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Mr. King : I am grateful to the hon. Gentleman for his comments. We looked carefully at the American experience in that respect. There have clearly been difficulties in some areas, but I shall say no more because some legal actions are flying around on some of the comments that have been made. We shall learn from America's experiences. There are some aspects of the American contract that we shall not follow. For example, we shall make sure that the contractor's contract includes incentives on the important matter of safety, quality and security, as well as on production matters. But it is interesting that the Americans are convinced that, whatever the problems that they have to sort out, the Government-owned, contractor- operated system--the GOCO method--is the right approach to take.

Several Hon. Members rose --

Mr. Speaker : I am sorry that I have been unable to call all those hon. Members who wished to speak, but I shall bear in mind their undoubted claims when we return to the subject.

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Points of Order

4.18 pm

Mr. Roger King (Birmingham, Northfield) : On a point of order, Mr. Speaker, of which I have given you due notice. It concerns an issue of importance to the House--the position of the Chairman of the Public Accounts Committee and his role in a broadcast on Radio 4 this morning on the "Today" programme. I attended, as an observer, the first of several sessions of the Public Accounts Committee on the sale of the Rover Group to British Aerospace.

Yesterday civil servants were interviewed and a number of questions were put to them. No doubt in due course a transcript will be available for us all to read and disseminate. Basically, they adopted a defensive posture, as one would expect. This morning, when I tuned in to Radio 4, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), the Chairman of the Public Accounts Committee, was being interviewed, and what he said struck me as less than impartial. During yesterday's interrogation of the witnesses, several references were made to sweetners and the fact that the Commission was being--

Mr. Speaker : Order. What is the point of order for me?

Mr. King : If a Chairman of a Select Committee or of an august body such as the Public Accounts Committee has already made up his mind as to what happened in the British Aerospace-Rover deal, what point is there in calling witnesses to determine what happened? Is it not a fact that, from now on, probably no one will get a fair hearing?

Mr. Robert Sheldon (Ashton-under-Lyne) : Further to that point of order, Mr. Speaker. I am grateful to the hon. Member for Birmingham, Northfield (Mr. King) for giving me notice that he would be raising his point of order. It is a pity that he did not discuss it with me because I would have been able to inform him of what you, Mr. Speaker, certainly know, which is that it is all here in the National Audit Office report to the Public Accounts Committee. The report was agreed with the Department concerned. What I value most is the unanimity of the all-party Committee. That is of enormous importance to me, and it is the strength of the Committee, for which I work all the time.

Dame Elaine Kellett-Bowman (Lancaster) : Further to that point of order, Mr. Speaker.

Mr. Speaker : No. I must make it plain that there can be no appeal to me about the way in which Chairmen of Select Committees see their responsibilities. It is not a matter for me.

Mr. Ron Brown (Edinburgh, Leith) : On a point of order, Mr. Speaker. Earlier, the Secretary of State for Defence said that he could not understand a question. Perhaps that was a mental blockage, perhaps it was political arrogance, but something strikes me about this place these days. It has to do with the noise and the acoustics. Could something be done about that? I am giving the right hon. Gentleman the benefit of the doubt, but something must be done.

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Mr. Speaker : It is sometimes difficult to hear in the Chamber with these rather old-fashioned microphones. If the hon. Gentleman were to move a little this way and under the microphone, we could all hear him more easily. I am sorry if his question was not heard, but I shall have the matter looked into.

Statutory Instruments, &c.

Mr. Speaker : With the leave of the House, I shall put together the Questions on the two motions relating to statutory instruments. Ordered,

That the draft Food Protection (Emergency Prohibitions) (Contamination of Feeding Stuff) (England) (No. 4) Order 1989 be referred to a Standing Committee on Statutory Instruments, &c. That the draft Medicines (Intermediate Medicated Feeding Stuffs) Order 1989 be referred to a Standing Committee on Statutory Instruments, &c.-- [Mr. Chapman.]

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Orders of the Day

Education (Student Loans) Bill

Order for Second Reading read.

Mr. Speaker : I repeat what I said earlier this week. There is a great demand, and I welcome it, for right hon. and hon. Members to participate in our debates these days. There is a great demand today and I shall have to put a limit of 10 minutes on speeches between 7 and 9 o'clock. Again, I appeal to hon. Members who are fortunate enough to be called before that time to bear that limit in mind.

Mr. Simon Hughes (Southwark and Bermondsey) : On a point of order, Mr. Speaker. We are about to debate the Second Reading of the Education (Student Loans) Bill. In the Queen's Speech, the Bill was announced with the following words :

"A Bill will be introduced to supplement students' grants with loans."

There is no provision in the Bill that deals in any particular with the loans, their amount, their funding, their arrangements or any other such details. This is a point of order to you to determine whether it is proper that we should debate today a Bill that has none of the detail that we were told that it would have by that short sentence in the Queen's Speech. That is germane and necessary before any proper consideration can be given to the Bill.

Mr. Speaker : The House has not yet heard the Secretary of State explain exactly what is in the Bill. The hon. Gentleman can raise the matter if he is called, and if he does not like what he hears he can vote against Second Reading.

4.25 pm

The Secretary of State for Education and Science (Mr. John MacGregor) : I beg to move, That the Bill be now read a Second time I shall be dealing with the matter raised by the hon. Member for Southwark and Bermondsey (Mr. Hughes) at some length during my speech.

The House debated student loans only recently--on Friday 20 October--and I do not wish to repeat all the points that I made then, but I think that it is worth restating three basic points by way of background. First, the Bill provides for loans as a top-up to student grants for maintenance, and for maintenance only. That is made clear in the long title, at the very beginning of the Bill.

Our present mandatory grant arrangements were introduced by the Education Act 1962, following the Anderson report, which envisaged higher education student numbers eventually reaching 175,000. There was no conception then of the way in which higher education would expand in the 1970s and 1980s. This autumn, there were more than 1 million full-time and part-time students in higher education, 400,000 of whom are in receipt of maintenance grant awards. That is compared with the 175,000 originally envisaged.

Dame Elaine Kellett-Bowman (Lancaster) : My right hon. Friend has stated clearly that clause 1 says that the Bill provides for top-up loans for maintenance grants alone. Will he draw attention to the somewhat misleading

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petition presented by the National Union of Students, which links student loans and tuition fees, as many of us are very much opposed to tuition fees but in favour of student loans?

Mr. MacGregor : It is made absolutely clear throughout the Bill that the provisions refer to maintenance grants and not to tuition fees. That will be made clear to everybody.

Mr. Harry Greenway (Ealing, North) : Will my right hon. Friend give way?

Mr. MacGregor : Very well.

Mr. Greenway : I apologise to my right hon. Friend, but it is an important point. I am grateful to him for explaining that the Bill will deal with maintenance grants. Is he aware that those of my constituents who are in higher education have still not been paid their maintenance grants by Ealing council, and that many of them have been forced into debt in connection with housing, food and everything else and so obliged by the inefficiency of Ealing council to take out loans at high interest rates? Ealing council, which is Labour-controlled, says that it opposes student loans but students have written to me and have been to see me to ask me to support the Bill so that they may obtain loans at a reasonable rate.

Mr. MacGregor : I hope that the Labour-controlled Ealing council will get on with it. There is no doubt that loans at a real interest rate of zero such as those that we propose--I shall deal with that later--would have helped all the students in their present predicament with Ealing council.

Mr. Jack Straw (Blackburn) : Will the Secretary of State give way?

Mr. MacGregor : I have hardly progressed with my speech, but I shall give way to the hon. Gentleman if he wishes.

Mr. Straw : I am grateful to the Secretary of State, because, as he says, he has hardly started. He has just said that the Bill will not cover tuition fees. Will he give a categorical commitment to the effect that it is the Government's policy that tuition fees will continue to be met in full from the public purse?

Mr. MacGregor : I should have thought that what we have done this year has made that absolutely clear, despite some of the suggestions that we heard in advance of the Autumn Statement. It was clear in the Autumn Statement--I cannot make it clearer, and the Bill cannot make it clearer-- that the loans are for grants for maintenance. I am aware that many right hon. and hon. Members wish to speak. As I have given way three times and I have hardly begun my speech, I hope that it will be understood that, in the interests of those who want to make speeches, I shall have to contain myself and not give way further.

The expansion in student numbers, unforeseen when the present system was introduced, is reflected in the costs to the taxpayer of the grant system. It has risen, at 1990-91 prices, from £236 million in 1962-63 to more than £600 million in 1989-90. Clearly, both the numbers and the cost to the taxpayer have risen considerably.

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My second background point is that our system of student support is substantially more generous than that in any other comparable country. The latest comparative figures are for the years around 1984 but the relative position will have changed little since then, and the figures are revealing. They show that the public funding for students is £30 per student in Japan, £40 in Italy, £70 in West Germany, £180 in France, £275 for the United States and £750 for the United Kingdom. The figures are dramatic and bear out my point. We anticipate substantial further expansion of higher education numbers in the years ahead. I have already reaffirmed my predecessor's expectations of something like a doubling in the numbers over the next 25 years.

Mr. Simon Hughes : No, the Minister has not done that.

Mr. MacGregor : I have said that so many times that I do not know how often I must continue to say it. I have said it again now, and perhaps the hon. Member for Southwark and Bermondsey (Mr. Hughes) will believe me.

At the time of the Autumn Statement, I announced provision of an extra £750 million to fund an expansion over the next three years, which would take the index of participation of the relevant age groups from 16 per cent. to 19 per cent. in those three years. Here is proof of action backing words : if that rate is carried forward over 25 years, it will actually more than double student numbers. It is not going to be feasible to ask taxpayers to bear the extra burden of student maintenance at that rate over the years ahead. We already have a higher proportion of our university expenditure going to student maintenance support than most other countries. We are indeed generous in this area with regard to maintenance, particularly when we consider how other countries provide for maintenance and residence support. Most other countries have loans systems, some depend on loans heavily rather than grant, but none is so grant-oriented. By our proposals we shall in most cases, be moving only some small way in their direction, and their examples demonstrate that loans do not inhibit access.

It is important for the House to note that most of the taxpayers who are contributing to that support will have earnings levels throughout their working life which will always be lower than the incomes which students can expect to earn for most the time after they have graduated. I must stress that.

Mr. Dafydd Wigley (Caernarfon) rose--

Mrs. Rosie Barnes (Greenwich) rose--

Mr. MacGregor : I must make progress, because I have a lot to say. I have already given way a great deal.

I have now set out the background to the Bill. Its purpose is to implement the proposals set out in the White Paper "Top-Up Loans for Students" published in November 1988. It is worth repeating the Government's objectives as set out in that White Paper. They are to share the cost of student maintenance more fairly between the taxpayer, students' parents and the students themselves.

Mrs. Margaret Ewing (Moray) : Will the Secretary of State give way?

Mr. MacGregor : I will give way to the hon. Lady in a moment, after I have made a little more progress.

Other objectives of the Bill are to reduce, over time, the contribution to students' maintenance that is expected

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from parents and to reduce, over time, direct public expenditure on grants. The objective is also to increase resources available to students and to implement the Government's decision to remove students from the social security benefits system, which was never intended to be a form of support for student maintenance. It is also intended to reduce students' sense of dependency on the state and promote an awareness of self-reliance and investing in their future, which will bring with it, as in other countries, a greater readiness to obtain value for their investment in their courses.

Mr. Richard Caborn (Sheffield, Central) : Will the Secretary of State give way?

Mr. MacGregor : I will give way in a moment.

I am confident that that is the right way forward. Our scheme will benefit students. It will increase the maximum resources available to them while they are studying by nearly a quarter and it will give them greater independence from their parents. It will benefit their parents by cutting the contribution expected of them, over time, by nearly half. It will also benefit taxpayers because part of the burden of student support will be shifted from taxpayers at large to graduates.

Mrs. Ewing : How will the Minister's plans benefit disabled students seeking access to higher education? Additional expenses are built into their courses and they may not find employment at the end of their courses to enable them to repay their loans. In passing, will the Minister refer to the four-year degree course in Scotland and the implications of the new Bill for that?

Mr. MacGregor : I will refer to the hon. Lady's points about disabled students later in my speech. One of the difficulties with so many hon. Members wanting to intervene early in my speech is that they pre-empt the natural flow of my speech.

The hon. Lady's point about Scottish student grants was discussed at length in a previous Question Time. I myself am a beneficiary of a four-year course in Scotland. Although I did not have a maintenance grant, I got scholarships and earnings during university vacations. Those who wish to have and can benefit from the four-year course in Scotland--I am aware that a considerable number of English students wish to do so--will not find that the cost of a small additional loan repayment will outweigh the benefits of that course. The choice is for them to make.

Mr. Alex Salmond (Banff and Buchan) rose --

Mr. MacGregor : I will not give way. I must get on.

I refer next to the Bill, and, later in my speech, I will deal with a number of general issues arising out of the proposals.

I have seen some criticisms of the form of the Bill. I believe that they are totally misguided and I wish robustly to defend our approach. I shall spend some time on this matter, because many hon. Members have raised it.

Our approach is right for three good reasons. First, it follows precedent. The nearest analogy is the Education Act 1962, which introduced the maintenance grant system for which these loans will now be a top-up. This Bill follows pretty well precisely the shape and approach of that Act. [Interruption.] The hon. Member for Blackburn

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(Mr. Straw) can make his points later. Perhaps he will allow me to develop mine, instead of constantly interrupting me.

Like the Education Act, the Bill identifies the purpose for which loans may be made and those to whom they may be made, as with grants. Like it, the Bill sets the framework, on eligibility and on qualifying institutions, and the ground to be covered in regulations and other arrangements. Like it, the Bill leaves the detail of loan rates and conditions, just as for award rates, to regulations made under the negative resolution procedure. I have not heard any complaints about the way in which student grants procedures are undertaken, in terms of parliamentary accountability or in other ways. We follow that precedent.

Mr. James Wallace (Orkney and Shetland) rose --

Mr. MacGregor : I will not give way. I must finish my three points.

My second point is that, like the Act before it, the Bill covers the crucial issues. Schedule 1 is explicit and precise in its definitions of the categories of higher education courses and the kind of institutions to which the loan system will be applicable. Schedule 2 stipulates in some detail--I will come to it--the ground to be covered in regulations and other arrangements. So the notion that the Bill gives me "unlimited powers" to make loans is utter nonsense. I have not heard such charges made about grants.

Thirdly, the Bill follows the 1962 Act in providing the flexibility, through regulations, to revise year by year such things as the amounts of loans, the period and manner of repayments, the deferment or cancellation of a borrower's liability, and even changes to eligibility. I should have thought that that is very much in both Parliament's and the students' interest.

For Parliament, can it really make sense that such details as the size of the loan each year and conditions that we might wish to change in the light of experience should be the subject of regular primary legislation? No one argues that for grants.

I want to mention specifically a very important point. We shall, of course, monitor closely the effects of the introduction of the scheme. We have already carried out, in 1987 and 1989, three surveys of students' income and expenditure. We shall continue to commission periodic surveys in this matter and others if that is shown to be desirable. [ Hon. Members :-- "So what?"] The flexibility that the structure of the Bill gives us will allow us to act speedily and effectively on the findings of our monitoring. That is "so what", and it is very sensible. That flexibility will also benefit students. They will not wish to wait for a place in the parliamentary primary legislative queue to get an uprating in loan amounts or a beneficial change in eligibility.

Let me give a specific example. The House should understand this matter, because the critics on this score are totally wrong. This summer, a case in relation to student grants, which is our parallel, was raised by my hon. Friend the Member for Canterbury (Mr. Brazier). It related to a very technical point about a clergyman who, for many years, had worked in another European Community country but who had now returned to live and work in the United Kingdom. Owing to the technicalities of the regulations, without a change, the grossly unfair situation

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would have arisen that, because the son and daughter of my hon. Friend's constituent had not had three years' ordinary residence in the United Kingdom, they were not eligible for maintenance grants, whereas other European Community citizens resident here for a shorter period would have been. We were able to change that and to make grants available to those students by regulation. Without that approach, as embodied in this Bill, they would have had to wait for primary legislation to make that small change. I do not believe that the House would feel that that is in the interests either of Parliament or of the students.

Mr. Julian Brazier (Canterbury) : Does my right hon. Friend agree with two points on this--first, that it was an exceptionally hard case? The gentleman in question had given his whole working life to the Church and was on an income of less than £9,000 per year, yet he was unable to get any grant for his daughter who was on an extremely expensive music course. Secondly, does he agree that, besides reflecting the sensitive and speedy way in which the Minister concerned handled the application--I saw him about it in July and it had been fixed by September--it could not have been done had we not had a flexible framework in the legislation, depending mainly on secondary legislation?

Mr. MacGregor : My hon. Friend is right. It would have deprived a student who, through a technicality, would not have been able to undertake that course. My hon. Friend makes his point very well. Indeed, it would have deprived such a student of ever having the chance to go on such a course, because it would not be possible to find a place in primary legislation for dealing with such a narrow technical point. That is what we are proposing in the Bill. I hope that the House will agree that these are powerful reasons for having this Bill in the form it is. Those who criticise it have to justify why they are not criticising also the parliamentary arrangements for student grants.

Mr. Wallace : The Secretary of State has made comparisons between the 1962 legislation and the Bill, so will he tell the House what references that Act makes to Scotland? The only specific reference to Scotland in the Bill appears to be, ominously, with regard to insolvency and sequestration of estates. Will separate regulations be made by the Secretary of State for Scotland? Finally, recognising that in recent years the principal of Aberdeen university has talked about reducing the Scottish university degree course to three years, does the right hon. Gentleman agree that this could be yet another burden that puts a nail in the broad- based traditions of Scottish education?

Mr. MacGregor : On the first point, the Education Act 1962, which I have with me, contained some technical requirements relating to Scotland. Such requirements are not really necessary in the Bill. Clearly, it will be for us to decide exactly how the regulations are followed through in any case, but I believe that the Bill applies perfectly sensibly to Scotland.

I turn now to the detail of the Bill itself. The heart of it is in clause 1 : this gives the holder of my office power to make loans for student maintenance within the policy described in the White Paper and according to the arrangements set out in schedule 2.

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Clause 1 and schedule 1 empower the Secretary of State to provide funding for loans for students' living costs. They define the students eligible for loans in terms for the courses they attend. These must be higher education courses of at least one academic year's duration. They must be provided at institutions which receive support from public funds, or at other institutions to be designated for the purpose under regulations.

The clause also provides for the Secretary of State to prescribe in regulations other conditions of eligibility, such as residence conditions and the exclusion of students aged 50 or over. We intend that students will not be excluded on the basis of their financial record and there will be no means-testing.

Clause 2 enables the provisions, which extend directly to England, Wales and Scotland, to be extended by order to Northern Ireland. Clauses 3 and 4 make the necessary financial provisions--on which more later--and give the short title, interpretation and extent. Schedule 2 identifies the main administrative elements of the loan scheme to be prescribed in regulations. It goes into considerable detail and requires the Secretary of State to specify the amount of the loan and the arrangements for repayment, deferment and cancellation. It sets out the basis for calculating the zero real interest rate which will apply to the loans. The Secretary of State shall be empowered to require higher education institutions to issue certificates of eligibility to their students. There is provision to arrange for third parties to undertake administration of the loans, which must include machinery for handling appeals. Finally, the schedule modifies bankruptcy law by excluding from a student borrower's bankruptcy any sum advanced by way of loan and the corresponding debt.

As I have already explained, the details of the loan scheme will be in regulations, and we shall lay those before the House in the usual way. The arrangements to be made will be built on the basis of clause 1 and schedules 1 and 2, just as the whole apparatus of mandatory awards is built on section 1 of the Education Act 1962.

Since I have just mentioned section 1 of the 1962 Act, let me make it clear that that section is to remain on the statute book : local education authorities will continue to have the duty to make mandatory awards : there is no question of abolishing the student grant. Once the loan component of student support reaches the level of the maintenance grant and parental contribution--that, of course, will be some considerable way ahead, in the early part of the next century--we intend that the two will continue in parallel.

Mr. Straw : The Secretary of State has slid over a central part of the White Paper, which proposes that the real value of the grant should be reduced and that the grant should be replaced by student loans. Is that still the Government's policy?

Mr. MacGregor : I did not slide over it. It has been clear all the way through and I have made it absolutely clear here that we are intending that the level of the maintenance grant and parental contribution will be reduced in real terms, of course, because I have talked about a fairer distribution of the burden-- [Interruption.] I make two points about this. First, that position will not be reached until the early part of the next century, as I have

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emphasised, and, of course, there is the opportunity for review at any stage during the 1990s. Secondly--I shall come to this later--it behoves those who pretend that we can go on financing that degree of higher education expansion by continuing to place a burden on parents and taxpayers to say how they would do it. I shall come to that later also.

Mr. Simon Hughes rose --

Mr. Caborn rose --

Mr. MacGregor : In fairness to the many hon. Members who wish to speak, I should now get on with my speech. I am sure that that is the mood of the House and that that is what people-- [Interruption] It is perfectly fair--

Mr. Simon Hughes rose --

Mr. MacGregor : No, I am not giving way. It is perfectly fair-- [Interruption.] No, I am not giving way, because it is important that we now proceed with the debate.

I turn now to various issues on which the public debate has also focused so far. I have already referred to the fact that most other comparable countries have loan schemes, but it is worth stressing to the House that we shall continue to be putting more emphasis on grants rather than loans than nearly all of them, and our loans scheme itself will have more generous conditions than most. For example, loans are a top-up to existing grants and are concentrated on maintenance only. Others have fewer grants and loans for fees. All students may take out a loan ; there will be no credit conditions. The interest rate will be in real terms zero, which is clearly a preferential rate. That means it will be beneficial to those students who currently have commercial loans. Repayment will commence only in the April following graduation, and then only if income is above 85 per cent. of the average wage.

Let me illustrate that point by giving an example. A student embarking on a three-year degree course outside London and taking up the loans during those three years to the full extent, and then earning a salary just above the likely deferment threshold in 1994--that is, just above 85 per cent. of the average wage threshold--would make an annual loan repayment of little more than 3 per cent. of his or her net income. That puts the position clearly in context. I would add that deferral terms are much more generous than, for example, in the United States, which is why I would expect default rates and individual difficulties to be much different here from there.

But what is common to other countries is that, even with less generous terms than ours, access to higher education in those countries has not been inhibited. That brings me to access. I do not believe that the introduction of loans to top up maintenance support will impede access. Loans are top-up loans : they will provide more money to students while they are studying-- for all students. There will be no credit rating. In that way, the Government will establish the conditions for wider access.

In addition--this is an important point which has not yet had sufficient attention--the parental contribution over the period will be cut by nearly half. We know that some 40 per cent. of parents--two out of every five--do not pay their student children the full sum for which they are assessed. Our scheme will reduce the burden on families with student children. The aggregate parental contribution, and the average parental contribution, will be frozen in cash terms.

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The effect is that parents, as their incomes rise in line with the general trend, will pay less and less in real terms. They will feel this as a saving equivalent to the rate of inflation. It will also mean that many students will be less dependent on their parents. I have seen a recent survey purporting to show that some young people assert that they would not go on to higher education were a loans scheme in operation. Many will share my scepticism about the usefulness of evidence derived from such surveys. If people are asked if they want a loan rather than a grant, it is pretty obvious what they will reply. One would get the same answer about business loans or grants, and so on, but that begs a lot of questions. It is also important to consider some of the questions posed by that survey. The response to the National Union of Students' sample was limited to 40 per cent. of all those asked. Therefore, the response is more likely to have come from those who are against loans--yet, despite that, many more said it would make no difference to their decisions. It is not at all clear whether those questioned were given a proper account of the loan proposals that we are actually making. Was the alternative put to them? It is unrealistic to suppose that the alternative to a loan is a bigger grant. Unless there is a student contribution, the alternative is a continuing decline in the value of the grant.

Above all, I have serious doubts as to whether such statements represent accurate predictions of what others will do in future. Students know the value to them of a degree--the educational and cash value. Let us fully acknowledge the first and not be ashamed of the second. I have no doubt that increasing numbers of students will wish to invest in their higher education in future.

Mr. Simon Hughes rose--

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