Select Committee on Education and Skills Minutes of Evidence

Examination of Witness (Questions 280 - 299)

MONDAY 13 MAY 2002



  280. What is wrong with a graduate tax?
  (Margaret Hodge) There are pros and cons on all these options and they are ones that we will take into consideration during our deliberations.

  281. You must sense the frustration we are feeling here. On the one hand we know that you cannot rule anything in or anything out and you are having a whole discussion with the Treasury and No. 10 and we know this is a highly political issue because of where it started. It started with the Prime Minister at the Labour Party Conference surprising all of us, everyone in the PLP as well as everybody else, including colleagues round this table, by saying that it was the most commonly brought up subject on the doorstep. I did not hear it once and I have not heard any other colleagues who found that it was except in one or two university towns which may be very special, like Huddersfield. The fact of the matter is that what we are trying to get from you is what you as a Minister are battling for. What do you think is the fairest system you could bring in? Is there anything that attracts you rather than something else?
  (Margaret Hodge) It may not surprise you, Chairman, that I have to say to that that in the interests of collective decision making those discussions go on at present within the department and across government. What I am absolutely hoping you will do is that when we do announce the results of the review you will have me back here to grill me as to whether or not the proposals that we have come forward with are ones that you think are appropriate and right.

  282. Meg Munn is feeling really frustrated over here.
  (Margaret Hodge) You may be frustrated but I do not think surprised.

Ms Munn

  283. No, no. I am not at all frustrated. I am finding this quite interesting because the whole point of this is for us to test out things that have come forward. This whole issue which we have all tackled, and I certainly had people saying about the issue of debt in Sheffield, is this issue of debt perception and, having sat in the UK Youth Parliament where the issue was raised, when people talk about the amount of debt what they are talking about, as we were saying earlier, is not just the amount that is the student loan but the overall debt that they are leaving university with and that was given to us also in evidence by the NUS President in relation to that. You have said that what the Government is trying to do is to share the costs of education between the Government, the person who is going to have the benefit of that, and parents and family. Our understanding is that students make up gaps in the money they have to live on by taking out commercial loans, whether that is through their credit card or in other ways, in order to have the lifestyle they want, whether that is £25 a week on drink or a car or whatever, but they are doing that and a lot of them are happy to do that because they do believe that they are going to be able to repay that. The bit that worries me is that the overall headline figure is the figure that is putting off people who might not aspire to £25 a week on drink or a car but it is also likely to be the people for whom the parental support of additional money, which perhaps middle class parents are able to put in, is not there. How are you addressing that particular bit?

  (Margaret Hodge) The best evidence we have on student income and expenditure is the 1998 survey. We are just about to re-do it so we will have results in a couple of years' time. They demonstrate that the level of the loan is not that far from the sorts of costs that it is appropriate for the state to think it ought to meet. Again that does not mean that you determine lifestyle choices. If a student wants to build up a credit card debt because they spend a thousand pounds a year on booze or whatever, that is their choice. The question we have to ask ourselves, and you as a Committee have to ask yourselves, is: is it appropriate that we should subsidise that in any way or should that be an issue in which the state should intervene? There is a question mark there. I was raising that seriously as an issue for debate. There is not a free lunch in this world on student funding, so it has either got to come from the student and their family or the taxpayer and we need to determine that distribution between them.

  284. Does that mean that you and the department will be saying more clearly to people such as the NUS that to talk about £10,000 worth of debt with perhaps £5,000 of that due to credit card due to lifestyle choices is unhelpful?
  (Margaret Hodge) When we have a regard to what support the Government should give to students in their university for living expenses or for their tuition, we have to think carefully about what it is right for the Government to bear. Beyond that I do not want to get involved. It is not our debate. That is for individuals to determine. The only thing I have said and I stick to is that I am not concerned, as many others are, about students working part-time as long as they keep the balance right. Clearly if a student works too many hours that will be detrimental to their studies but if they work for ten to 14 hours a week, which appears to be the current average, I do not think it will be damaging to their studies.

  285. With respect, Minister, I do not think you have answered my point there. I am absolutely with you. Less booze, no car, get on your bike.
  (Margaret Hodge) No, no; they can have booze and cars.

  286. It is whether the Government should be supporting that. You started off saying that if the issue is that it is perception that is causing the problem to people and then you have the NUS going round saying, "This is the debt people are leaving university with". It is not just the NUS but other people as well. We have had evidence here that says that only a proportion of that is debt from student loans. Have you not got a responsibility to be a bit more up front and to have a debate about that issue?
  (Margaret Hodge) I would be very reluctant to get involved in determining students' life choices.

  287. I am not suggesting that.
  (Margaret Hodge) Should I tell the NUS what they say to their student body? I think that is difficult. That is up to them.

  288. I am saying should not the Government be saying that the average student loan debt that students are leaving university with is X and that if this overall figure which gets bandied around—I have heard young people quote it back and it gets bigger by the minute; it gets up to £16,000—is an issue of lifestyle choice should that not be challenged?
  (Margaret Hodge) Yes. The fact that I have been saying that students spend on average £25 a week on drink is perhaps opening up that debate.

Paul Holmes

  289. We keep talking about the average spending on drink etc of a student but we have already established that within the average there is a huge variation. I was at Nottingham University a few weeks ago and I was talking to a student there who is living on an absolute knife edge. She has got two part-time jobs, she is counting down to the last penny, she can afford two drinks in the bar a week, and yet there is another student who is rolling in money. The first millionaire I ever met was a student when I was at university who had inherited a million from his grandad. You have got such variations, especially since such a large chunk of the student population does come from the high and more affluent part of society. Is it not rather simplistic and crass to keep quoting this figure of the average student spending £25 a week on drink because the averages vary massively?
  (Margaret Hodge) Of course there is a distribution around the average. I will turn it round on you. What do you think the Government, the taxpayer, ought to be concerned with in terms of the amount of money a student gets? What is the right level? I do not know what your student in Nottingham is having but if I meet students I do start asking them where they spend their money and how does it go, which is a lifestyle choice that it may not be appropriate for the Government to fund, which is one that we ought to think about in ensuring that there is sufficient money. On the whole people in the system think it is a good investment. They are happy with it. I accept that point that Meg has made that we have got to be better about promoting the benefits and looking at choices around the debt that you come out with at the end of it. I think there are real questions to be asked about the extent to which we ought to invest taxpayers' money in supporting perfectly legitimate lifestyle choices that we all engaged in when we were at university.

  290. To move on to another extension in a new area, it is fairly obvious that under the new system, whatever it is whenever it comes in, a lot of students are going to be paying more money back probably, whether it is in bigger loans, higher interest rates, graduate tax. Whatever it is, students will be paying money back. The argument for that is, as we said earlier, that students on average are going to earn hundreds of thousands of pounds more than non-students over their lifetime. At what level do the repayments start kicking in? Is it still 80 per cent of average earnings when they start to repay the student loan?
  (Margaret Hodge) No. That was the old mortgage style. You start paying back once you start earning over £10,000 and then you pay nine per cent of all the additional money that you have earned over £10,000. To give you an example of what that would be, if you earn £11,000 you will be paying back £90.

  291. Without the exact figures students start to pay back at well under average earnings. If the argument for students paying back is that they are earning way over average earnings over the course of their working life, why should it be that they start paying back before they have even reached average earnings? Why not when they reach the average or why not when they are 20 per cent over the average?
  (Margaret Hodge) Another option.


  292. Minister, you will know that the Select Committee's previous report recommended a higher level of earnings.
  (Margaret Hodge) That is another option. All I would say back to you is that it is income contingent and that it is only nine per cent of all extra money earned above the £10,000 threshold.

Paul Holmes

  293. But they are paying back before they even reach the average and the whole theory is that they are paying back because they are earning well above the average but they have to start before they even get to that point. Secondly, how far do you take into account the fact that a student, compared to somebody who left school at 16 and started earning, at minimum has spent at least five years not earning but racking up loans and debts because they have done two years of "A" levels or equivalent and three years at university? Many students have done six, seven, eight years or more before they even start to earn, so yes, they are going to earn a lot of more in the future but up to this point they have spent five to eight years on average where they are earning nothing and racking debts up, and then you make them start to repay before they have even reached average earnings. Is that fair and are you looking at that?
  (Margaret Hodge) Lifetime earnings are £400,000 more. That is what we look at. To be absolutely honest, the issue you have raised is one that we need culturally to tackle. The main reason for leaving school at 16 is the attraction of immediate earnings. We have to convince people that immediate is not the same as lifetime.

Mr Simmonds

  294. I do feel quite frustrated, Chairman. I am not sure that I particularly have gleaned very much about you and your Department's thinking and the way you are going with this, and that may be deliberate from your perspective, but perhaps I could push you a little and ask you personally as the Minister responsible what are the positive aspects of the different funding regimes that exist in Scotland and Wales and Northern Ireland that you might like to include in the review when it comes out?
  (Margaret Hodge) Again those are different schemes that we are looking at.

  295. Are there parts of those schemes that you like?
  (Margaret Hodge) This is back to describing the pros and cons of a hundred different changes. I am not going to do that tonight. Clearly we are looking at what both the Scots and the Welsh have in their devolved administrations introduced.

  296. But without going into specifics you do think that there are positive aspects of the Scottish and Welsh schemes that you may well bring in to this?
  (Margaret Hodge) There are pros and cons of probably every variation you can think of.

Mr Shaw

  297. Why was not post-16 funding included in this review given that that is absolutely fundamental to your original point about widening access and we know that that is the springboard?
  (Margaret Hodge) Post-16 funding is being looked at. The educational maintenance allowances are being piloted and are looking effective. Funding 16 to 19 year olds in FE is different to funding students, weekly payments against term repayments. They have very different needs on up front payments against bringing money in regularly. One of the reasons the EMA is working very well is they get the bonus at the end which provides a huge incentive for staying on. Of course they are related and you are right to be concerned about it, but I do think they are meeting a different cohort of people with different needs.

  298. The department has one budget. If the key is from FE, that is the springboard and surely you should have started at the beginning?
  (Margaret Hodge) That does not mean that we are not addressing those absolutely crucial issues and it does mean that we are seeing this review in the context of—

  Mr Shaw: The Secretary of State will have to make tough choices. Within the budget, in terms of higher education, further education, all education, educational maintenance allowances will be part of that tough decision. It will not be a separate decision.


  299. I know you are in a building called Sanctuary Buildings and it may seem you do not have your ear to the ground as well as this Committee but have you not noticed a change from the time when the Prime Minister made his intervention? We in the Committee are picking up much more of a way to emphasise not on what the problems were deterring students from going in from poorer backgrounds at 18, but the discussion has been about why not enough qualified young people stay on, 16 to 18, to ever be able to go to university. There has been a sea change in the discussion and debate around this six, seven or eight months.
  (Margaret Hodge) I do not think there has been a sea change. The moment I got this portfolio, it did not take me very long to come to the conclusion that we had to get 16 year old participation up. We had to get prior attainment up. We had to get aspirations up and we had to sort student funding. It is absolutely right to have this review now. We would knock ourselves if, three or five years down the line, we suddenly found that we had inappropriate systems in place which did not meet our aspirations.

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