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Caroline Flint: We could have a huge debate about how student finance should be constructed, but will the hon. Gentleman at least concede that, after the student loans system had been introduced under a Conservative Administration, when Labour came to power in 1997 it introduced ways in which the burden of debt could be
paid over a longer period, starting at a higher rate of earnings than was relevant under the Conservative Administration?
Chris Grayling: I am interested in the issue for today's students, and the reality is that, whatever the history of student finance, today's students face a debt burden that is a disincentive and a huge problem for many of them. It is right and proper that the House, the Government and all parties with an interest in the area should be addressing that issue today.
For that reason, at the general election the Conservative party said that our first priority should be to change the burden on today's students, to make it possible for students leaving education and entering their first jobs not to face a huge burden in their pay packets from day one—and a burden it is. A newly qualified nurse earns £15,355 a year. A newly qualified house officer—a young doctor—earns £17,935 a year. A newly qualified teacher earns a little more than £17,000 a year. Newly qualified social workers and other public servants all earn similar amounts.
Currently, that newly qualified nurse, on £15,355 a year, must pay £481 a year in repayments from day one. Even if the proposals put forward by the Liberal Democrats at the general election were implemented, that nurse would pay more than £200 a year in debt repayments. That is why the Conservative party said, at the general election, that we needed a quantum leap in the threshold for repayments. We should not be looking to young, newly qualified public servants to start paying their debts until they have reached a reasonable salary level and start to have the cash that will enable them to afford those repayments.
Valerie Davey (Bristol, West): Did not the manifesto also say that that loan would be repayable at market rates of interest?
Chris Grayling: The hon. Lady obviously did not read the detail in the manifesto. It said that market rates of interest would be offset by tax allowances that would enable us to securitise the student loan book to provide a significant cash investment in our universities, while ensuring that students paid no more money in repayments. That would have made a huge and real difference to our universities.
Mr. Willis: We cannot let the hon. Gentleman get away with that, because the policy of the previous Government, when they left office, was to sell the student loan portfolio, and the Minister and her colleagues had to pick up that problem. No one would buy it. It is no good saying that the Conservatives would underpin universities with extra resources from a portfolio that no one would buy. It was not commercially attractive to anyone unless it was written down by at least 50 per cent.
Chris Grayling: I think that in today's world one has rather more chance of securitising the student loan book than of encouraging further bondholders in Railtrack.
We move on to what the Government are proposing. If we are to believe the apparently authoritative leak in The Guardian today, we shall see a return to a maximum grant. However, it will be a maximum grant that will go
nowhere near what is needed by today's students to live a life in full-time education. The suggested figure is £2,600 a year. I will be intrigued when the Minister sums up at the end of the debate if she can give us a hint of whether that figure is even in the ball park. If it is, it is profoundly worrying.If a poorer student is going to be entitled to a grant that represents a fraction of what is needed to live on, and if the student loan structure is to disappear, what about the rest? Are we saying that students from less well-off backgrounds will have to borrow large amounts from their bank and repay it at much higher rates of interest than the present student loan? The consequences will be serious indeed.
Professor Alan Smithers of Liverpool university has offered some initial analysis of the report, saying
- "For many students it will be a poor deal as it would actually be better for them to pay the money up front and not to incur debts at market rates of interest . . . It is a very untidy solution and it is hard to see who is going to benefit. The financial consequences for a number of students are going to be quite serious . . . It is an attempt by the Government to put a sticking plaster over a self-inflicted wound."
At the end of the day, the family will be expected to pay. The Government's view is, and seems always to have been, that a family with an income of £35,000 a year is rich and can well afford to pay tuition fees—to pay a little extra here or support maintenance grants there. In reality, some Ministers have privately admitted that they are placing too many burdens on middle-class families with mortgages and other children to support. The present threshold of £35,000 is not such a vast amount of money that it leaves a huge amount of disposable income to support a student.
We also hear that there may be a graduate tax, repayable over 25 years. What will be the threshold for the repayment of that tax? Will it apply in full measure to the newly qualified nurse, doctor or teacher I mentioned? Will they start paying in full from day one? If a graduate tax is to be the approach, it should not be structured in a way that will affect the least well off—the newly employed graduate.
Caroline Flint: I thank the hon. Gentleman for giving way a second time. Does he agree that we want to expand the opportunities for most young people, so that they can get the best out of their education? We must recognise that graduates can earn four times as much in their lifetime as someone without a degree. There is no doubt about that fact. Therefore, there is a social justice to a graduate tax—they should pay something back for the benefits that they have gained from their education.
Chris Grayling: At a time when the public services in my constituency and many others are crying out for people and simply cannot get the new entrants they need, it is the height of folly simply to pursue a political dogma, increase the financial burden and make it less easy still for graduates to move into jobs that are less well paid than those in the private sector. We need to deal with the problems of today's students going into today's public
services. Trying to expand numbers just to achieve a target while failing to recognise the potential impact on those people would be foolhardy in the extreme.Why the rush? The Prime Minister made a speech two or three weeks ago and we are already hearing detailed leaks of what the Government are planning. If they got it wrong four years ago, surely now is the time to step back, think about the matter carefully, talk to the organisations involved, have widespread consultation and then reach a conclusion. They should not cobble something together in three weeks.
Many hon. Members referred to Liberal Democrat education policy—the magic 1p. I will not attempt to satirise it. My hon. Friend the Member for North-East Bedfordshire has done a far better job than I ever could. Year after year, election after election, the magic 1p returns, each time with a different spending commitment attached.
I flicked through the detail of the Liberal Democrat manifesto to see what came under the heading of that 1p this time. There are some startling figures. The range of potential spending commitments is enormous. The one that particularly caught my eye was the commitment to reduce class sizes to 25 pupils, on average, for children aged five to 11—an admirable desire in theory, but if fulfilled would require the construction of the equivalent of 3,000 new primary schools and the hiring of 30,000 new teachers. Schools cannot find teachers to fill today's vacancies, let alone find 30,000 more. The possible capital cost alone of pursuing that policy would gobble up a huge chunk of the magic 1p.
Sue Doughty (Guildford): Does the hon. Gentleman agree that it is rather more realistic to promise improvements in public services and help for students by accepting that taxes may have to rise, than by pretending that they will be cut?
Chris Grayling: A responsible political party should make commitments on a basis that can be substantiated, not on the basis of promising all things to all people all the time, with no genuine financial backing to support them.
It is also noticeable that little is said about grants and financial support for students in the Liberal Democrat manifesto. Tuition fees make the headline-grabbing political point, but the detail of how to tackle the debt burden is important. As I said in citing the example of the small threshold increase for repayments that was included in the manifesto, in reality little has changed in the huge debt burden placed on today's students.
Mr. Rendel: I have a copy of the manifesto here, and the bit on student maintenance is clearly rather longer than the bit on tuition fees.
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