Examination of witnesses (Questions 28
- 39)
MONDAY 3 APRIL 2000
MR NICOL
STEPHEN, MR
GRAEME DICKSON
and MS GILLIAN
THOMPSON
Chairman
28. Can I welcome our next set of visitors from
Scotland, and a welcome return to Nicol Stephen. Welcome also
to Graeme Dickson and Gillian Thompson. This is a first for you
and for us. As I said before we spoke to Mr Cubie and his colleagues,
there was never any intention to impinge on your area of responsibilities
or to get involved in the Scottish situation in terms of higher
education or anything else. We thought it would be remiss of us
as a Select Committee not to look at a valuable report like the
Cubie Report and the work that you have done as the Scottish Executive
in terms of looking at the problems that we face in higher education
and both student fees and student support. It would be remiss
of us not to say that it must have implications for the rest of
the UK and indeed there is much that we can learn in the process
and why reinvent something if it has already been done north of
the border? It is in that spirit of learning from you that we
both invited you and welcome your attendance at this Committee.
(Mr Stephen) Thanks very much, Chairman. It is a great
pleasure for me to be here through the snow and the rain and the
wind from Aberdeen, mostly snow in Aberdeen. I very much welcome
this opportunity to contribute as a Minister from the Scottish
Executive to the Committee's inquiry. It is the first time for
a very long time that a Liberal Democrat Minister has given evidence
to a Committee of this type, and the first time as well that a
Scottish Executive Minister has addressed one of the key issues
that has arisen as a result of devolution before a Westminster
departmental committee. As you know, Scottish Ministers are accountable
to the Scottish Parliament for higher education and for student
support issues and devolution has given us this opportunity to
apply our collective minds in the coalition to the best way ahead
on Scottish issues in this area. You have already heard Andrew
Cubie's explanation of his report and I would be very happy now
to give an explanation of our detailed response to it. In making
these introductory remarks could I explain that Graeme Dickson
is the Head of Higher Education in the Enterprise and Lifelong
Learning Department, and Gillian Thompson is the Head of Student
Support.
Chairman: In view of the historic nature of
this occasion I am going to ask Evan Harris to ask the first question.
It has been suggested that we have not had a Liberal Democrat
Minister give evidence before a Select Committee in this House
since Archibald Sinclair, but perhaps we had better check that
out.
Mr Harris
29. The Chairman remembers it well! It is a
particular pleasure for me to welcome you here, Mr Stephen, but
I will not ask you what question you want me to ask you. I am
going to ask you if you could set out briefly the key reforms
that you set out for student finance for Scottish domiciled students
studying in Scottish higher and indeed further education establishments
to give us a platform on which to ask further questions.
(Mr Stephen) The starting point was clearly the Cubie
Report. It was a very authoritative document, a great deal of
consultation had been done and independent research had been commissioned
by Andrew Cubie and his Committee. Essentially, and it is an important
point, we accepted the guiding principles in the Cubie Report
and the basic structure of the proposals that he put forward.
Starting with tuition fees, we agreed with the recommendation
that tuition fees should be abolished. We also felt it was important
to address further education and we agreed that full time students
in further education should have their tuition fees abolished
also from the autumn of this year. That was a change from the
Cubie recommendation because in relation to tuition fees the suggestion
was that they should be abolished from autumn 2001. Having agreed
that part of the package, and clearly that element is the element
that has tended to take the headlines, it was not necessarily
a simple or straightforward agreement but it was something that
we did eventually agree. Next we looked at the whole issue of
re-introducing access bursaries as the Cubie Committee calls them.
We had to consider whether, because we had got rid of tuition
fees, we would accept the re-introduction of access bursaries
because, as some members of the Committee have already suggested,
clearly getting rid of tuition fees in themselves could be argued
to be a regressive measure rather than a progressive one because
poorer students already have their tuition fees funded by the
state. We agreed that, yes, we did want to re-introduce access
bursaries which would tilt the balance of that package of measures
back in favour of poorer students and students from more disadvantaged
backgrounds, and we agreed the proposal that they should get access
bursaries of up to £2,000 per year. We did not however agree
to the top-up fund, what Andrew Cubie called the wider access
fund, of £18 million of additional money which would allow
a top-up of the £2,000 bursary to a full £4,000 bursary.
We felt that the £2,000 payment was a generous one, certainly
in relation to any of the proposals that any of the political
parties in Scotland had in their policy commitments and their
manifestos. We also had to consider whether we wanted to increase
the total cash, the total amount of money that would be available
to students each year. Andrew Cubie suggested an uplift for all
students of about 13 per cent to just over £4,000, I believe,
We decided that it would be difficult to afford or to justify
that for all students and we targeted an extra £500, an entitlement
to an extra £500 of income on students whose parental income
is less than £15,000 per year, and also for mature students,
we decided to give them access to bursaries on top of their existing
loan entitlement, so in other words, the bursary payment would
not reduce the loan entitlement for mature students. We then had
to consider whether we could afford all of this out of general
taxation, out of the Scottish block, or whether we would agree
to the suggestion of the Graduate Endowment, and again we agreed
to that recommendation, provided it was clear that it would be
used to provide funding for poorer students, for students from
disadvantaged backgrounds and provided it was clear that it was
not the tuition fee. We were helped in all of this by the response
to the Cubie Report by COSHEP and the NUS, the National Union
of Students in Scotland, the AUT and others where they accepted
the notion of a Graduate Endowment and they agreed with Cubie
that it was neither a tax nor a tuition fee. Therefore, because
of all of that and because of the view of the MSPs in the new
Parliament, we did agree to the Graduate Endowment. Clearly, if
it had been a tax, it would have been ultra vires the powers
of the new Scottish Parliament and if it had been a tuition fee,
it would not have carried the majority within the new Scottish
Parliament. That, in brief outline, and this is a complex area
where many, many, many words can be used, but that, in brief outline,
was the background to our response.
30. My follow-up would be that we have discussed
with Andrew Cubie the fact that the proposals coming forward both
from yourselves and from him are not in a cash-free situation,
that there are budget constraints by the fact that there are no
usable tax-raising powers in the short to medium term. What I
want to ask is if there were more resources available for the
sector, and of course the sector may not be the first priority,
extra funds in higher education, then what would change? Would
you reduce the level of endowment or would you raise the threshold
at which repayments started or would you be more generous with
bursaries? If there was more money available, what would give?
(Mr Stephen) Well, the approach that we took, and
I mentioned the Wider Access Fund, that would have cost, I think,
£18 million, from recollection. I mentioned the uplift of
13 per cent in the funds available to students for each academic
year and that would have cost, I think, another £16 million,
so already you are up to beyond £30 million in terms of savings
on the Cubie proposals, and clearly affordability was a very major
issue. There are many pressures on not only the Scottish block,
but many pressures on government throughout the UK in terms of
expenditure. It is a very difficult judgment. We had to make a
judgment in the context of Cubie and in the context of student
support and tuition fees. If there had been more money available,
would we have put more money into student support or would we
have put more money into perhaps the abolition of tuition fees
for more part-time students, which again is an issue that concerns
us, the whole position of part-time students? I, in short, do
not know the answer to that question, and it would be speculation
for me to respond on behalf of the Executive, but clearly there
would come a point where we might say that if extra money were
to be invested, it might be better invested in expanding the sector
and providing for more students to get access to higher education
and indeed further education, or there might be other areas within
the Scottish block—health, education, school-age education—where
there are significant pressures and that would obviously be a
matter for Scottish Executive Ministers to decide.
Chairman
31. Were you surprised that Cubie came back
with such an emphasis on student support? In a sense, you did
send him away to deal with one thing and he came back with a very
strong recommendation on a range of others. He explained to us
that once he got into looking at tuition fees, it was much more
important to take a holistic approach.
(Mr Stephen) I think that we were pleased that the
whole issue had been widened and that the issue of student hardship
and student support became a much more central, much more high-profile
issue, and that it was not solely hooked on the issue of tuition
fees because the message we were getting throughout the consultation
and the period after the Scottish Parliament elections, the message
that was coming through loud and clear principally from students
and student organisations was that tuition fees in themselves
and alone were not the only issue, that they were important, but
that there were many other issues in relation to student hardship
that needed to be addressed. One of the statistics that I think
shocked us and galvanised our action in this area was that in
social groups 1 and 2, the top social groups, 50.1 per cent of
those going forward into higher education institutions come from
those two social groups, whereas in social groups 4 and 5, the
bottom two social groups, 9.6 per cent of those going forward
come from those families go forward. Therefore, we were determined,
based on those statistics and based on the need to widen access
to higher education, to do something to improve access to higher
education for these more disadvantaged social groups.
Valerie Davey
32. You have clearly widened the debate in the
context we have just addressed, but what about the longer-term
effects of what you have done? It does seem to me as if it was
a very intense, emotive political debate which needed immediate
resolution. In the longer term where will this leave the universities?
We heard earlier about the situation in Denmark which is not dissimilar
in size and background to your own country. Where does this leave
the actual funding of universities and indeed colleges in the
future?
(Mr Stephen) Well, at times it did not feel like a
very immediate solution; it took from the 6th May through until
the end of the year when Andrew Cubie reported and then another
four or five weeks of very tough discussions to reach this solution.
However, you are right, that in the greater scheme of things,
it was speedy progress that we made on the issue. It leaves us
in a situation where we fund to our universities about £600
million per year. We have been funding about £300 million
of student support and obviously that goes up as a result of this
package of measures, and the total expenditure of the Enterprise
and Lifelong Learning Department is around £2 billion per
year, so we recognise the need to continue to expand that core
funding for our universities, the £600 million, and we want
to continue to do that, and we would like to achieve that at a
rate ahead of inflation. Clearly in this area of the £300
million which is provided for student support, we recognised that
if we were to do something significant, if we were to reintroduce
bursaries, we needed a contribution from students and that was
the issue we were prepared to address.
33. The longer term still seems to reflect that
when you get the demands, as you will and we will, for higher
pay for our university staff, for development in further education
colleges, that will outstrip the amount that you will get back
from endowments.
(Mr Stephen) The amount that we get back from endowments,
we have made it very clear that we will use that to fund improvements
to student support so that we will target that on improving benefits,
on improving bursaries for mature students, on reintroducing bursaries
for students from poorer families, so we regard it as really separate
and an issue that is the responsibility of government. It is a
responsibility of the Scottish Executive to improve the core funding
for our universities and we recognise that it is not only about
universities, but it is about further education as well. We just
announced last week quite a significant increase, which I assume
has been reflected in England, Wales and Northern Ireland, in
the funding for our further education colleges, but it is clearly
a difficult judgment and it is a question of balance because,
on the one hand, you are wanting to encourage more students into
higher education from disadvantaged families in particular, whereas
at the same time expanding the number of students puts further
strains on the university system in terms of quality, and we want
to be competitive internationally and we want to have a world-class
higher education system. I think in many areas with the institutions
that we do have, we can claim to have a world-class system, but
we recognise that we cannot be complacent and we have to continue
to be competitive in the future and many other institutions in
other parts of the world have at times resources which I think
all of us throughout the UK would be quite envious of. The
Committee suspended from 5.10 pm to 5.16 pm for a division in
the House.
Mr St Aubyn
34. Just to be clear about this Graduate Endowment
concept, there will be those who say it is merely playing with
semantics, but there are obviously some differences from tuition
fees. Would you like just to highlight the benefits of the Graduate
Endowment concept and of it kicking in at such a low level.
(Mr Stephen) Clearly the Graduate Endowment that the
Scottish Executive has agreed to will be £2,000 and it was
very important that we were clear what this Graduate Endowment
was. I mentioned that it has been agreed that the money raised
from this will be used to fund the reintroduction of access bursaries
and to provide the bursary package, the £10 million package,
that we have set aside for mature students, so that will be the
use of it. The nature of the payment is that it is a payment which
recognises the benefit that you receive from higher education
and it will only be payable by people who have graduated. Also
there will be quite significant exemptions. Andrew Cubie identified
that there were particular groups, key groups that were disadvantaged
and those were mature students, lone parents and disabled students;
they will not be required to pay the graduate contribution and
neither indeed will HNC and HND students.
35. Under the resource accounting principles,
the real values are recognised upfront and hopefully that increases
the resources available to spend in higher education in the year
in which the fee is paid on the loan basis or whatever. Surely
if you have a Graduate Endowment, you will have to wait until
the endowment is triggered before you can recognise the revenue
and put it to use, so it will be some years after someone has
left university that the money they have put in has any beneficial
effect at all.
(Mr Stephen) We still have to agree the detailed accounting
treatment, and perhaps this is a point Graeme might want to comment
on, but I think the logic of your argument is the right one, but
the solution, I hope, will be a different one in the sense that
it is at the time that the commitment is made, at the time that
you take on the loan that you have resource accounting consequences.
I think it is worth emphasising as well that loans are not a cheap
solution in terms of public sector finance; they are very expensive
in terms of the impact on the public purse and there is a considerable
element of subsidy. In the same way, as soon as you start your
degree, there will be a commitment, there will be an undertaking
to agree to the Graduate Endowment should you graduate and, on
that basis, we believe in resource accounting terms that the benefit
of that will be allowable in year one.
(Mr Dickson) I am not sure if I can add much more
to what the Minister has said. The Cubie Committee recommended
that we use the changes to resource accounting to take account
of the income from this in the early years. Unfortunately, we
cannot just decide to do that ourselves, but it requires the agreement
of the National Audit Office, so the amount that we will be able
to score in the early years will require their agreement and convincing
them of a statistical model that predicts the full funding.
36. If they came back and said, "We don't
allow you to accept it until the endowments are actually triggered
by someone reaching the £10,000 threshold", do you think
you ought to go back and revisit the whole scheme and perhaps
look at the alternatives, which does mean that the funding comes
in immediately and, therefore, there is a better sense of where
it should go?
(Mr Stephen) I am tempted to behave like a politician
and refuse to answer a hypothetical question, but clearly we have
taken soundings and the indications are that the approach that
we are taking, because it is logically consistent with equal,
but, admittedly, opposite situations where we are looking at expenditure
rather than income, the strong likelihood is that we will be able
to score it in this way. Clearly if there was a problem in this
area, and it applies to several of the other areas that we have
reached agreement on where we have made announcements, we would
have to look at alternatives, but we would not want to undermine
the basic shape of the agreement that we have reached because
we think it is a good one.
37. Are these endowment requirements at all
means-tested? Obviously the fees are means-tested for those coming
into university, but the endowment which is triggered after people
leave university, is that means-tested?
(Mr Stephen) The Graduate Endowment is not means-tested.
Helen Jones
38. Can I ask you about your decision on the
threshold at which the endowment becomes payable. Cubie recommended
that it should become payable on an income of £25,000 and
I understand you have opted for it to become payable at £10,000.
Now, could you perhaps explain to us why you have gone for this
figure particularly and also what effect you think it might have
as a possible disincentive to students? We were talking earlier
about debt being a disincentive and this is clearly a debt of
sorts, so can you explain your thinking behind that to the Committee?
(Mr Stephen) Yes, I am very pleased to do that. I
think this is probably the single most misunderstood area of the
agreement that we reached. We did not choose the £10,000
figure and I would like to really underscore that point. What
we have agreed is that the Graduate Endowment would be payable
through the existing student loan system and the existing student
loan system is changing or has now changed, I think, from the
1st April to an income contingent system where the £10,000
threshold is the figure at which you start to pay 9 per cent of
your income over £10,000 to repay your student loan. Therefore,
because we were adding the Graduate Endowment to the student loan,
the key issue for us became one of the overall level of student
debt and we worked very hard to achieve a model that ensured that
no student who was making use of the student finance system would
have greater debt, even if you included the Graduate Endowment,
than they do at the moment, and, on that basis, we felt it was
acceptable to use the student loan system for the collection of
the Graduate Endowment. The alternative that we had was to set
up a separate bureaucracy and to find a way of tracking students
and monitoring their income at a figure of £25,000 or whatever
figure we separately set and we felt that that would not only
be expensive, but it would leave a situation where some students
were paying the full Graduate Endowment payment, the 2 per cent
of income over £25,000, plus, because they had a student
loan, 9 per cent of their income over £10,000, so some of
us were concerned at that and that that payment, the Graduate
Endowment, the extra payment, would kick in at a time when students
were settling down, having a family and that they would have a
double payment to make. The guarantee that we were able to give,
and it is an important one, the guarantee is that no student will
have to pay more than they do under the current system, nor will
they have to pay back for longer than under the current system
because their level of debt will be the same as or less than under
the current system.
Valerie Davey
39. Can I just clarify then that the additional
thing you did was to reduce the level of the endowment so that
instead of the £3,075, which Cubie recommended, yours is
£2,000?
(Mr Stephen) That is exactly right. This is a vital
point, that what we decided to do was to make use of the current
student loan system and there was a change, or there is now a
change to the existing student loan system so that if you have
a student loan, you now pay back 9 per cent of your income over
£10,000, so under the Cubie proposals where loans are still
very much a part of the system, you would still be paying back
9 per cent of your income over £10,000 to repay your loan,
and separately you would have a liability to pay back the £3,075
once your income reached £25,000 per year.
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