Select Committee on Education and Skills Second Special Report


APPENDIX

POST-16 STUDENT SUPPORT

GOVERNMENT RESPONSE TO THE SIXTH REPORT FROM THE EDUCATION AND SKILLS SELECT COMMITTEE, SESSION 2001-02

Response to the Select Committee's conclusions and recommendations

The Select Committee's recommendations are in bold text.

The Department's response is in plain text.

STUDENTS' PAID AND UNPAID WORK

Recommendation 1: The proposal from the Institute for Public Policy Research that voluntary work by students could be linked to fee credits should be considered seriously in the Government's review (paragraph 25).

1. We fully accept that voluntary work by students is to be encouraged, both for the benefits it brings to the community and to them personally, and that there are advantages to offering incentives for this work. The White Paper The future of higher education (Cm5735) announced a pilot of a new initiative to encourage students to undertake paid, part­time support roles in schools or colleges. This will build on existing work such as the "Teacher Associate" scheme run by the TTA, and will give students valuable experience, in addition to the support they will provide to teachers. The scheme will also cast students in the part of role models, offering pupils in schools an insight into what university life is like and potentially raising their aspirations.

2. We do not believe, though, that there is any need for voluntary work to be linked to fee credits, as under the new system there will be no requirement to pay any fees up front. It therefore seems more appropriate to reward students directly, where any form of financial reward is involved, to help them with costs associated with studying.

3. The Government supports youth volunteering with a number of initiatives, including the highly successful Millennium Volunteers programme. More than 82,000 young people have signed up to volunteer in their communities through this programme.

Recommendation 2: We recommend that in its review of student support the Government should pay particular attention to the needs of a significant group of students who may be unable to work (paragraph 26).

4. Students with children and those with disabilities already get generous grants to pay for childcare and other special needs. Almost a quarter of a billion pounds are now spent on support targeted at those who need it most, compared to £124m in 1997-98. A single parent with two children can now get over £16,000 of support, with full loan and grants, each year. From April 2003 students with children will also be able to claim Child Tax Credit from the Inland Revenue regardless of whether they are in paid work or not.

5. The Government announced on 28 November 2002 that it was streamlining support for students with children and those with disabilities. The number of different grants and bursaries will be reduced from 14 to 5 over the next two years. From 2003-04, there will be a new Parents' Learning Allowance of up to £1,300 for course related costs, which will replace three existing grants; and the Childcare Grant for those using registered childcare will be increased to meet 85% of actual costs across the whole academic year. The Parents' Learning Allowance will not count as income for tax credit purposes. For disabled students we are speeding up the application process and providing more access centres for assessments. There will be clearer guidance so that disabled students can apply for assessment of their needs much earlier and get their support in place at the beginning of their course.

6. From 2004-05 we are simplifying hardship support by merging hardship loans and hardship fund into a single, non­repayable one stop Access to Learning Fund. We are preparing new guidance on the Access to Learning Fund to ensure that Higher Education Institutions (HEIs) assess students on a level playing field. Students who are unable to work because of family responsibilities, or a disability, or because of academic study requirements, will not be disadvantaged when they apply for help from the new Fund.

7. The White Paper "The future of higher education" includes proposals for improving support for part­time students. For those on courses which are equivalent to 50% or more of a full­time course we will provide means­tested tuition fee support, and a £250 grant instead of a loan, applied for through the LEA. Help with childcare will be available from the Access to Learning Fund. For part­time students on certain courses which are equivalent to at least 10% of a full­time course we will provide tuition fee waivers and, for the first time, support from the Access to Learning Fund.

POSTCODE PREMIUM

Recommendation 3: We believe that the present methods of identifying students from more deprived backgrounds are underdeveloped and we call upon the Department for Education and Skills to refine their methods and to learn from private sector methodology in order to improve the precision of targeting (paragraph 32).

Recommendation 4: We believe that the present "post­code premium" of 10% is still too low and urgent consideration should be given to a higher rate, reflecting the true costs of recruiting and supporting students from disadvantaged backgrounds (paragraph 33).

8. We have considered the Select Committee's findings carefully and, after consultation with HEFCE, we agree with the Committee that postcode analysis is too crude a measure of disadvantage, given the variation in circumstances across many postcodes. We favour reform of the premium to reflect the new performance indicators also proposed in the White Paper to help institutions and students see how well they are doing at improving access, all of which we expect to be in place by 2007. These are family income, parental levels of education, and average results of the school attended, which we believe will provide a more sensitive indicator of disadvantage.

9. We also agree that, in the light of a range of work, including that published by the Select Committee in July 2002, that the present rate of the postcode premium is too low to meet the real cost faced by institutions. HEFCE are at present considering the level of funding to support institutions that recruit students from disadvantaged backgrounds from 2003-04. I understand that they plan a significant increase, raising the premium to around 20% additional funding for each student from a disadvantaged background, compared to around 5% now.

DEVOLVED RESPONSES

Recommendation 6: We do not recommend the adoption of the Scottish system for England (paragraph 43).

Recommendation 7: We were not persuaded to recommend the adoption of the Welsh approach for England (paragraph 45).

Recommendation 8: We recommend that the Department should make careful appraisals of the Scottish and Welsh higher education funding initiatives (paragraph 46).

10. The Government examined both the Welsh and Scottish approaches as part of the student finance review. We have not followed either approach in full, although elements of both systems feature in our proposals.

11. The new HE grant (see paragraph 7.36 of the White Paper The future of higher education, Cm 5735) has some features in common with the Welsh Assembly grant. The Welsh Assembly grant is paid in full to students from income backgrounds of up to £10,000 and then tapered out to nothing at a family income of £15,000. This grant is paid to students in both FE and HE. However, our intention is for the new HE grant announced in the White Paper to be paid to around 30% of students, targeted at those from the lowest income backgrounds. Since student support is a reserved matter the new grant will be paid to students in England and Wales. We will also continue to provide help with fees for those from lower income backgrounds, and will pay for the first £1,100 of fees per year for students with family incomes of £20,000 or less, and some support for those with family incomes of £30,000 or less.

12. The proposal to allow students to defer their fees (see paragraph 7.39 of "The future of higher education") has some similarities with the Scottish endowment model, where instead of paying a fee upfront, the students add an amount to their student loan on graduation instead. The difference with the model proposed in "The future of higher education" is that a student's loan for fees will be built up year by year as they follow the course rather than consisting of a single sum on graduation.

INCREASING PARTICIPATION AND FINANCIAL SUPPORT/EXTENSION OF EDUCATIONAL MAINTENANCE ALLOWANCES

Recommendation 9: We support the growth and development of a society that values lifelong learning and encourages participation in learning by all, including those in the Government's target group. While the development of an effective student support strategy will be an important contribution to this objective, there is much else to be done, including raising aspirations and achievement in schools and developing parity of esteem for vocational, professional and academic learning (paragraph 55).

13. We know that the key drivers for raising participation in higher education, and stimulating learning within our society generally, are raising aspirations and attainment in schools. To succeed in schools we need to create a challenging, motivating and flexible curriculum that will help young people develop an interest in learning that will last for a lifetime. This message was set out in the "Investment for Reform" paper following the Spending Review.

14. We also believe that there is a need for more work­focused learning, both in schools and colleges, and in higher education. The White Paper makes clear that we envisage most of the forthcoming expansion in higher education coming through Foundation Degrees, which will ensure that higher education produces people with the spread of qualifications and skills necessary to meet the needs of employers, and of our economy.

15. We have acknowledged that there has been growing concern about the slow progress children make between the ages of 11 and 14 and we recently set out our agenda for raising standards for this age group - the Key Stage 3 strategy. This strategy is intended to stretch all pupils, and will ensure that the vast majority of pupils have reached acceptable standards in the basics of English, mathematics, science and ICT, benefited from a broad curriculum, and learned how to reason, think logically and creatively and to take increasing responsibility for their own learning.

16. One of the central themes of Opportunity and Excellence, our policy response to the recent Green Paper on 14-19 education, is the promotion of more effective pathways beyond 14, including high­quality vocational routes that will build on vocational A­levels and the new GCSEs in vocational subjects that were introduced from September 2002. Schools will work with colleges to give better opportunities for work­related studies for students aged 14-19. By 2004, over a quarter of young people will enter modern apprenticeships by the age of 22. We recently announced a wider vocational target that by 2010, 90% of young people will have participated in a full­time programme fitting them for entry into higher education or skilled employment by the age of 22.

17. In respect of level 2 qualifications, we have set ambitious targets for the proportion of 19 year olds who achieve 5 good GCSEs or the equivalent to rise by 3% between 2002 and 2004, with a further 3% increase by 2006.

18. The Education Act 2002 continues the drive to raise standards throughout the school system, particularly at secondary level, and beyond. The Act contains a number of provisions which will free schools to allow them to innovate, create greater diversity and flexibility and deliver high minimum standards for all. The Act seeks to deliver this aim by promoting diversity in the system and supporting the agenda of creating individual pathways for 14-19 year olds. The Act makes several important changes to the law to support the development of a more diverse system, not least by seeking to involve a wider range of partners and providers.

19. By wedding diversity and choice in education with the objective of raising aspirations and standards, through mechanisms such as the successful AimHigher campaign, we believe more young people will be motivated to stay on in learning beyond 16 to achieve the skills and knowledge that will give them the opportunity to contribute to society and enjoy the benefits of a broad and balanced learning experience. We want to ensure that education and training meets the needs and aspirations of all young people, so that they are motivated to engage in lifelong learning.

Recommendation 10: We believe that in the context of the Government's participation target for higher education, and the evident under­representation of students from low income homes, it is essential that a seamless system of financial support should be introduced that will encourage poor or otherwise disadvantaged students to continue their studies through further education and into higher education (paragraph 56).

Recommendation 22: We recommend that the Government should thoroughly explore the costs and implications of a seamless support system, based on the EMA model, spanning further and higher education, to underpin this progression. Such support should continue at least as far as the conclusion of the first year of a full­time higher education course, and should include those between 19 and 24 studying full­time for an initial level 2 [equivalent to five or more GCSEs at A* to C] qualification (paragraph 97).

20. We are currently undertaking a Review of the Funding of Adult Learning. The overarching aim of the Review is to examine the arrangements for funding for adult learners post 19, including how the Government's various support mechanisms for learning could be more effectively deployed to:

    (a)  Provide incentives to employers to engage in training;

    (b)  encourage institutions to be responsive to employer needs, building their capacity to work with employers;

    (c)  widen participation in learning by the low skilled; and

    (d)  enable Regional Development Agencies (RDAs) to play their full and effective role in developing and implementing regional skills strategies.

21. The Committee will welcome our announcement that a national system of Education Maintenance Allowances (EMAs) will be introduced from September 2004.

22. The White Paper announced that support for those from lower income backgrounds will now be available in higher education, in the form of the Higher Education Grant. Our intention is to offer a full grant of £1,000 a year to around 30% of students, with some grant being available to those whose families earn up to £20,000 a year, on a sliding scale. This is in addition to funds for fee remission, which will continue at the current level, with Government paying for the first £1,100 of fees for those from poorer backgrounds (family income of £20,000 or less, with some help provided up to a family income of £30,000).

23. As we have said above, the Department is reviewing the funding of individual adult learners aged 19 or over outside higher education, and is considering the most cost effective ways of targeting financial assistance.

24. This pilot, taken alongside the new Higher Education Grant, will be an important part of making sure the system of support for learners is focused on their needs at each stage of education. We agree with the Select Committee that we should be working to create, as far as possible, a seamless system that supports and encourages people to progress through education in a way that best fits their learning and skill needs.

THE BALANCE BETWEEN INDIVIDUAL AND STATE CONTRIBUTIONS/REFINED INCOME-CONTINGENT LOANS WITH REDUCED SUBSIDY /TIERED INTEREST RATES

Recommendation 11: During the course of our inquiry we have become convinced that while income­contingent loans may, in principle, be an effective means of sharing the cost of student support between individual beneficiaries and wider society, the scale of the current interest subsidy, combined with the blanket entitlement of all students to 75% of the full loan, channels subsidy to those who do not need it as well as to those who do (paragraph 59).

Recommendation 20: It is clear to us that the current zero real interest rate for student loans subsidises those from affluent backgrounds while providing insufficient funds to those from poor or otherwise disadvantaged circumstances (paragraph 83).

Recommendation 21: It is our view that there is considerable scope for development of models of student support which are based on adjustable interest rates. Such models would enable fine tuning according to prevailing economic conditions or policy in relation to particular groups or subject areas (paragraph 84).

Recommendation 25: We have been disappointed in the Government's dismissal of the Barr and Crawford proposals. In our view they provide a challenging critique of the current system and present an innovative approach to student support policy. We were therefore astonished to discover that neither Professor Barr or Mr Crawford have been invited to meet with the review team and discuss their proposals in detail. We urge the Department to correct this omission at the earliest opportunity (paragraph 108).

Recommendation 27: It is our view that the proposal to reduce the interest rate subsidy for those who do not need it and the intention to expand take­up of further and higher education are not irreconcilable positions and that the Government should be encouraged to develop innovative and potentially radical solutions to this challenge, without introducing excessive degrees of complexity (paragraph 118).

25. The Government does not accept this analysis. The interest rate subsidy is targeted at those on lower incomes.

26. It is important to distinguish between the family income background of the student before and while undergoing higher education on the one hand; and the income earned by the student after graduation on the other. Much of the commentary on this issue confuses these two points.

27. A student grant is a subsidy which assists the former case: the family income background from which the student comes. We have reintroduced student grants because we know from research that potential students from non­traditional and lower income backgrounds tend to be more deterred by the prospect of incurring debt to finance their higher education. Hence a grant helps these students to come into higher education in the first place.

28. A key feature of our proposals is that they treat students as independent adults at 18 - which is an important reason for removing upfront costs. The interest rate subsidy on student loans is a subsidy targeted on the graduate while the loan is in repayment, meaning that it supports the graduate themselves, irrespective of their family background. Here it is important to understand the interaction between rates of interest and the income­contingent loan repayment regime.

29. With income­contingent loans, the amount a graduate repays each year depends on how much they earn. The repayments are set at 9% of income above a threshold, which we are raising to £15,000 to make repayments easier for those on lower incomes (see paragraph 7.41 of "The future of higher education"). If the loans are subsidised so that no real rates of interest are charged (ie the loan is just uprated to match inflation), this means that the loan just takes longer to repay - there is no penalty associated with paying over a longer period because your income is lower.

30. However, if a real rate of interest is charged, the effect is highly regressive. The effect is that graduates on lower incomes, since they pay for a longer period, will pay more in interest. And those that earn the least will pay the most. So it is clear that the effect of an interest rate subsidy, when combined with an income­contingent repayment regime, targets the subsidy rather well, in direct proportion to income. Those who benefit most from the subsidy are those who earn the least.

31. Charging a real rate of interest would cause particular difficulties with those who choose lower paid professions after graduation, for example in the voluntary sector, and those taking career breaks - such as women on maternity leave. We illustrated the effects of these in the memorandum for the select committee on 27 May 2002. It would of course be possible to devise a complex system whereby the interest rate charged is reduced for those on lower earnings and on career breaks. However, such a system would be significantly more complex and expensive to administer and still would only have the effect of channelling the subsidy back to those people - ie on lower earnings - who are the principal beneficiaries of the subsidy at the moment.

32. Officials from the Department met Professor Barr and Dr Crawford in Autumn 2002 and discussed these issues in full detail.


 
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