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I will conclude with some comments about the loans system. The Student Loans Company received more than £16 million from the Government last year to cover administrative costs, but that does not reflect the true cost of the scheme. The CVCP has estimated that the average cost to universities per application is £7, but the company provides institutions with £4 per loan application. That leaves the university to pick up the tab of £3 per application.
There is little evidence that higher education will benefit financially from the shift to loans. Original Government figures allow 25 years to break even. However, bearing in mind the Minister's written answer to the hon. Member for Dewsbury (Mrs. Taylor) on 4 November and his correspondence with me prior to the debate, the House will be interested to know when the Minister thinks the student loan scheme will break even and when it will have a negative effect on the PSBR.
There are certainly some worrying trends. According to the Public Accounts Committee last month, the number of students now deferring repayments has reached 40 per cent. That 40 per cent. provide ample evidence, if such was needed, of the difficulty encountered by graduates in finding jobs and of the waste of talent caused by the Government's economic policies.
The CVCP has revealed some other startling figures. It claims that of borrowers in repayment status, 8.8 per cent.--that is, 12,786 students-- were in arrears on 31 July 1993, and that 6.6 per cent. were in default, more than two months late in repaying. We may have to wait until the middle of the next century before the scheme breaks even. I hope that the Minister will pay particular attention to my next comment, which is that that forecast is based on what we presently know.
Dame Elaine Kellett-Bowman : On a point of order, Mr. Deputy Speaker. I am distressed that the hon. Member for Bath (Mr. Foster) is misleading students who are over the age of 50. Some 5,500 are being misled.
I hope that the Minister will comment on the following important point, if he has a chance to speak. We are all concerned about when the Student Loans Company will break even and when it will have a negative effect on the public sector borrowing requirement. Even the information that we have been given so far, which may lead us to the middle of next century, is based on what we know to be the Government's intention.
There is a possibility that the Government intend to phase out maintenance grants altogether. Some Conservative Members have referred to the possibility of introducing a top-up fee system. It is important that we have assurances this evening on both those matters, not least because of the anxiety caused by yesterday's announcement that the student awards branch in Scotland is to transfer from direct Scottish Office control, paving the way for the amalgamation of the Student Loans Company and the ultimate abolition of grants. The House deserves a response from the Minister.
The House will be pleased to know that I am about to conclude by referring to a Department of Education press release dated 16 December 1993 which shows the lengths to which the Government are willing to go to put a gloss on their appalling policies towards students. In describing what the broken promise that the accelerated switch from grants to loans will mean, the press release claimed that it would
"enhance still further the flexibility of our system of student support".
Most hon. Members know that for the words "flexibility of" we should substitute "cuts to". In view of what is contained in the regulations, students may well wish to reflect on the flexibility of Government promises.
The Parliamentary Under-Secretary of State for Further and Higher Education (Mr. Tim Boswell) : Those of us who are familiar with the speeches of the hon. Member for Bath (Mr. Foster) and who retain some sympathy and affection for him cannot help feeling that he is a latter-day Malvolio, not so much intellectually challenged as merely intellectually cross-gartered. He produced a typical modern speech from a Liberal Democrat, a speech of virtual reality whereby the performer or propeller flails around in all directions but somehow the aeroplane never manages to get off the ground. It is entirely unsafe and unchallenging.
Among all the stuff was a heavily disguised plea for more resources. There was no mention of where they were to come from or how they were to be applied. There was a grudging concession that, because we were prepared to face the issues, we were prepared to provide an extra 20 per cent. on the capital budget for higher education.
I may be able to help the hon. Gentleman on one specific point. I was surprised that he was not familiar with the authoritative international study of comparative student support carried out by the Australian Government economist Bruce Chapman called "Austudy : Towards a more flexible approach". It concluded by stating that the average United Kingdom student is the most grant-subsidised of all.
Mr. Simon Hughes (Southwark and Bermondsey) : Just before we leave my hon. Friend's point about the amount of money spent per student, I hope that the Minister does not deny that, given that there has been a significant expansion in numbers--nobody denies that--capital expenditure on buildings, plant and equipment has not kept pace with the expansion in numbers. That is why vice-chancellors and principals are arguing that expenditure per student is falling.
These are the latest in a series of annual regulations. I remind the House that their approval is essential to ensure that students receive from next autumn the significant increases in maintenance support that my right hon. and learned Friend the Chancellor of the Exchequer announced in his Budget statement on 30 November. Their timing is influenced by the new arrangements for the financial year. Aside from including the new grant and loan and fee rates for 1994-95, the regulations are largely unchanged from previous years. We have made a few purely technical changes, and we have made two specific changes to the regulations on loans to make the scheme more student friendly. The first change provides for a simpler application process for students who have already taken out a loan. If they want to apply for a second loan--
Mr. Hugh Bayley (York) : Did the Minister hear the Chief Secretary to the Treasury's recent statement that students should perhaps pay course and examination fees? That would obviously limit access to higher education. On behalf of his Department, will the Minister specifically rule out the possibility that students might be made personally liable to pay course fees?
Mr. Boswell : I will not be tempted, by York or Durham, to speculate on matters that go beyond our very clear proposals that are set out in the regulations. That also applies to the questions of the hon. Member for Bath. We have set out plans and I am doing my best to explain them to the House.
Column 998The second technical change is that borrowers are to be notified promptly of their entitlement to defer repayments. I am sure that all reasonable Members would want to welcome those important changes. Quite understandably, the hon. Member for Bath focused on wider issues of student support. I am perfectly happy to stand by the Government's record and to explain it to the House.
"The loans scheme is a success"
are not my words ; they are the words of a national newspaper, normally thought to be on the left, when introducing its student finance supplement some months ago.
The loans scheme is an accepted part of the higher education landscape. More than 1 million loans have now been taken out
We are already receiving a significant volume of repayment, amounting to £18 million to date. That money is coming in and it is available to the Exchequer for the support of students and the university sector.
Despite attempts to rubbish it, the Student Loans Company is also a success. Its performance matches the best of private sector standards. Its unit cost per account managed was less than £21 last year and is continuing to fall. We have made it clear that any justifiable, reasonable administrative costs of the universities can be underwritten. The figure that is charged is essentially a matter for negotiation between the universities and the Student Loans Company. However, I am willing to receive a case if it was felt that the figure was inappropriate--for example, in relation to volume which continues to expand.
The loans company's collection performance is impressive by any standards. Only 4.1 per cent. of borrowers are currently in default. That is a good record when compared to many commercial companies. It gives the lie to those terrible warnings we heard when the scheme was introduced. The regulations build on the success of that scheme. We have always intended to replace grants progressively with loans until the two elements were broadly equal in value. As the hon. Member for Bath knows, if any progress were to be made beyond that--and we have no plans for that--it would require an affirmative resolution of the House.
As the hon. Member for Bath said, so far we have moved towards that goal by freezing the level of the maintenance grant and uprating the loan facility each year. But he will have noticed our success in bringing inflation under control. The very fact that we have been so successful in doing that means that that progressive shift would be extremely slow, so we have decided to accelerate the process by reducing the level of main rates of grant for the next three years and making corresponding increases in the loan rates. By 1996-97, the values of the two elements will be equal.
Column 999We hear much propaganda from the Opposition parties about allegations that we are cutting the total level of support available to students. Next year, through the main rates of grant and loan, the total amount available to students will not be lower but 4 per cent. higher than it is this year. That is a good and fair increase in a difficult economic climate. Supplementary allowances payable to older students, disabled students and those with dependants will also be increased by 4 per cent. while the average value of the loan facility itself will be increased by 44 per cent.
It is wrong to suggest that the shift from grant to loan will cause financial hardship or will force students to drop out of their courses. Students do not need to repay anything while studying. The money that they actually receive, as long as they choose to take out the loan available, will be the same in real terms next year as this year. It is scaremongering to suggest that graduates will be weighed down with enormous debts. Borrowers pay nothing back until their income reaches a reasonable level. This year, that is about £14,000. There are very few starting salaries, even in London, at that level. We keep repayment terms under review to ensure that repayments for those earning more than that amount are manageable. The average is currently a modest £11 a month.
Mrs. Campbell : Is not the Minister being a little disingenuous in supposing that all students take out loans? What percentage of students are presently taking out a loan, and what percentage are existing entirely on the grant?
Mr. Boswell : I do not know what goes on in the Labour party, but we believe in freedom of choice. It is open to students to take out a loan or not. The figure has been rising towards approximately 50 per cent. I did not say, nor did I imply, that all students avail themselves. If they do not, one wonders whether their situation is as bad as all that, just as one wonders, bearing in mind the disgraceful attack on my right hon. Friend the Secretary of State at the London School of Economics, whether some students are so ill financed that, instead of spending their money on eggs for personal consumption, they decide to sling them at the Secretary of State. I hope that the hon. Member for Oldham, Central and Royton (Mr. Davies) will repudiate that disgraceful action.
Dame Elaine Kellett-Bowman : The hon. Member for Bath (Mr. Foster) correctly alluded to the fact that students over 50 might not obtain a loan. He omitted to say that a student over 50 who starts a course is, in common with other mature students, entitled to a basic means-tested
Column 1000maintenance grant of up to £1,045 for which he can apply to his local authority. That fact should be on the record. The hon. Member for Bath might have put off people of that age.
Of course there will always be a small number of students who find themselves in financial difficulty. For those, and for the small minority who are not eligible for loans, institutions can and do use the access funds to help. For the coming year, we have increased those funds by 10 per cent. Nor should we forget the impact on parents. In the coming year, the contribution from parents whose earnings rise in line with the national average will continue to fall in real terms ; for parents whose incomes rises more slowly, even the cash contribution will fall.
The most absurd claim made by many about the loans scheme is that it would have a disastrous effect on access to higher education. In October 1993, for the first time ever, more than 30 per cent. of young people entered higher education. We have reached our target for the year 2000 in 1994-95 : that is a triumph. It is more than double the participation rate of five years ago, and 60 per cent. higher than the rate when the loans scheme was introduced in 1990. Is it not interesting that student numbers really began to take off at precisely the time when the scheme was introduced?
There is no evidence to support claims that students from lower-income backgrounds are disadvantaged. Our recently published survey--which, unlike the Barclays bank survey mentioned by the hon. Member for Bath, was not self-referred ; it was a representative survey--found that students entering higher education from less well-off backgrounds had shifted from being the minority in 1988 to being the majority now. The loans scheme reduces students' dependence on their parents, and in so doing it widens access.
Mr. Jon Owen Jones (Cardiff, Central) : I believe that my constituency contains the highest proportion of students in the country. Does it not concern the Minister and the Government that the expansion of student numbers has taken place largely in such subjects as humanities, rather than in science and technology? The country desperately needs more people qualified in those subjects. Is that not partly because it is far more expensive to educate people in science and technology? The Government claim that there has been a reduction in costs for students. That is partly because we are educating those who are cheaper to educate, rather than those who are more expensive to educate but whom the country badly needs.
Mr. Boswell : I am astonished : the paranoia is the paranoia of the Labour party, but the attack on sociology from that quarter is entirely new. Moreover, is it not remarkable that the hon. Gentleman did not give us credit for our new engineering bursary scheme, which deals with our joint concerns?
The Government want a high-quality higher education system that is not confined to an elite. We are not closet elitists.
Column 1001overwhelming majority of those extra students come from social classes 1 and 2? In 1992, only 7 per cent. of university admissions came from social classes 4 and 5. What increased access is there for the poorest members of society?
Mr. Boswell : I have already given the overall figures from our study of participation. I am very glad to note the increase in participation. I am also surprised that the hon. Gentleman gave us no credit for the huge increase in the number of part-time and mature students. That, too, will deal with our joint concerns.
Dr. Keith Hampson (Leeds, North-West) : I remember taking part in a similar debate nearly 20 years ago. Did not the massive expansion in the humanities and social sciences take place in the 1960s, under a Labour Government?
Despite the view expressed in the Robbins report, and echoed consistently by Opposition Members, that a grant scheme would bring in far more from the so-called working class--or blue-collar workers--it never did. Throughout the years of the grants-only system, the increase was marginal and statistically unimportant.
Mr. Boswell : I agree with my hon. Friend. We now have the practical means of access, and the national curriculum, which has been led so well by my right hon. Friend the Secretary of State and my hon. Friends, will deliver high-class education even in the deprived urban areas from which we want people to go to university. Let us not forget that we do not want to put insupportable burdens on the taxpayer. We cannot will the expansion without providing the resources. Undoubtedly, higher education provides a benefit to the economy and to society, but the main beneficiaries--let us not mince words--are the graduates themselves. Is it not right that they should be expected to contribute? The Committee of Vice-Chancellors and Principals thinks so, the Royal Society thinks so and even some of the more enlightened Opposition Members think so. The Government agree with them, and that is why we made the proposals.
I suppose we shall hear the truth about Labour party policies--"now you see them, now you don't." It is time to come clean about the Labour policies, as has been suggested by the hon. Member for Birmingham, Perry Barr (Mr. Rooker). I wrote to the hon. Member for Dewsbury (Mrs. Taylor) on 17 November, and I have not yet had a reply. It is four months since the Labour party's so-called "Green Paper" on higher education was prepared and printed. However, it was withdrawn at the eleventh hour on the explicit instructions of the Leader of the Opposition. No wonder, as he was obviously embarrassed to associate himself with it. The document floated such crazy ideas as the introduction of a corporate levy on business to help to pay for higher education. The Labour party's priorities, shall we say, were not quite in that direction.
We need to hear from the Labour party tonight, and I will give it time to tell us what it proposes. There would be no clearer contrast than with the Government's clear policy on higher education. The regulations which we are debating are central and fundamental to that policy. Taken as a whole, the arrangements for student support are fair and generous, and many students in other European countries such as Germany--which I know well--would give their eye teeth for such generous support as we give.
Column 1002The regulations allow a fair level of financial support for students while they are studying. They provide equal support for all regardless of background, and they share the cost of a student's attendance in higher education more fairly between graduates, parents and taxpayers. The regulations are good for parents, good for taxpayers, good for students and good for higher education, and I commend them to the House.
Mr. Bryan Davies (Oldham, Central and Royton) : I remind the Minister that the debate is about regulations which will become the law of the land once the Government's supporters are driven through the Division Lobby this evening. We are not engaged in a general debate about higher education ; we are dealing principally with the Government's appalling legislative proposals which will make life more difficult for students in higher education. In my view, they will reduce the opportunities for students to enter higher education.
In passing, I will mention that the hon. Member for Bath (Mr. Foster) commented on the fact that tonight's debate has been made possible because of a Liberal party prayer, which of course it has. Prayers are debated on the Floor of the House when they have the agreement of the Government of the day, and some collusion is therefore necessary. The last period in which we were accustomed to having Liberal prayers debated on the Floor of the House was when the Conservative Government thought that the rise of the Social Democratic party might do damage to the Labour party, as indeed it did. I must give a warning to the Liberal party : "Timeo danaos et dona ferentes"--it should watch that lot once they start handing out a few free gifts.
The Government's measures are born of panic. They are not about enhancing opportunities in higher education. They are a response to a £50 billion public expenditure deficit and an attempt to restrict expansion, which the Government regard as out of control. The demand of students for opportunities in higher education--a demand to which we would have thought that the Conservative party, with its free market principles, would seek to respond--has to be choked off by deliberate Government attempts to restrict opportunities next year. For example, it is clear that there will be 10,000 fewer places in higher education next year than would have existed, because of the 3.5 per cent. cut in the Government's
Would he care to tell the House how many students there were in higher education when the Labour Government of which he was a member left office, and how great the proportion is today if, for the purposes of hypothesis, I accept the likely student numbers next year that he suggested?
Mr. Davies : There is growing awareness, even in the dimmer ranks of the Conservative party, that we need to enhance our skills in this country. We can do so only by increasing the education budget. It is palpably clear from the public expenditure White Papers that the Government are not prepared to fund the continued rate of expansion in higher education numbers that we have had in recent years. The chairman of the Committee of Vice-Chancellors and Principals, reacting immediately to the Government's proposals of public expenditure in November, said :
"Having stoked up the aspirations of young people and encouraged them into further education, the Government are now attempting to deny them the opportunity for which so many are now clamouring." I fail to see how the Government can deny that fact.
Mr. John Marshall : The hon. Gentleman was asked a question a moment ago. Will he confirm that, in 1979, one in eight were in higher education and today it is one in three? Is that not progress that he should welcome?
Mr. Davies : The hon. Gentleman ought to recognise that we still have a considerable way to go. The number of people that we are educating in higher education is below the average for advanced countries. It will remain below the average under the Government's present proposals.
The Government are involved in cutting the maintenance grant. That is what the regulations do. Originally, the plan was to create rough equality between the maintenance grant and student loans in the year 2007. That was the proposal in the 1988 White Paper. Why the sudden dramatic acceleration? Is it because the Government have rethought their higher education policy on the basis of fresh principles, or is it a panic reaction to the costs of higher education and a determination that they should be borne out of the private resources of the students, many of whom are those who are least well placed to meet such costs?
Mr. Nigel Forman (Carshalton and Wallington) : I have listened carefully to the hon. Gentleman. I, too, welcome him to his new responsibilities. Is he aware that, in a society such as ours, it was possible under the earlier arrangements for people from much poorer backgrounds and families to have to contribute through their taxes to the cost of student support? Does he accept that this rebalancing, putting a greater emphasis on loans, is a fair policy?
Mr. Davies : I agree with the hon. Gentleman's premise that there is inequity in higher education, in that students from relatively prosperous backgrounds are subsidised by the taxes paid by the less well-off. We have not argued that higher education is part of a redistributive welfare state. I believe, however, that there are important gains to the community from the development of higher education. Those gains should be recognised in the way in which we finance higher education, but thrusting the loan system on to the individual student will lead to inequity.
Under the Government's solution, students will be expected to incur substantial debts. The Minister says that such debts are of no concern to students, because the loan element has not deterred them. As the Minister recognised, however, loans have been only a small part of the total resources available to students. Moreover, in a slightly more relaxed vein, the Government's intention was that the period over which the loan would increase as a percentage of the resources available to students would be almost two
Column 1004decades. Now, with brutal suddenness-- within the next three years--students will find that half the resources on which they are individually dependent will have to come from their own pockets or take the form of a loan.
Dr. Hampson : Does the hon. Gentleman accept that, if a student takes the full loan and also receives a maintenance grant, he is well over 20 per cent. and even 30 per cent.--it depends on the balance--better off than he was before the loan was introduced? Was not that one of the main arguments of the first proponent of the loan system in the then Department of Education? Furthermore, the hon. Gentleman knows as well as I do-- because we attended a conference together many years ago--that the first proponent was Lord Peston when he was the special adviser to a Labour Secretary of State.
Mr. Davies : I am being asked to commend the idea that a student with a loan facility has slightly more resources than under the Conservative Government's grant arrangements in the mid-1980s. Well, I accept that fact. In the mid-1980s, British students' maintenance awards were below the level that obtained throughout the 1970s when my party was last in government.
Mr. Gerry Steinberg (City of Durham) : Is my hon. Friend aware that I have received figures from Durham students' union? [Hon. Members : -- "Reading."] I am not reading ; I am merely giving some figures. A Durham student's maintenance bill this year is £1,900. In 1995-96, the student grant will be £1,834, so by 1995-96 a Durham student's college bill will be higher than his grant and he will have to take out a student loan simply to exist, after having paid all his bills. A student arriving in Durham in 1996 will have to borrow £4,156 just to survive.
Mr. Davies : I am grateful to my hon. Friend for that graphic illustration of my case. To his illustration I would add the obvious statement that, although the loan scheme may not have been a deterrent to entry into higher education when it formed a small part of student entitlement, it will become a great deterrent in future. The loan scheme is fatally flawed. Private enterprise would not touch the loans for students scheme. We all remember the noble Lady Thatcher, the previous Prime Minister, touting the scheme around the banks with all her authority and their reluctance to have anything to do with it. We all recognise that higher education institutions subsidise the loan companies because the loan companies receive less in resources than it costs them to process the loans for each student. The scheme costs £11 million to administer, and it has been condemned as inefficient by no less a body than the Public Accounts Select Committee.
The system, which the Conservative party suggests is the basis for expansion of higher education and for raising our skills level, offers nothing to part-time students, who account for 35 per cent. of students in higher education. The Government have no proposals to offer support or encouragement to such students.
Mr. Ian Bruce (South Dorset) : The hon. Gentleman was having a short sabbatical when we passed the loan scheme legislation. However, he will see, if he looks back at the debate, that it was difficult to get anybody on the Labour Front Bench to commit himself to the pledge to which he now wishes to commit it--that the Labour party will do away with the loan scheme when it returns to office,
Column 1005and put grants in its place. May we have that commitment from the hon. Gentleman this evening, or is he talking humbug?
Mr. Bryan Davies : Let me remind, or perhaps inform, the hon. Gentleman that I may have been taking a sabbatical but I was keeping a fairly beady eye on the proceedings of the House from a vantage point that gave me a clear analysis of the horrors which the Government have been visiting on the British people in recent years. The loan system does nothing for part-time students. It does nothing to help the growing crisis in post-graduate education. [Hon. Members :-- "Answer."] Of course, it does nothing to deal with the problems in further education, which also need our attention to develop the skills of our people.
Even the Minister suggested that he could not explain why 57 per cent.-- [Interruption.] I repeat the figure, if I may, over the hubbub.
Mr. Boswell : I am grateful to the hon. Gentleman for allowing me to make what will probably be my last intervention. May we have a statement clearly on the record : would a future Labour Government abolish the loans and return the value to a full level of grant--yes or no?
Mr. Davies : I sought to point out to the Minister earlier that we are addressing the debate to the proposals of the Government. [Interruption.] We are in the process of developing clearly-- [Interruption.] Let me commend to Conservative Members for bed-time reading the extremely well thought through, well written paper by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker).
Mr. Bruce Grocott (The Wrekin) : From his vantage point of the past few years, I wonder if my hon. Friend has been able to make any assessment, as I have, of just how long it would take to repair the damage to education and to other areas that the Government have inflicted on the country in the past 15 long years? My estimate is that, even with an incoming Labour Government, it would take a little bit of time. Does he share my mathematics?