Select Committee on Education and Skills Minutes of Evidence

Examination of Witnesses (Questions 380 - 399)



Valerie Davey

  380. So we are doing brilliantly if we have all these low-income families of 37 per cent. What are we worried about?
  (Professor Callender) We have also got the top at 37 per cent, but the issue there is I still think that the problem associated with Barr and Crawford is that at the end of the day, those people who take up the largest loans, which we know to be low-income groups, will end up having the largest repayment and will take a long time to pay off those repayments. I think we need to be somewhat more creative and we need to think about issues, like, for example, if we give a grant of £4,000, that is not going to be enough to live on, therefore, students may still need loans, and I think we need to think about differential interest rates for different income groups and students. I think we need to think about who we make loans eligible to and not eligible. There is an argument for means-testing loans even more. At the moment there is a 75 per cent cut-off. We could think about saying that only 50 per cent of students should be eligible to borrow money.

Mr Shaw

  381. You are describing a whole variety of different things and one of the issues that is putting people off is the complexity of the current system and what you have just described seems to make it even more complex.
  (Professor Callender) It is going to make it more complex, but I think we have got to decide what our key priority is and if the priority is to actually give more help to lowest-income groups, unfortunately there is no simple solution to that.

  382. But we know that where a system of financial support is complex, whether it is student support or whether it is indeed other welfare benefits, the take-up by the target groups is low. Can I ask you, Dr Piatt?
  (Dr Piatt) I think the priority is to simplify the non-repayable bursary aspect of student support. I think the figure of 21 is cited as the number of grants which are available for the neediest students, so having the HEMA would solve that problem. In terms of the loan, it actually does not make it a lot more complex if you allow certain exemptions from the real rate of interest and very importantly, which has not been mentioned in some evidence, is that the real rate of interest would be frozen during periods of childcare and unemployment. Other schemes which impose this real rate make those terribly important exemptions, so the debt does not accumulate as much as it might do otherwise, but the system can cope with some of those exemptions.

Mr Pollard

  383. Repeatedly it has come through evidence all around the piece that it is the perception of debt which has been known to put people off. That implies that if we just explained it better, the perception might change and, therefore, people would come in. Is that not something we could pursue, and that is just explaining it and saying, "It's not too bad really"?
  (Dr Piatt) Information is the key. People constantly pay lip-service to the importance of informed choice and making sure everyone has access to the same amount of information. Realising that in practice of course is much more difficult. I think the Government have taken steps to do that with, for example, the Connexions Service and I think they are very keenly aware of the problem of disseminating information, so one has to be patient, I think, to allow that information to get through. I think it is gradually, and I think there is a change of perception in terms of debt and loan, particularly amongst the top socio-economic groups, or at least not 4 and 5, in that some surveys have recognised an increasingly positive or at least a resigned attitude to debt every year. The Barclays survey indicated that and the Mori/Unite survey indicated it. So it is a big change in culture for Britain of course. In Australia, it took many years for students to accept this new investment in learning culture and America have had it for many years. It is very embryonic in this country.

  384. As to the 50 per cent, the emphasis seems to have changed because the target was 50 per cent and now we are moving towards 50 per cent, so that is a softening and I welcome that. Does this drive the whole agenda? We all seem to be focusing on this extra 2 or 3 per cent and these are the very poorest, the ones we want to attract in, but is it the tail wagging the dog, this 2 per cent, which is driving the whole thing up?
  (Professor Callender) I think irrespective of whether there was a target of 50 per cent or not, there are inequities in the current student funding system and those need to be rectified. The pressure may be that much greater now that there is a target of 40 per cent and, as Professor Green suggested in her evidence, in terms of where that expansion is going to come from, if there is a serious commitment to widening participation, then it has to come from those lower-income groups.

Valerie Davey

  385. You were talking about the overall fairness, Claire, or you started to. What about the FE students who are not in the 16-to-19 group?
  (Professor Callender) They are the second-class citizen par excellence because at the moment the system of EMAs is only for 16 to 18-year-olds. Older FE students are totally reliant on access funds and access funds are arbitrary.

  386. And the Government has been quite clear that this review is for higher education?
  (Professor Callender) It has been, and as three-quarters of the FE population are older than 19, I am very concerned about that older group. I am particularly concerned about any suggestions that loans should be introduced for that age group, though I understand that that is a possibility, and my concerns are three-fold. Firstly, there are issues about returns to higher education, especially in relation to catering education. We are aware that part of the rationale behind loans is that you give the money back because you get higher earnings and the data around the returns of further education in terms of qualifications that further education students get and especially older students is that they are certainly not as good and in certain cases they are near to zero. That is number one problem. Number two problem is the problem of debt and we all know that story, but we all have in addition to remember is that FE students will already have some debt because they are normal people like the rest of us in this room, and in work I did for the HEFCE, which was with FE students in 1998, what that showed then was that 37 per cent of all students over the age of 19 had some level of debt

  387. In other words, we are saying that it is not debt aversion generally that people are opposed to, but it is debt aversion in terms of their education?
  (Professor Callender) Yes, well, there is another thing and that is about the attitudes towards fees for education. When asked about whether FE students would be prepared to take up loans, only 20 per cent did say they would be prepared. The other bit of evidence is let's look at CDLs, let's look at creative development loans, and in fact only a minority of people taking vocational qualifications used CDLs, so they vote with their feet. The highest, the most significant thing amongst FE students was whether or not they thought they would benefit financially from their qualification.


  388. Are we not in danger of becoming sort of nannyish about this?
  (Professor Callender) No.

  389. It is absolutely true that all sorts of people at various stages of their life will have debt.
  (Professor Callender) Of course they do.

  390. It is a bit nannyish to always protect them against that.
  (Professor Callender) Of course they do, but what one has to be completely aware about is what debt is used for. If it is me, I use debt to improve my standing of living.

  391. People on the poorest estate in my constituency pay absolutely ghastly rates of interest to buy their children toys at Christmas.
  (Professor Callender) That is right, that is exactly it.

  392. What we are suggesting in this Committee, some of us, is that the loan system that is offered to students is a very good buy compared to credit cards and to the rip-off people on the street corners.
  (Professor Callender) Absolutely, but what I am trying to suggest about the use of credit is that I use credit in one way, to improve my standard of living, and I should imagine the people on your estate use credit to make ends meet, and that is a very important difference. Yes, of course, relatively speaking, the interest rates associated with student loans are by far preferential to the sort of, sadly, repayments and interest rates that the people on your housing estates in Huddersfield are having to pay, but thank God that they are.

Valerie Davey

  393. Can I just ask Wendy very quickly whether she thinks that FE post-19 students ought to have been considered if the Government's objective is to get greater access into higher education?
  (Dr Piatt) Absolutely. One of our key proposals is that extending the EMA to the 19-to-24 age group is so important and again ideally for students who have not attained their initial Level 2 qualification as this is the key to entering the labour market, and again there are many students usually from low-income backgrounds who leave school at 16 and then realise that the labour market is a harsh environment, they need to come back into education, and then there is the awful disincentive to start coming in at 19, so we really need to address that point. If I can just make a quick point on the loan, it is very important to differentiate between the type of vocational qualifications because they are very different and the returns to them are very different, so a qualification, particularly an HND in engineering, is relatively lucrative in that there is a substantial wage premium to that qualification, so it makes perfect sense to allow people who want to take that qualification to take out a loan. Also going back to Nick Barr, Nick did an analysis on the repayment of FE loans using his economic modelling and it showed, on the whole, that FE loans would be repaid extremely well. My main point is that loans are better than nothing. What would these people have done without having access to the capital that other people have access to, so okay, we may be worried that they will be accumulating some debt, but at least it enables them to start the qualifications that they may not have been able to do in the first place. The problem with CDLs is of course that the banks have discretion over who they lend money to and to me that really does undermine the credibility of CDLs and is partly the reason why lots of people did not take out the CDL.

Paul Holmes

  394. I was a head of a sixth form previously and when I give examples sometimes of how I saw in recent years that it became more difficult to get students from low-income backgrounds to go to university, it sometimes gets dismissed as anecdotal, although having seen 1,000 students go to university, it is a pretty wide anecdotal base, but I was interested, Professor Callender, in your report that you sent us on summarising the research on student debt on participation. You quote various surveys which provide more systematic evidence and one is, "Prospective students from lower socio-economic classes are more likely than those from better-off families to report they are deterred by the costs of HE, and the prospects of debt", or "More important" in deterring young people from entering the HE system, "is the `pull' of economic independence offered by employment, frequently in a chosen career that does not require a higher education qualification". Again there is no systematic evidence of the deterrent effect of the current fees and loans system, yet in your report on the summary of research you point out the difficulties of knowing exactly what is happening since we are only just getting students graduating, but you report a lot of different studies which produce a lot of evidence that people from lower socio-economic backgrounds are deterred by the current system of fees and loans. What would you say to those people who say, "Well, there is no real evidence of this deterrent effect"?
  (Professor Callender) I think I would be laughed off. It is quite true in terms of the scientific study that needs to be done to prove it has not been done. However, if I turned around, they would laugh at me and also they are reporting that they feel it is a deterrent and there is now mounting evidence and students reporting it, but I cannot show you that participation rates have gone down by X per cent because nobody has done the research, including the Government and it is very costly, and it is only the Government really at the end of the day that can afford to fund this piece of research.


  395. But the killer for us very often when we ask questions to people slightly outside the research side is that they say, again reasonably anecdotally, but some pretty firm evidence backing that anecdote up, that it was not a very good system of full grants in getting the target people in. The old system did not work, but the new system does not seem to be working any worse, so why do we think there is some sort of miracle answer by going back to grants?
  (Dr Piatt) I certainly do not think it is a miracle answer and I often emphasise that there is too much emphasis on the financial aspects of wider participation. As I emphasised in the book I have submitted to you, the key reason why people from the lower socio-economic groups do not go into higher education is that they are not attaining the Level 3 qualification and they are not performing as well at school. That is the key reason. If they performed as well as their more affluent counterparts, we would increase the number of those people in higher education by about four, four-fold.

Mr Shaw

  396. I think there was a report in The Independent recently on the situation in Ireland where they have reduced fees or abolished fees and introduced maintenance grants, and the participation amongst poor students has decreased.
  (Dr Piatt) Or not changed, yes, absolutely.

  397. Do you have any observations, Professor Callender?
  (Professor Callender) No, because I do not know the research.

  398. It is rather interesting.
  (Dr Piatt) Yes, that is true, but, having said that, you are not going to see a huge change, but it is getting the balance right. I do not want to overstate the importance of finance, but, as I have said, from the evidence we have seen, there is a case for enabling, just giving an extra push to those students from low-income backgrounds to be able to enter higher education. There are more important factors, but still I think there is enough evidence to warrant that modification to the present system.


  399. We are winding down in this session now and probably when you leave this room, you will think, "They didn't ask me the relevant questions and I didn't get a chance to answer what I really wanted to answer", so last chance. You have heard the discussion this morning and you have been following actually all the course of this inquiry, and this is the last session, so are there other things you want to put on record which otherwise have not been put on?
  (Dr Piatt) I think the main point is if the Government's overriding objective is social inclusion, and I happen to think that is the right priority, then just some of the policy instruments they have employed have not been the best to achieve that and that the best of the system they have inherited should be reformed further. I think there is a genuine commitment to increasing attainment in school in order to increase participation, a recognition of the importance of ensuring that all adults attain a Level 2 qualification. It is just that the funding at the moment does not quite reflect those priorities, so I would suggest a funding regime that does reflect those key priorities.
  (Professor Callender) I would absolutely agree with Wendy, that we need a funding system whereby what we are looking at is the outcomes, and if the desired outcome is widening participation, we have to then think about what would meet that overall aim and objective and that policy outcome. My concern is that the current policies that we have in place do not do that.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 11 July 2002