Examination of Witnesses (Questions 361
WEDNESDAY 22 MAY 2002
361. Thank you very much for coming. You are
becoming like old friends to us in terms of the number of times
we have seen you in various guises, either in the Parliamentary
University Group, I think, Professor Callender, the Government
seminar recently and, Wendy Piatt, similarly, but we want to get
the most we possibly can out of this session, so I am going to
ask a small introductory question by saying if you were looking
at the costs with the three key people in the Treasury and the
Department of Education and Skills, the three key people who were
going to make the decision, Wendy, what would you say? What should
they put into the changes that they are going to bring into the
(Dr Piatt) I think the allocation of
funds for post-16 education should be distributed more fairly
across the sector and within higher education. The Government
did inherit a regressive system and they have made significant
changes to make it fairer, but still there is much more to do
so that higher education institutions and students still receive
disproportionately more than their FE equivalents and this is
despite the fact that HE students are predominantly middle class
and then of course they go on to earn a lot more than their FE
equivalents, so I think just a fairer and more efficient distribution
of funds would be the principle from which I would start.
362. Claire Callender, the same question to
(Professor Callender) I think in many ways I would
agree with Wendy in terms of the thrust of her argument, but I
think then we have to be very careful that we do not see funding
for FE into some funding for HE as a zero-sum gain. There are
good arguments for additional funding
363. Other people would describe that as robbing
Peter to pay Paul, would they?
(Professor Callender) Absolutely, and I do not think
that we should give more money to 16 and 18-year-olds at the expense
of 18-year-olds, so it is a mistake to assume implicitly that
the size of the cake is fixed.
364. You are leading researchers in this field
and what we got from the higher education witnesses, from Universities
UK just now is that, quite honestly, this system has not even
bedded down. Even your research, as you said I think the last
time we interviewed you, Professor Callender, was tentative because
the hard facts of what really is happening out there in terms
of student debt, student debt aversion, people either coming in
or not coming in from more socially deprived groups, really there
was not the hard data there.
(Professor Callender) There is no question about it
and that has not changed. There is no hard data showing us the
extent to which the system either has a neutral effect or a disincentive
effect. We do not know the definitive figures because the research
has not been done. I am currently doing some work looking at the
disincentive effects of funding amongst prospective students for
Universities UK, but there are some things which are very firm
and that we know from our previous study and other research, which
is that there have been some interesting and significant changes
as a result of the system bedding down. One of the results is
that, for example, students' choices in terms of what university
they go to and where they go to university is changing and is
being constrained by the changes to student funding, so for that
actually now there is mounting evidence. There is mounting evidence
about the impact of paid employment on academic achievements of
students, but again I am doing more research on that. We know
certain things and perhaps I may correct some folklore things
which I have been hearing while I have been sitting at the back.
We do know roughly, for example, what proportion of student debt
consists of credit card debt and the idea that it is 50 per cent
is ridiculous. It is more likely to be 75 per cent. In my study
it was 75 per cent, but 75 per of all student debt consists of
money owed to the Student Loans Company, so I think we have to
be terribly careful and when we are talking about debt amongst
students, we are primarily talking about debt owed to the Student
Loans Company, student loans, and to take us off down a different
avenue, saying that the majority of student debt or 50 per cent,
as has been bandied about, is credit card debt is just not the
case. I think that is an important sort of folklore thing which
has been coming around and I think there are a few other bits
of folklore which seem to have been established around the place.
365. I was not particularly saying 50 per cent
or whatever. That is not something that I have taken on as necessarily
being the case. I think my concern has been that if we are talking
about debt aversion, people's concerns about it, the amount of
debt that is being talked about almost gets ratcheted up every
time you hear about it and yes, sitting where you were sitting,
effectively we were doing exactly that. What seems to be happening
is not people saying, "This is a known fact that there is
50 per cent which is credit card", or whatever, but they
are almost, like, doubling the current known debt to the Student
Loans Company and saying, "Well, actually, in reality, there
is more debt than this", so I think actually having more
information about what the debt is, what the amount is going to
be when people leave and what those proportions are is enormously
important because actually it is that figure of saying, "Well,
you are going to end up with £12,000 debt", which is
more likely to put people off.
(Professor Callender) One of the other things is that
we now have for the first time information on some of the effects
of the change in student funding. Particularly the Mori/Unite
study, that was the sort of first major study done whereby the
cohort of all the students surveyed were then affected by all
the changes. You may reflect in my report, it was conducted in
1999 and, therefore, for lots of students we were not seeing the
full impact of the change from maintenance grants to loans. One
of the most startling and I think the most shameful findings in
the Mori/Unite study, which was conducted earlier this year, was
that whilst student debt amongst students in social classes 1
and 2 had increased by 14 per cent, for students in social classes
4 and 5 it had increased by 49 per cent. In other words, the gap
in the level of debt between low and high-income students, that
in one year alone has increased three-fold, so that is the issue
I was trying to explain previously, namely that the gap and the
level of the debt between high-income and low-income students
is widening whereby debt ends up becoming a class issue.
366. There is a distinct difference between
serious academic research and a Mori poll, is there not? Sometimes
this Committee gets a little worried about what is seen as distinguishing
from serious long-term research where we do get some fundamental,
respected academic opinions, but as you said earlier, the first
cohort has not yet even graduated and yet you are extrapolating
and saying, "We know about what the effect is on debt, choice
of occupation", and much else. How can that be serious research
if you are extrapolating from a situation where you do not even
have any graduates yet?
(Professor Callender) Well, we have not got any graduates,
but this was their debt at the time, their current debt, and the
current debt had increased three-fold. It is not the final debt,
but the current debt, so that is quite legitimate and I have actually
looked at that study quite thoroughly to check and looked at the
academic rigour of it.
(Dr Piatt) Just to pick up on that, I do think there
has been scaremongering and a misrepresentation about debt which
in itself is a disincentive and the things that Nick Barr mentioned,
that if you added up how much tax a graduate would pay, that would
be a prohibitive sum. What people do not understand of course
is that a lot of the repayment of the debt to the Student Loans
Company is of course income contingent, so there is a lack of
understanding there. Back to the point about lack of evidence,
this is something we were keenly aware of because we began a project
in 2000, so it was something that we realised we would have to
be very wary about and of course often in surveys the level of
hardship reported by students can be overestimated and that is
perhaps where Claire and I might depart slightly, and also this
is why we have not recommended a radical overhaul of the system.
We feel that it should bed down, but we do feel that there should
be modifications based on some concerns which do emerge repeatedly
and strongly from Claire's study and some of the other studies
which have been undertaken, for example, Connor's, and one of
the main ideas emerging is this idea of perceived risk, not even
debt aversion per se as I think that is more contentious
and unproved, but there does seem to be a higher perceived risk
on the part of people from low-income backgrounds. So there is
not a level playing field and I think this is where the Government
can come in and help to minimise, not eliminate completely, but
minimise that risk by allowing some kind of-non-repayable bursaries.
367. Looking at EMAs, Margaret Hodge is on record
saying, "They are a most effective instrument that we have
found to increase participation". Do you share that view?
(Dr Piatt) I think it has certainly been shown to
be effective. The numbers are not staggering. We are talking about
5 per cent, though it has gone up in the second valuation to about
5.9, and of course we do have to remember that part of that is
the displacement from the work-based learning group, so it is
not all people who would be unemployed at 16. However, we have
clear evidence that it works and, therefore, I chose this scheme
as the basis of the Higher Education Maintenance Allowance and
also that it would present some kind of coherence so that if people
have their EMA at 16, they know that this is going to continue
to HE. It simplifies the system and gives them the reassurance
that we need.
(Professor Callender) I think the other advantage
of EMAs is that they were specifically designed to be an incentive
and that, I think, is terribly important.
368. Have we costed out how much it would actually
be to extend into higher education the EMAs?
(Dr Piatt) Well, it is difficult, and, as you can
imagine, you can think, "Well, should I give £2,000
and then £1,000 and £1,000?" which is the one that
I looked at. I know it does not sound very generous, but within
the constraints of the funds, and that would mean that you could
give about 125,000 people that Higher Education Maintenance Allowance
which would amount, and these are very rough figures, to, I think
it was, about £500 million. I was aiming for around the £500
million/£600 million as a realistic amount that we could
focus on and of course that would be very targeted probably on
people with incomes less than £10,000.
369. Do you think there would be any differences
between a Higher EMA and the one which exists post-16 at the present
(Dr Piatt) I think you would have to modify it to
a certain extent. Very basically the payment would be probably
monthly rather than weekly. There would be more emphasis on meeting
assignments and having discussions with personal tutors rather
than the strict attendance and the docked payment if you miss
a lesson, which works for that age group, I think. I think what
is also beneficial about it is that payment would be explicitly
linked to that support and of course we have been saying that
some non-traditional students need that extra support, so you
are more likely to get it as soon as you get a financial incentive
(Professor Callender) I suppose the reality is that
the vast majority of people at university do not have that support,
so if you had, for example, as a condition that you must see your
tutor once a month or once a week, I cannot imagine it happening.
Chairman: Well, it would be wonderful discipline!
370. In the calculation of the costings, did
you take into account the hardship money which universities now
get because we were talking earlier about rolling it up and using
it? You did use that money?
(Dr Piatt) No. That was just a very rough figure.
371. So you could deduct it.
(Dr Piatt) Yes, and some of the problems with the
roll-up of course is that some of these bursaries are very specific,
so you could not roll up all of that.
372. But the majority of it is for university
dispersal and so if they are complaining about the cost of actually
dispersing it out, perhaps we could put it into the cost of maintaining
and supporting students instead, and the money would be available
through a different route by default.
(Dr Piatt) Absolutely.
373. Professor Callender, you wanted to dispel
a myth in your opening statement about the proportion of student
debt in terms of the student loan and commercial sources. In your
paper to us as part of your evidence, you have said that increasingly
students are borrowing more money from commercial sources. Can
you just tell us a bit about that. How much more is that increasing?
(Professor Callender) I am sorry, I am not sure what
evidence you have got.
374. I am looking at your paper of October 2001,
2.2, the fourth bullet point.
(Professor Callender) That was looking at changes
since 1995-96, so that was showing that there had been an increase
in levels of credit card debt.
375. So it is on the increase?
(Professor Callender) It is on the increase, but that
is the increase between 1995-96 and 1998-99.
376. So you do not know what the situation is
at the moment?
(Professor Callender) No.
377. Universities UK want students to have a
£4,000 grant as opposed to a loan. They have said that is
a matter for the Government to cost, and they have said that it
will be for people on benefits, so it is going to be quite a narrow
band of people. What are your observations, both yourself and
Wendy Piatt, regarding that? Is that the solution? Is that the
(Professor Callender) I think that is part of the
solution, absolutely, and a grant of £4,000 is a start. Whether
that is going to be enough is open to question in terms of reasonable
living costs. I think the living costs are approximately £5,500/£6,000
a year, not £10,000. I think perhaps there was a muddle with
the debt, but the average living costs are about £5,500 across
378. Why do you not front-load it and give £4,000
in the first yearthat is the crucial year, we have heard
in your evidenceand then switch to loans in the second
and third years?
(Professor Callender) I would like to see something
rather different. I want to think back in line with Wendy about
what are the principles which need to inform our funding system,
what are the aims and objectives and what are the desired outcomes.
If one of the aims and objectives is to maximise access and equality
of access to higher education, I think then help needs to go to
those most in need, so I would like to see grants reintroduced
and I think that could be paid for in a variety of ways. I think
that Barr and Crawford have some interesting ideas, but actually
that money freed up really would only give, for example, grants
of £2,000. That £8 million that he talks about would
really only give grants of £2,000 to various
379. It was £800 million, I thought.
(Professor Callender) Yes, the £800 million would
only pay for roughly all students whose parents' income was below
£10,000 to have a grant of about £2,000. According to
Hodge's figures, 37 per cent of all students come from families
with an income of £10,000 or below.