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6.36 pm
Mr. Cynog Dafis (Ceredigion and Pembroke, North): It would be remiss of me not to speak in this debate because I have two universities in my constituency. It would also be remiss of me if I did not emphasise the crucial issue of the severe predicament of students from low-income, unprivileged backgrounds, which has already been mentioned but about which I want to be specific.
Such students from unprivileged, working-class backgrounds were the sort of students whom the University college of Wales in Aberystwyth was set up to serve. It was a college established largely with small, individual contributions from working-class communities. It is for just that category of student that the university was set up, and those students are now subject to severe pressures. Such students are subjected to those pressures because of the reduction in grant, the introduction of a loan system that requires repayment in the first five years of employment and because of their inability to call upon support from their families.
The maximum total income available to a student from both grant and loan amounts to only £3,270. In Aberystwyth, up to £1,753 per annum goes on accommodation fees. That means that about 44 per cent. of students' income goes on accommodation compared with the average citizen's expenditure on accommodation of only 33 per cent. Most of the grant goes on paying for accommodation.
If parents, as many do and as I did for my children, pay for students' accommodation and provide an allowance for them--and there are many students in that situation-- there is no problem. Those students are able to live a reasonably comfortable life and get on with their studies without much difficulty. Such students, as has been
emphasised, are able to obtain loans with equanimity. They can do that without having to worry about it, but for those who are not so privileged, the situation is really desperate, especially as such people are deeply anxious about taking up loans in any case.
I have spoken today not only to the welfare officer of the university at Aberystwyth, but to Ann Rhys, a consultant psychiatrist seconded to the university from the Ceredigion and Mid-Wales NHS trust for 50 per cent. of her time. The evidence that she has given to me is eloquent about the painful reality experienced by unprivileged students.
Over the past four years--she stipulated in her conversations with me that it was the past four years-- Ann Rhys has noticed a great increase in the incidence of stress disorders. She listed them to me: eating disorders; panic attacks; serious anxiety symptoms; self-abusive disorders; and what she called secondary depressive illnesses. She emphasised that she was talking not about some kind of superficial psychological difficulty but about deep psychiatric illness, which was becoming much more common. As a member of a students health association, she told me that that was happening throughout the United Kingdom. That well-known fact has already been mentioned.
Ann Rhys had no doubt that all those problems were linked to the financial position of students and that that was the primary cause. In that regard, anxiety about debt is crucial. Many of those students come from families where borrowing is not part of the social culture. If borrowing occurs, it is seen as a sign that people are getting into financial difficulty. Ann Rhys finds in her conversations with students that they experience a great deal of anxiety about their parents. Many of them come from a home where the father is unemployed and the mother is overburdened by low-paid employment, as happens in many south Wales valley communities. She may have not one job but a number of part-time jobs. The option not available to such students is to ask for support from their families. Indeed, they are the kind of people who even avoid sharing the anxiety with their parents because they recognise that their parents, too, suffer from anxiety and face financial difficulties.
The majority of those students take part-time employment. They work in supermarkets or bars, often for less than £3 an hour. They work long hours, which leads to fatigue. Other hon. Members have mentioned students who work night shifts. Many of those students often work late at night. Ann Rhys pointed out that, as well as fatigue, those students suffer further anxiety because they find it more difficult to cope with their essays and the tasks set for them, and they become anxious about falling behind with their studies. She tells them that they should not go to work as they are not well enough and it is too much for them. Sadly, they are not in a position to choose. Although work exacerbates the psychiatric disorders from which they suffer, they have no choice: if they do not work, they will get deeper into debt.
Ann Rhys sometimes refers students to the psychology unit at Bronglais hospital, but the waiting list there is increasing. The waiting time is now some six to eight weeks. She claims that the length of that waiting list is, to a degree, the outcome of that very phenomenon. Thus the hospital system finds it increasingly difficult to cope,
and the hospital has now devised opportunities for group therapy rather than individual consultation and treatment for those various disorders.
Those problems are bound to be a disincentive for people from working-class and less privileged backgrounds to take up higher education. If that fact has not yet begun to feed through into the statistics, it will soon do so. We heard this evening that the proportion of higher education students from the working class or social classes C and D has increased. That merits some investigation and analysis, but it is clear that a range of factors may cause such an increase, such as changes in the pattern of employment, or the reduced availability of employment in many working-class areas and therefore an aspiration to seek better occupational opportunities through higher education, which is often bitterly disappointed.
There is bound to be a disincentive, which will become increasingly evident if the picture that I am describing is true. It is small wonder that Aberystwyth university has a drop-out rate of 13 per cent. That is particularly high, which probably relates to the fact that Aberystwyth is a small town, and a huge majority of the students come from far away and a small proportion live locally. I am told that that leads to a loss of fees of some £250,000 and it can lead to reduced funding from the Higher Education Funding Council for Wales which, like all funding councils, emphasises the outcome in determining the amount of funding.
My main concern tonight, however, is the misery imposed on that category of student and the injustice perpetrated. It is particularly ironic in relation to Aberystwyth, and it must be tackled. It is unlikely to be tackled, however, when the conventional wisdom these days, as we have heard more than once tonight, is obsessed with reducing public expenditure. I do not share that obsession.
Mr. Mike Hall (Warrington, South):
I oppose Second Reading because, if enacted, the Bill will do nothing to improve the financial resources available to students in higher education. The Minister has confirmed that in his speech this afternoon.
It is a great pleasure to follow in this debate the hon. Member for City of Chester (Mr. Brandreth), who gave us a lecture on financial probity. Given that his track record in business is one of bankruptcy and of a business collapse, taking with it huge amounts of taxpayers' money, it was an extremely interesting lecture.
Before I explain why I oppose Second Reading, I should be grateful for a little leeway briefly to mention the results of the first opt-out ballot to take place in my constituency. Lymm high school is a successful school. Its pupils achieve excellent results, it has great facilities and its future is very secure. Over the past month or so, the parents of pupils at Lymm high school were balloted on whether they wanted to opt out of the local authority. The Minister will be delighted to know the result: 322
parents voted in favour of opting out; and 1,293 voted against. That was an emphatic rejection of opting out and an overwhelming endorsement of staying in the family of local education provision. I congratulate the parents of pupils at Lymm high school on their common sense. I thank you for your indulgence, Mr. Deputy Speaker, in allowing me to say that.
The arguments in favour of a Second Reading of the Bill are a repetition of those expressed on 5 December 1989, when the Second Reading of the current Act was debated in the House. The then Secretary of State for Education told the House that the Education (Student Loans) Bill was a scheme that would "benefit students". Some 435,000 ex-students have now had the benefit of a student loan debt: 187,000 of those have deferred the starting date of repayments and 44,000 are already in arrears on their repayments. Some £1.3 billion is now owed to the Student Loans Company and 147,459 graduates now owe £36.1 million; 11,296 students are in default as of 31 March 1995, which is 7.7 per cent. of the total.
That puts into perspective the comments of the then Secretary of State for Education and Science, the right hon. Member for South Norfolk (Mr. MacGregor), when he said that student loans were
When the student loan scheme was introduced in 1989, the House was informed that loans would top up the maintenance grant paid to students. Evidence now shows that those loans will soon supersede the maintenance grant as the main part of student funding. So much for top-up loans and the concept of loans designed to assist students during their time in higher education.
What is the purpose of the Bill? In 1989, the Government wanted to involve the high street banks in the loan scheme and the then Secretary of State for Education stated:
During the Second Reading of the Education (Student Loans) Bill in the other place, Lord Caithness said:
I intervened in the Minister's speech to ask what had changed. Why are the Government now trying to resurrect a failed policy of six years ago? They are like dogs returning to their vomit, and they should avoid that at all costs.
Six years ago, the Government promised to cover the loss of interest payments, pay administration costs and cover default costs, but still the high street banks did not feel able to participate, because the scheme did not suit their commercial interests. If the high street banks are now interested in such a scheme, they must have been offered a better deal. How much more money--additional sweeteners--will the Government throw at the banks to resolve the problem?
A spokesperson for Midland bank recently said of the Bill's proposals:
Sir Eric Ash--perhaps the Minister will tell us whether he is to be appointed as the chief executive of the Student Loans Company--has been consulted on the Bill's proposals and has said:
The explanatory and financial memorandum to the Bill notes that the extent of any overall reductions in public expenditure depends on the precise arrangements that are made with the financial institutions and the number of students who take up loans with the private sector.
The Minister must tell us how much more money and additional sweeteners the Government will offer to attract high street banks into the student loan business. The answer to that fundamental question underlines the purpose of the Bill. How much money will the Government pay to make the student loans scheme attractive to the high street banks when those banks refused to participate six years ago, despite all the guarantees offered to them? The Minister may want to intervene to answer that question, because it has been estimated that it will cost an extra £1,500 per student loan to attract the high street banks. I notice that the Minister has not got up to deny that figure at the Dispatch Box.
If the Government are prepared to spend resources on subsidising the high street banks, that money would be better spent on improving current student grants. If the Government can afford to pay £1,500 to subsidise the loans offered by high street banks, they can afford to give that money to the students direct. Instead, the Government have come up with a plan that involves the high street banks taking all the profits while the Government shoulder all the risks and the costs. The Government must consider seriously the ethics of using public money to subsidise private money lending.
What has the Minister got to say about the ethics of using taxpayers' money to bankroll high street banks?
While he contemplates that question, he may be interested to hear what Lord Beloff said during the debate on the Loyal Address in 1989. On the specific issue of student loans he said:
The Government have asked the House to give the Bill a Second Reading, but they have not consulted on the issues involved. They have not offered the House any costings of the new scheme, and therefore they are asking the House for a blank cheque. The House must resist those moves.
The Government have also tried to seduce the House with arguments about choice. The Minister has claimed:
It is most deceitful for the Government to talk about extending choice when it is plain to everyone that the Government want to transfer loans to the private sector. The Government will simply end up creating a two-tier system of student loans, providing the banks receive a big enough bribe. That will happen despite the Government's promise, given on Second Reading of the pervious Education (Student Loans) Bill, that
The introduction of the Bill signals the Government's intention to force more and more students to take up loans from the private sector. The Bill shows the way forward for the Government to pay huge amounts of taxpayers' money to the high street banks. It shows the way to force more and more students into debt during their years of higher education and early years of employment.
"intended to reduce students' sense of dependency on the state and promote an awareness of self-reliance and investing in their future".
The effect of the student loan scheme has been to transfer a considerable part of higher education costs from the Department for Education and Employment to individual students. The effect of Tory education policy has been to turn our undergraduates into debt carriers throughout their university careers and early into their years of employment.
"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 experience of lending . . . Our aim is to ensure that the scheme is likely 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."--
[Official Report, 5 December 1989; Vol. 163, c. 175, 182-83.]
Unfortunately, the Secretary of State then had to inform the House that Lloyds bank, and five other high street banks, had pulled out of the scheme.
"We saw some advantages in making the expertise and the branch network of banks available to help with administration of the scheme; but the banks decided that there was no commercial benefit for them."--[Official Report, House of Lords, 27 February 1990; Vol. 516, c. 604.]
Those words will come back to haunt the current Minister as he seeks to introduce the new scheme. On 17 November, the Minister issued a press release in which he said:
"The expertise and experience of the private sector would mean a better loans system overall and a better deal for students."
He almost repeated the argument used in 1989.
"This is a high risk venture and we see considerable problems in managing this book. It is not the most attractive proposition in the world."
"The message I'm getting back from the banks that I've spoken to already . . . is that they're not really very interested."
"I warned the Government that if they were trying to act through a consortium of banks, they would find the banks very reluctant to co-operate. That has been borne out by their experience. After all, a fishmonger sells fish; that is his business. A banker lends money;
27 Nov 1995 : Column 983that is his business. One does not have to bribe a fishmonger to sell fish but apparently the Government have to bribe the banks to lend money. Could we get further into absurdity?"--[Official Report, House of Lords, 23 November 1989; Vol. 513, c. 186-87.]
The extra cost involved in getting the high street banks to participate in the student loans scheme is yet another example of where the Government are prepared to spend more and more money on administration and bureaucracy to feed their ideologically motivated policies.
"Students can only benefit from the choice, diversity and competition that these changes would bring."
He has also said:
"Private loans would be available from the beginning of the 1996/97 academic year. In due course we would expect most loans to be private ones."
The Government claim that the Bill will widen the choice available to students by giving them an option of where they get their loans from. In the same breath, they tell us that, eventually, they want all loans to be provided by the private sector. In his press release, however, the Minister made it clear that the value of the loan, whether provided by the Student Loans Company or the private sector, will be exactly the same. It is therefore clear that there will be no choice and no incentive provided to students to opt for loans. That reveals, once again, the gap between the rhetoric and the practice of the Government.
"students will not be excluded on the basis of their financial record and there will be no means-testing."--[Official Report, 5 December 1989; Vol. 163, c. 178.]
It is clear that the Bill gives discretion to the banks to give loans to whomever they want. The problems that that will cause have already been outlined by my hon. Friends.
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