MONDAY 13 MAY 2002
Mr Barry Sheerman, in the Chair
Memoranda submitted by MARGARET HODGE MP and
STEVE AND DENISE SMITH
Examination of Witnesses
MRS MARGARET HODGE MBE, a Member of the House, Minister of State for Lifelong Learning and Higher Education, examined.
(Margaret Hodge) I would be quite happy, Chairman, to go straight into questions. When I last came and gave evidence to you I did say that we had embarked on a review. We are now well into it and we beaver away hoping to come out with a sustainable solution which will ensure that we can meet our higher education target of having 50 per cent of under 30-year olds in higher education by 2010 without debt and the fear of debt being a deterrent to that target.
(Margaret Hodge) It may not surprise you, but I am not going to tell you exactly what you can expect at the end of this exercise. What I will say to you is that it has been a complex exercise which we have undertaken thoroughly and probably when we embarked on it we were not quite as aware of the enormous variations that you can look at in developing a student support scheme which lasts. We will be discussing one or two schemes in detail, I imagine, as we go along tonight and it all seems pretty straightforward when you start, and then you start thinking through what will that mean in practice, who will benefit from this, who will lose, what does that do in relation to where our ambitions for higher education take us over time, and it just takes time. Because I thought, Chairman, that you might ask me this question, I looked back at previous reviews that had been undertaken by various governments on student support and I remember one which you will recall that the previous Government undertook before it introduced its changes in higher education. At that time the now Foreign Secretary was then Opposition spokesperson on education and I will quote from what he said in the House of Commons in 1989 on the then review which was: "The review of student finance on which the scheme was based was promised in 1986 to be completed in a year. Instead the review took two and a half years. The previous Secretary of State promised an early debate but he dodged for all he was worth to avoid any debate whilst he was in office so as to pass the poisoned chalice to his luckless successor." What that quote made me think is that obviously previous people who have got into the detail of a review understand the complexity of it, but equally, unlike previous Secretaries of State of previous governments, neither this Secretary of State nor this team are avoiding engaging in debate on the issue.
(Margaret Hodge) Pretty regularly. We are doing a thorough job, Chairman, and you would feel angry if we came forward with a solution to the issue that was not something which was sustainable over time, certainly to see us through to at least ensure that we meet our target.
(Margaret Hodge) I have not got dates in my diary every week to see us forward into the future. We meet as and when we need to when further work has been completed. There are meetings both at official level, as you would expect, across government, quite rightly, and there are meetings within the department and there are meetings across department. It takes place as and when.
(Margaret Hodge) Some of the meetings I chair, yes.
(Margaret Hodge) It depends. Some of the meetings are clearly chaired by the Secretary of State in that she has overall responsibility for the policy.
(Margaret Hodge) No.
(Margaret Hodge) They are always chaired by us, yes.
(Margaret Hodge) I think there are plenty of views around and there is a whole range of ways in which you can determine the heart of what the review is about, which is the appropriate balance between what the student and their family pay and what the state should pay towards the support for students during their time in higher education. There is a huge range of options and the trick is not thinking of them but doing the very detailed work to ensure that when you go for a new scheme there is not an unintended consequence that we then regret one or two years down the line. The people you have talked to I have also talked to, but there are representations made by, for example, student bodies, the NUS and others. There are representations coming from various universities, higher education institutions, further education colleges and their representative bodies, Universities UK, who I believe want to give evidence to you, so what you have talked about is some individuals who have made it the focus of their research. There are plenty of other people who have thought about it and whom we have listened to.
(Margaret Hodge) We always have a lot of independent research going on in the department. Because I thought you might ask me this I have had a list of seven bits of research going on which are relevant to this and we are planning five more.
(Margaret Hodge) I think I would answer that by saying that what we are trying to do is proactive work to ensure that as we reach that 2010 target we really see a change in the socio-economic composition of those who go to university. What is quite extraordinary, and I have said this in a number of arena about participation in higher education, is that, despite the massive expansion since the days when you and I went to university, there has been no change in the socio-economic composition of people who go there. If I can quote some figures at you which are quite interesting, in 1960, out of the top three groups - if you divide them into A/B/C and then C2/D/E - 27 per cent went to university and only four per cent of the three lower groups went to university, so there was a gap then of 23 per cent. If you look at the 2000 figures, 48 per cent of those in the top three groups go and now 18 per cent in the bottom three groups go, so you could say that that gap has increased if you look at it that way. You can look at the issue in different ways and I will give you a more optimistic view. If you look at those who go into higher education now, five years ago, in 1995, 26 per cent of them came from C2/D/E; now in 2000 we are up one per cent to 27 per cent. Nevertheless, even if you take that more optimistic take on the figures, what has happened is that we have seen growth in participation without any change in opportunity for young people from lower income backgrounds. Our purpose must be not just to expand numbers to meet the skills agenda but also from the social exclusion agenda to ensure that there is real opportunity across all socio-economic groups. It is because of that that we are undertaking the review, to ensure that debt and the fear of debt is not an inhibitor. The evidence is not clear as to the extent to which it is an inhibitor. I said to you last time that equally important is prior attainment and raising aspiration levels, but we are beginning to get quite a lot of anecdotal evidence both from universities and from student groups, from those at the coal face, saying that debt and the fear of debt is an inhibitor, particularly for working class young people. Claire Callender's work says a bit of that. Then we have this bit of research that says that four out of ten agreed with the statement that "some of my friends were put off going to university because of the cost". It is not great, you can equally mount an argument in the opposite direction, but it is enough to worry and concern us. We have to make sure that we have got that right. You would not like us to come in two or three years' time and say to you, "We are doing brilliantly. We are getting very close to our 50 per cent target" and yet it is still middle class people who are accessing it. If you are only at 48 per cent of middle class people you could easily get to 2010 without making any dent whatsoever into that social imbalance.
Chairman: We come back to the fact that the social structure of the United Kingdom over those years has changed and those two lower social classes have shrunk quite dramatically as people have moved up.
(Margaret Hodge) The answer is no because we have a three-pronged strategy to tackle the fact that people from lower income groups are not going to university. One is to raise their prior attainment levels and that is the whole of the secondary school agenda for 14-19-year olds, and tackle the staying on routes at 16, all that stuff that we have been going on about. Two is this business about raising aspirations, getting young people to aim higher. We have got this really worrying evidence that 44 per cent of people in these lower income groups never hear about university as an option for them whilst they are at school, which suggests that not just their families and their friends but also their teachers and their career advisers are not getting them to aim higher, so the Excellence Challenge programme, all the work we are doing there to raise the aspirations and to work with things like the Connection service and the parents, is important. Three is the issue of debt. We feel that there is probably enough evidence that those from very low income backgrounds are more debt averse than others so that, although we know that higher education is a good investment because of your lifelong earnings and your job opportunities and all those things, there is still that fear in the lower socio-economic groups that it does put people off. Again, the evidence that Claire Callender has put together also demonstrates that debt is increasing, partly because the loans are generous and people are taking them out, but also debt among the lowest socio-economic group is increasing more than for others. There are some worries there and I would rather be proactive and do something to prevent us regretting in two or three years' time that we got it wrong.
(Margaret Hodge) Yes. The prime objective is to achieve the 2010 target and to achieve it in a way whereby we get a better spread of people from varying backgrounds into higher education.
(Margaret Hodge) No. I am very comfortable with that target and I think it is an appropriate target for these reasons. First, all the work that we have done around labour market predictions in the future demonstrates that out of the 1.7, 1.8 million jobs that are likely to emerge over the next decade, 80 per cent of those, eight out of ten, will require the sorts of skills and qualifications that you can only get through an experience in higher education. It may not be the experience perhaps that you had. It may not be the traditional honours degree. It could well be a much more vocation focused foundation degree or some sort other qualification. There is a spread. We also know that a one per cent increase in participation leads to about a half per cent increase in GDP which is about four million. There are two very strong economic arguments for us pursuing that target. It is an ambitious target, it is a tough target, it is an appropriate target, and then of course there is the other side of that coin, which is the social inclusion argument which we have dealt with.
(Margaret Hodge) Is it complicating? It is a part of our agenda for achieving a target, an ambition, that we set ourselves in our manifesto.
(Margaret Hodge) Yes.
(Margaret Hodge) I knew you had taken evidence from Nick Barr and Iain Crawford, so I focused a bit of my thinking in preparing for this evening around those issues. This is a very good example of where it is easy to come to a quick answer without having thought through some of the implications properly. The fact that we do not charge real interest on the loans that we give to students of course is a subsidy to all students, but thinking that charging real interest would be redistributive and would be benefiting people from low income backgrounds at the expense of those from middle income backgrounds I think is questionable and I would like to take you through some of that argument. In my view, if you go down that road too far - and again it is a thing we are thinking about; we have not ruled it out; these are the problems that we are having to think about - those who benefit least from charging real interest would pay most. Let me take you through the argument.
(Margaret Hodge) No. The Government borrows at varying rates of interest, as you know, Chairman. The rate that they talk about is actually six per cent which is the discount rate that the Treasury currently use. Interestingly enough, if you take the current regime, that is one of the difficulties with the current mortgages running now. It is six per cent plus the 2.3 per cent that we currently levy to keep the real value of the debt, so in fact what you would be charging would be 8.3 per cent under the Barr/Crawford scheme. The discount rate from the Treasury is six per cent. You have to keep the real value of the debt and currently inflation is running at about 2.3 per cent.
(Margaret Hodge) I think that is the view. I think Barr and Crawford would concur on that 8.3 per cent. Let us take that as an instance. If you take that, when at the moment you are borrowing for your mortgage at five per cent or thereabouts, a middle class family would immediately think that it is cheaper to add a bit to your mortgage and lend it on to your children than would a lower income family who may be in social housing and who may not have access to a mortgage. That is the first unfairness. Let me take another unfairness. One of the misunderstandings from Nick Barr and Iain Crawford is that under the old mortgage loan scheme you only paid for 25 years and that was it. Under our new income contingent scheme you carry on paying until you are 65 or die or become a permanently disabled person. Unless that happens you carry on paying it. There is not a stop which, as I understand it, certainly with the documents I have seen on this, was what they suggested to you there was. You do carry on paying. Let me take some examples and we will let you have them in detail if you are interested in pursuing that. Take somebody who borrows £10,000 and they are a low income person. We have divided them up into deciles. Take the second decile. They currently pay back, with 2.3 per cent to keep the real value, £12,700. It takes them 40 years to pay that back. This is a low income person. If you add in six per cent they would actually pay in cash terms not £12,700 but £28,300. Let me just finish this point because it is very important. If you then add in that it is a woman who takes a career break for five years, she would pay back in cash terms £59,000. From currently paying back £12,700, with the six per cent it goes to £28,300, add in the career break and it is up to £59,000. These are cash and I can give it to you in real. That is what they pay back. Take somebody on a high income, and we have taken somebody in the eighth decile. They currently pay back, if they pay back fast, £11,000. If they pay back the six per cent interest they pay back £14,100. If they take a career break they pay £16,800. The difference between the high earner and the low earner without a career break is double, from £14,100 to £28,300, and the difference between the high earner and the low earner, assuming a career break, takes £16,800 to £59,000, which is getting on for four times as much. What is described by Nick Barr and Iain Crawford as being a progressive system is not quite as progressive when you start digging down into the details. I have talked about career breaks. There are other issues of course which come in.
(Margaret Hodge) What I do not agree about is that, if we are concerned particularly that people from lower income backgrounds should participate, what they care about is the totality of their debt. I think the other implication -----
(Margaret Hodge) It is.
(Margaret Hodge) Ah, I see what you mean.
(Margaret Hodge) I fear that what you are actually suggesting is that we should further subsidise the interest rates for students so that the debt is low, which I am suggesting to you -----
(Margaret Hodge) You are because the alternative -----
(Margaret Hodge) The presumption on which all that is predicated is that the only way in which students survive in the present framework is by them all taking out massive credit card debt and I do not accept that premise.
(Margaret Hodge) I do not accept the juxtaposition that you are putting. First of all, I do not think that working whilst you are a student in higher education need be detrimental. It depends on the number of hours worked. The Barclay Report shows that on average they are working 11 to 14 hours a week. If you look at young people in FE colleges and schools, we have about the same proportion doing part time jobs in the FE sector -- and nobody raises an issue around that -- as we have of students in higher education also doing part time work. Secondly, the value of the grant, despite what the NUS I understand said to you last week, has gone up eight per cent in cash terms and one per cent in real terms since we brought it in. We do not have the evidence in the analysis that we have both from the student income and expenditure survey and from the MORI Unite survey to suggest that a combination of loans, working, support from parents -- and lots of students do get support from parents -- means that there is not enough in the student's pocket to have a pretty good standard and quality of life whilst they are studying. Every student feels hard up but what in reality they feel they have to pay for may be two slightly different things.
(Margaret Hodge) You have to await the outcome of the review to see what conclusion we come to.
(Margaret Hodge) I am happy to provide you with further examples. I will just show you New Zealand.
(Margaret Hodge) Do, because I think it is another interesting example where the proposals that were put on the table were not accepted by the Hungarian government.
(Margaret Hodge) If you start thinking that the answer to student support is simply to raise real interest rates on student loans, you are in danger of hitting those very students whose interests you most want to protect.
(Margaret Hodge) One of the key reforms that David Blunkett and Tessa Blackstone introduced which I supported was a tuition fee, which is only paid by those who can afford it. It is means tested.
(Margaret Hodge) I think those reforms that we introduced started ensuring that those who were able to pay contributed. To say the tuition fee does not count misses half the point. To the extent that university is still largely enjoyed by the middle classes rather than people from low income backgrounds, it must be true that any subsidy that we put in through the taxpayer goes to middle class people. To that extent it is true but remember that what we are asking people to do is, when they graduate, to pay back on an income contingent basis. For example, eligibility to the loan is determined according to income. You only get the last 25 per cent of the loan depending on the income of your parents. I am not evading this. I think you are trying to make too simplistic a conclusion of what is very complex.
(Margaret Hodge) You have to also remember where we were moving from. The loan system that had been introduced in the previous government was a system which had no real interest on it. A decision could have been taken at that time to levy the real interest on the loans. To the extent that there are more middle class people at university, that would have been charging more middle class people more for going to university. What I have tried to say in response to some of the arguments that Nick Barr and Ian Crawford put forward is it is just not as simple as that. If you think interest charges are an easy answer, you hit those very people you most want to help.
(Margaret Hodge) If we had a sustainable system in place which ensured that nobody was put off going to university because of debt and the fear of debt.
(Margaret Hodge) It is an issue of the balance between what students and their families pay and what the taxpayer pays.
(Margaret Hodge) We have already in that the Bill is in the House of Lords at present. When that Bill becomes an Act, there will be a facility within it to ensure that those who go into teaching in shortage subjects will get support for the repayment of their loans. There is nothing in any system that will prevent you discriminating in favour of particular groups in society who you ant to encourage. The private sector do it now.
(Margaret Hodge) Yes.
(Margaret Hodge) You are at the heart of the issue. How do you get the balance right between the contribution of the individual, their families and the state? We can argue about that and that is the sort of debate we are engaged in. Secondly, it is still true that the graduate premium is probably healthier in the UK than it is elsewhere. It is still the case, despite the expansion in numbers, that you earn over your lifetime £400,000 more if you are a graduate, on average, than if you are not. Of course there are exceptions to that but your average earnings will be 35 per cent more than a non-graduate. You are right that it is an issue of balance. You are right that there may be areas where the public sector will wish to intervene. We must not forget that there is still a big graduate premium. I went to the States recently to look at some of their universities and I think there is a different attitude there, between the States and ourselves, where the students are much more an investment in their future; whereas here in the UK we still see them as a cost. That is an attitudinal difference which we need to reflect on.
(Margaret Hodge) We have to look at the balance. Within the distribution of the average there will be some who, for all sorts of reasons, either the choice of career or career breaks or whatever, will find it more difficult to pay back. Hence my concern about going too far down the road about interest rates. There is no reason in any scheme you devise why you cannot have exceptions.
(Margaret Hodge) It is because we are very conscious of the competing demands on our resources that we are looking at the student support review in the context of the wider expenditure review on both higher education and education in the round or demands on education within our department. When we came in, in 1997, we inherited a generation of under-funding in the higher education sector. It amazes me how well the sector stood up, despite that 30 per cent cut in per unit funding over ten years until we started turning it round. We spend something like 6.8 per cent less on research today than we did 15 years ago or thereabouts. All those things are really worrying aspects; and yet we have kept our numbers up; we have kept our retention rate up; we are doing jolly well on research internationally; we have done a lot of innovative work about engaging with the local community. The QAA exercise shows that teaching standards are high. It has survived very well in a generation of under-investment. We have now to tackle some of those structural difficulties that the sector faces, whether it is pay, research, infrastructure, engagement in the local community, whether it is growing the sector to respond to our 2010 target. We have to see the student support review in that broader context and then see HE in the broader context of education spend across the whole department. Those are very tough decisions that the Secretary of State will have to take.
(Margaret Hodge) You are absolutely right to say that students do not understand that, even if they pay the current contribution to their fee, it is not the whole cost of their tuition in university, taken as an average cost. If you get into things like medicine, it is much higher. There is a huge amount of work to do when we have completed the student support review to get a proper understanding amongst students, parents and the wider community about the real costs and who contributes. I completely take that point. Before we get too gloomy, may I quote some of the stats from the MORI Unite poll? It is not ours; it was done by an independent organisation. Not all is gloom and doom out there. 96 per cent of those questioned thought university was worthwhile. 90 per cent thought it was a good investment. 86 per cent had a favourable impression of their higher education. 88 per cent were happy. 86 per cent were optimistic. These are not bad figures. Only ten per cent thought of dropping out for financial reasons. Let us build on that optimism which many students feel about their experience in higher education, although I totally accept what Valerie Davey said, which is that we have to get a better understanding of what the contribution to student fees really is.
(Margaret Hodge) That has been an argument that has been around in the sector for a decade and is constantly being raised with us. To the extent that we are looking at everything, we are looking at that.
(Margaret Hodge) The review body is looking at higher education and student funding there but, in my responsibility for life long learning in higher education, I am looking, together with my colleagues, across the whole support for students, across the whole age span. Students in FE aged 14 to 19 will not be paying fees. What you are talking about is a contribution to fees from adult students and that varies. It is not consistent across the whole sector. There are anomalies there. We know that over 40 per cent of our students are in FE that we want to get into HE. We have to ensure that we get the right incentives there to meet both the economic objectives of wider participation and the social inclusion objectives.
(Margaret Hodge) The last figure we got for last year was 42 per cent pay no fees and about between a third and 40 per cent pay full fees. We have not yet got this year's figures.
(Margaret Hodge) I was simply putting a question which I hope the Committee will accept is a legitimate question. If, out of the Unite MORI poll, we know that students on average are spending £25 a week on drink, that is £1,000 a year if my arithmetic serves me right, whilst nobody wants to interfere with lifestyle choices, least of all me -- my children go potty when I do -- is it appropriate that there should be state support to those life choices? That is all. Going back to some of Jonathan Shaw's questioning, if students choose to spend money in certain ways, we have to be clear the areas which we as a government and we as taxpayers are willing to put support into.
(Margaret Hodge) There is an argument. Again, you have to think about the balance between what the state puts into the system and what the student and the family puts into the system. We have to look at all the issues that the Chairman raised: how we see student funding in relation to other priorities across HE, FE and the wider education agenda.
(Margaret Hodge) We are looking at a huge range of options. They all have different impact as to who they benefit and disbenefit. They all have different costs, savings, and we have just got to get the balance right.
(Margaret Hodge) No; it is means tested. It is gradual.
(Margaret Hodge) There is an argument. You can look at these endless options. I would simply draw to your attention that, as far as we know from current data, 37 per cent of all students have an income of less than 10,000. That includes independent, mature students as well as younger students.
(Margaret Hodge) No. It depends. It is the parent with whom they live.
(Margaret Hodge) 10,000 or less. The higher you put it up the income scale, the more people you bring in.
(Margaret Hodge) That is always a problem with means testing, where you put the cut off point. That is an issue. I was simply trying to say that the higher up you take it along the income scale the greater the cohort of students, both young and mature, dependent and independent, that you bring into the frame. You are then back into an affordability issue.
(Margaret Hodge) You will have seen the letter that we sent to HEFCE this year and the letter that we sent in the last three years. It is an issue that has been put onto the agenda by a whole range of people, so we keep it on the agenda.
(Margaret Hodge) Nothing is ruled out. I have to keep coming back to that.
(Margaret Hodge) I think you are being somewhat unfair on me because I have given you the parameters quite clearly. The parameters are the 2010 target, our desire to grow numbers and extend social inclusion. We are looking at all this issue in the context of the broader expenditure issues. Within that, you would be the first to criticise me if I did not look at all options to ensure that I was not closing a door which might support our objective.
(Margaret Hodge) I hope I was not disparaging the argument. What I was attempting to use that as an illustration of was the complexity of the argument. Of course there is a whole range of interest rates that we could look at but the lower the interest rate the less the addition that you get into your costing. Can I just correct something else for you to have on the record, Chairman? I do not know where this figure of 42 per cent came from that we spend on student support. My officials will correct me if I am wrong because I am doing this off the top of my head but I think it is 35 per cent which is the amount we spend on student support. That is based on OECD 1998 figures. In the 1998 figures we were still under the old regime. At that point part of the student support was money that we were putting into LEAs for them to pay their contribution into universities, so the actual proportion of the HE budget that goes on student support is 23 per cent against an OECD average of 16 or 17 per cent. I just want to put that correct on the record so that we know we are measuring like with like.
(Margaret Hodge) Yes.
(Margaret Hodge) The lower the interest rate charged the more it then becomes a "subsidy" and the less you can raise to redistribute, which is an essential part of the schemes devised by Nick Barr and Iain Crawford. Of course you can play around with it. Those are some of the variations that clearly we are looking at. The only other thing I would say is that I think it would be regressive to go back to the mortgage scheme that the previous government had in place because once you reach the threshold where you have to start paying you have just got to pay it off. It is like a mortgage where you have to pay it off so that the years when your bills are highest because you have had a couple of kids and your partner may not be working or working part-time are going to be the time when your repayment will be strongest, whereas this is entirely income related.
(Margaret Hodge) Of course. You can do all those things.
(Margaret Hodge) We have not discounted anything, as I keep saying; we would not. All I was trying to put to the Committee was that what may seem like a straightforward solution is rather more complicated. Let me just add one further complication to the agenda. Once we start charging real interest you come into consumer credit legislation which means that you have within 12 days, if a debtor asks, to tell them how much they owe and how much more they need to pay. Our current income contingent scheme means that you collect through Inland Revenue. Inland Revenue only tell you at the end of the year what you have paid so we would have to come out of the Inland Revenue scheme and then immediately what would happen would be that people would default more.
(Margaret Hodge) The reason I chose, rightly or wrongly, to hone in on the argument about interest rates was that in a sense you have been I think, as I have read who has come to see you and the way you are thinking, focusing your considerations on that and all I wanted to say to you was that it is really a bit more complicated than it seems at first sight. There are arguments for and against absolutely everything and going into them is a little bit like the Chancellor going into every tax that he could or could not raise in a budget and it would certainly keep us here for ever.
(Margaret Hodge) There are pros and cons on all these options and they are ones that we will take into consideration during our deliberations.
(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.
(Margaret Hodge) You may be frustrated but I do not think surprised.
(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 re-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.
(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.
(Margaret Hodge) No, no; they can have booze and cars.
(Margaret Hodge) I would be very reluctant to get involved in determining students' life choices.
(Margaret Hodge) Should I tell the NUS what they say to their student body? I think that is difficult. That is up to them.
(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.
(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.
(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.
(Margaret Hodge) Another option.
(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.
(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.
(Margaret Hodge) Again those are different schemes that we are looking at.
(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.
(Margaret Hodge) There are pros and cons of probably every variation you can think of.
(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 are very different up front payments against bringing money in. 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.
(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.
(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.
(Margaret Hodge) I feel as passionately as I know you and the Committee do. I think higher education is at a crossroads now. There is a lot that we have to get right over the coming period in terms of investment in all the areas that we talked about earlier on. If we do not get it right, we will pay a heavy price, not tomorrow but five or ten years down the line. I feel that about student support as much as I do about higher education across the board. There are lots of ambitions around. We have got to meet as many of them as we can.
(Margaret Hodge) We are looking at simplifying the current regime, particularly of targeted student support. The link between those students who most require support and the benefit system is something that we constantly keep under review. There is a lot of discussion between the two departments.
(Margaret Hodge) They are certainly part of the targeted support work that we are doing and the simplification of that target support regime.
(Margaret Hodge) Again, you are asking me to preempt spending review decisions. All I would observe is that that so far has been the most effective lever that we have found to increase participation at 16 and to keep young people in full time education at 17. That is the evidence so far.
(Margaret Hodge) I am pleased that HEFCE are doing a review to ensure that the additional money that is required to both give support to students and to ensure they get the appropriate teaching is targeted better at those who need it most. That review is appropriate.
(Margaret Hodge) What I would very happily do is two things. One, give you some examples of tables when I spoke about repayment profiles. The other thing that I think would be of interest to you is to look at the New Zealand experience.
(Margaret Hodge) I will reflect on what we can send you and I will send you as much as I am able to.
(Margaret Hodge) Probably there was work done around that. It is one of the options we have looked at and I will check in the department and write to you.
(Margaret Hodge) I will check to see what we have available.
(Margaret Hodge) I will check to see what we have that we can give you.
(Margaret Hodge) Thank you.
Chairman: We have not got everything we sought, but we will see you again.