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Mr. Tony McWalter (Hemel Hempstead): The hon. Gentleman mentions bad policies. Surely it would be a bad policy to leave universities radically underfunded?

Dr. Pugh: The Liberal Democrats are in no way proposing to do that. My concern tonight is top-up fees. Labour Members will have to stand alone at the hustings in two years, justifying top-up fees and tuition fees. That is a headache that not even a party loyalist wishes to face. Temporary embarrassment today is a reasonable trade off against serious embarrassment at a later date.

Top-up fees are no part of the ideology of the Labour party generally or of new Labour. They are not an irreversible plank of Government policy. The Chancellor will not commit suicide if we reverse that policy. I am sure that he could fill the hole that the removal of top-up fees would leave, even if he does not follow the Liberal Democrats' suggestions. It could be said that I am appealing to the low motive of electoral survival, but I ask Labour Members what the high motive is. What is the argument for top-up fees based on political idealism or on socialism?

We all agree that the universities need to be well funded to compete internationally, but the Government are claiming that the only solution is that some should be allowed to charge. That is to assume that all universities will not end up charging, which is not something that Labour Members are at all comfortable with. What will happen is that the most prestigious educational institutions will charge more and it will cost more to study at them.

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In sum, the most prestigious education will be less affordable. Prestigious education should be affordable, but Labour is arguing that it should be less so. Whether tacit or explicit, that is the philosophy behind top-up fees. It is not socialism or equal opportunity; it is disguised in part by talk about access regulators and support for poorer students, but the reality is that prestigious courses will become less affordable.

Mrs. Anne Campbell: I am a long-standing opponent of top-up fees, but I must say that I would find it much easier to support the Liberal Democrat motion if I knew what their total policy was. To pick out one little bit of policy and to concentrate on it is to try to confuse both the House and the electorate. It is not telling us how the Liberal Democrats would get extra money into higher education.

Dr. Pugh: The hon. Lady must make up her mind whether she accepts the principle behind top-up fees and whether she expects those fees and tuition fees to damage her electoral success.

Essentially, the premise on which top-up fees are based—the only ideology or principle on which they are based—is that prestigious education makes people wealthy: go to the right universities and end up richer. That is the credo of philistines who take the view that if prestigious education does not make a person wealthy, it is not in fact prestigious education. It is a matter of empirical fact, and I shall not dispute it, that graduates from Russell universities have more overall earning power. They will end up earning more than average, but they will also end up paying more tax than average.

The principle still dogging top-up fees is that they make prestigious education less affordable while it is not necessarily more lucrative. Russell group undergraduates will do better financially than most, but the reason for that is not necessarily the fact of their going there. Part of the reason will be that, having gone there, they are part of a family that is upwardly mobile and that helps and supports them in every conceivable way. Perversely, the effect of top-up fees will be to make those universities more elitist and less effective. At the end of the day, Labour party members must decide whether they accept the principle that the best education in this country should become progressively less affordable.

6.42 pm

Mr. David Rendel (Newbury): We have had an interesting debate, demonstrating a lot of angst in the Labour party on top-up fees, which is no surprise. We have long known that a number of Labour Members agree with the sort of policies that the Liberal Democrats have proposed. If one or two, such as the hon. Member for Cambridge (Mrs. Campbell), do not know the rest of our policy, I can only say that many Members on both sides have explained it at great length. They have obviously gone to great lengths to find out what Liberal Democrat policy is, even to the extent of reading LibDem News. I am delighted to learn that the only party political paper still in existence is so well read by hon. Members.

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The first point I want to pick up from the debate is whether the level of fees charged has any effect on the amount of money going into our universities. There has been widespread agreement that our universities are seriously underfunded. We need sources of funds for university research and teaching because the level of funding has sunk greatly, particularly since the big expansion of the universities began. Whatever the Minister may have said—he is new, and we cannot expect him to have read all the facts yet—tuition fees did not lead to any increase in funding for universities. In fact, funding per student fell and continued to fall for some years after tuition fees were introduced.

Four or five years later, the Labour Government, to their great credit, began to put a little more money into higher education. I am all for that. The Liberal Democrats have continued to say that we support the fact that the Labour Government are putting more money into higher education. The point is, however, that there is no correlation between the introduction of tuition fees and more money going into higher education. The two things are quite separate, as is always bound to be the case. Any Government will look at the national cake, try to decide how to divide it between personal expenditure and spending on public services, and then decide how the money for public services can be raised. Some will come from voluntary sources, such as people paying privately for health or education or businesses giving money for research in universities, and some will come from charges, such as charges for education or prescriptions. More will come, at the margin, from taxation. It is inevitable that any Government will decide first how the national cake should be shared, then how the money should be raised. The marginal part of Government revenue will always be taxation.

If the Government know their business at all, the level of fees cannot, therefore, have any real effect on spending in higher education and universities. Indeed, it would be a dereliction of the Government's duty if it were otherwise. The whole purpose of the Government must be to seek the best way to spend the national wealth on behalf of all the people. If that is their prime purpose, they must make that decision before they know how much will be levied in charges, and not afterwards. I fear that the university vice-chancellors who favour top-up fees are sadly deluded in what they think will be the result. The fact that tuition fees made absolutely no difference to the amount of money going into universities demonstrates my point.

I shall talk briefly about Conservative policy, but we shall have another opportunity on Wednesday to tear them to pieces. I look forward to that, and I feel sorry for the hon. Member for Daventry (Mr. Boswell) who will presumably have to defend his policies then. For today, I am glad that the Conservatives have come round to our point of view in opposing both tuition fees and top-up fees and in saying that they will never implement top-up fees, if ever they get the chance. I shall be delighted to have their support in the Lobby.

The hon. Member for Blackpool, South (Mr. Marsden) felt that top-up fees would help the less prestigious universities. If there is to be a market, however, and the Minister was insistent that the whole business of differential fees would cause a market between the universities, it must be the case that

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prestigious universities will gain the most in top-up fees because they will be able to raise their fees the highest and charge the greatest fees. Inevitably, the market will mean that the less prestigious universities do least well out of fees. The hon. Gentleman's argument that top-up fees are necessary to help the less prestigious universities is nonsense. I am afraid that that, to my mind, destroyed the whole basis of his speech. I fear that I did not pay much attention to the rest of it, for which I apologise to him.

Differential fees have also been raised, and there seem to be three main disadvantages to those. First, courses such as science and medicine could cost more, in which case we would reduce the student numbers for those courses that are exactly those in which the country needs to encourage more students to participate. What a bizarre use that would be of market forces. Alternatively, courses that cost more, such as science and medicine, will be charged at lower fees, but that, too, would be a bizarre form of market.

Secondly, the posher and more prestigious universities would be able to charge more. That would only widen the divide that is already there between the different resources going to universities. It would drive some universities into the ghetto, and it might drive others into liquidation, a threat that already hangs over some. If the threat worsens, I fail to see how the Government's policy of trying to widen the number of people going into higher education will be advanced.

Thirdly, if there are differential fees, poorer students will inevitably tend to go to the less well-equipped and prestigious universities. What will that do in terms of providing better opportunities for the young people in our country who come from less well-off families? The Minister suggested that he was slightly doubtful about whether the less well off would tend to choose the cheaper universities. I can only point him to MORI's "Student Living" report, which came out earlier this year, and which makes precisely that point. When MORI polled students, a great many said that they would choose a university according to cost if they did not have the money to pay for the most prestigious.

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