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Question accordingly agreed to.


That the draft Avon (Structural Change) Order 1995, which was laid before this House on 9th February, be approved.

Mrs. Ann Taylor (Dewsbury): On a point of order, Mr. Deputy Speaker. I have given notice to the office of the Leader of the House that I intend to raise a point of order. You will be aware that the business this evening is somewhat unusual in that we have three one-and-a-half- hour debates. It is therefore perfectly reasonable for Ministers, in exceptional circumstances or when something urgent needs to be said, to come to the House to make a statement without interrupting the flow of business. I therefore wonder whether you have had any response to the request made earlier by my hon. Friends that the Secretary of State for Health should make a statement to the House about the increase in prescription charges, which has been announced by way of a written answer.

Mr. Deputy Speaker: That is not really a point of order for the Chair. As far as I am aware, the Chair has not been notified of any Government intentions whatever.

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Student Finance

8.13 pm

Mr. Bryan Davies (Oldham, Central and Royton): I beg to move, That the Education (Mandatory Awards) Regulations 1994 (S.I., 1994, No. 3044), dated 30th November 1994, a copy of which was laid before this House on 1st December, be revoked.

I understand that with this it will be convenient to discuss at the same time the following motion:

That the Education (Student Loans) Regulations 1994 (S.I., 1994, No. 3045), dated 30th November 1994, a copy of which was laid before this House on 1st December, be revoked.

The debate takes place against a background of worsening student hardship and an increasingly defective system of student support. Those facts are undeniable, yet the Government are determined to press ahead and make further cuts in the grant next year, increase dependence on a flawed and failing student loans scheme and abolish the allowance paid to mature students for the extra financial needs that they have.

The Government have also clamped down on any increase in participation in higher education. They have frozen the number of places available. That is both economic madness and a social injustice. It represents a blunting of aspirations and a denial of opportunities for qualified students. Even the CBI has called for a 40 per cent. graduation rate for young people. The Government have set their face against that advice and, just as with the economy, they demonstrate that they can organise a short-term boom, but in higher education, of course, that is followed by bust.

Dr. Keith Hampson (Leeds, North-West): The hon. Gentleman and I have crossed swords on higher education for a great many years, from his previous time as a Member of Parliament. He does not acknowledge the greatest single expansion of opportunity that there has ever been in this country in higher education. The number of people going into higher education has increased from one in eight to one in three. The only time since the war that the numbers and the percentage fell was when he was a member of the previous Labour Government.

Mr. Davies: The hon. Gentleman is disregarding the record of the Conservative Government over 15 years. He should recognise that the Conservative party had been in power for almost a decade before it addressed the representations, which had been made right across the sector, of the necessity to increase opportunities for our young people. It then produced a short-term, five-year period of rapid expansion--I freely acknowledge that--not, I might add, bringing us up to the level of many of our competitors in advanced economies, but nevertheless creating a degree of expansion. Then we had the 1993 trauma of budgetary cuts, and instead of an education policy we saw an economic policy that caused a collapse of education provision. The student loans scheme, in which we have been asked to place our confidence, is totally flawed and failing. It is universally derided. It fails on every criterion by which it should rightly be assessed. First, is the scheme fair or equitable? Loans are not available to part-time students,

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who must pay all their own fees and maintenance costs and make up 35 per cent. of the people in higher education.

The Parliamentary Under-Secretary of State for Further and Higher Education (Mr. Tim Boswell): As the hon. Gentleman has now accurately referred to the participation of part-timers in higher education, will he please explain why earlier he said, inaccurately, that the participation rate was frozen, without respect and without reference to the part-timers whose participation is not frozen?

Mr. Davies: The Government should be careful when taking responsibility for the expansion in the number of part-time students. The Government give precious little in the way of support or opportunity to part-time students; in fact, they have continually set their face against such participation, and--I shall refer to it later--there is one clear instance of a group of students whom the Government appear to be setting out to deter. The student loans system is also flawed in that it does nothing for the vast majority of postgraduates. Loans are concentrated on a minority in post-compulsory education.

Secondly, the scheme requires graduates to repay loans at a time when their earnings are likely to be at their lowest--shortly after they have entered the employment market. Yesterday, at Question Time, the Minister said that the average figure for a monthly repayment at present is £14, but that is because he has included all the people who are paying now for courses that they completed when they could borrow only small amounts and therefore are repaying minimal amounts and bringing the average down. Already for many students the sum is far higher and is bound to increase in the future as Government plans to cut grant and increase the loans develop.

Mr. Jon Owen Jones (Cardiff, Central): Will my hon. Friend find time in his speech to refer to the fact that not only is the student loans scheme inadequate in giving security to students but even when mistakes are made--students in my constituency have waited as much as a term to have any money at all--there does not appear to be an adequate system to deal with the problems?

Mr. Davies: I pay tribute to my hon. Friend for being one of the first to bring to the attention of the House the flawed system that the Student Loans Company was operating and for identifying the large number of students before Christmas who were victims of the scheme's failure.

The Minister is quite prepared to see the level of loan repayments increase. The Committee of Vice-Chancellors and Principals estimates that by the end of the century students will owe as much as £96 a month. Therefore, we are not talking about trivial amounts. Yesterday, the Minister sought to suggest that at present the figures were low, concealing the full position.

The inescapable fact is that once graduates go above the low repayment threshold they must pay back amounts that bear no relation to their earnings. That is why there is no equity in the system. The latest figures show that even on the present minimal borrowings, more than 20,000 borrowers were in default status and more than 2,000 were subject to legal action.

Only 47 per cent. of students took out loans last year, compared with a Government estimate of 80 per cent. when they designed the scheme. In the first year, the

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take-up was only 28 per cent. The figure therefore has been creeping up only marginally. It is clear that a central plank of the Government's student support policy is just not delivering. The third flaw in the scheme is that it does nothing to widen access to higher education for all social classes. Increased access depends primarily on increasing the number of places available--the very feature that the Government have frozen. It is clear that relative social class participation rates have not changed significantly for many years. The CBI confirmed that last year. Finally, the loan scheme is grossly inefficient. It does not generate funds for higher education as the Government intended. Last year, only £19.8 million was repaid. That just about covers the running costs of the Student Loans Company. The administration of the scheme, referred to by my hon. Friend the Member for Cardiff, Central (Mr. Jones), has been appalling. My hon. Friend knows that I will reinforce his argument this evening.

Last year, there was chaos in the processing of loans under a new fast- track application system. Some 35,000 students had still not received their loans by Christmas, of which the company admitted that at least 8,000 cases were its fault. The company was besieged by complaints. It received 11,000 calls each day from anxious students who had been left high and dry. The chairman of the CVCP was moved to write in the strongest terms to the Minister about the deprivation and suffering that that abject failure had caused.

The assessor, a somewhat reclusive figure who is supposed to act as an ombudsman for students, has been paid £34,000 in the past four years, yet he has dealt with only three cases, in two of which he found in favour of the company while the third is still awaiting consideration. One of those was a case brought to my attention of a student who had withdrawn temporarily from a course because he had to undergo two serious operations. Despite being fully informed of the position, the company stepped in and activated a direct debit to withdraw funds from the student's bank account. The assessor found that the company had done nothing wrong. What sort of ombudsman is that?

Meanwhile, the Department for Education has commissioned an investigation into allegations of malpractice and mismanagement at the Student Loans Company. The National Audit Office has also announced its intention to conduct a further investigation. This is a disgrace and it demands a full inquiry. Imagine the uproar if pensioners or the unemployed had been deprived of their livelihoods. Why should students be treated any differently?

The Government claim that student poverty does not exist and that the resources available to students have been maintained in real terms. That simply is not the evidence of the figures or what experience tells us. Students are turning increasingly to part-time work. Some universities are beginning to look for jobs that they can create for students so that students can keep body and soul together. Where students cannot obtain part -time work, they increasingly have to have recourse to the banks and to friends and relatives. Those who are lucky can just about survive. Those who are not so lucky drop out.

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Hon. Members have many surveys and the experience of their surgeries to tell them a completely different story from the one given by the Government. The CVCP conducted a survey last autumn which showed a worrying increase in dropout rates of 30 per cent. between 1991-92 and 1992-93 for reasons other than failure on the course. The chief executive of the Higher Education Funding Council for England was reported recently as saying:

"the system as a whole was under recruited last year, which indicates a fall in numbers in the late years of courses . . . My guess is that the reasons are financial, with people building up debts, looking around and saying `I have to do something about this.'"

Mrs. Helen Jackson (Sheffield, Hillsborough): Is my hon. Friend aware that in my constituency, with a high percentage of students in one part of it, one can see the enormous pressure on mature students in particular to continue their courses? Will my hon. Friend ask the Minister to comment on the difficulties faced by law students from families without substantial financial backing or professional wherewithal who find it impossible to finish their training because they have no financial assistance in the final year of the law degree to enable them to finish their practical work?

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse): Order. We have only one and a half hours for the debate and many hon. Members wish to speak, so long interventions of that nature do not help.

Mr. Davies: I am grateful to my hon. Friend for identifying a crucial area which should cause concern to which I hope the Minister will respond.

The problem is destined to get worse. I have a letter from the treasurer of Somerville college, Oxford, which says:

"Dear Parent or Guardian,

The College would like to draw to your attention the finances needed for an undergraduate in Oxford . . . Government assistance, whether in the form of a grant or a loan, no longer provides sufficient funds to support an undergraduate in Oxford."

I believe that Somerville was the college attended by the former Prime Minister, Baroness Thatcher. I wonder how her father, Alderman Roberts, would have responded to such a letter.

The brutal facts are that the Government have progressively whittled away the value of the maintenance grant, excluded students from benefit entitlements and taken away the vacation hardship allowance. The total weekly resources available to most students are less than those given to someone on state benefits. To cap it all, students who seek to flee today's appalling increase in prescription charges by applying for free prescriptions on the grounds of low income will find that the student loan is treated as notional income, regardless of whether they have availed themselves of the loan. That effectively means that the vast majority of our students will receive no help at all with those costs. As one of my hon. Friends graphically expressed it earlier this evening, prescription costs are 2,500 per cent. above what they were when the Government first came to power.

Perhaps the most pernicious, short-sighted and indefensible measure that we are debating tonight is the withdrawal of the means-tested older students allowance. It penalises all those who want a second chance at higher education. In a modern economy, people must be given the opportunity and encouragement to undertake learning

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throughout their lives. Abolishing the older student allowance does precisely the reverse. It has no educational justification whatsoever; it is simply a Treasury-led cut.

Mr. Richard Tracey (Surbiton): I am grateful to the hon. Gentleman. As he is presumably not going to speak for too much longer, will he now put some figures on student grants? Will he tell the House what he thinks the right level of student grant should be? As my hon. Friend the Member for Leeds, North-West (Dr. Hampson) pointed out, one in three young people become students at our universities and colleges. What should their grants be, and how would a Labour Government pay for them?

Mr. Davies: As I pointed out this evening, the drop-out rates alone show that present resources are insufficient. Of course I am not prepared to give a figure now, but it is manifestly clear that the Government are serving students ill.

If the Government do not believe that the cut will deter mature students' participation in higher education, perhaps the Minister will tell me how he would respond to a letter that I received recently. It said:

"I have recently been offered a place at University which I was delighted to accept. This follows three years of studying at evening classes to obtain two A-Levels. As I work caring for adults with learning difficulties and have two small children it was not easy. You can imagine how devastated I feel to realise that I cannot, after all my efforts, accept this place due to the removal of the mature students allowance, which was to me worth £1,000 a year". It continues:

"The ironic thing is that my local college contacted me today to tell me that I had been chosen as one of the nominees for student of the year."

How would the Minister respond to that letter? Would he tell its writer to apply for access funds?

The removal of the mature students allowance is a disgrace and the Minister should be ashamed of commending the order which contains it to the House tonight.

Mr. Llew Smith (Blaenau Gwent): My hon. Friend mentioned that, for mature students, it is their second chance for an education. Does he accept that it is often not their second chance, but their last chance, for an education, and their last chance of escaping poverty in communities such as ours, where a poll on job vacancies one day last May showed that the average hourly rate was just over £3 a hour?

Mr. Davies: I am grateful to my hon. Friend. I am sure that the Minister will have heard his comments and I hope that he responds to the issues this evening.

Student support is failing. Students are in poverty and some get no help at all. We need a comprehensive system of support for lifelong learning, not a shambolic mess of half measures that fails just about everyone who comes near it. The Government should think again. I urge the House to revoke the orders.

8.33 pm

The Parliamentary Under-Secretary of State for Further and Higher Education (Mr. Tim Boswell): Even the best friends of the hon. Member for Oldham, Central and Royton (Mr. Davies) would not regard that performance as a magical speech. The hon. Gentleman

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missed his vocation as a magician. He sought to distract the House's attention with hair-raising and heart-rending stories of student poverty that had very little reference to the facts.

Sir Harold Walker (Doncaster, Central): I received an anguished telephone call today from one of my constituents who was induced to undertake a three-year course, the first year of which expires this September, when I understand that student will face a cut of £1,000 in grant and, having been encouraged to take the course, will no longer be able to continue it. That is horrendous and disgraceful. Although £1,000 may be marginal for the Minister, it represents disaster for a student.

Mr. Boswell: I am always interested in interventions from the right hon. Gentleman. I shall investigate the case, but the figures that he has given me suggest that it almost certainly involves a non-mandatory award and may suggest some withdrawal of support by local authorities.

The hon. Member for Oldham, Central and Royton sought to weave a tissue of concern about student poverty. He said that the system was failing, but he did not say a word about the proposals on which he based his principled opposition to the orders. That is perhaps understandable, because the failure rate of Opposition Front Bench spokesmen on higher education is considerable.

In the past, the hon. Member for Birmingham, Perry Barr (Mr. Rooker) suggested that one possible option would be through "funds from individuals using and directly benefiting from higher education."

He then passed from the scene, but the hon. Member for Oldham, Central and Royton said just after Christmas that he would be prepared to consider a graduate tax. The hon. Member for Sheffield, Brightside (Mr. Blunkett) expressed interest by saying:

"I am interested in the tax related to income which is progressive and I shall explore that, but we are a long way from taking a decision."

We have heard very little about that tonight, for the simple reason that the Opposition do not wish to say too much about their alternative proposals.

Tonight we are faced with a proposition to overturn regulations that will bring considerable benefits to students and that are essential for their welfare. The regulations validate for forecast inflation the main rates of grant and loan for the coming year and the supplementary maintenance allowances for students with additional needs such as disabled students and students with dependants. They are essential if students are to receive these increases, and they follow yearly increases since 1990-91 that have been consistently above the outturn rate of inflation. We did not hear that from the hon. Gentleman, but it is true.

As a result, the support available to students through the total grant and loan package in the current year is more than 5 per cent. higher in real terms than it was in 1990-91.

Dr. Lynne Jones (Birmingham, Selly Oak): The Opposition accept that there has been an increase in the number of young people going on to higher education. Our concern is that people from modest family backgrounds or with modest means have great difficulty in embarking on a university course. How will the Minister's proposals help those people? We already know

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that students are having great difficulty. How will the Minister encourage people from poor backgrounds into higher education. Certainly someone from my background would not be able to enter higher education today.

In respect of mature students, I have a letter from the university of Birmingham, which is extremely concerned about the effect of these measures --

Mr. Deputy Speaker: Order. I have already pointed out to the House that long interventions deny those who are waiting the opportunity to speak in the debate. In a short debate of this nature, they are not helpful.

Mr. Boswell: Perhaps I can respond to the hon. Lady by saying that I entirely share her concern for the participation of less-favoured students or students from less-favoured backgrounds. It is a matter of record. The latest student income and expenditure survey, which is carried out independently, shows that the participation of those from relatively disadvantaged groups such as socio-economic class C1 or below is now rising above 50 per cent.

Before being interrupted--I do not propose to give way extensively, because I want to hear the Back-Bench speeches--I was going to refer to the older students' allowance. It is easy for the Opposition to take no notice of financial implications, but funding is always under pressure and we must always weigh our priorities. The withdrawal of the allowance will save £5 million in the coming year, then £20 million and £30 million progressively.

Mr. David Blunkett (Sheffield, Brightside): It is disgraceful.

Mr. Boswell: The hon. Gentleman says that it is disgraceful. The allowance is means-tested--indeed, it is doubly means-tested. I suppose that this is a characteristic of Islington man, or whoever populates the Opposition Front Bench, which the hon. Gentleman may not have noticed. Unlike any other Government support, the older student's allowance is means -tested: students must have an income of £12,000 a year to qualify. It is not related to need; it is intended to cushion people experiencing a decline from a relatively more favourable salary.

As for the needs side, there is provision in the access funds, as well as the overall student support package. We do not feel, however, that giving an exceptional allowance to those on the highest incomes can any longer be justified.

Mr. Andrew Welsh (Angus, East): Will the Minister give way?

Mr. Boswell: Almost for the last time.

Mr. Welsh: May I ask a brief question about the mature student's allowance? To qualify for the allowance next year, a student must be in receipt of it this year. What will happen to those who were receiving the allowance but left their studies for a year because of illness or other reasons? Will they still qualify?

Mr. Boswell: Yes, they will. We protect their position, as we protect the position of those currently on courses. I am talking about new students.

The regulations set out new loan arrangements for students studying in London who choose to live away from the parental home, but who--in the view of the local

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education authority--could conveniently live with their parents while studying. That special loan rate has been set above the parental home rate of loan, so students will still receive a cash increase compared with what they received this year.

I have already mentioned the uprating of student support over the past five years. That real-terms uprating followed a 25 per cent. cash increase in the main rates of student support when loans were introduced in 1990, which was more than adequate to compensate most students for the withdrawal of benefit in the same year. I should remind the House that particularly vulnerable students, such as single parents, have a continuing opportunity to receive benefit; but to restore students' benefits wholesale--housing benefit, for instance--would encourage the dependence on the welfare system that we have properly sought to eliminate.

Mr. Blunkett: Will the Minister answer a simple question? If I cut his salary by 30 per cent. and offered him a bank loan instead, would he consider himself to be better off?

Mr. Boswell: The hon. Gentleman may have overlooked the fact that the total cash package available to students includes the 1990 uplift of 25 per cent. He needs to draw a distinction, as I thought his party was seeking to in other contexts, between those who require social support because they are particularly vulnerable--I share the hon. Gentleman's concern for such groups--and those who are investing in their future through the medium of higher education, and whose future earnings are likely to be substantially greater than the earnings of those who are financing their time at university. There are extra allowances for those who find it hard to stay at university, including disabled students, students with dependants and students who study for longer than the normal academic year. I take a particular personal interest in the fact that the access funds for higher education have been substantially increased for the third successive year, by a further £1 million to £22 million.

Dr. Hampson: I have always supported the loans scheme, but we must accept that the vice-chancellors in particular argue that there are problems with the current position. One of the central issues has been the invariable repayment system--the mortgage-type system. Is my hon. Friend investigating that? Even if we keep the present structure, could it be related to income?

Mr. Boswell: I am grateful to my hon. Friend for his intervention, because it enables me to pick up a point that was made earlier. We continue to keep repayments in the existing structure under review; if the figures escalate from the £14 that I mentioned to the House yesterday, we shall be prepared to consider whether and when it would be appropriate to vary the repayment periods.

As for moving to a different structure, my hon. Friend will know that we are carrying out a review of higher education. All matters can be considered, but we have no immediate plans to act because we believe that the scheme is well conceived and is broadly meeting its objectives.

The hon. Member for Oldham, Central and Royton was not ready to concede that there are more students in higher education than ever before. Nearly one in three of our young people now enter higher education, compared with one in eight when the last Labour Government were in

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office. Student numbers will increase by some 22,000 in the year to come, and will continue at a record level in the planning period through to 1997-98.

Our policies have helped to ensure, and will continue to ensure, that higher education is no longer merely the privilege of the wealthy; I share the concern of the hon. Member for Birmingham, Selly Oak (Dr. Jones) about that. That expansion would not have occurred if we not been prepared to grasp the nettle, in the teeth of opposition from the Labour party, and find a means of widening opportunities.

Mr. Tracey: Will my hon. Friend give way?

Mr. Boswell: For the last time.

Mr. Tracey: Will my hon. Friend say a word or two about what he is doing to shake up the Student Loans Company? Although in my experience students are rather in favour of loans--they accept that they will have very good opportunities--

Mr. Deputy Speaker: Order. That point does not arise from the regulations.

Mr. Boswell: I may deal with my hon. Friend's point in a moment.

Mr. Deputy Speaker: Order. I hope that the Minister will not do so; I have already ruled that the point does not arise from the regulations.

Mr. Boswell: I am grateful for your ruling, Mr. Deputy Speaker. I need to make the point--because the hon. Member for Oldham, Central and Royton did not--that total available public funding for English universities and colleges will increase by some 3 per cent. between the current year and next year, to a record £4.5 billion. That is the system that the hon. Gentleman considers to be failing, or to be on its last legs. Student support through grants and loans will amount to a further £1.7 billion, producing an overall public total of £6.2 billion. In a difficult public expenditure climate, that is a remarkably good show: it will ensure that the participation rate of young and older people is maintained within the target, which is already over 30 per cent.

Respecting the point that you made about the orders, Mr. Deputy Speaker, I shall now turn to the student loans to which one of them relates. I shall deal with both their quantity and the delivery of the system. The Student Loans Company certainly experienced difficulties last term; I acknowledge immediately that those difficulties caused real problems for students, and were not acceptable. They arose because of a new application process that was intended to speed up payments for repeat borrowers. The process did not work as well as it should have; nevertheless, it is worth pointing out that some 336,000 loans were paid by the company this year, compared with 246,000 last year. The system is not failing but extending itself, and it is increasingly accepted by students. The company has set up an urgent examination of the administrative difficulties, and--together with, at my suggestion, the Committee of Vice-Chancellors and Principals and the National Union of Students--is

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considering what action is necessary to avoid any recurrence. My right hon. Friend the Secretary of State and I have taken a close interest: we have asked for a full report from the board, and we are anxious for proper decisions to be taken to ensure that the problems do not occur again.

I think, however, that it is wrong for the Opposition to confuse their uneasiness and equivocation about the case for changes to the loan system with the controversy that they tend to drag in--the oldest possible red herring--about the administration or, in a sense, the propriety of conduct of the Student Loans Company. There have been problems this year, which I have acknowledged, but we continue to believe that the system is fundamentally well designed.

Indeed, the point made by the hon. Member for Oldham, Central and Royton about the relatively low load on the assessor makes the point that the same demand, concern and failure did not exist in earlier years. The assessor will have to consider the points that have been made to him, although I hope again that the House will recognise that the first port of call for complaint is the company. That is as it should be.

We hear calls for some more radical changes. It is easy, for example, to call for an income contingent repayment scheme. The existing scheme is already income contingent. Graduates need pay nothing until they are earning nearly £14,600 per annum. Figures from the incomes data service were quoted in the Financial Times today. They showed that the average graduate starting salary was £13,800 per annum, which is below that other figure. It is therefore not surprising that, as of 1 February, 45 per cent. of borrowers have taken advantage of the concession. They have deferred repayment of their loans. That is exactly as intended.

The hon. Member for Brightside confused formal defaults with those of people who are not yet in that position. The figures are lower than he anticipated. The number of people who are not paying is clearly a small proportion of the total number of loans extended. It is easy to call for cure-all loans through a tax on the national insurance system. They would be complicated to administer and would have to be paid for. The hon. Member for Brightside is beginning to trail the idea of slinging graduate taxes around the necks of students indefinitely. On graduation, many of them will take out mortgages for house purchase at substantially higher rates than the projected or likely rates of student loans.

Having said that, we are far from complacent about higher education. We care too much about it for that and it is too important to this country for that. Last autumn, my right hon. Friend the Secretary of State for Education announced a wide-ranging review in consultation with all the people who have an interest. We are considering the purpose of higher education and its future size and shape. In the light of views submitted to us on those fundamental issues, we shall move on to review funding and student support arrangements to ensure that they continue to be appropriate at the turn of the century and beyond.

The guiding principle behind student loans--that students should make some financial contribution to the cost of their attendance in higher education- -is finding increasing favour with the people involved. They include the Committee of Vice-Chancellors and Principals, the Royal Society, the Borrie Commission on Social Justice,

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