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Mr. Chaytor: Will the hon. Gentleman give way?

Mr. Rendel: I am sorry, but we are behind time.

The fourth point is that higher education produces benefits, as most of us accept, for industry, society as a whole and the individual graduate.

We all accept, therefore, that all three should contribute to the costs of higher education. I stress that my party accepts that, because some people deny that we do.

Graduates do not all benefit to the same extent, however. Some receive much more as a result of going to university, yet, as my hon. Friend the Member for Harrogate and Knaresborough (Mr. Willis) pointed out, some people would earn more money over their lifetime if they had never gone to university, but had gone straight out to work. Even graduates in the same subject do not necessarily earn the same amount during their lifetime. Some will go into better paid jobs as a result of getting a degree, but some will be less well paid.

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Using income tax to fund our higher education system has the added advantage that those who gain most financially from their degrees pay more, while those who gain least pay less. That is a fairer way. If the burden of repayment falls equally on all those who obtain degrees, whatever their degree may be, we shall inevitably end up with a less fair system than if we funded it through income tax, which is contingent on the income earned throughout a graduate's life. Under an income tax-funded system, the burden is spread more widely, thinly and evenly.

Tuition fees and top-up fees will not in themselves put even one extra penny into higher education. Higher education should be funded by the three sources that benefit from it. They should contribute in proportion to the benefit that they gain.

This evening we have an opportunity for the Labour party to rid itself of the millstone around its neck, an opportunity to support widening participation and the needs of our economy and an opportunity to create a fairer society, which makes the best use of the potential of all its young people.

6.52 pm

Alan Johnson: With the leave of the House, I shall reply to this interesting debate. I am grateful for all the kind words welcoming me to the Dispatch Box. I do not know whether the debate will be memorable for anybody else, but it will certainly be memorable for me as it has been my first canter around this particular course. It has shown the strong feeling of Members on both sides of the House about an important and crucial issue, whose central features cannot be ducked. They need to be debated.

I shall try to respond as far as I can to the various points that were made. The hon. Member for Harrogate and Knaresborough (Mr. Willis) seemed to be alleging that the White Paper offers no help to full-time students working part-time. Perhaps my understanding was not accurate, but he seemed to be making that accusation. In fact, our White Paper proposals certainly will provide assistance, with the reintroduction of the higher education grant and no upfront fees.

The hon. Gentleman asked whether the additional fee income really would be additional. That is also an important point for Labour Members. My right hon. Friend the Secretary of State for Education and Skills has made it clear that the income will not be taken into account in the Higher Education Funding Council formulae and mechanisms; it will be additional money going into universities. I am happy to repeat that.

Mr. Barry Sheerman (Huddersfield): Today, the Select Committee on Education and Skills has been finishing its inquiry into higher education, which is why its members were unable to attend the debate. The Minister will recall that when we recommended that the postcode premium should be increased, we thought that that would be extra new money. It has not been new money; it has been top-sliced from the rest of the budget.

Alan Johnson: Extra money will be going in during the settlement, however. We are very much looking forward to my hon. Friend's report.

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The debate got bogged down for a while on all things Scottish. As great believers in devolution, we accept that different decisions will be made in Scotland and in Wales. A relevant point was made, however, about the comparison of the Scottish grant with the new grant that we plan to introduce, which will be a non-repayable grant of £10,000—[Hon. Members: "£1,000!"]—of £1,000. I am sorry. That was nearly a policy change—I could hear someone falling to the floor behind me.

The English system will be better for poorer students than the Scottish system. Under the Scottish system, £2,100 is removed from the student loan, while in our system, the poorest students do not have to pay upfront tuition fees; they receive a non-repayable £1,000 maintenance grant and up to £1,100 is removed from the variable fees. They will not have to start repaying any of that until they earn £15,000. The £2,100 endowment payment is not income-related, so I think that we have a good case, which we shall make over and over again, that we have a better and more generous system for the poor.

I greatly respect the hon. Member for Daventry (Mr. Boswell), but the policy of Her Majesty's official Opposition is opportunism over integrity. I cannot understand how the party that set up Dearing and supported tuition fees in the House should not only be against the extra funding, which is bad enough, but should also want to return to a 19th-century policy of elitism as we enter the 21st century. That is thoroughly depressing.

The hon. Member for Daventry asked about the repayment threshold, which is another important point. He said that the repayment threshold of £15,000 is still lower than it was under the Tories' loan scheme. However, under the Tories' scheme, when a person's income reached £15,000 they paid back the money with interest big-time. It is not a minor point of detail about our threshold when we say that neither students nor parents will pay the fees, but graduates will. When graduates earn more than £15,000, the rate will be 9 per cent. of the difference between £15,000 and their earnings. The rate of interest will merely keep pace with inflation. That is entirely different from the Conservative scheme.

My hon. Friend the Member for Blackpool, South (Mr. Marsden) made an extremely thoughtful contribution from his experience not only as a lecturer, but as a distinguished member of the Select Committee. He rightly pointed out the anomalies in the Liberal Democrat position. He made the point about part-time students being helped and he said that variable fees must be additional. He said that the White Paper is not perfect and that it needs to be refined and revised, but that it is the only show in town.

I wish to dwell on the contribution from my hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly), as it goes to the centre of the whole argument. He said that the proposals would discourage youngsters from poor backgrounds and referred to research from America, where about 45 per cent. of youngsters from the poorest backgrounds go to university. I want to make two important points to my hon. Friend. First, there is an incredible statistic that shows that there is an 8 per cent. gap in social classes, but only a 1 per cent. gap in admissions in applications to the Russell group of universities. We need to address some of the points that

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my hon. Friend makes about being put off going to Oxford, and we have a whole host of recommendations in our White Paper to tackle those issues. Secondly, my hon. Friend mentions America, but we have information from Australia, which has a fee deferral system very similar to what we are producing, showing that that does not deter pupils from poor backgrounds from going to university.

In conclusion, the whole thrust of our White Paper is that, if we do not take action now, our very well respected and thriving university and higher education sector will decline. The institute for employment research shows that 1.7 million jobs will be created in this country between 1999 and 2010. Nine out of 10 of those jobs will require higher education and a graduate education. I know from my previous job at the Department of Trade and Industry that, if we do not take this opportunity to improve and enhance our higher education system and to attract more youngsters, we will damage the future prosperity of this country.

I believe that the three Dearing principles were absolutely right. The hon. Member for Newbury (Mr. Rendel) tried very hard to convince us that a contribution from society through taxation is Liberal Democrat policy, because of the argument that the postman and the labourer—non-graduates—ought to make more of a contribution through the tax system, and that the Liberal Democrats support the Dearing principles. However, the tax system will not ensure that the universities can take advantage of that extra funding. If taxes were increased, the money should go to other parts of the education sector.

I am afraid that Liberal Democrat Members cannot suggest that their policy in any way reflects the Dearing report, which very clearly refers to a contribution from society through taxation and a contribution from employers. My hon. Friend the Member for Blackpool, South made an important point about endowment policies representing a long-term solution. That is an important feature of the White Paper, but employers have to make their contribution. As Dearing said, the other important element is that graduates, who benefit from university degrees, should repay using a fair system, which we have proposed. I ask hon. Members to support the Government in the Lobby tonight.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 193, Noes 267.


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