Transfer of certain functions to National Assembly for Wales

60.     Clause 41 transfers to the National Assembly for Wales the majority of regulation-making powers in respect of student support contained in the 1998 Act. Certain functions are not transferred, for example those powers whose use is connected with taxation and bankruptcy, which are UK-wide matters. The Assembly intends in practice to make regulations affecting students who have a prescribed connection with Wales when they start their course, regardless of the location of the institution at which they are studying and of their place of residence after graduation.

Disclosure of information

61.     Clause 42 permits the Secretary of State to make regulations allowing student support authorities to supply information collected in connection with the operation of the student support scheme to prescribed persons, with the consent of the individuals in relation to whom information is to be supplied. The intention is to be able to simplify the interactions of citizens with other government or higher education organisations. The regulations will specify the conditions under which information may be supplied including what information may be supplied and the organisation to which it may be supplied. They may also specify further constraints such as restrictions on passing on information received and the manner in which consent must be obtained.

62.     The effect of the provisions in relation to Wales is that the regulation-making powers can be effectively exercised by the Assembly only after the student support functions have been transferred to it. Prior to this, the Assembly will have no functions relating to the operation of the student support scheme and, accordingly, can hold no student support information (as defined in the clause).

Part 5 - General

63.     This Part contains general provisions including those relating to the exercise of powers to make orders and regulations; commencement; extent; and short title.

PUBLIC SECTOR FINANCIAL COST

64.     It is intended that the Arts and Humanities Research Council should receive its funding from the Office of Science and Technology as part of the same budget as the existing research councils, and take part in discussions about funding in exactly the same way. The Education Departments of England, Scotland and Wales (through their respective Higher Education Funding Councils), along with the Northern Ireland Department for Education and Learning, currently provide the existing AHRB with grant-in-aid for funding research and postgraduate training. From 2005-06 this funding will transfer from the existing funding departments to the DTI. Provision for 2005-06 is estimated as £78m. Annual expenditure on direct funding related to arts and humanities research will vary from year to year, and a projected annual figure is therefore not available. There are implementation costs for the AHRB, including some administrative costs in moving to the mechanisms used by the research councils. These additional costs will be borne by the DfES and the devolved administrations through the funding of the AHRB by the funding councils. Replacement of the AHRB with a fully fledged research council creates potential savings for the new AHRC in terms of labour as its systems are aligned with other research councils.

65.     There will be costs associated with implementing proposals to allow HEIs to charge variable fees, linked to the intention to provide loans to allow deferral of fees, with no interest in real terms. Possible costs are illustrated in the scenarios set out below. The costs of issuing these loans under Government resource accounting and budgeting (RAB) are made up of the interest subsidy, and charges arising from defaults on the loans and write-offs which occur on death, retirement age, or permanent disability. The interest subsidy element represents the difference between the interest charged on the loans to maintain their value in real terms, and the Treasury's real terms discount rate, which is 3.5 per cent. The actual costs of implementing these proposals and the long term cost of allowing undergraduates to defer payment until they are earning will depend on a number of factors. These include:

• the number of students entering HEIs from September 2006 onwards;

• the level of fee charged for each course by each institution;

• how the level of fee charged will vary over time: it is likely that the fee levels charged in 2007 will be different to those charged in 2006, as HEIs gather information on the impact of their fee levels on demand for their courses. It is probable that this process of adjustment of fee levels will carry on for a number of years after the introduction of variable fees;

• the number of students choosing to take up loans for fees. At present 82% take up maintenance loans, and the rate for fee loans may well be higher. The precise level of the cost of loans to Government in Resource Accounting and Budgeting (RAB) terms may also vary, depending on a number of factors such as level of initial graduate income and earnings growth over time.

66.     Of these factors, the most uncertain is the behaviour of HEIs in setting fee levels and how that will vary over time, but that is the factor which has the greatest impact. As a result, it is not yet possible to estimate what expenditure on the deferral of variable fees will be. However, as an illustration, the following scenarios indicate what the steady state costs in 2006/07 terms might be on the basis of the assumptions used:

• If 75% of HEIs charged the full £3,000 fee and 25% charged the standard fee, and if 80% of students took out fee loans, the loan advanced for the additional fee over and above the standard fee would be around £900m, and the cost to the Government would be approximately £395m.

• If 75% of HEIs charged the full £3,000 fee and 25% charged the standard fee, and if 90% of students took out fee loans, the loan advanced for the additional fee over and above the standard fee would be around £1,010m and the cost to the Government would be approximately £445m.

• If 50% of HEIs charged £3,000 and 50% charged the standard fee, and if 80% of students took out fee loans, the loan advanced for the additional fee over and above the standard fee would be around £600m and the cost to the Government would be approximately £265m.

• If 50% of HEIs charged the full £3,000 fee and 50% charged the standard fee, and if 90% of students took out fee loans, the loan advanced for the additional fee over and above the standard fee would be around £675m and the cost to the Government would be approximately £295m.

67.     The costs of providing fee deferral for the current standard fee only, expected to reach £1,200 by 2006/7, are around £37 for every £100 of loan advanced. The total cost to government depends on the extent of take up of fee deferral:

• If 80% of students took out fee loans to defer the current standard fee, the loan advanced would be around £450m and the cost to the Government would be approximately £165m

• If 90% of students took out fee loans to defer the current standard fee, the loan advanced would be around £510m and the cost to the Government would be approximately £190m

68.     It is estimated that the Office for Fair Access's annual budget will be in the region of £500,000, though DfES anticipate fluctuations in the level of work related to the cycle of approving and monitoring plans. This includes the Director's remuneration of between £50,000 and £100,000, and other expenditure relating to staff time, accommodation, travel and general running costs. These costs will be met by the Department for Education and Skills.

69.     Clause 39, on the effect of bankruptcy, incurs no publicly funded costs, and will save money in the sense that it prevents the write-off of student loan debt that would otherwise occur.

70.     Clause 41, which transfers functions to the National Assembly for Wales, will be accompanied by a transfer of resources for student support and publicly funded tuition fees to the National Assembly.

71.     Clause 42, relating to the supply of information, is expected to produce some savings in terms of public funding once the system is fully established.

EFFECTS OF THE BILL ON PUBLIC SERVICE MANPOWER

72.     The creation of the AHRC is not expected to have a significant effect on public service manpower, as the AHRC will have a similar level of staffing to the existing AHRB.

73.     The introduction of variable fees will affect the Student Loans Company, who will have to revise their documentation and procedures to allow for the need to monitor what fees a student is incurring for what courses, as they will be paying students the loans to allow fee deferral. These costs will be met by the Department for Education and Skills.

74.     OFFA will be a non-departmental public body. It is likely to be a very small organisation consisting of the Director and a small number of support staff. Initially, it will be supported by existing staff at the HEFCE.

75.     DfES do not anticipate any other areas of the Bill having any significant effect on public sector manpower.

SUMMARY OF REGULATORY IMPACT ASSESSMENT

76.     A regulatory impact assessment (RIA) has been produced to accompany the Bill and is available on www.dfes.gov.uk/highereducation.

77.     There will be some implementation costs for the AHRB in moving to the mechanisms used by the research councils. These additional costs will be borne by the DfES and the devolved administrations through the funding of the AHRB by the funding councils. Benefits include stronger links between researchers in different disciplines; further collaboration between arts and humanities and the sciences; imaginative inter-disciplinary research; more participation by the arts and humanities in national and international programmes; and reduced bureaucracy for institutions as AHRB systems are aligned with those of the other research councils.

78.     The costs of the establishment an office to handle student complaints are likely to be in the region of £500,000 with similar annual running costs. The burden of these costs, in advance of legislation, will fall on Government, with higher education institutions meeting the costs once they are required to subscribe statutorily. DfES expect that institutions' subscription fees will vary according to the size of the institution. Fees may range from around £2,000 to £10,000. Benefits are potentially significant. For instance, where Visitors currently employ legal advisors (usually QCs), costs can be between £1,000 to £5,000 per case, depending on the amount of work involved. Further benefits will fall to students and institutions, who should gain a more effective and straightforward means of resolving disputes than is currently available.

79.     HEIs will benefit from being able to charge variable fees of between £0 and £3,000 - those charging the maximum fee could raise an additional £1,800 per student per year of study (this being the difference between the maximum variable fee of £3,000 and the standard fee of £1,200, and making reasonable assumptions about where inflation will have taken the standard student fee by 2006/07), with a corresponding cost to the student, after they have graduated and are earning enough to begin making repayments. This money should help HEIs to improve the overall quality of their institutions, and to further their individual missions.

80.     If HEIs had been able to charge a maximum tuition fee of £3,000 in 2003/04, the following two scenarios illustrate the additional income for English HEIs.

• If 75% of HEIs had charged the full £3,000 proposed maximum fee and 25% charged the standard fee, the approximate fee income to English HEIs would have been between £1,780m and £1,820m, of which between £990m and £1,010m would have been over and above existing fee income.

• If 50% of HEIs had charged £3,000 and 50% the standard fee, the approximate fee income to English HEIs would have been between £1,450m and £1,490m, of which between £660m and £680m would have been over and above existing fee income.

81.     For institutions seeking approved plans, the costs will be in the time they spend drawing up the plans, and their compliance costs in actually providing the bursaries and outreach work that they propose in those agreements. The former should be relatively small in terms of net additional costs, since approved plans will subsume the widening participation strategies which institutions already have to submit to HEFCE as a condition of grant. The compliance costs will vary according to the amount of extra fees income above the current minimum that an institution expects to raise.

82.     Preventing student loans being written off on discharge from bankruptcy is expected to save public funds associated with lost repayments of the debt that would otherwise be written off. Annual Government spending on student loans is in the region of £2 billion, and this is expected to increase if loans for variable fees are introduced from 2006 as proposed. Even if, as a result of future bankruptcies, only 1% is written off, this would represent a significant depletion of public funds.

83.     The cost and benefits of implementing each data sharing opportunity will be assessed on a case by case basis and a business case brought forward with any future recommendations. There will be no costs to individuals. The benefits of data sharing will include contributing to our aim of providing administrative arrangements that are easy for students to use, simple to administer, "joined up", flexible and value for money.

84.     There will be some initial costs for DfES and the National Assembly for Wales in arranging the transfer of student support functions. There will be benefits to LEAs and the National Assembly, as the burden on LEAs of running two parallel student support arrangements will be reduced after the DfES administered student support system is transferred to the National Assembly, as the opportunity will arise to embed the Assembly Learner Grant (ALG) within the mainstream student support system.

COMMENCEMENT DATES

85.     The commencement clause provides for some provisions to come into force on Royal Assent, and the remainder to be commenced by order by the Secretary of State, the National Assembly for Wales or the Scottish Ministers (as appropriate). The reasons for early commencement are to ensure that systems for producing plans in relation to the charging of higher fees in England can be put in place in time for students to have adequate notice of fee arrangements before applying for entrance in 2006, and to safeguard public funds in relation to bankruptcy.

86.     The transfer of functions to the National Assembly for Wales is to be commenced by the National Assembly by order, with the consent of the Secretary of State.

EUROPEAN CONVENTION ON HUMAN RIGHTS

Review of student complaints

87.     The scheme for review of student complaints, which will be given a statutory underpinning by the Bill, will provide for the independent external review of complaints. The Government's decision to legislate was in part prompted by concerns that the Visitor system which operates within some HEIs might be incompatible with the ECHR. This was because in universities where a Visitor has jurisdiction to deal with student complaints, access to the courts is limited. This raised concern about compatibility with article 6 of the ECHR and also with article 14 as the students at universities with Visitors could be said to be discriminated against. The relevant clauses in the Bill will replace the Visitor system for student complaints and ensure that all students at a qualifying institution have access to the same scheme for having their complaints considered. The scheme will provide for the independent external review of complaints. There will be the usual access to the courts in relation to any legal rights of the student regarding an HEI (e.g. in contract or for negligence). The decisions of the designated operator will be subject to judicial review. These features will ensure compatibility with the ECHR.

Student fees

88.     In examining article 2 of the First Protocol to the ECHR (no person shall be denied the right to education) in conjunction with article 14 (prohibition of discrimination), two considerations arise. One is that there is no obligation to provide any particular type of education or system of student support. The other is that in any event there is no discrimination. All students have equal rights of access to higher education through the provision of loans to cover tuition fees which are repaid on an income-contingent basis after graduation and which bear interest at the rate of inflation only. The Government's strategy for increasing participation among low-participation groups includes ensuring high levels of awareness of the financial assistance available, raising aspirations of young people and raising attainment at A-level. The Bill will establish a regulator (the Director) in England to ensure that HEIs make strenuous efforts to encourage applications from a wide range of potential students.

Director of Fair Access

89.     The powers of the Director fully respect all property rights that HEIs have under article 1 of the First Protocol to the ECHR. The powers the Director has to impose financial sanctions on HEIs relate only to grants, loans and other payments provided from public funds through the relevant funding council. These are discretionary funds allocated to HEIs by Government. There is no right to such funds.

Disclosure of information

90.     The powers being sought to supply information to other organisations will only be used with the consent of individuals. This ensures that the legislation is fully compatible with ECHR.

Section 19 statement

91.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). The statement has to be made before Second Reading. The Secretary of State for Education and Skills has made the following statement:

In my view the provisions of the Higher Education Bill are compatible with the Convention rights.

ANNEX A

Table of powers, duties and responsibilities which Higher Education Bill confers on the National Assembly for Wales

ANNEX B

Glossary of abbreviations used in these notes

• AHRB - the Arts and Humanities Research Board

• AHRC - the Arts and Humanities Research Council

• DfES - the Department for Education and Skills

• the Director - the Director of Fair Access to Higher Education

• DTI - the Department for Trade and Industry

• ECHR - the European Convention on Human Rights

• HEFCE - the Higher Education Funding Council for England

• HEFCW - the Higher Education Funding Council for Wales

• HEIs - higher education institutions

• LEA - local education authority

• OFFA - the Office for Fair Access, which will be headed by the Director of Fair Access to Higher Education

• TTA - the Teacher Training Agency