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Mr. Eric Illsley (Barnsley, Central) (Lab): Will my right hon. Friend comment on a situation that has arisen in other countries whereby the rate of interest on student loans for tuition fees was initially set at a very low level but was increased over time to commercial rates of interest?

Mr. Clarke: There is a wide range of international examples. I think that my hon. Friend has in mind New Zealand, where a new Government decided to change the rate of return in that way. Other countries with a system similar to that which we propose—it is worth emphasising that most Organisation for Economic Co-operation and Development countries have such systems—operate it not on the basis that my hon. Friend criticises, but on the basis of our type of system. It may be helpful to the House if we place in the Library a summary of systems in other countries to assist hon. Members in analysing such questions.

Mr. Allen: Will my right hon. Friend take it from the Member of Parliament who represents the constituency in which the least number of young people go to university that working-class kids fear not having to repay minor amounts of fees, but that they may not be able to keep body and soul together to get to university in the first place? If he wishes to give any leeway to anybody, will he resist those who want concessions on fees and ensure that any assistance that he has at his disposal goes towards increasing the student grant so that those young people can get to university in the first place?

Mr. Clarke: My hon. Friend makes a powerful point. There are two ways of addressing it: first, we can consider the level of student grant, as he suggests, and secondly, we can consider the level of maintenance that students are entitled to receive to ensure that they have enough money to survive while at university. We are looking at both those issues to see how we can assist people in his constituency and others.

Ian Lucas (Wrexham) (Lab): My right hon. Friend makes a persuasive case. I am fully with him in relation to the first two pillars that he outlined, but I have some difficulties in relation to the variable fee. Does he accept that higher costs for individual courses deter people from poorer backgrounds from going to university to pursue those courses?

Mr. Clarke: That is a legitimate point, which, if my hon. Friend will forgive me, I shall address when I reach that part of my speech.

Further to what I have said about fairness, our proposals for the office for fair access, which will have any kind of bite only in a world of variable fees, will ensure that universities have to make available a wide range of bursaries as a condition of charging a higher

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fee. I have say to the hon. Member for South Suffolk that the office for fair access does not tell universities whom they must or must not admit. He was wrong about that in the House and on the "Today" programme. If he takes time to study our proposals in the course of his busy day, as he deals with both education and health, I hope that he will withdraw his comments and acknowledge that that is not what we are about. We are trying to ensure that universities have fair systems that can operate properly and provide bursaries in order to do so. Let me give an example. As a direct result of our decision to take the approach that I outlined, Cambridge university has confirmed that one in three students could be awarded up to £4,000 a year in addition to Government money. That is a substantial amount. One of the most significant universities in the country has said that a third of students will get that sort of money on top of fee remission and the grant. That means that for the first time in many years—I do not know if it has ever happened previously—there is a genuine incentive for people from the constituency of my hon. Friend the Member for Nottingham, North (Mr. Allen) to look to Cambridge rather than other universities on financial grounds, leaving aside the merits of any other case.

Cambridge university's policy flows directly from our approach, and I applaud its action. Many people would never have believed that such universities would offer such incentives to poorer students. It is a great step forward. Moreover, I believe that others among our great universities are likely to follow that example. That will deal with some points about which some hon. Friends have expressed concern.

Mrs. Anne Campbell: I welcome my right hon. Friend's remarks. I agree that the Cambridge university bursary scheme is excellent and will help enormously to alleviate the poverty that students experience. However, Cambridge university is in a relatively privileged position and it has fewer students from lower-income backgrounds than many other universities. It will be difficult for other universities to try to match Cambridge because they will not have the financial security.

Mr. Clarke: My hon. Friend makes a fair point. Nevertheless, it is significant that Cambridge university has taken such a step, and I believe that other universities of that order are considering precisely the same action. That makes a strong case for the existence of an office for fair access that tells any university that considers charging higher fees, "You'd better come up with a case for ensuring that students from working-class backgrounds can get to university." That is an important element of our proposal. I congratulate Cambridge university on getting ahead of it. It does not mean that such action stops there. I am simply trying to show that our policy approach has led to major universities, such as Cambridge, taking major steps that will give people from working-class families major advantages in getting to some of the best universities in the country. The action will spread.

Mr. Colin Pickthall (West Lancashire) (Lab): It is worth putting on the record the fact that every Cambridge and Oxford college gets an extra £2,000 a year per student from the Treasury. That has happened for many years. I know that the Government are putting

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that on to a sliding scale, but the universities of Cambridge and Oxford have immense advantages over others.

Mr. Clarke: The issue that my hon. Friend raises about Oxbridge colleges is a long-standing soap opera, in which I am perhaps disappointed not yet to have participated seriously. Although his point has weight, it should not detract from the significance of Cambridge university's decision and the measures that it is prepared to take to do something different.

Dr. Alan Whitehead (Southampton, Test) (Lab): Does my right hon. Friend accept that even if the access regulator improves the relative performance of some universities when compared with others, specific universities that already have many disadvantaged students will continue to have to confront the problem of immediately putting the money that comes in through the front door out through the back door in bursaries? The more élite universities will not feel the same effect, even if they improve their performance, according to the access regulator. Does my right hon. Friend accept that a case might be made for a maintenance system that starts centrally, before the money is distributed to universities rather than afterwards?

Mr. Clarke: I shall comment on the good work of my hon. Friend and other colleagues later. I accept that there is a problem, and my right hon. Friend the Minister for Lifelong Learning, Further and Higher Education has been discussing the matter with universities throughout the country to ensure that we do not have the sort of disincentive that my hon. Friend described. I hope that when we publish our proposals we will be in a position to deal with the issue in the most effective way. However, I accept the legitimacy of his point.

Variability has caused great anxiety to hon. Members of all parties, especially Labour Members. I believe that it is a critical driver of fairness and equality. I appreciate that it is controversial and that some Labour colleagues want a flat fee of, for example, £2,500 across the board. I pay tribute to my hon. Friend the Member for Southampton, Test (Dr. Whitehead) and other colleagues for their detailed work, but I remain of the view that it is necessary to vary fees from zero to a maximum of £3,000 for different universities and courses. I believe that that reflects the reality of our diverse higher education system. It would be unfair to insist that every student on every course at every university paid the same amount. Every university would be forced to charge the same amount across the board, irrespective of demand or the nature or quality of the course and the potential rate of return for the student. Anyone who examines our university system knows that variations exist, and students understand that when they apply to university.

Let me consider some disadvantages of a flat-fee system. First, it would remove flexibility. Earlier, I mentioned the possibility of even leading Russell group universities charging zero fees for specific courses to encourage people to join them. Those who try to develop foundation degrees want to give people an incentive to join their courses. They could not do that if they were required to charge a fee at the suggested levels.

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Secondly, it would be unfair to students not to take account of different courses and different universities in terms of the return in employment. Thirdly, a flat-fee system would remove the mechanism for access requirements from the office for fair access. The earlier exchange about Cambridge university suggest the potential power to change matters, not only after the mechanism's existence but as a result of thinking about it beforehand.

Fourthly, when universities are given a choice of a course at £2,500 or not having the course, their only option might be to end a course that they want to continue because they cannot reduce fees to attract people to it. That is an important issue for universities when they plan.

Variable fees will allow a much stronger guarantee of value for money and quality of courses because they relate the course to the student more directly and specifically. It is ironic that a flat rate of £2,500—the figure that many colleagues suggested—would distribute money from the poor to the affluent.

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