsidy for those who, perhaps, have lesser claim.
Mr. Baker : I certainly would not introduce means testing for these loans. One of the attractive features of our scheme is that the loans are not means tested. The parents of about one third of students--for example, middle class parents--who have their grants reduced because of means testing do not make up the full entitlement that their children would have if they were not means tested. This system will be of considerable benefit to that group.
Mr. Win Griffiths (Bridgend) : Will the Secretary of State name the banks and financial institutions that have been in negotiation with him? Exactly what are their terms in respect of the costs that they are prepared to bear in the administration of this scheme? Was the White Paper the basis of their discussion? If so, is not the whole thing bogus, because the inflation rates used in the White Paper were 5 per cent. in 1989-90 and 3.5 per cent. in 1990-91 and the succeeding inflation rate was 3 per cent.? The figures in the report cannot form the basis of a real estimate of the cost of administering the scheme. What is the present estimate of the real inflation rate in the years ahead for the administration of this scheme?
The hon. Gentleman asked whether the White Paper was the basis of discussions with the banks. We said that there were certain features that any loan scheme would need to have. One was universal accessibility to all students, irrespective of their position. That is not a normal banking function. We said also that there should be deferment if, after graduation, a graduate has a salary or wage a certain percentage below the national average wage. Again, that is not a characteristic of a normal banking repayment scheme. We have ensured that both factors are built into the scheme as discussed. I reiterate that it is up to individual banks and other financial institutions, including building societies, to say whether they will participate, but assurances, given personally to me, show that there is substantial interest from the clearing banks in participating in the scheme.
Several Hon. Members rose --
Mr. Speaker : Order. I should like to call all the hon. Members who are now standing. This is an Opposition day, the subject of which has been chosen by the Social and Liberal Democrats. I shall allow questions on the statement to continue until 4.15 pm. If questions are brief, I shall be able to call all those hon. Members who wish to speak.
Mr. Harry Greenway (Ealing, North) : Will my right hon. Friend confirm that the average student borrows £370 a year and is required to repay it at commercial rates, so this scheme will lighten the load? Will he cost the increase in the number of students in higher education over the past 10 years? There are now 266,000 more
Column 30students in higher education, and we are moving towards one in five of the eligible population before the turn of the century.
Mr. Baker : I cannot confirm the precise figure, but the average indebtedness of students is of that order. Various surveys on the subject have been carried out. My hon. Friend asked me to cost the increase in the number of students. We have allowed in annex E to the White Paper for the increase in the number of students. Since we have been in office there has been an increase of about 200,000 in the number of students. This has been one of the most rapid periods of expansion, most of which has taken place in the polytechnics, although the universities are begining to expand again. The financial arrangements that I made in respect of universities and polytechnics, and which I announced about a month ago will stimulate polytechnics and universities to expand their numbers. The funding is changing so that it is very much a matter of the money following the students, and that is a demand-led expansion.
Mr. Dennis Skinner (Bolsover) : Is not today's statement a way for the Secretary of State for Education and Science to try to convince the taxpayer that he will use taxpayers' money to introduce the scheme as a first step so that, later on, the Government can spread the idea abroad that student loans will provide a much greater part of the grant than at present? In other words the Government are using taxpayers' money to get across the idea and will then hammer the students. Will the Secretary of State confirm that Johnson Matthey is one of the banks with which he is having discussions--or is it the Abbey National? When students decide to protest against this evil scheme and come to the House of Commons to do so, will he rejoice in seeing Kate Adie, Brian Barron and other journalists infiltrating picket lines of police who are trying to block the students on Westminster bridge?
Mr. Baker : I am sure that if there is a group of militant students waiting to protest, the hon. Gentleman will be at the head gingering them up. I doubt whether his leader would sanction that action. I am not prepared to name any individual bank but neither I nor, as far as I am aware, any of my officials have had discussions with Johnson Matthey.
The hon. Gentleman also said that we were trying to persuade foreign sentiment abroad. I do not follow his argument.
Mr. Baker : I do not follow the hon. Gentleman's argument. It would be foreign sentiment if it were abroad, and I thought he said that. The hon. Gentleman should re-read the White Paper, which makes it clear that from 1990 we shall introduce top-up loans, the grant will be frozen and the loan will go up over a period. We have not disguised our intentions about this, which has been an essential part of the proposals announced in November. Instead of coming in here and shouting at my right hon. and hon. Friends all the time, the hon. Gentleman should do his homework and read the White Paper.
Column 31time than for many years? In those circumstances, it is not unreasonable to transfer part of the cost of student maintenance from the taxpayer to the employer? Most students will have very little to lose and a great deal to gain from the introduction of the scheme.
Mr. Baker : My hon. Friend is right. It is incontrovertible that there is to be what statisticians call a demographic trough and that there will be a dramatic drop in the number of 18, 19 and 21-year-olds in the course of the next five to 10 years. Graduates will find that they are moving into a buyers' market when they leave college. There is very little graduate unemployment today, and there will be even less in the four or five years ahead. My hon. Friend raises the interesting point that in those circumstances, companies may tend to pay off student debts. That is now becoming a regular feature of American schemes in which, if an employer wants to take on a particular person, as part of the employment package he is prepared to write off the debt or provide favourable repayment terms. It may be that various employers in various parts of this country, both in private and public sectors, will want to move towards such arrangements.
Mr. Donald Anderson (Swansea, East) : Is the Secretary of State going to freeze basic grants or progressively reduce the basic grant using the loan as cover? Has he seriously considered the effect on women? I heard what he said about women's experiences in the United States. The scheme is bound to give women not only a negative dowry, but a disincentive to return to work at a time when the Government are trying to encourage teachers to return to work after basic training. Is the Secretary of State aware that this scheme contradicts other Government policies?
Mr. Baker : I do not accept that. Some of the other student loan schemes across the world do not include deferment for a woman graduate who goes off to have a family. It is expected that while she is not earning she will repay some of the debt, but that is not so under our scheme. When people cease to be in employment they fall below the threshold level, so the obligation will be deferred. As regards the structure of the scheme, I confirm that under the proposals in the White Paper the grant will be increased again next year. Its level will be resolved in the PES round for 1990. It will then be frozen in cash terms over a period of years. It will not be reduced in cash terms. The top-up loan will begin and increase yearly thereafter.
Mr. Peter Thurnham (Bolton, North-East) : To the extent that disabled students have additional needs, will my right hon. Friend consider adapting his excellent scheme so that they can have extra funds and, when they can earn enough, will he consider helping with easier payments by increasing their thresholds?
Mr. Baker : I shall certainly look into that. Disabled students who graduate and take jobs may well qualify for some of the deferment arrangements. There are allowances in the grants for certain aspects of disability.
Mr. Max Madden (Bradford, West) : How will students be credit-rated in future? Will loans be liable to attachment for non-payment of the poll tax ; and will loans be available to students who are overseas nationals?
Mr. Baker : The hon. Gentleman's question is about the civil debts of students, not about this particular scheme. A student's credit rating will depend upon whether he repays his debts. We envisage, as I said today, that a loan facility will be available through the loan administrator, a company which will be set up to provide the loan. The banks will be able to bring their considerable expertise, through the branch network, to the recovery of debt.
Mr. Graham Riddick (Colne Valley) : Despite the fact that loans will not have to be paid back until students have completed their courses and are earning a living, does my right hon. Friend agree that their introduction will have the psychological effect of concentrating the minds of aspiring students on choosing courses which will be useful and worthwhile in later life?
Mr. Baker : Yes, one of the things that we discovered when my hon. Friend the Parliamentary Under-Secretary of State and his predecessor visited various countries was that in Sweden, for example--radical, Left- wing Sweden--where there has been a loan scheme like this for years, it was said that the scheme had concentrated students' attention and often increased their motivation.
I agree with my hon. Friend that the scheme will make many students think. I do not believe that it will be harmful to any course of study. More and more young people aged 18 and 19 in the student world recognise the enormous return which they will earn from higher education. There has been great increase in their numbers, about 200, 000, in the past 10 years. That encouraging figure is welcomed on all sides of the House.
Economic analyses have shown that the return to a student from higher education is an estimated 25 per cent. on the amount spent on that education. The return to society for that amount is between 5 and 8 per cent. It is a good investment.
Mr. David Winnick (Walsall, North) : It is not too difficult to know what the Secretary of State would have said about the scheme if he had remained on the Back Benches. Is he aware that this is the sort of Thatcherite discriminatory nonsense that the electorate rejected so decisively on Thursday?
Mr. Alan W. Williams (Carmarthen) : I was one of seven children from a very modest background ; each of us had the benefit of six years in higher education. That was only possible with adequate student grants. Does the right hon. Gentleman realise that the continuing devaluation of the student grant, and his student loan proposals, will cut off millions of people from modest backgrounds who possess the talent that the country needs, and will make higher education more and more a middle class preserve?
Mr. Baker : First, there is no evidence abroad that this happens and secondly, as he knows and about which I am constantly chided, the real value of student grants in the United Kingdom has fallen since 1979.
Column 33200,000. That includes full-time and mature students. If the hon. Gentleman is saying that part-time students are wrong, he has no policy at all for the expansion of higher education.
Mr. Andrew Smith (Oxford, East) : Does not the patent inadequacy of the Secretary of State's responses show the latest instalment of a saga of breathtaking incompetence concerning the whole scheme? It can only be implemented by a dogmatic determination, not to bring in top-up loans but to destroy the basis of the grant system. Did I hear the Secretary of State right when he said that all students are now to be credit rated as part of the scheme? Will he come clean and tell us the true administrative costs in the later years? On many occasions he referred to annex E. Will he give an undertaking to publish an amended version of annex E showing the true administrative costs, including the default rate cost and the interest rate cost? Does not his statement unforgivably overlook the effect on those students and institutions whose courses are longer? As my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) said, that applies to medical students. Do the proposals not also deal a body blow to the traditions of Scottish higher education, whose needs have been as contemptuously ignored in the statement as they were in the White Paper itself? What about the effect on teachers and on their training? Is not the statement a body blow to the prospects of successfully addressing the teaching crisis? Above all, will not this shameful statement deny access to higher education to the very students whom we ought to be attracting and who are presently denied that opportunity? Does the Secretary of State realise that his kamikaze determination to go down in history as the man who brought free access to higher education to an end will be opposed with the utmost vigour by the Labour party, the students and, and I am sure, by the public at large?
Mr. Baker : Methinks the hon. Gentleman "doth protest too much". The hon. Gentleman should appreciate that under this Government there has been a substantial expansion of higher education. I have proposals to expand it even further. I have provided money for expansion in the last three years and I shall strive to do so in the coming years. The hon. Gentleman asked about teachers. He well knows that I am bringing forward proposals which will probably mean that many teachers will not do the fourth year. I think that the hon. Gentleman has supported a policy which suggests that the course for a bachelor of education degree should no longer be a four-year course, but a three-year course with one term in school. I do not think that I misinterpret the proposals. In that case they stand equal with other students. The hon. Gentleman asked if I would publish a revised version of annex E. I am quite happy to consider that and if it is helpful I shall do so. [Interruption.] I am free with information because there are no secrets in my Department. The hon. Gentleman started his attack on me by questioning my competence. I can be accused of many things but I am not usually accused of being incompetent.
That the draft Restrictive Trade Practices (Services) (Amendment) Order 1989 be referred to a Standing Committee on Statutory Instruments, &c.-- [Mr. Alan Howarth.]