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Mr. Clarke: First, may I appreciate not just my hon. Friend's but his Committee's contribution to the public debate on this question during the past year? The short answer to his question is that of course refinements—his word—will always be looked at; that is the right thing to do. But if the question is whether we would be prepared

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to contemplate a fundamental change in the Bill's approach, for example on variability or whatever, the answer is no. It is, as I said, a package, but a package where refinements can be considered.

Mr. Julian Brazier (Canterbury) (Con): Will the Secretary of State confirm that the amount of money that the package in its totality will raise is less than the cost of the latest round of expansion in the universities, so the funding gap can only widen? Secondly, will he confirm that there are now 10 universities with a drop-out rate of around 25 per cent. or higher, and does he think that that drop-out rate will go up or down after these proposals?

Mr. Clarke: I cannot confirm the hon. Gentleman's first figure because it is wrong. The extra money coming through will be of benefit to the universities. On his second point, Britain has the lowest drop-out rate of all the OECD countries. The drop-out rate is high in 10 universities; there are other universities from the same group—the ex-polytechnics and so on—which have outstandingly good records on drop-out rates. We all work to improve them and the hon. Gentleman is right to raise the matter, but he should not demean what is happening. Our universities have an outstanding record on this compared with those in any OECD country.

Mr. Nicholas Brown (Newcastle upon Tyne, East and Wallsend) (Lab): Why are the Government philosophically attracted to a market-based solution to the funding problems of higher education? Once the cap is lifted, as it inevitably will be, how will youngsters from homes of ordinary means, or even just above ordinary means, ever be able to afford to take the most prestigious courses at the most prestigious universities, for which the fees will of course rapidly be raised, as the vice-chancellors have, in fairness, said is their intention?

Mr. Clarke: My appeal to my right hon. Friend and others is to look at the reality of the current university system. Fifty per cent. of students in our universities—part-time students, postgraduates and others—are paying variable fees right now, in the system that is moving forward. That is the reality. The second reality that it is important to recognise—I believe, after speaking to the universities, that this is the case—is that every university will have at least one course whose fee is £3,000, and that no university will have only £3,000 courses. There will be massive variety through the system, and that is as it should be.

The reason for variability is not some ideological market-based obsession of the kind that some people are concerned that we are about. This is about trying to ensure that universities, in seeking to increase access and to provide courses that are relevant to the economic future of the country, are able to make rational choices about adopting the right fee structure to address those issues while bringing more money into the system. The assurance that I will happily give to my right hon. Friend is that there is no market dogma driving this approach. I know that some people believe that there is, but there is not.

The second assertion made by my right hon. Friend related to ambitions for raising fees in the future. I know that he is concerned about that because we have

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discussed it directly. As I have announced today, we have in place a rigorous process—involving every Member of the House in a vote, if the situation were to arise—relating to allowing the cap to increase. That is a positive approach that will deal with the issue properly.

Mr. Peter Luff (Mid-Worcestershire) (Con): How can the Secretary of State justify imposing on a newly married, recently qualified teacher couple a combined household debt of £50,000 to £60,000 or more?

Mr. Clarke: That will not happen. The hon. Gentleman gave the example of teachers, but he may not be aware that my Department has a whole programme for encouraging people into teaching which involves paying up front in a way that deals with many of these questions. Other colleagues in both the private and public sectors have similar policies. The key question for the married couple to which the hon. Gentleman refers is: are they able to earn at a level that enables them to make a reasonable contribution? If so, they will make that contribution; if not, they will not have to pay it. If, for example, the wife decided to stay at home and look after the children, the effect of the 25-year cap that I have announced today would mean that that debt would not hang over her after that point.

Dr. Alan Whitehead (Southampton, Test) (Lab): I welcome my right hon. Friend's commitment to move money into the pockets of poorer students who would otherwise not have access to higher education. May I urge him, however, to examine urgently and early the case for fee remission to grants up front, so that the £1,300 that could be created by that process could go into the pockets of those poorer students in 2006, when the scheme starts?

Mr. Clarke: I appreciate the effort that my hon. Friend and his colleague, my hon. Friend the Member for The Wrekin (Peter Bradley), have put into the consistent, serious, intelligent and applied work that they have done to promote the course of action that he suggests. My right hon. Friend the Minister for Lifelong Learning, Further and Higher Education has discussed with him in detail the direction that we should take. We do not agree on all the points, as my hon. Friend knows, but we appreciate the spirit and style of the serious discussion on the policy.

The answer to my hon. Friend's question is yes, we will examine the question in the way that he suggests. As I said in my statement, there is a strong case for bringing fee remission and the grant together, which we support in principle. There are some serious issues involved, and it would be foolhardy of me to say, "Okay, we can brush those aside", which is why we must look at the matter carefully. If we can sort those problems out, however, we will do what he and his colleague have suggested.

Mr. George Osborne (Tatton) (Con): Do a majority of Labour Back Benchers support this policy?

Mr. Clarke: I am tempted to ask the hon. Gentleman whether a majority of Conservative Back Benchers support their Front Bench's policies—[Hon. Members: "Yes!"]—then I will say the same the other way round.

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I will answer that question after the Second Reading of the Bill, when we are able to count up the numbers in detail.

Mr. Huw Edwards (Monmouth) (Lab): What reassurance can my right hon. Friend give to those modern universities that already take a high proportion of access students? They have expressed concern that the extra fees that they might receive would be redirected to the students and not directed into teaching and other resources that they need.

Mr. Clarke: The reassurance that I can offer to those universities is that, instead of having to find about £800 per student in the form of higher fees—as outlined under our previous proposals—they will have to find about £300 per student, as a result of our decision to increase the student grant. As I said in my statement, that means that in all cases, the universities will be able to spend more than 90 per cent. of any income that they generate by increasing fees—it is a matter for them to decide whether they want to do that—directly on teaching quality, salaries, investments and so on, rather than reprocessing it into student bursaries. We have analysed this question in relation to those new universities. The figure that we were talking about before was of the order of 70 per cent., and it was that figure that gave rise to some of the concerns reflected in my hon. Friend's question. What I have announced today addresses that point.

Mr. David Rendel (Newbury) (LD): Given that the universities that charge top-up fees are now going to be expected to pay something back to the students in the form of bursaries, will the Secretary of State tell us what proportion of the gap in funding—whose existence he has acknowledged—will be covered by the increase in fee income that the universities can expect to receive?

Mr. Clarke: The estimate depends entirely on the level of fees that the universities charge, and we do not know that yet. If we were to assume that 75 per cent. of courses were set at the full £3,000 level and the remaining quarter at the current level, for example, the extra income that that would generate would be of the order of £1 billion to £1.2 billion. On an annual basis, it helps to supplement the £3 billion that we have already put in to attack the historic underfunding deficit that we inherited from the Conservatives.

Peter Bradley (The Wrekin) (Lab): I am rendered practically, but not quite, speechless. It has to be acknowledged that this is a radically different Bill from the one that I believe Ministers originally envisaged, and much of it is welcome. I welcome the commitment to a maintenance grant, to equity for the modern universities, and to parliamentary control over the future of variable fees. The Bill leaves one important question unanswered, however. If we have disarmed the adverse consequences of variable fees, what are they for? If the three-year review is unable to find an answer to that question, will my right hon. Friend be prepared to abandon them altogether?

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