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Mr. Davies: The hon. Gentleman should recognise that the Bill was introduced by the Government whom he supports and that it is the issue on which we shall reach judgment this evening. He should also recognise that the Government are involved in an extensive consultation exercise on higher education. Why are they rushing to implement one particular measure when a whole range of higher education issues are part of a national debate to which the Labour party is proud to make a significant contribution? We shall continue to do so and we shall produce our policy in our own good time.
The Minister does not need to await the outcome of such a consultation process because his mind is made up, whatever anybody else has to say. In a modern democracy, an Opposition party shortly to take up the responsibility of government must adopt a different approach.
The Government have also withdrawn a whole range of student benefit entitlements. This year, they have cut the grant and, as my hon. Friend the Member for Sheffield Brightside (Mr. Blunkett) has said, they have withdrawn the mature students allowance so that, in the past year, discrete bodies of students have been suffering from policy choices by the Government.
To cap it all, the Government even overturned a High Court ruling that would have allowed students who temporarily suspend their studies to claim social security benefits. The judge ruled that if students have no entitlement to grants and loans when they temporarily withdraw, they must have some means of support. The Government did not agree and suggested that they should claim discretionary awards. What discretionary awards did they mean? Under the present privations of local government finance, the Government must surely recognise that discretionary awards have all but disappeared.
The real motive behind the Bill has nothing to do with advancing opportunities in higher education, providing adequate support to students or improving education provision. It is a way to generate public expenditure savings to pay for tax cuts in tomorrow's Budget.
Instead of seeking to lever in private finance to increase the resources invested in higher education, the Government are simply trying to divest themselves of responsibilities. Absolutely nothing in the Bill or in the Minister's speech suggests that the savings that will accrue from the privatisation of the loans will be used to tackle student hardship or to increase access to higher education. Indeed, we do not even know what the savings will be. How could we?
The financial effects of the Bill will depend on the arrangements with the private sector and the number of students who choose to take out private sector loans. Will
the Minister tell the House what savings the Government expect to accrue and how? Will he guarantee that any such savings are destined to go back to higher education?
It is clear, however, that any savings will be short-term ones. In the long term, any loan scheme should reach equilibrium between inflows and outflows. It is only because the Government's original scheme proved to be such an expensive mistake that they are trying to shuffle it out of the PSBR.
The chairman of the Conservative party said that the Queen's Speech was intended to smoke out the Opposition, and that is another failure for the Government. Instead of setting out a programme to tackle the huge problems that we face in society, they are merely trying to garner each scrap of political advantage.
Mr. Jenkin:
Will the hon. Gentleman give way?
Mr. Davies:
No. I have already given way to the hon. Gentleman.
The Bill does not begin to address the huge global challenge that we face to improve our educational performance. The Bill provides for the privatisation of student maintenance but does nothing at all for education. It does not set out a framework for lifelong learning or for the sustained effort that we shall need to equip our people with skills and abilities for the next century; it merely builds on a scheme that is flawed and failing.
Mr. Robert Jackson (Wantage):
I hope that the House will forgive me if I begin with some ancient history that, I believe, will shed light on this welcome little Bill and provide a necessary introduction to the somewhat futuristic remarks that I intend to make in concluding my speech.
When I was appointed Minister for Higher Education and Science after the 1987 election, one of my principal tasks was to devise a way of fulfilling the Conservative party's election promise to introduce a system of student loans to compensate for the proposed removal of students' entitlement to social security benefits.
When I arrived at the Department of Education and Science, some of the groundwork for that policy had been done by my predecessor, my hon. Friend the Member for Buckingham (Mr. Walden), but his work had reached an impasse because the Treasury took the line that student loans should be introduced with no net increase in public expenditure. As the savings from student disentitlement to social security benefits were worth no more than a couple of hundred million pounds, that would have meant either the provision of student loans at a wholly nugatory level, incapable of justifying the administrative costs, or
an immediate move to the wholesale replacement of student grants by loans, which would have been hard to achieve politically.
For tactical reasons, so as to get the discussion going again, I decided to propose a scheme for student loans raised and provided by the private sector. My proposal was based on the premise that it would be possible for the Government to subsidise such private student loans and to treat the risk of default as an insurable risk, with the Government paying all or part of the premium for such insurance. On that basis, the social security savings could be used to pay the premium and to provide the subsidy, leaving the student loans system to be funded by the private sector, thus achieving the Treasury precondition of no net costs to public funds.
I had a further, strategic, motivation as well as that tactical motivation for proposing a private sector scheme and I shall return to that later. I am glad to say that my proposal had the desired effect of putting the Treasury on the defensive and reopening the blocked discussions.
Treasury officials had two objections. First, and rather absurdly, they argued that the student loans scheme should be publicly funded because the Government could always borrow more cheaply than the private sector--an argument for replacing all private investment by Government investment and proof of the inherently socialistic tendencies of the Treasury.
The officials' second line of argument was more interesting and more difficult to address: that even if there were only a small amount of public subsidy and risk insurance guarantee, the volume of funds from the private sector made available as a result of such subsidies and guarantees would necessarily have to count as a contingent liability and as part of public expenditure. That definition was presented as a fundamental proposition of Treasury metaphysics--one of those tablets-of-stone absolutes around which no progress can be made.
The exchanges gave me the basis for a serious discussion with Treasury Ministers and, after a tete-a-tete with Nigel Lawson, the Treasury gave up its insistence on no net additional cost, thus opening the way to the present student loans scheme, which I believe is currently costing an additional £1.3 billion of public money.
My purpose in reciting that ancient history is to draw attention to the Treasury doctrine on the way in which private sector funds, guided in a particular direction by public subsidy or risk insurance, should be counted in relation to the public sector borrowing requirement.
In introducing the Bill, my hon. Friend the Minister-- and I am glad to welcome him to his position--described its purpose as being essentially to introduce an element of competition for the Student Loans Company in the provision of student loans and an element of choice for students. That is certainly very welcome, but I suspect that it looms less large in Treasury thinking than what I understand, reading between the lines, to be a further objective--to shift as much as possible of the burden of financing student loans from the PSBR to the private sector. If I am right in that understanding, it would appear that the Treasury has done some welcome rethinking about the doctrine with which I was confronted as an unrevisable absolute in 1987. I take it that the rethinking that has been occasioned by the private finance initiative
now leads the Treasury to be prepared to consider as falling outwith the PSBR those funds that are generated from the private sector by an element of public subsidy and public risk guarantee.
I do not propose to press my right hon. and hon. Friends for further illumination on that point, but I guess that the critical issues will be the amount of the subsidy and the extent to which the risks will be shared. The danger will be that the Treasury's terms will be such that private operators simply will not take up the opportunities presented to them by the scheme. However, I want to stress that if the Treasury's thinking has indeed moved in that direction, whatever difficulties there may be at the start of the new scheme, it is good news and, in particular, it is good news for the universities. At first blush the universities may not recognise that, so I want to explain why I think that it is, in what some will no doubt regard as a futuristic account of the way in which I believe policy in these matters should develop in future.
I mentioned that I had a strategic as well as a tactical reason for trying, back in 1987, to press the case for a private sector student loans scheme. I promised to say more about that. My strategic concern was to promote the autonomy of the universities and to reduce the extent of their financial dependence on the state. It is a concern that I believe should be central to our higher education policies. I very much regret that it is a concern that is honoured rather by lip service from the Government, from the different parties in the House and, I sometimes think, even from the universities themselves.
I shall briefly state why I consider the financial autonomy of the universities to be important and then go on to show the link between that concern and the question of private sector loans to students. When the Government provided a measure of temporary financial support for the universities after the first world war, administered by a temporary University Grants Committee, they inadvertently laid the basis for the nationalisation of higher education. Over the years, we have reached a position where higher education costs the taxpayer some
£8.5 billion a year--2.5 per cent. of total public expenditure.
In legal form our universities continue to be private corporations, but the reality of power in higher education is that the balance between the autonomy of universities and their role as the agents of Government policy has shifted steadily--and, in recent years, dramatically-- against the principle of university autonomy. After a brief period during which the uncapped fee funding system, which I promoted within government, restored to universities their freedom to determine their recruitment policies, the overall size of each university is again effectively determined by Government agencies--the higher education funding councils--which fix the price that will be paid on behalf of each student and cap the level of student numbers from the United Kingdom and the European Union in each institution.
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