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David Taylor: If a golden dawn is indeed emerging for those who work in higher education, why is it that Association of University Teachers branches throughout the country are so vigorously opposed to what is proposed in the Bill and the financial arrangements that surround it?

Jonathan Shaw: Perhaps when that dawn, as my hon. Friend describes it, does appear, they will not be so against them. Once people see increases in their salary they will not be quite so against them, but we must take those decisions now, or we stay where we are, or we find finance from somewhere else. If my hon. Friend believes in raising taxes that is fine, but I remind him that we have had issues about our manifesto commitment. We stood on a promise not to raise the top rate of tax, so where would the money come from? After all, we would be asking for a reasonable contribution—a graduate earning £18,000 a year would be asked to pay £5.19 a week. Most of my constituents would think that that was a reasonable starting point.

If we want to invest in our young people and widen access, this is the right proposal for the country, the individuals and the institutions, which need it for their lecturers. It will provide opportunities for so many young people in our constituencies. However, it is not only the proposals on student finance that will achieve that. It will also be achieved through the Sure Start programme, investment in primary schools, and investment and improvements in secondary schools. The Bill is right for the country, the institutions and the individuals, and I hope that the House will support it.

5.30 pm

Mr. Boswell: I shall speak in favour of new clause 5, because it would remove the possibility of charging for tuition fees, which would have an unacceptable impact on students and would be unstable in prospect—as I shall make clear later. My immediate concern is to welcome one aspect of the change in the Labour party. It has begun to take on board some of the principles of a market system. Nor does it wish to put up taxes—as has just been pointed out—at least not by the front door. However, that is not a debate for today.

I find it odd, however, that the Labour party dissociates itself completely from the impact of the price mechanism. The Bill will impose a charge for the tuition of students, and the fact of that charge—however moderated or explained away—will have an impact on students. If a charge is levied for something, it is less attractive as a result.

Mr. Robert Jackson: My hon. Friend, for whom I have great admiration, congratulates the Labour party

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on its conversion to market principles, but it is a little strange to do so at a time when the Conservative party is abandoning them.

Mr. Boswell: I thank my hon. Friend for his comments and I hope to have the chance to advert briefly to alternative means of finance, although of course this is not a Second Reading speech.

I make the point about price in relation to disadvantaged students and the discussions they have with their parents and siblings. Any imposition of fees is likely to act as a deterrent, at least for some of them. However much the charge is removed from the time of tuition and applied to graduate level, and however much it is attenuated or made more acceptable by maintenance grants—which the present Government abolished, of course—there will be a disincentive effect.

Before Ministers pat themselves too much on the back for their generosity, it should be remembered that some of that generosity will be financed by other students. The Government have improved the Bill, but parts of the package remain to be hammered out, with great difficulty and political angst. It will require the imposition of a charge on the universities that will have to be put back into bursaries, and they will in effect be financed by the less indigent students.

Mr. Barnes: New clause 5 would remove fees for students. Is the hon. Gentleman aware of my amendments, which have not so far been debated? They also try to tackle the student debt problem and are more radical in some respects, in that they would apply to all debt, and less radical in other respects, in that they would not get rid of all the fees in one fell swoop. They would provide for a holiday from debt. What are his feelings about those amendments?

Mr. Boswell: The hon. Gentleman has introduced his argument without having to make a speech to it. The short answer is that I am aware of his ingenious proposals. They deserve consideration, but I do not, on balance, come down in favour of them. However, at least they encourage discussion on the matter.

There will be problems for less privileged students, and I am equally concerned about the problems faced by people whose families are on a moderate income, which were set out eloquently and expertly by my hon. Friend the Member for Hertsmere (Mr. Clappison). There will be an impact on such people's families. Their parents may continue to make a contribution, but if they do not, it will add to the student's debt on graduation.

Angela Watkinson (Upminster) (Con): Does my hon. Friend agree that, when graduates' salaries reach the point at which the repayment of student debt is triggered, they are likely to be taking on other commitments such as marriage, a family and a mortgage? The collective effect of the debts is likely to create a disincentive to enter a college course in the first place.

Mr. Boswell: I strongly endorse what my hon. Friend says. Her point was enshrined in an intervention that I

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made on the hon. Member for The Wrekin (Peter Bradley) in which I pointed out that mortgage providers must take account of the overall package of debt.

Mr. Lepper: Is the hon. Gentleman aware of a statement made by the Council of Mortgage Lenders? It says that it

Mr. Boswell: I accept that the council does not wish to discourage people from applying for a mortgage, but whether lenders will be prepared to make well-founded offers on that basis is a different matter. The debt will be a debt that must be serviced by somebody.

Mr. Rendel: I do not know whether the hon. Gentleman was in the Chamber when I asked the Prime Minister a question on that matter. I pointed out that one of my constituents who has a debt of a mere £12,000, which is much lower than the likely debts of the future, has been turned down for a mortgage simply on the ground of student debt.

Mr. Boswell: I am grateful to the hon. Gentleman for pointing that out.

I do not think that enough has been said about the Bill's implications for students on long courses, which I am worried about. Not all those people will go on to be in the private sector, and their burdens will be substantial.

Let us consider alternatives. It is a matter of record—I do not want to debate it with my hon. Friend the Member for Wantage (Mr. Jackson), for example—that when we were in government, we ran a system that did not charge fees, but that was open to fees. There was a slight disagreement with the hon. Member for Harrogate and Knaresborough (Mr. Willis) about that, but the issue did not arise except on one brief occasion. At that time, we were still able to expand the higher education sector substantially. That approach would provide for significant access to higher education and I shall defend it on another occasion.

An alternative heroic approach, which is not ruled out by the Bill, would be to go for an all-private system—some universities occasionally talk about that. A university that was prepared to forgo all public funding could go private and rely exclusively on fees or other forms of private income. It could introduce needs-blind support if that could be financed. It is highly questionable, however, whether that would meet the access concerns of the Minister and Conservative Members and whether it could be introduced, because there would undoubtedly be consequences for the student body. However, I emphasise that that approach would not be ruled out by the Bill.

If universities find themselves in difficulties, despite the package, the Minister does not rule out the possibility of them moving towards unregulated parts of the sector—similar to the way in which public utilities buy businesses that are unregulated, if I may put it that way. I am thinking about part-time students—we had a

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constructive debate about that in Committee—postgraduates and overseas students. There is nothing to stop a university rebalancing its intake, which some have suggested they might do.

I was sorry not to be in the Chamber to hear the speech of my hon. Friend the Member for Wantage. Some important avenues could be explored in relation to the contribution that future employers and graduates can make to stimulate alumni contributions and endowments more generally.

One of my major concerns about stability is not simply the financial stability of the system and whether it will deliver. I am entitled to be at least slightly sceptical about Labour Members' claims. It is interesting that they inherited a system from us that was delivering a more than one-third participation without fees. They announced that it was necessary to make changes, so they introduced tuition fees and abolished maintenance grants. They came up with a system that was supposed to solve everything, yet six years later they are back to the drawing board with a repeat solution, as if the system was never viable in the first place.

Apart from the financing costs of the system, there will be a heavy regulatory price to pay. The fees regime will come unstuck because of the huge public expenditure cost, which exceeds the value of the fees available to universities. Equally, the regulatory system will not work and will pave the way for further interference in the admissions policies of universities.

My essential concern on the substance of the matter, as enshrined in new clause 5, is that the fees regime will break down and what has been put in by way of public expenditure to sugar the pill exceeds the amount that universities get. More to the point, the ratio will worsen over time as the level of student debt for most students increases and, ipso facto, the level of subsidised loan outstanding for each student, or for the generality of students, itself increases. Eventually, a future Chancellor will conclude that the promised loan subsidies will be unsustainable and the cost will be excessive. At that point, all bets are off.

Another pressure that may develop—the Minister will realise that this has been implicit in the debate—is that most universities will charge the market rate. As the Select Committee explained, if they do that there will not be a free market in any substantial sense of the term. A few fees will be discounted, but universities will be subject to a growing pressure to have a higher rate so that they have a greater level of differentiation.

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