Examination of Witness (Questions 740-759)
WEDNESDAY 19 MARCH 2003
RT HON
MR CHARLES
CLARKE
Mr Chaytor
740. Following on from Mr Jackson's question
earlier, on the timescale leading to 2011, could you confirm that
you said you are open to a different timescale? You said that
this should be enshrined in primary legislation and that it was
an issue that perhaps should be revisited. Regardless of whether
there is a future government that lost control of inflation, even
with tight control of inflation, by 2011, the basic fee would
go up to about £1,350, so we are really talking of a supplementary
fee of only £1,650.
(Mr Clarke) What I said was two things, Mr Chaytor.
The first is that I am open, the words that you used, to discussion
about whether the setting of the actual fee should be in primary
legislation or in secondary legislation. Secondly, as far as the
Labour Party is concerned, this Government are concerned, we have
given the commitment and we will keep it that, in our next general
election manifesto, we will say that fees should not go above
£3,000 in real terms during the course of the next Parliament
and that would be the commitment we would make to the electorate
at that point.
Mr Jackson
741. "In real terms".
(Mr Clarke) Of course, other parties can say different
things at that time and they may do, but that is our position.
The question of formally is that we need to resolve whether it
will be primary or second legislation in which the fee is set
and, as I said to Mr Jackson, I am open on that question.
Jeff Ennis
742. Initially, Minister, there seemed to be
a certain amount of confusion about the maintenance grants being
set at £1,000 and the fact that students from families with
incomes of less than £10,000 would benefit and the number
of students who would fall into that category. I am pleased to
say that the Government have changed their tack now and they are
saying that 30% of the cohort of students will benefit from the
£1,000 maintenance grant. Do we know what sort of maximum
income level that will equate to out of the £10,000?
(Mr Clarke) Not at this stage though we are working
further on it. What happened—and I apologised at the time
to the House on this—was that we had set, for our purposes,
the view that about one-third of the student cohort should receive
the £1,000 grant. We thought it was important that that one-third
included all those who are independent students, mature students
coming back and so on, and we then said on top of that, if you
did it for the poorest, up to what level of income that would
take you to get to one-third. Our initial calculation was that
that would be a family income of £10,000, which is what we
said. We were questioned on that and we then reviewed it and went
back and that is when we made our statement to the House indicating
that we had made a mistake in saying that it needs to be set at
the £10,000, but I am not in a position to say today what
the figure would actually be.
743. Can you give us a guesstimate?
(Mr Clarke) I will not do because, having made the
mistake before, I am rather loath to set another hare running
on that particular question.
744. I know that I have told you this before,
Minister, but the EMA, Education Maintenance Allowance, has been
very successful in places like Barnsley and Doncaster in increasing
sixth form staying-on rates. Have you considered giving an automatic
entitlement to students who have benefited from this once they
move on to university? That obviously then leads me on to the
question, would it not have been better to base the maintenance
grant on the EMA model overall? It seems that is a successful
model to adopt.
(Mr Clarke) Firstly, I agree that the EMA model, initially
at any rate, seems to be extremely successful and has been a very
positive approach. Secondly, I will be interested to see what
you report on this when you have assessed all the evidence. We
are prepared to look at what is precisely the best way to do it
because we do not want disincentives, but I do think it is important
to just put one slight caveat into this. I do think that independence
or the reaching of the age of majority at 18 is quite an important
issue and I think it is important that we do not think that students
at age 16 are in precisely the same position as students age 20.
In life, I think there is a point that you go through. So, I do
not actually accept the argument that because this is the State
support that you received at the age of 16, it should necessarily
be the State support that you receive at the age of 20, but I
do accept the argument which you made implicitly that it must
be a coherent system and one which incentivises rather than disincentivises
and I think the view of the Committee on this will be of interest.
745. In terms of trying to widen access to students
from lower incomes, would it not have been better to give higher
levels of maintenance grant rather than providing a general subsidy
to the whole student body?
(Mr Clarke) This is a very big question. The reason
why we put the maintenance grant in is that most people believe
that the maintenance loan of the order of £4,000 a year outside
London is very tight, let us put it like that, if one is trying
to live a life at that point and we felt that the extra £1,000
that was available would make it possible for people from poorer
backgrounds to be able to actually live properly when they are
at university over that time by having a total of £5,000,
a £1,000 grant and a £4,000 loan, to be able to live
over that period. I attach a great deal of importance to our review
of student expenditure which we are operating at the moment in
conjunction with the National Union of Students for the first
time for two or three years to make a serious assessment of what
the correct level in order to be able to live would be and I have
a relatively open mind about the right way to proceed going into
the next comprehensive spending review to deal with that issue
and how we take it forward. As I said in the House when we published
the White Paper, we also think that the question of whether the
£1,000 a year for the poorest is the best way to deal with
the point that Ms Davey raised earlier about the poorest people
going to the elite universities is a very, very good point and
we indicate in the White Paper, and it remains the case, that
we are open to the view that it might be better to spend that
resource on really giving proper benefits to the students from
the poorest backgrounds to go the universities with the highest
fees to ensure that they are able to do that without disincentive.
We also think that, in the context of the access regulator, the
case of what bursaries universities are able to provide to deal
with that is very important. So, there is inter-relationship between
all these issues and we are open to seeing what the best way is
to do it.
746. That really brings me on nicely to my last
question. Under the existing tuition fee system, 40% of students
from poor backgrounds do not pay any tuition fees at all. If we
are seriously concerned about access, which I know you are and
you know that I am, would it not be better to waive the whole
of the tuition fee under the new system of £3,000 for the
students from poorer backgrounds?
(Mr Clarke) I think there is a good case for that
and that is why I have indicated that it is something that we
are prepared to look at. Going back to the question the Chairman
raised earlier on, I think it will be interesting to establish
what universities are really intending to do. As I said earlier,
I do not accept what they are all saying at the moment that they
are going to do and I think it will be interesting to see how
they approach it. I think there is a case for doing what you say.
The reason why we went down the course of the £1,000 grant
is that if you have no access to any other resource at all, if
you are from a particularly poor background or even because your
parents refuse to support you in any way, then you actually have
great difficulty surviving at university on the current level
of maintenance loan in a number of different cases and that is
why, if we can get the level of maintenance loan right, then we
can see how the extra money, currently about £280 or £300
that we budget for the grant, could best be spent, but that is
a question that we need to look at in the context, most importantly
of all, of the proper review of what really are the costs of being
a student today.
Ms Munn
747. Secretary of State, you have been bold
in relation to variable fees. You have bitten that bullet. You
are going for something that does not appear to be very popular.
Why are you not being bolder around student loans by having a
zero real rate of interest? Evidence that this Committee has heard
in the past is that we are continuing to subsidise better-off
students. Why do we not charge a real rate of interest which would
then put significant more amounts of money into the equation which
could be used to do the kind of thing that my colleague is talking
about? Is it because politically that would be difficult?
(Mr Clarke) People argue strongly about the disincentive
of debt for people from poorer backgrounds. All I can say is that
from all the arguments I have heard, it is firstly an argument
which is passionately believed by many people and secondly an
argument which has some substance and I think that trying to ensure
that the potential disincentive effects of debt educationally
are less than they might otherwise be, by having a zero real rate
of interest is an important way of doing that, so that student
debt is not the same as a Barclaycard loan or a mortgage or whatever.
So, there is an education argument. For the same reason that follows
directly from that education argument, there is therefore a political
argument which follows about the acceptability of dealing with
the debt position and that helps to deal with that. There is,
if you accept the rest of the thrust of the logic of what we have
been arguing about this, an inequity in what we are proposing
in that you could argue that, if you are going down the course
of people paying properly for what they benefit from in higher
education, they should pay properly, i.e. pay a real rate of interest
that reflects something nearer reality and I think that is a perfectly
sensible argument. The reason why we ultimately went for zero
real rate is for the reasons I have just said.
748. This Committee has never argued that it
should be a Barclaycard rate of interest; they have argued that
it should be at the rate that it costs the Government, which is
considerably lower. It still sounds to me like you are arguing
one thing on tuition fees, which is that we have to be more realistic
about how universities work and how people need to contribute
to that, but that we are not prepared to bite the bullet on loans
and say that, in order to put more money into poorer students,
we are just going to subsidise all students.
(Mr Clarke) I paid a very interesting visit, Ms Munn,
to the student loan company in Glasgow to see how they did it
and I listened to many of their phone conversations with people
who were calling in to see how they were dealing with the debt
question because I think it is interesting, for people of my very
elderly generation, to see how debt is dealt with compared to
how some young people are dealing with it. Actually, one of the
things that visit impressed on me was that younger people do see
debt in a slightly different way than the way in which people
of my generation used to and therefore would support your argument
that having a real rate, I agree not at Barclaycard levels, might
be a realistic thing to do. However, all the time in making these
proposals, I have been trying, not just for political reasons,
though that is always important too, for educational reasons,
to get a trade-off as to how we deal with debt and how it moves
forward and that is the reason why we come up with where we are
now. I will be very interested if the Committee takes the view
that that is the course that we should go down and, just as an
invitation as it were, if you do take the view that we ought to
be charging a non-zero real rate of interest, I would be interested
to know what you think it should be and how it should operate.
Obviously, you would be arguing in the context of not being profit
making, but there are serious issues about what it would be. A
large point, in my mind, is the question of women going into higher
education throughout all this because women will have career breaks
after university and that will continue and is perfectly right
and proper but, if the cost of a career break is that the debt
goes up in real terms, then I think that would be unfortunate
in many ways and that is again an argument for a zero real rate
of interest. In contrast, I am told that there are other systems
in the world where it would be impossible to find ways of compensating
for that situation in the system that is operated and I can imagine
that could operate, but I would like to make one final response
to the question you have asked. In this, there is an important
trade-off between complexity and simplicity and one of the serious
problems that I felt and feel about the student finance system
is that it all seems very complicated to people and I think the
simpler it is, the easier it would be and, if you put a real rate
of interest in at whatever level you put it in, but then say "but"
and then a whole stream of exceptions for particular types of
people who take career breaks for whatever reason, I think it
just makes it more complicated and it looks like a morass. However,
I cannot dispute your central point in the question you put that
there could be seen to be inequity in having a zero real rate
of interest for people who really are going to be earning very
well in the system later in life.
749. I entirely accept the issue about the length
of time that people have to pay back their debt and that it also
affects people in low-paid jobs if you have a rate of interest
on that, but one of the other pieces of evidence we have heard
is that the current loans for students do not meet living costs
and one of the things that happens is that students end up taking
out other loans and they end up paying back credit card rates
of interests and then the banks come along and say, just as you
have done, "Let's simplify it, let's roll it all up, we will
take this on and you just pay this one amount a month" and
the students end up paying more. It is a trade-off but have you
considered the benefits of increasing the amount of money that
students could borrow as against keeping it at a low amount but
at a zero rate of interest?
(Mr Clarke) I am extremely interested
in that question but that would depend entirely on the outcome
of the student expenditure survey to see what is real. The truth
is that we need to ensure that every student has the money that
they actually need to be able to study properly. There are a number
of caricatures that have gone on about students on skiing holidays
and booze and fags and all the rest of it, which I know is a caricature
of the way people live. However, the fact is that we need to ensure
that everybody has the amount of money that they actually need
to be able to study and the ability to have that kind of money,
which is why we have the review, and I would hope that we end
up in a position, through all this, where everybody can get enough
money in order to be able to live and that is how it should be.
That has a knock-on, as you say, because, if that does reduce
the amount that people borrow from private companies, then that
is different. I am speaking from memory now, so I would appreciate
it if the Committee would not hold me to these figures, but I
think I am right in saying that the average level of debt is of
the order of £7,000 a year from public sources, but MORI
and others that have done surveys show that the average total
level of debt at the moment is of the order of £9,000 to
£10,000, which suggests there is a gap there which is essentially
money which is borrowed, as you are suggesting, from private financial
sources and of course at a high rate of interest. If we could
get to a situation which worked better along the lines you are
proposing, I would welcome that. You could even imagine, in those
circumstances, having variable rates: a zero rate of interest
up to a certain level of what you borrow and then a real rate
of interest for a further element. I am open to all discussions
about how we can get this right but I feel in the dark to an extent
because, until we are clear what the student expenditure conclusion
is, then I think it is difficult to say exactly how we address
it.
Chairman
750. Members of this Committee have to bear
in mind, Secretary of State, the same as you do, that, in Norwich
or in Huddersfield, there are large numbers of people whom we
represent who do not get a higher education, who go into work
or go into small business and they do not get offered zero rates
of interest, they certainly do have to borrow at commercial rates
and they do have to run up their credit cards and, in most of
our constituencies, there are many more of them than those who
are lucky enough to go off to higher education, so there is a
balance here. Professor Nick Barr and Ian Crawford from LSE now
say that the new arrangements will need a £1.2 billion subsidy.
You spoke of the Oxford debate about true socialism but, if you
are going to take £1.2 billion and spend it on something
in education, many people out there would ask, "Would we
do it subsidising interest rates for students?"
(Mr Clarke) I think there is great logic in that argument.
I think it is a perfectly real argument. This is one of the arguments
that I make: if you have 43% or so of the population going into
higher education, broadly speaking, those 43% have received about
five years of education—the two years at school after 16
plus the three years at university, so five years—paid for
by the State. If you look at the other 35 to 40% who left school
at 16, they receive basically zero in terms of educational support
after that point, but that 40% are then asked—these are
exactly the people you describe in Huddersfield or Norwich—to
pay out of their taxes for the people who receive those five years
to earn more money than they do later in life. There are social
benefits, you cannot argue that, but the distribution issues are
very serious, which is one of the reasons why I make the argument
I do, that a fee regime is not unreasonable.
Jonathan Shaw
751. Secretary of State, do you know how much
it would cost the Government to pay off fees of students from
poorer backgrounds as proposed? Can you give us a rough idea.
(Mr Clarke) Not off the cuff, Mr Shaw.
752. It will be a tidy sum.
(Mr Clarke) Yes.
753. If your key concern is about the costs
of maintenance and wanting to provide incentives and assist students
from the poorer parts of Huddersfield, Norwich or indeed Chatham,
would it not be better to use whatever this tidy sum is front
end and increase maintenance grants and everyone pay off their
fees regardless of a parental means test? Ultimately, you could
be a poor youngster from Norwich, Huddersfield or Chatham and
go on to earn a vast sum of money. There is not actually a logic
in the proposal. It is better to provide more money front end
to poor kids than paying off fees back end when you have no idea
how much they are going to earn. We do know that they are from
a poor background but we do not know that they are going to be
poor in future.
(Mr Clarke) First of all, Mr Shaw, I
think you have put your finger on a very important subject in
the debate which has not yet been sufficiently discussed. When
we talk about a "poor student", do we mean a student
who comes from a relatively poor background financially and does
not have resources in their family to support them, or do we mean
a student who will earn poorly throughout the rest of their lives?
As you have correctly said, these are two completely different
concepts of the word "poor". The shift that we are trying
to move towards—and we set it out quite clearly in the White
Paper—is to shift the funding of higher education towards
the latter concept, ie saying that you are independent at 18 and
should pay back through the tax system and put the money in to
help people from poor backgrounds who are actually beginning to
get into university. There is a political consequence of this
which is very real as you know only too well in that, if you decide
that more is going to be paid by the student having gone through
their university, that does increase student debt. The Chairman
mentioned Professor Barr's work on this and he says not to call
it debt but some kind of tax repayment or whatever and there is
a great deal of argument in that. However, there is a political
process of getting from where we are to where you imply. One of
my jobs is to try and calibrate that political process in an appropriate
way and your job in a sense, if I can say it like this, is to
scrutinise, in the way you are, the judgments that I am making
about this and say that perhaps it could be calibrated differently.
If you were to say to me that we ought to increase student debt,
as it were, by getting students to pay more through their lives
and put more money into helping poorer students get to university,
I think that is a perfectly logical position.
754. But the debt is not just accrued through
fees.
(Mr Clarke) Correct.
755. The debt is accrued through maintenance.
(Mr Clarke) Yes.
756. Is it not a very clear message to say,
"Okay, poor kids in Chatham, Norwich, Huddersfield and elsewhere,
what we are going to do is to give you £3,000 up front maintenance
every year to help you through college but that will cost a flipping
fortune. So, when you finish your degree, you will pay the same
as everyone else."
(Mr Clarke) I do not quite understand when you say
"you will pay the same as everybody else"?
Jonathan Shaw: You will pay the same
as everyone else. You will pay the £3,000 fee." The
point you made, Secretary of State, in terms of defining what
is poor is a very important issue because someone may choose to
be a voluntary worker, although their parents may be wealthy,
and go into a poorly paid job and why should they then be saddled
with debt? Whereas a youngster from the White Road Estate in my
constituency may go on to be a very rich Secretary of State. I
hope that they do.
Chairman: Which country would he be in
then?
Jonathan Shaw
757. Hopefully a liberated Iraqi because we
have quite a number of asylum seekers! I think you agree with
me, Secretary of State.
(Mr Clarke) I am very much on your line. My problem
as a politician and Secretary of State for Education is to see
how we can manage the transition towards a system in a way which
is acceptable and operates properly. I think that, in this White
Paper, we set out a very clear path and my codeword for it is
"independence at 18" and therefore paying back through
the tax system later in life according to what you earn and our
system, as set out here, has a number of resemblances to a graduate
tax from that point of view and I think that it is worth tackling
in precisely the way you address. All I can say to you—and
perhaps, through you, say to the Committee as a whole—is
that, in all the discussion that there has been about this document
with a number of people in a number of different ways, the issue
of student debt so-called flags itself up very substantially in
all kinds of gatherings and all kinds of ways and many colleagues,
both in this Parliament and elsewhere, are very, very concerned
that, if you take any steps to increase the level of student debt,
that is a more serious disincentive to people going into higher
education than it is for any other sector that can be taken. Now,
they may be right or they may be wrong, but the reality is that
there is deep concern about this question.
Chairman
758. As you are making that point, we have,
as you know, looked at access, retention and student finance in
fairly recent times in this Committee and of course it keeps coming
back to the fact that if we can keep a student in education through
16 and then into 18, that is really the target for any government.
That is without any dispute. Out of all the evidence that this
Committee has taken, it is money, resources and initiatives to
keep those people in education which is the true value. It is
not student debt that puts . . . People never get to the stage
to even think about student debt in order to be in that position.
(Mr Clarke) I accept this argument completely, Chairman,
without any qualification whatsoever and that is why we focus
so hard on our 14 to 19 proposals of improving the education system
and so and that is true. I also believe that the secondary aspect,
which is important and relates to Ms Davey's questions earlier,
is what are the networks that universities operate in terms of
applications and so on and are they seriously seeking applications
from across the range? That is an important part of the access
regulator proposals that we have talked about. I also think that
finance is an important consideration. I myself do not think that
it is the most important consideration; I think the one you have
identified is. All I say to you, as a matter of political fact,
is that there are deep concerns about the financial aspects of
this in the way that this whole subject has been discussed. I
can put it no higher than that.
759. We take that point, Secretary of State,
but one thing that did slightly worry some Members of the Committee
and certainly myself was that, when the NUS came before us, I
found it a very selfish kind of view that the vetting machines
are an interest group. They represent students now, people who
have not made it into higher education mainly, and it just seemed
to me missing that this zeal for those people who were missing
out on getting into education. I know you have a long history
of involvement in the NUS—
(Mr Clarke) In my days, it was entirely different,
Chairman! I have talked to a number of student groups about this
in a wide variety of contexts including in 15 second exchanges
going through picket lines on a variety of occasions. I think
there is a concern. I have been surprised at the number of students
who have said to me, "You basically have to pull the drawbridge
up. We are here and we do not want higher education expanded"
and so on. When I say that is interesting, if you take the Conservative's
position, their response is also interesting in turn. I think
this is really quite an important issue. Nevertheless, its political
power cannot be ignored in the overall process, in my view.
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