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Mr. MacGregor : I shall give way, but this must be the last time.

Mr. Hughes : The Secretary of State has said that his proposed scheme will not harm access to higher education. He has talked about predictions. Can he predict whether the number of students applying for courses in the next two years, when the loans scheme is operating, will be fewer or greater than those who would apply under a better funded grant scheme? We believe that loans will be a substantial deterrent to access to higher education, and the people share our fear.

Mr. MacGregor : Since I gave way to the hon. Gentleman, I hope that he will be comparatively reasonable in his speech, as I know that a number of my hon. Friends want to speak. The experience of other countries that operate loans schemes offering much less generous student support than our own is that such schemes do not inhibit access. I do not believe that that survey gives an accurate prediction of the future. There has been a large increase in the number of students going on to universities and polytechnics this year, and they will be the first students to whom the loans scheme will apply. In practice, therefore, the number of students has already increased.

It is in the nature of a loan that it has to be repaid. Most graduates' incomes are well above the incomes of non-graduates. With a zero real interest rate on the loan, they should not find repayment of their loans a difficulty. I have already illustrated that.

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We do not propose to exempt any categories of graduate from repayments, but I repeat two points that the Government have already made clear many times. First, those following long degree courses may well need longer periods of repayment, and we are considering that sympathetically. Secondly, as I have already said, students with low or no incomes at any point in time will not be penalised : in those cases, repayments will be deferred.

Let me take this opportunity to repeat that, in the Government's view, the repayments should be real repayments and should not be hidden away in the tax or national insurance systems. Today, one newspaper said that, although it supported the concept of loans--it is important to stress that support to the Opposition Front Bench--there had been no convincing rebuttal of the suggestion that loans should be repaid through tax or national insurance. I dwelt at length on this in my earlier speech to the House. Our reasons for not adopting such a scheme are practical. We do not wish to add to bureaucracy, or to place additional burdens on employers. More fundamentally, we want to encourage students, through the loans scheme, to see their higher education as their own investment in themselves.

Mrs. Maureen Hicks (Wolverhampton, North-East) rose --

Mr. MacGregor : I am sorry, but I cannot give way again. The students should know that they are borrowing money from, and repaying it to, the taxpayer.

I know that there are some who continue to argue for a graduate tax. I do not see virtue in a differential tax which affects graduates irrespective of whether their income is low or of how much they contributed to their own higher education costs.

Our estimate is that the social security benefits received over a full year by the average young single student would amount to £210 in 1990-91. Among those in this group who actually claim, we estimate that the average receipt would be £315. So the top-up loan, averaging £420, will more than compensate most students for any loss of benefits. We are, however, setting up the access funds to cater for students who may need further financial help.

It is unhelpful and misleading to take the outside, extreme case and to suggest that that will apply to most or all students. It is clear that that is not so, but in cases of extreme difficulty we have set up the access funds. They will be there for those who genuinely demonstrate that they need further financial help.

Mr. Wigley rose--

Mr. MacGregor : I am sorry, but I cannot give way again. The three access funds will be funded under existing powers. I will make regulations under section 100 of the Education Act 1944 to enable me to pay grant to the governing bodies of direct grant-maintained and assisted institutions of further and higher education, in respect of expenditure they incur in giving financial assistance to their students. Sections 131 and 132 of the Education Reform Act 1988 provide that the Universities Funding

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Council and the Polytechnics and Colleges Funding Council respectively shall be responsible for administering funds, made available by the holder of my office

"for the purpose of providing financial support for the provision of any facilities and the carrying on of any other activities". That provision will enable the operation of the grant.

Concern has also been expressed about disabled students and disabled graduates. The existing support provided for disabled students through the social security system will continue, unaffected by the introduction of loans. Unlike other students, they will not be excluded from the benefits system : the loan will be a net addition to their resources. The deferment provisions were designed with the difficulties of disabled graduates, among others, very much in mind. As to the banks, I should like to make it clear that we have never asked them to express an opinion for or against the loans scheme as such. That is a decision for Government and Parliament to take. Mr. Robert Rhodes James (Cambridge) rose--

Hon. Members : Give way.

Mr. MacGregor : I believe that it is the wish of the House that I should continue.

We have simply asked the banks to assist in the administration, on a contractual basis, because they have the branch network-- Mr. Rhodes James rose--

Hon. Members : Give way.

Mr. MacGregor : It is important that I continue.

Because the banks have the branch network--

Mr. Rhodes James rose--

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

Because of the noise from the Opposition Benches, I am not clear whether that point was heard. Let me repeat that all we have asked the banks to do is to assist in the administration, on a contractual basis. We have done so for two good reasons. Those banks have the branch network and the experience of lending.

As the House knows, I announced on 16 November that I had reached agreement with ten major banks on the next steps. Those banks have formed the company, to be known as the Student Loans Company Limited, which is undertaking the necessary preparatory work.

I made it clear that, subject to the passage of the necessary legislation and to final agreements being reached between Government and financial institutions, the Government intend to enter into a contract with Student Loans Company Limited for the administration of the loans scheme itself. I have placed in the Library of the House copies of the memorandum of understanding signed by the participating banks and a report by Price Waterhouse on stage 2 of the preparatory work on the scheme.

It was always clear that some banks would not wish to join in from the outset ; that was their decision. We needed enough banks to join in a national network, which is what we have got. Banks and other financial institutions cannot commit themselves to participate in the scheme until they have seen the terms of the brochure which will appear in due course. Those terms are still the subject of negotiations between us. Our aim is to ensure that the scheme is likely

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to be underpinned by a broadly based network of institutions, the services of which will be available to students. That will also be to the benefit of students.

Mr. Rhodes James : If the scheme is so marvellous, why is it not in the Bill?

Mr. MacGregor : I am sorry that my hon. Friend was not listening. I should have thought that the basis was exactly the same as that for the grants scheme. If there are objections on the grounds of parliamentary accountability, they apply also to the grant scheme. I would have concluded that the vast majority of hon. Members would believe that it is to the benefit of students to have the ability to change the scheme, often to their benefit, by secondary legislation, rather than primary. I have already shown by example why that is so. Mr. Wigley rose --

Mr. MacGregor : I cannot give way for the moment. The hon. Gentleman will have plenty of time to make his point.

Clause 2 concerns expenditure. I take this opportunity to set out again the loan figures, together with our forecasts of expenditure and related matters. Our intention is that the maximum full-year loan facilities for 1990-91 will be : £460 for students attending institutions in London ; £420 for students at institutions outside London ; and £330 for students living at home, with some adjustment to the corresponding final- year figures.

Annex E of the White Paper shows the financial effects of the loans scheme, net of access funds and administrative costs. The table in that annex is based on a series of deliberately cautious assumptions, including a constant 10 per cent. default rate. If default were 2 per cent.--a more plausible figure--it would bring forward to 2000 the year in which savings outweigh outgoings.

Mr. Wigley : On a point of order, Mr. Deputy Speaker. Earlier in the debate the Secretary of State said that he would respond to the point about the needs of disabled students raised by the hon. Member for Moray (Mrs. Ewing). The matter has been raised with the Minister in briefings on behalf of disabled people, and clearly he has not responded. Is there any redress for the House when the Secretary of State refuses to meet commitments that he gave earlier in the year?

Mr. Deputy Speaker (Mr. Harold Walker) : I have no responsibility for what appears in a Minister's speech. We are at the start of the debate and doubtless during the debate there will be opportunities to raise matters relevant to the Bill.

Mr. MacGregor : In the interests of many hon. Members who wish to speak, I did not want to give way again. I have already referred to disabled students. We take that matter seriously. If points are made during the debate, my hon. Friend the Under-Secretary of State will certainly respond to them when summing up.

Administration costs will not be precisely known until contracts have been concluded, but will be in the range of £10 million to £20 million in the first three years.

The hon. Member for Blackburn attempted to make play of the fact that in the early stages the loans scheme would cost the taxpayer more. It is inherent in any loan system that outgoings exceed repayments for an initial period. That indicates graphically that we are increasing

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resources for students. The hon. Gentleman's criticism brings us to the heart of the matter, which is that we have recognised that some change in student support methods is required for the period of expansion ahead to avoid an increasingly heavy burden on taxpayers--most with lower incomes than graduates--and on parents. We have been clear and realistic about that.

What is the Labour party's alternative? Although the hon. Member for Blackburn complains about the higher cost, I assume that he would not wish to offer the student less in total than we are. However, he makes it clear that his party's alternative is a continued exclusive reliance on grant. On the assumption of the already published figures and the basis that the grant would not be less generous than the loans policy, but that both would replace social security benefits, that system would cost £145 million in 1990-91, assuming a 100 per cent. take-up of grant, which we would expect.

In total, the costs of the loans scheme and access funds would be £135 million. That is not a big difference in year one, but is slightly less expensive. However, if the Labour party proposes to continue social security benefits, the extra cost could rise to £65 million in year one. We should like to be clear about the Labour party's position on that.

During the decade, the amount will accumulate. The extra costs of paying grants instead of loans would continue year in, year out, whereas the loans proposal promises savings for both parents and taxpayers. The loan repayments will then start to come in on an accelerating scale.

Mr. Straw : No.

Mr. MacGregor : That is bogus. There are considerable changes in the 1990s, which I am spelling out to the hon. Member for Blackburn. Mr. Straw rose--

Mr. MacGregor : I shall not give way again.

This shows two things : first, the point at which loan outgoings are overtaken by repayments ; secondly, the point at which the totality of repayments is greater than the totality of outgoings-- [Interruption.] That is in balance. Obviously, the hon. Member for Blackburn does not understand, and I do not want to spend much more time explaining it to him. The point he misses is that he is being critical of the cost of the loans scheme in the 1990s, but his alternative throughout the 1990s would be more expensive. I am about to tell him by how much.

I have already said that, in the first year, it could amount to £65 million. During the decade it will accumulate because the extra costs of paying grants instead of loans will continue year in, year out, whereas the loans proposal promises savings for both parents and taxpayers. In the second half of the 1990s, the loan repayments will start to come in on an accelerating scale. Therefore, on White Paper assumptions only, the difference between the schemes would be £165 million in a single year by the year 2000 or £225 million, depending on the Labour party's position on social security benefits. That means that, before too long, we shall see a widening gap in the burden on taxpayers and parents produced by our proposals and that produced by the Labour party's proposals as I understand them. However, even more significant, the White Paper assumptions on increased student numbers are already out

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of date. This year's Autumn Statement expenditure plans are based on considerably higher numbers, so the extra cost of the Labour party's alternative would be a good deal higher.

What is the Labour party's alternative? Is it the proposal put forward in early-day motion 117 by some of the colleagues of the hon. Member for Blackburn,

"aiming towards a living grant of two-thirds average wage levels"? I hope that the hon. Gentleman will repudiate that now. He has been bobbing up and down, so perhaps he will bob up and repudiate that now.

Mr. Straw : I am glad that the Secretary of State has given me a chance to intervene in his speech. He refused to do so earlier when I gave the figures, not that we had produced, but that he had produced in answer to questions from the Opposition, to show that there would be no cumulative savings on loans until 2013.

The Labour party's position is made absolutely clear in the policy review. We shall continue the grant system and increase its real value as resources allow-- [Interruption.] There is no dubiety about that.

How does the Secretary of State's assertion about the cost of the grant system being greater than the cost of the loan scheme fit with annexe E, which shows that in every year between now and 2002 the loans system will be a greater burden on the Exchequer than grants, even if they are uprated in line with prices? The Secretary of State made an important commitment at the start of this debate, when he said that he categorically committed the Government to paying the full cost of tuition fees for the increased number of students to which he is now pledged. That must mean a dramatic increase between now and the end of the century in public expenditure on higher education. Is he committed to that, and to what amount?

Mr. MacGregor : I have explained the point about cumulative savings. The hon. Gentleman is simply not prepared to accept that the Labour party's alternative during the 1990s will cost taxpayers and parents--or possibly just taxpayers--a good deal more for student maintenance alone. I noted--I assume that this is the point of the hon. Gentleman's answer--that he has already repudiated the proposal put forward by some of his colleagues in early-day motion 117. I hope that he will make his position clear. Alternatively if it is to finance the higher student numbers through a non means-tested grant at the same levels as the totals we are making available today or at higher levels, that will clearly be more expensive.

In any event, I hope that everyone will have noted the weasel words "as resources allow". No wonder those weasel words came into it, for the right hon. and learned Member for Monklands, East (Mr. Smith) has already spiked the hon. Gentleman's guns by saying :

"We are all agreed that we cannot spend what has not been earned." We recall the experience of the last Labour Government when they failed to earn and thereby totally failed to meet their expenditure commitments. No wonder the hon. Gentleman uttered the weasel words "as resources allow".

Our position is more honest and is more likely fairly to finance higher education expansion. That is why the hon. Member for Blackburn has been careful not to commit

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himself to anything today-- [Interruption.] He is behaving as though he is still a superannuated students leader--engaging in a massive con trick, giving the impression of spurious promises without substance, attacking us in the hope that nobody will notice his weasel words.

By contrast, we are making realistic proposals to underpin our objective of substantial expansion in higher education. By making available a loan facility to top up maintenance grants, the Government are providing a valuable extension of the resources of support available to students. The cost of supporting students' maintenance will be shared more equitably between taxpayers, students' families and the students themselves. Students, with a loan on generous terms, will have a greater personal stake in their own higher education.

I commend the Bill to the House.

5.11 pm

Mr. Jack Straw (Blackburn) : The Bill contains one operative clause. Three and a half years of public debate and almost universal criticism of the proposed loans scheme are compressed into just three lines. Forty-eight pages of the loans White Paper and 68 papers of two successive consultants' reports are reduced to 27 words. Those 27 words give the Secretary of State power by ministerial diktat to establish whatever loans scheme he chooses and to deny to Parliament and the people who elected us any serious opportunity properly to scrutinise the detailed effect and operation of the scheme, for there is no detail in the Bill.

We have before us three lines and 27 words by which this wretched Government tell the rest of the world that they have no interest in reasoned argument and the views of others. The Bill is a grave abuse of parliamentary democracy. It is an enabling Bill. It confirms the march of an "elective dictatorship," as the former Lord Chancellor, Lord Hailsham, described the Government earlier this year. The Bill gives more power to the Executive, with less parliamentary check on their discretion, than legislation such as emergency powers and defence of the realm measures designed for wartime emergencies, and it is so arbitrary in scope that it would today be thrown out by the Parliaments of East Germany, Poland, the Soviet Union and Hungary-- [Interruption.] Indeed, the drafting might even bring a blush to the face of a member of the Russian politburo. Yet the Bill produces no shame in the Secretary of State. When it comes to contempt for parliamentary democracy and abuse of power, he and the Government know no shame.

It is fitting that the Second Reading of the Bill should take place on the day of the contested election for the Conservative leadership, for nothing symbolises better than this measure the arrogance and incompetence of the Government and the fact that, with honourable exceptions, the parliamentary Conservative party is packed full of cowards, sycophants and wimps who know what is right but vote for what is wrong. The Bill will receive its Second Reading by the same large majority which has driven through ill-considered, half-baked legislation such as water privatisation, social security legislation and the poll tax. Recently, in a newspaper, the hon. Member for Leeds, North-West (Dr. Hampson) issued this warning to his colleagues : "We are potentially into another poll tax scenario in which MPs"--

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Conservative Members--

"welcome the principle of loans without waking up until it is too late for its practical repercussions."

The Parliamentary Under-Secretary of State for Education and Science (Mr. Robert Jackson) : In reliving his past as president of the National Union of Students, perhaps the hon. Gentleman will explain why, if this sort of enabling approach is so inappropriate, the Labour Government, when they had the opportunity for many years, did not repeal section 1 of the Education Act 1962, which provides for making grants in exactly the same way as our proposal for making loans.

Mr. Straw : There is a profound difference between the 1962 Act and this legislation. First, section 1 of that Act imposes a clear and justiciable duty on local authorities to pay grants. This measure imposes no duty on the Secretary of State to do anything ; it gives him the widest possible arbitrary discretion to establish a loans scheme without any possibility of its detail being properly scrutinised by this House. Secondly, the 1962 Act was far longer. Thirdly, it was an all-party measure. Fourthly, it was based on more than 20 years' experience of local authorities and the Department running a grants scheme, whereas this measure is based on no such experience.

As I was saying, the hon. Member for Leeds, North-West warned his colleagues that they were "potentially into another poll tax scenario".

But this Bill is worse than the poll tax measure, for even that dreadful Bill contained much more detail and constrained the powers of Government to a greater extent. On the BBC Radio 4 "Today" programme on 27 November, the Secretary of State was asked why no detail was contained in the Bill. He declared that that was "a normal procedure." The interviewer then asked :

" is it so short because you don't actually know what you want to do?"

When the Secretary of State replied, "Not at all," he was asked : "So what do you want to do?"

The right hon. Gentleman answered :

"We will come forward with details of the scheme and we have illustrated one poss one approach in the White Paper ... we can do so partly during the debates but we can do so properly when the regulations come forward."

Can we take it from that that the scheme in the White Paper is just a possibility, as the right hon. Gentleman suggested on radio? Is it just an illustration and not necessarily the scheme that will be brought into effect? If so, what scheme will be brought into effect?

Mr. MacGregor : It will be possible for any Secretary of State to come forward with proposals to change the level of loan and to change the eligibility in the light of reviews to deal with the sort of situation that I illustrated in relation to grants when answering my hon. Friend the Member for Canterbury (Mr. Brazier). I should have thought that the House would regard that as a sensible step to take.

Mr. Straw : Far from being sensible, the right hon. Gentleman is saying that it will be possible for any Secretary of State, by negative resolution or by regulations, to impose a completely different loans scheme from that suggested in the loans White Paper and to do so without any proper scrutiny by Parliament.

In that BBC interview, the Secretary of State suggested that Parliament could "debate and approve" the detail of

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the regulations made under the Bill. Who was the right hon. Gentleman trying to deceive? Later tonight the House will have one and a half hours in which to debate a crucial order on teachers' pay and negotiating rights. That instrument will be unamendable, but at least under the terms of the teachers' pay legislation the Minister must, by law, lay the order before Parliament before it can come into effect. In this Bill, the power to make regulations is subject only to the negative procedure, by which Parliament has no automatic right to debate or approve the regulations before they come into effect and no right to amend them.

Mr. MacGregor : There is considerable detail in the Bill about the kind of scheme that we propose to have ; schedules 1 and 2 contain considerable detail. As for giving details when one wants flexibility year by year, we are following the process applied to grants. Is the hon. Gentleman saying that we approach the grants system year by year in the wrong way and that that is a great abuse?

Mr. Straw : I have already dealt with the fact that there is no parallel between the loans legislation and the grants legislation. What is more, everyone knew how the grant system was to be administered. That was the purpose of imposing a duty on local authorities. Under this scheme there is no detail about the administration of the loans, and no detail will ever by written into law about the administrative arrangements with the banks. The scale of the Government's arrogance and contempt for the views of others can only be measured against the ever-growing mountain of opposition to this loan scheme. When the Government started on this road they promised

"wide consultation before any scheme was implemented"

--the exact words of the Government's response to the Education Select Committee as long ago as 1979-80. The former Secretary of State, the right hon. Member for Mole Valley (Mr. Baker), said much the same when he announced the student loans review in June 1986. Is it any wonder that people become so cynical about this Government when what has characterised this consultation has been the Government ignoring everyone they have consulted? No institution of any standing and no individual of any standing now supports the measure. Even the Government's best friends have deserted them-- [Interruption.] This proposal was not in the manifesto. The manifesto contained a promise to bring in legislation to supplement the student grant system--[ Hon. Members-- : "That is what we are doing."] By their comments, Conservative Members show their ignorance of the effect of the scheme, for this loan scheme does not supplement the grant scheme--it replaces it. That is clear from the White Paper and the Bill.

Mr. John Marshall (Hendon, South) : Will the hon. Gentleman accept that university grants will continue under the White Paper proposals?

Mr. Straw : The Secretary of State has admitted--under duress--that the idea of the loans White Paper is that the real value of the student grant should be cut by half. That is not a supplement--it is the replacement of half the grant.

Students and parents oppose this scheme. So, too, do

vice-chancellors, who say in a scathing note that the form of the Bill means that there will not be a proper opportunity for Parliament to debate the scheme. An overwhelming majority of Conservative Members who have ever bothered to think about the scheme also oppose

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it. In the debate on 20 October, opposition to the scheme came not only from the predictable Conservative critics of the Government's higher education policies, such as the hon. Members for Cambridge (Mr. Rhodes James) and for Leeds, North-West (Dr. Hampson), but from the hon. Member for Sevenoaks (Mr. Wolfson), who voiced unease about the simultaneous loss of benefits to students and the impact on lower-paid careers. It also came from the hon. Member for Hendon, North (Mr. Gorst), who questioned the practicality of the scheme, from the hon. and learned Member for Feltham and Heston (Mr. Ground), and from the hon. Member for Chichester (Mr. Nelson), who correctly described the Government's arguments about access as bogus--and said :

"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."--[ Official Report, 20 October 1989 ; Vol. 158, c. 422.]

Dr. Keith Hampson (Leeds, North-West) : As the hon. Gentleman has mentioned me so often, I should remind him that his right hon. Friend the Leader of the Opposition shared many platforms with me when he was Labour education spokesman. He used to attack the middle-class, highly subsidised, elitist higher education system in this country and was prepared to consider a loan scheme so that people from better backgrounds would be able to contribute to prevent poorer families from paying through taxation for the benefit of better-off families.

Mr. Straw : That is complete fantasy and fabrication.

Mr. Caborn : I represent a poor constituency in which about 18 per cent. of the young people are unemployed. The removal of social security benefits, rent rebates and income support will have a devastating effect. Contrary to what the Minister has said, it has been calculated--not by the student unions, but by professionals in the DSS--that students aged under 25 currently in receipt of rent rebates and income support will be £1,240 per year worse off. I remind the Minister that since rents were deregulated they have risen by 25 per cent. and students now pay on average £30 per week. Students aged over 25 will be some £1,400 or more worse off. This will have a profound effect on people from inner cities who want access to higher education but who will be denied it by what I have described, quite apart from the loan scheme.

Mr. Straw : My hon. Friend is exactly right. If we take account of the fact that the real value of the grant has been cut by 23 per cent. in the past 10 years and that it will be cut again under the Government's policies, and that housing benefit will be cut, there is no question but that many students from lower-income families will be plunged into severe hardship.

Outside the House, the opposition of many Conservatives to this scheme is well known--for example, that of the Tory Reform Group, which counts among its numbers the Leader of the House, the Secretary of State for Wales, the Secretary of State for Health, the Foreign Secretary, and perhaps even the Secretary of State for Education and Science who, in a previous incarnation, was political secretary to the former Conservative Prime Minister, the right hon. Member for Old Bexley and Sidcup (Mr. Heath).

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Today, however, there is opposition to the Bill from inside the very temple of Thatcherism--from the high priests themselves, such as Professor Alan Peacock, who is now executive director of the David Hume Institute. He wrote to The Times after the last debate that it was almost generous to describe the scheme as a dog's breakfast. Opposition has also come from Stuart Sexton of the education section of the Institute of Economic Affairs--a former adviser to the previous Secretary of State, Lord Joseph. He demanded in The Daily Telegraph that the scheme be scrapped, saying that

"if ever a subject got the Government in a tangle it is the student loan scheme".

The result

"is a bureaucratic nightmare and one which produces no immediate savings for the public purse"--

Mr. Steve Norris (Epping Forest) rose--

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