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Mr. Wolfson : I thank my hon. Friend for confirming my point and for putting a figure upon it.

Another matter that has not been aired this morning by those arguing against the system in total is the continuing scope for students to take vacation work, which could help to limit the extent of the loan that they require and help them to repay it rapidly when they finish university and before they take long-term employment. I am not skating around the issue and trying to pretend that that is an easy solution for all students, but my experience of a wide range of students is that there is an acceptance of and a readiness to take vacation work. Many do so, but many others do not.

Students are not living on the poverty line. Indeed, some of them are much better off than others because of their ability, initiative, energy or, perhaps, luck in finding vacation work. Of course, some may find it difficult to do so, but such work is available and it would not necessarily be bad to pressure students to seek such work. I ask my right hon. and hon. Friends whether, in their total view of university funding, they will continue to pay

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proper attention to how student costs for maintenance are incurred. It is clear that the opportunity for students to live in college or hostel accommodation has a direct bearing on the costs that must be met for maintenance. There is a need for universities to increase the provision of hostel accommodation for those wishing to use it. The burden on student budgets rises dramatically when they have to live out. Many universities allow them to live in their hostels for only one year. I hope that my hon. Friend the Minister will comment on that point, because it bears directly on the ultimate amount of money that a student needs to survive his university education. It is important to remain acutely aware of the differentials by area of student costs, which I hope Ministers will continue to bear carefully in mind. I acknowledge the point made by those who oppose the scheme that the simultaneous loss of other student benefits requires careful monitoring of student incomes and costs. I have some sympathy with those who voice their uneasiness in respect of students wishing to enter lower-paid careers but who nevertheless require a university education as a qualification for those careers--such as those in the paramedical field, including physiotherapy and radiography. Although such careers offer relatively low salary levels, one needs a higher standard of education to enter them. Mention has also been made of doctors, and the response from my right hon. and hon. Friends on the Front Bench so far has been that the students concerned will ultimately enter highly paid professions. That may be so, but the training required for them is lengthy, as it is for veterinary surgeons, and attention must be paid to avoiding the danger of the scheme acting as a disincentive to entering professions that are essential to the wellbeing of the country. By comparison, companies in certain sectors of the British economy are very ready to offer not only high salaries to university graduates but even golden hellos, so that those new employees can often wipe off a large debt on the day that they start work. Ministers must be aware of the kind of competition that such arrangements create.

I turn finally to the scheme's administration. I share the concern about it that has been voiced, particularly by my hon. Friend the Member for Leeds, North-West (Dr. Hampson). For a Conservative Government, we appear to be getting ourselves into a very strange situation. We are utilising public money to establish a quango for the purpose of administering a loan scheme when currently, as many other hon. Members pointed out, the banks administer such loans as part of their normal business. I ask both my hon. Friend the Under-Secretary of State and particularly my right hon. Friend the Secretary of State, with his extensive City background and financial knowledge, to bring ingenuity and new ideas to bear in rethinking the scheme's administration, which is not as simple, inexpensive or effective as it ought to be. We should surely use the private sector to do that work, as it is similar to schemes that it already operates.

I support the scheme in principle. I believe that it is the right and proper way forward, but I hope that the points I have made will be given careful consideration.

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12.48 pm

Mr. Andrew F. Bennett (Denton and Reddish) : The main tenor of Conservative Members speeches has been that, although they are in favour of student loans in principle, they are not in favour of the proposed scheme. The evidence of the debates on loans over the past four or five years is that a scheme can be devised that will be attractive to certain groups of people. The amazing thing is that the Government have designed one that is attractive to nobody. The only reason for the scheme that one can see is that it solves certain social security problems and adheres to the Government's ideological commitment to the belief that students will only value higher education if they have to take out a mortgage to receive it. That is an appalling state of affairs.

When the Secretary of State opened the debate, he went straight into the argument about people not valuing higher education unless they made some investment in it. That is absolute nonsense. People make an investment from the second or third year at secondary school in the amount of time and effort that they put into their studies. From the age of 16 they make a considerable financial sacrifice because those with good exam results know perfectly well that they could get well-paid jobs, but they choose to stay on at school and in many cases are worse off.

The present level of student grant means that most students have to make sacrifices. To assume that they will value higher education more if they have to take out a mortgage for it is absolutely apalling. The hon. Member for Brent, North (Sir R. Boyson) referred to student unions. It was a very neat manoeuvre by the Government last year to announce a review of student unions. It was really a warning : "Be very careful, don't make a fuss about loans or we may clobber you with both of them." I was pleased that the Minister announced that, because of procedural problems, he has backed off from that. I should like an absolute assurance in the winding-up speech that, when the Government draw up the title for the Bill on loans they will make sure that there cannot be a Back-Bench amendment about membership of the National Union of Students. We saw the way in which a Minister was mugged in the middle of consideration of a Bill, and most student unions fear that that is what will happen here. I am amazed at the way in which the proposed Bill has been put together. The previous Secretary of State and the Under-Secretary of State could have come up with a loan scheme that would have been of some advantage to somebody. The only people who they have pleased are the Prime Minister, with her loan ideology, and the Department of Social Security.

The only real benefit of the scheme will be that students, instead of going to the Department of Social Security for help, will have to apply for loans. That is the only change that will take place in the lifetime of this Government.

Why do the Government want to get people out of the Department of Social Security? Because students are not subservient when they go to claim benefits. They go in believing that they are demanding a right. Therefore, it is convenient for the Department to chase students out and stop them claiming benefits. Students sometimes give advice to other people in benefit offices, and make a fuss when things are not done properly. The one gain for the

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Government is that they will push students out of benefit offices. There is nothing in it for students, as they will not get an extra penny in their pockets as a result of this proposal. All they will get is a mortgage.

The Government keep saying that we cannot have a graduate tax because that would put up earnings, but they must be very naive if they do not think that some of the big accounting firms are not already preparing to recruit students saying, "We'll make sure that we meet your repayments of any loans."

I suspect that one of the reasons why the Department of Education and Science likes the scheme is that, if it wants to attract people into teaching, it would be possible for the Government to say that they would write off the loans of the students they recruit. Because of the shortage of graduates, an increasing number of employers will put up their costs to write off the loans of students they recruit, but the loans of students who go into more socially adventurous areas will not be written off.

If the Minister wants to understand the problems caused by a loans scheme, he should look at the situation in the United States. Time after time, articles in the American press menion the problems. One reported huge losses put United States loan scheme at risk. Another reported a $2 billion deficit and a third wrote, "Bankers 1, Students 0."

When it comes to sorting out the problems in the United States scheme, it is the bankers who have the power, not the students, and today's students have to pay for today's defaulters. That is an appalling situation.

The Government have been praying in aid the fact that the Germans have a loan scheme, yet clear evidence is emerging that as a result of the loan scheme in West Germany working-class youngsters have been put at a serious disadvantage. The Under-Secretary of State is shaking his head. Perhaps he can refute the article in The Times Educational Supplement of 13 October. Perhaps the publication got it wrong.

Mr. Jackson : I can certainly assure the hon. Gentleman that the proportion of working-class students in German universities has risen from 16 per cent. to 18 per cent. in the past five years.

Mr. Bennett : Let me quote the article, then :

"Working class families have been at a severe disadvantage since West Germany went over to a total loan system in 1982, a new survey has shown. Whereas demand for higher education has risen considerably among almost all groups of society, students from low-income groups are still under- represented in higher education."

Evidence from other countries, too, shows that the participation rate is nothing like as high as one would wish.

This squalid loan system is an appalling waste of parliamentary time. The Government should be addressing the real problems of higher education. They should be attracting more people into higher education. There is nothing in the proposal to achieve that. They should be addressing the question of access for mature students. There is nothing in the loan scheme that is attractive to them. The Government should be addressing the problems of funding higher education, as well as the appalling drain of academics and the difficulty of recruiting them. None of those matters is addressed in the loan scheme. It is

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irrelevant to the needs of the nation, and the Government should scrap it now and start to address the real problems of higher education.

12.56 pm

Mr. Anthony Nelson (Chichester) : I have grave misgivings about the scheme, although, strangely, I find myself wholly disagreeing with the hon. Member for Denton and Reddish (Mr. Bennett). I did not find any of the arguments that he adduced persuasive, although I shall make some critical comments about the White Paper.

I welcome the debate, albeit late in the Session. I believe that my right hon. Friend the Secretary of State and my hon. Friend the Under-Secretary of State have come to the debate with an open mind, that they will listen sincerely to what is said on both sides of the House and that our comments will be translated into changes in any measures that are introduced. At this stage, the Government have an obligation to slow the pace of reformative legislation and to be concerned about the extent to which major reforms will upset an important constituency of future voters and those who will make major contributions to our economy in years to come.

The Government should look forward, rather than backward to the progenitors of these ideas. I cannot help but feel that the ghost of Keith Joseph stalks us in the proposals. We do not yet have a voucher system and we have not yet tackled tuition grants. But after years of trying to introduce a scheme such as this and assessing that there was not the necessary political backing, the Government have finally placed a proposal before us. It was Keith Joseph who started the process. His proposals did not enjoy majority support on the Conservative Benches at the time and I predict that if the Government seek to introduce proposals such as those outlined in the White Paper and today, those proposals will have a most difficult passage through the House. The Government, whom we support, would be wise to listen to the concerns and criticisms of those who wish them well and who have a common interest in seeking better access to, and great improvements in, our system of higher education.

Let me outline my principal misgivings. First, the arguments about access are, quite simply, bogus. Secondly, I believe that, far from helping poorer people to gain access to higher education, the scheme will amount to an indiscriminate subsidy to the middle classes who need it least. Thirdly, the problem should not be seen in isolation from wider questions concerning future funding of higher education--in particular, the future funding of tuition grants--and the numbers we expect and hope to enter further education.

Like many hon. Members, including my hon. Friend the Member for Sevenoaks (Mr. Wolfson), I have serious reservations about proceeding with a scheme which does not enjoy the administrative backing of the banks which administer most of the finance for young people. It is a sad reflection on the admittedly substantial progress in education in post-war years that only 15 per cent. of young people enter further education. Of those, a much smaller percentage enter degree-level further education than is the case in the countries of our principal industrial competitors worldwide.

It is an even greater concern that only about 7 per cent. of the children of manual workers in this country enter further education. Therefore the sentiments behind the

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Government's proposals are, I am sure, quite right in seeking to improve access and participation in higher education. However, like my hon. Friends the Members for Leeds, North-West (Dr. Hampson) and for Cambridge (Mr. Rhodes James), I do not see the link between introducing a loan facility and substantially improving the access of young people to the university system, which is particularly important for the least well off.

Let us consider a middle-class student in years to come. As I understand it, under the proposals a loan facility will be given regardless of income. Unlike the grant, which will be means tested, the loan will be available for all. Plenty of students and families have substantial resources and can afford to go to university. Such a student will have a real incentive to borrow as much as he can interest-free and deposit that money in a building society. He will earn interest and maintain his capital sum which he can repay at the end of the course. On current rates of interest, a student will earn £243 over the three years even on the basic rate of grant. When the loans move up to equate with the level of gross grant and contribution a student could earn £1,423 net at 10 per cent. interest over the three years. He will be able to pay back all the money that he has borrowed and have that sum net. That is a substantial sum. I do not want to be told that people will not do that. I have a young family who I hope will go to university. I will not tell them to look such a gift horse in the mouth. However, is that a sensible use of taxpayers' money? I believe that it is not. If the grant system is means tested, logically the loans system should be means tested too. If that were the case, the Government would be able to target limited resources of taxpayers' money on those most in need, as they are doing in other areas. I could live with a loan system if it were means tested. By means testing and not subsidising the more wealthy middle classes, money could be spent to improve the quality of our higher education system and on improving, in real terms, the value of the student grant.

I have a more fundamental objection to the proposals. When these proposals were first mooted, I went to see my hon. Friend the Member for Wantage (Mr. Jackson), the Under-Secretary of State for Education and Science, to ask him to think again. I asked him whether it was worth the political candle and whether it would bring about benefits and changes. I asked him whether, if the cost saving turns out to be a cost increase, the proposals will be worth the problems that he will encounter in the House and elsewhere.

I hope that my hon. Friend the Under-Secretary of State will not consider me to be romantically nostalgic, but, like my hon. Friend the Member for Cambridge, I believe that we all have an obligation to remember how lucky we were to benefit from university grants. We have an obligation to do at least as well for the next generation. It cannot be right to be considering proposals in isolation which will substantially undermine that.

When we consider investment in higher education, we must remember that there is a fundamental difference between maintenance and tuition. It does not make good sense to borrow money for day-to-day living expenses. A stronger case could be made for introducing loans if students or their families had to pay some of the tuition

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costs. Tuition costs represent the investment side of education. Students can see that they will gain great benefits from their tuition in the years to come. While I understand that tuition and maintenance cannot be considered separately, it cannot be a good principle officially to sponsor young people to incur debt simply to pay their living expenses. The Conservative party should not be the progenitor of that way forward.

I sincerely hope that the Secretary of State and his Ministers will think carefully about the case for the legislation and about some of the positive proposals put forward to improve it. First, we must have an assurance that Government responsibility to fund tuition fees will not be undermined in future. Secondly, access funds should be larger. The amounts proposed in the White Paper seem to be small. As moneys expended from the funds will be on a discretionary basis they should not be limited to the relatively small sums proposed for helping to resolve some of the serious problems of those on the lowest incomes in higher education.

Thirdly, the Government should reconsider means testing so that, as in other areas of social policy, we insist that help goes to those most in need and thus make a genuine contribution to improving access to higher education.

1.7 pm

Mr. George Galloway (Glasgow, Hillhead) : The hon. Member for Chichester (Mr. Nelson) made a splendid speech and the whole House is grateful to him for giving us the benefit of his experience as a merchant banker and bringing to bear some of the more salient fiscal facts of life. I have long since abandoned hope that the Government will listen to moral or principled arguments. If they are not persuaded by the hard pounds, shillings and pence of the hon. Member for Chichester I fear that they will never be persuaded about anything.

The Secretary of State opened the debate by saying that he knew nothing of the nervousness from which the Government are reported to be suffering as a result of the reception that these plans have received. If, from his period as a Scot, he remembers the motto of Duncan McCrae :

"D'ye ken noo?"

does he now understand why he should be nervous about the reception that the plans have received? I have listened to every Tory Member who has spoken. The fulsome support of the hon. Member for Welwyn Hatfield (Mr. Evans) was a mixed blessing. Sometimes on a Saturday afternoon I have occasion to be grateful to him so I had better be careful. Only he supported unequivocally the Government plans. That was rather like the rope supporting the hanging man.

The hon. Member for Leeds, North-West (Dr. Hampson) has remarked in the newspapers that the Government are getting themselves into a poll tax scenario. The hon. Member for Cambridge (Mr. Rhodes James) put forward the extremely principled and intelligent argument that trained intelligence is important. Indeed, every Conservative Member who has spoken seems to have the most profound misgivings about the Government's proposals.

The Government have made a U-turn on this question before. One part of me, while I am speaking about ropes and hanging, hopes that the Government will proceed with the scheme because it will be another nail in their coffin. However, as an hon. Member representing more students

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than any other Scottish Member--Glasgow university, parts of Strathclyde university and many colleges are in my constituency--I believe that the proposals will cause too much suffering for us to allow them to pass without vigorous opposition.

It has been said before--and it is important to repeat it--that it is a disgrace that not a single Scottish Tory Member is present for the debate, even though we have had three months' notice of it. Not a single Scottish Minister or Tory Member has seen fit even to hear the Government's case, let alone defend it. As the Tory party has recently touched bottom--16 per cent.--in the Scottish opinion polls, Conservative Members are not prepared to turn up to defend the indefensible.

There is a cynical, cheap-jack move to locate 250 loan shark jobs in Glasgow. They will probably be in my constituency. Heaven knows we are grateful for any jobs, even if they are 250 loan shark jobs. I wonder how many will be Glasgow loan sharks. How many will be eastenders in sheepskin coats battering people's doors trying to get money? Blood money will cut little ice in Scottish public opinion. Perhaps the Tories have not yet reached bottom in the Scottish opinion polls.

I have often said that the Government know the price of everything and the value of nothing. Having heard the arguments of the hon. Member for Chichester and having read what I have read, I believe that we have now reached the almost unbelievable pass at which the Government know neither the price nor the value of anything. The financial arguments against the scheme--they have been well deployed and time does not permit me to add to them--are overwhelming. I have never been a student. I speak only as someone who represents students. I do not recognise the life of a student as described by the hon. Member for Welwyn Hatfield. He said that a student grant scheme is not only generous but overgenerous. That is truly mind- boggling. Students come to my surgery every week, including my surgery on the campus. Students simply cannot make ends meet. If they are making ends meet, they are doing so only by getting further and further into debt.

There is already a student loans scheme. It is called bank overdrafts, bank loans, and loans from parents. Some Conservative Members talk as though the poll tax is only on the horizon in Scotland. It is already in place. With the poll tax and other housing regulations, other gentlemen in sheepskin coats--private landlords--have been unleashed on the student population in the west of Glasgow and elsewhere. There are mounting problems in the everyday lives of students. Of course ultra-high interest rates are already punishing students who have overdrafts or store credit cards. That is the means by which students buy clothes. They are up to their ears in debt with Top Shop, Burton and Top Man, and they are paying 35 to 40 per cent. interest on that indebtedness. Some are getting money or support in kind from their parents who are now suffering under the Government's high interest regime. As parents struggle to pay their mortgages, hire purchase commitments and other debts, there is nothing left for their student children.

I must leave to catch a train, so I apologise to the Secretary of State and to the Minister for not being able to remain much longer. The hon. Member for Welwyn Hatfield gave the game away when he said that the real reason for these proposals is to force a change in student attitudes--a kind of cold

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bath, short-sharp-shock treatment for the nation's students. The Government think that, somehow, a cold bath will be good for them and that they might place a higher value on their education. That is an offensive argument. The Secretary of State also gave the game away when he repeatedly talked of higher and further education being a means by which students invest in their own future.

I advise the Secretary of State that the state is investing in the nation's future when it spends money on education. However, the Government's attitude is typical, given that they believe, in the words of the Prime Minister, that "There is no such thing as society, only individuals and families." It is clear how the Tories have come to see education through that distorted prism.

I believe that the Government not only should but probably will think again on this matter. Having tested the water of this cold bath, they have found the reception frosty. I hope that we will hear little more of this measure in the months to come.

1.15 pm

Mr. James Pawsey (Rugby and Kenilworth) : It is interesting to follow the hon. Member for Glasgow, Hillhead (Mr. Galloway) because he and I have at least one thing in common--neither of us was a student. I was however, interested in some of his comments on student poverty. An excellent local newspaper, the Coventry Evening Telegraph , has stated :

"Students started a five-month protest when they were told that those living on campus would not be able to use their cars there from the beginning of this month About 3,000 students live in campus. Last year more than 650 had cars."

I do not object to the principle of students running motor cars. Indeed, I say "good luck" to them--but I do ask whether it is right to call upon the taxpayers to part-fund those same motor cars. I wish to refer to the remarks of the hon. Member for Blackburn (Mr. Straw) and to an intervention in his speech by my hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh). My hon. Friend asked a specific question to which the hon. Member for Blackburn did not respond in his customary frank way. My hon. Friend asked about Labour's proposals in this area and what they would cost. The hon. Member for Blackburn replied, "We will keep the grants system." Therefore, I must ask the hon. Gentleman, at what level would he maintain the grants system? Will there be an uprating for inflation, or is it intended that the system will gradually erode without the comfort of a loans system? If the hon. Member for Blackburn wishes me to give way on this point, I shall be happy to do so.

Mr. Straw : Obviously, it is implicit--it was explicit in the policy review--that, in keeping the grants system, we aim to maintain its real value and, as resources allow, to restore the loss of grant that has been suffered under this Government, not under the previous Labour Government. Contrary to what the Secretary of State said, despite the economic difficulties of the last Labour Government, the grant's real value was then restored, whereas it has been cut by 23 per cent. under this Government.

Mr. Pawsey : Is the hon. Gentleman saying that he would increase the value of the grant by the amount that he says has been taken from it? Will he put a figure on what he believes that that will cost? Again, I shall give way if the hon. Gentleman wishes to intervene, but obviously he has

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said enough. People outside the House will be able to draw their own conclusions from the silence of the hon. Gentleman.

I offer my congratulations to my right hon. Friend on his appointment as Secretary of State for Education and Science. He will take the transition from sheep to science and from agriculture to the arts entirely in his stride.

I subscribe to the view that has been expressed by some of my hon. Friends that student support in the United Kingdom is among the most generous in the western world, but despite that only 32 per cent. of the target group enter higher education. That is a smaller proportion than in many other European countries. Top-up loans will increase access to advanced education by reducing dependence on the taxpayer and by introducing an element of new money. Surely no hon. Member can doubt that there can be a limit to the number of students that the taxpayer can afford to support on the present grant-only basis. Incidentally, the NUS seems to be inhabiting a Peter Pan world if it believes that an additional £100 million can be found by taxpayers to restore the level of grant to the 1978-79 figure. Surely the NUS must be aware that, as the Prime Minister has said on a number of occasions, Governments do not have funds of their own ; they have only the funds that are given to them by the taxpayer. I cannot see why taxpayers should be expected to be soaked for every single student penny.

Mr. Straw : The hon. Gentleman is complaining about the NUS demand to spend £1 billion to restore the value of the grant, but what about the £1 billion plus that the loan scheme will cost?

Mr. Pawsey : I believe that the hon. Gentleman will find the answer as my speech develops.

Many students will be able to take advantage of one of the three access funds that will be administered by the institutions. Those funds will total about £15 million. I told my right hon. Friend's predecessor, however, that £15 million is grossly inadequate. I urge my right hon. Friend to make further representations to the Treasury so that the figure may be increased. My hon. Friend the Member for Leeds, North-West (Dr. Hampson) may have given us a lead when he said that a modest interest charge of between 2 and 3 per cent. should be imposed. The proceeds from such interest repayments could then be used to increase the amount of access funds. I am convinced that there will be hardship unless we substantially increase the three access funds. I hope that my right hon. Friend will forgive me for returning to that specific point.

The top-up loan of £420 will be available to virtually all full-time home students in higher education, the exception, of course, being postgraduates. It is fallacious to argue, as Opposition Members have done, that a large measure of taxpayers' support is necessary to guarantee student admission to advanced education. I underline that point by using the very argument advanced by the NUS and the Opposition that since 1979 the real value of student grants has fallen by 10 per cent.--I know that the hon. Member for Blackburn may argue that it has fallen by 23 per cent. If we stick with the hon. Gentleman's larger figure, he will find that he is arguing my case. Despite the real fall in the

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value of the grant, the number of students has increased by 200, 000. I am anxious that the Opposition should take that argument on board.

Mr. Straw : The hon. Gentleman knows that university student numbers have barely moved in the past 10 years and that polytechnic student numbers have increased by 70,000. That does not make 200,000 full-time students in receipt of mandatory awards.

Mr. Pawsey : The full-time equivalent is 200,000.

Mr. Straw : No, it is not.

Mr. Pawsey : Yes, it is. I fear that we cannot continue to have this argument across the Dispatch Box.

The percentage of 18 and 19-year-olds in higher education has increased from less than 13 per cent. to more than 14 per cent. There is no case to answer when one argues that the reduction in grant equals a reduction in student numbers. That is demonstrably untrue. Another reason for introducing top-up loans is the number of 18-year-olds now entering higher education. Hon. Members will recall that just two years ago it was predicted that one in five 18-year-olds would go into higher education. It is now agreed that by the year 2000 that figure will be much nearer one in four. Furthermore, the proportion of students qualified to enter higher education will continue to increase. That increase, more than anything else, helps to underline the success of the Government's policy to improve the quality and standard of state education. Because of that improved quality, more people are going on to higher education.

Hon. Members will also be aware that the number of pupils studying for A- levels has increased sharply from 21 per cent. of the age group in 1987-88 to 24 per cent. this year. That is a significant increase which contrasts strongly with previous forecasts which said that by the mid-1990s there would be a fall in student numbers. There has been a change and the numbers in universities on a full-time equivalent basis--which has some relevance to the point we were discussing a moment ago--will rise from 330,000 last year to well over 400,000 by the year 2000. That increase underlines the Government's strength and commitment to state education.

There is another reason to justify the introduction of top-up loans for students which was mentioned by my right hon. Friend the Secretary of State in his admirable opening speech. Most graduates expect to receive substantially higher remuneration than non-graduates. Since students benefit most from higher education, can it be either right or equitable that the tax paid by those leaving school at 16 and starting work at that age materially assists those attending university? Can it be fair or just that the non-graduate is called upon to subsidise the graduate?

To underline a point made in the Secretary of State's opening speech, economic analysis shows that graduates obtain a personal return of about 25 per cent. on their investment in higher education, whereas society's return is between 5 and 8 per cent.

Despite the existing system of grants, fewer students enter higher education in this country than in many other European countries. The position is even worse if we consider the number of young people who come from blue collar homes, who currently account for about 60 per cent.

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of the population. They represent only 21 per cent. of university admissions, which is wrong. To some extent, the introduction of loans will help to remedy that imbalance.

Another reason for the introduction of top-up loans is that 35 per cent. of parents do not make the full parental contribution. Five of my sons went to institutions of higher education and I did not provide a contribution to the extent which I should have. Therefore, my sons, like so many others, had to make good the deficit in different ways, for example by borrowing.

The hon. Member for Hillhead said that students now borrowed at a commercial rate of interest. This system would provide loans at zero rate. That is a fundamental and basic difference which will be much appreciated by students. It seems extraordinary that students who are aged over 18 and old enough to vote should be dependent, at least to some extent, on their parents. That is unfair to both

parties--students and parents alike.

We have heard it said in the debate that, as loans are introduced, social security benefits are being abolished. However, the facts do not always sustain the arguments put forward by Opposition Members. Loans will be available for all students. Currently, only half of all students receive social security benefits--which average about £300. The great initiator, Beveridge, never foresaw the day when students would be beneficiaries of the social security system. As my right hon. Friend the Secretary of State said in his opening speech, many safeguards will be built into the system. Payments will be deferred for those who earn less than 85 per cent. of the national income, which is currently about £9,500 a year. Women who start families will not be required to repay loans until they start to earn. There will be no such thing as a negative dowry.

Opposition Members have said much about the substantial problems which might arise from defaulters. Other Conservative Members may share my surprise when I say that I was a little amused at the level of concern being expressed by Opposition Members about the profitability of the banks and the accountability of Government. We have been reminded of the default position in the United States, but we have not been told the fundamental difference between that and what is proposed here. The United States has no general system for the deferment of payment when income is low ; moreover ; default occurs principally among those taking non-degree courses--courses that do not always improve employment prospects to any real extent. It should also be remembered that banks in the United States have found it relatively easy to create a default and then simply draw in the Government guarantee and seek a refund. That system will not operate here ; indeed, it will be reversed, a positive incentive being offered to banks to get the money in. Incidentally, if we are to draw examples from the rest of the world, we should consider Socialist Scandinavia, where default rates are between 1 and 2 per cent. I believe that a mixed system of loans and grants is fairer, representing both better value for the taxpayer and improved access to higher education.

1.31 pm

Mr. Jim Cousins (Newcastle upon Tyne, Central) : I wish to confine my remarks to the short-term effects that the proposal will have--and, indeed, is having now. Arguments about the technicalities of the scheme, and its

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damaging effect on access to education, have already been well rehearsed by hon. Members on both sides of the House , Conservative Members should understand, however, that the shadow of the scheme is already having an impact on higher education. This year, student choice between courses, institutions and locations has been affected by the prospect, adding to the fear in the academic community that we are heading towards a two-tier education system, divided between a handful of glamorous, high-cost, high-delivery institutions and a raft of low-cost operations in low-cost areas.

Dame Elaine Kellett-Bowman : I am glad to know that Lancaster university figures among the glamorous institutions. It has experienced a massive increase in applications, which are going up every year.

Mr. Cousins : That is exactly my point. The Universities Central Council on Admissions and polytechnic clearing applications this year show a major shift in emphasis between institutions. It is precisely that change to which I am trying to draw attention. I shall not comment on the status of the hon. Lady's local university, which may well be a low-cost operation in a low-cost area.

Mr. Jackson : I think that the hon. Gentleman is scoring an own goal. Certainly recruitment to both universities and polytechnics is substantially up this year, and if he is arguing that that is attributable to the prospect of student loans he has produced a very useful argument for our side.

Mr. Cousins : The shift that I have described foreshadows the introduction of the loans scheme.

The short-term impact of the scheme will be highly concentrated. The general student population is itself concentrated in particular locations, but the student populations on whom the scheme will bear most heavily in the short term are still more concentrated. My constituency has a polytechnic and a university which together contain 12,500 undergraduates. More than 3,000 of those are mature students, students recruited through a special means of intake, or students who are on special courses designed to meet special needs. That important but fragile structure has been carefully built up over recent years and in it much of the exciting innovation in teaching is to be found. It is on that structure that the shadow of the loan scheme will be felt first. I ask the Minister to bear that in mind. The hon. Member for Welwyn, Hatfield (Mr. Evans) said that students are very passive and take what is given to them because it is free. That is far from the case. Student expectations of courses and institutions are rising rapidly. With the introduction of the loans scheme students will rightly become far less patient about deficiencies in resources. The loans scheme will promote the introduction of tuition fee systems by higher education institutions, and those have been steadily condemned throughout the debate by Conservative Members. Such tuition fee income systems will be needed to meet deficiencies in provision that cannot otherwise be met. In my city the polytechnic has had to reduce its expenditure on books by 20 per cent. of what it was four years ago. Student bodies faced with the introduction of loans systems will be far less patient about that kind of deficiency when this scheme begins to take effect.

Finally, we have the terrible impact on student communities of rising rents which are becoming an

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ever-increasing problem. There are difficulties about the availability, quality and cost of student accommodation and housing, whether it be, in the immortal words of a Conservative Member, in or out. That is a growing problem for students. Next year we shall see the withdrawal of housing benefit and the introduction of the poll tax and that will add greatly to these problems. Hon. Members with large numbers of student voters are already facing students who are asking us to approach their landlords about separating the rent and rate factors which are being brought together as part of the introduction of the poll tax and which students feel is a future deceit.

To those problems we must add the introduction of the loan scheme in September 1990 and the withdrawal of housing benefit at Easter--a recipe for considerable trouble and difficulty. One consequence may be that not a single constituency with a significant academic community will be represented by a Conservative Member. That will happen if the Government proceed with this scheme. From my point of view there are far less troublesome methods of achieving that object.

I ask Conservative Members to bear in mind the remarks by the hon. Member for Chichester (Mr. Nelson) who said that this was not the time in the liftime of the Government for great new and glamorous reforming projects. He is right. Night time comes upon the Government and it is not the time for great new and exciting dawn marches over difficult terrain. It is a time for hot toddies before bed. It is a time for early bed times and the Government should be thinking of showing their supporters a cosy huddle around a dying fire and not yet another great new project which will torpedo the base upon which the Government stand.

1.38 pm

Mr. Patrick Ground (Feltham and Heston) : Both sides of the House appear to agree that the overwhelming bulk of expenditure on higher education--including tuition--should be borne by the Government. Even after this scheme is adopted, should it be so, that will be the case. I suspect that the majority of hon. Members also accept that the maintenance of students should be achieved not by the social security system but by a proper student support scheme administered by the Department of Education and Science.

For the actual concept of top-up loans--if they are to be correctly described as that--there has also been a considerable amount of support. The hon. Member for Fife, Central (Mr. McLeish) appeared to accept the validity of that concept, as did my hon. Friend the Member for Cambridge (Mr. Rhodes James), although he was otherwise opposed to these proposals. Provided that the amount of the loan is not too great, I suspect that most people would see the advantages that such a scheme would provide in dealing with the problem of unpaid parental contribution and with the myriad cases that are not adequately covered by the existing system. I agree with my hon. Friend the Member for Rugby and Kenilworth (Mr. Pawsey) that the access funds will have to be looked at, and almost certainly increased. I would not be surprised if they had to double.

The House divides on a point that is both interesting for the future of the scheme and important--the balance

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