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Alan Johnson: I cannot help my hon. Friend with that, but as I said that the Government are prepared to accept amendments Nos. 129 and 130, he can assume that we are not willing to accept any of the other amendments. My hon. Friend argued his case on Second Reading. I doubt whether any party in government could accept it. It involves not just fees, but a loan, and calls for a holiday of five, 10 or 15 years before any money comes

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back to the Government. The problem with that is that it would cost us £100 million to £200 million—money that we could use elsewhere in a student support package. I do not have time to go into detail, but I assure my hon. Friend that we considered the idea carefully and we are not attracted to that amendment.

New clause 5 is an attempt by the official Opposition—this was not much mentioned when it was moved—to take us back to the period pre-Dearing and pre-1998 when colleges could charge, but when every student had a non-means-tested grant to meet the charge. It is a back-to-the-future proposal. I am amazed at what is going on with the official Opposition. I very much respect their Front-Bench spokesmen. Throughout this debate on the future of higher education, there has been only one Back Bencher on the official Opposition Benches. [Interruption.] Well, the hon. Member for Wantage (Mr. Jackson) is facing the right goal in this match.

No one has mentioned Dearing or the national committee of inquiry that the previous Government set up. The Opposition say that we should go back to the period pre-Dearing and that there should be no fees whatever. They support amendment No. 128, as well they might—it was originally their amendment No. 21—but they were not always in favour of the position pre-Dearing. When the Dearing report was published, the Conservative party supported its principles. The right hon. Member for Charnwood (Mr. Dorrell), who was then shadow Secretary of State for Education, said that the Conservative party supported all the principles laid out in the Dearing report.

Some time between that and the 2001 election, that turned into a pathetic statement that the answer to the funding problem in higher education was endowments. The hon. Member for Esher and Walton (Mr. Taylor) pointed out on Second Reading that £30 billion of endowment capital would be needed to raise the amount of money that we are providing for in the Bill.

6 pm

So we move from support for Dearing, whose report the Opposition commissioned when they were in government, to a frankly pathetic policy of endowments to solve the problem, to this debate on the future of higher education. To be fair, the Liberal Democrats have a principled stance, although I do not agree with it. I accept that the Government's stance is mildly controversial, but at least it sets out how we intend to tackle higher education. But Her Majesty's official Opposition tell us that they are in a hiatus, with absolutely no policy whatever. That is poor form, to use words that Opposition Members sometimes use.

If that were not bad enough, we have the five principles that will guide Her Majesty's official Opposition when they do come up with a policy: to increase income for universities; to improve the financial position of students in respect of debt; to increase universities' freedom from central Government; not to increase taxes; and not to increase fees. It is no wonder that it is taking the Opposition a bit of time to come up with a policy when those are their guiding principles.

The hon. Member for Westmorland and Lonsdale (Mr. Collins) asked us to look across the waters at the system in New Zealand, and I am grateful to my

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university-educated hon. Friends who know that there are six universities in New Zealand. But since this form of university funding was introduced in New Zealand—albeit with a real rate of interest, which we are not introducing, on which it has had to backtrack participation among those from lower socio-economic backgrounds rose from 18 to 26 per cent. in three years, and participation among Maori students, the poorest of New Zealand's citizens, rose by 46.1 per cent. in six years. There is a clear record that if this policy is introduced properly, with a balanced package, it will not damage widening participation. Indeed, I would argue, as many Labour Members have argued, that it will support widening participation.

Mr. Collins: The Minister will know that in New Zealand there was a 38 per cent. drop in the number of working-class males attending the most expensive courses. But on consistency, which the Minister seemed to be urging on Her Majesty's Opposition, if we unveil a policy that meets each of the five tests specified earlier, will he undertake to support it? Given that he refers to Dearing and to 1997 and 1998, why is one of the centrepieces of his argument in favour of this legislation the proposal to remove the up-front fees that his Government introduced in 1998?

Alan Johnson: I undertake, on the record, to present the hon. Gentleman with a Dan Dare badge if he comes up with such a policy. For ex-Eagle readers, there can be no greater accolade.

While we are considering new clause 5, which goes back to the position pre-1998, let us spend a second discussing the Dearing inquiry. It is easy in a debate such as this to say what the problems are and what is wrong with our proposals if there is no alternative. Dearing looked studiously at the problem. An NUS representative who served on the national committee of inquiry that looked at all the options said that we could not continue to under-fund our universities as we had done in the past and that we must close the funding gap and tackle widening participation. It was Dearing who pointed out that in 40 years of free higher education with generous maintenance grants, the social class gap widened rather than narrowed.

Paul Farrelly : Does my right hon. Friend recognise that the capped variable system in Australia has not really improved access because it has had the common-sense result: higher fees have worked one way while improved grants and maintenance have worked the other? For our policy to be generally progressive, we must take access seriously, and all the access measures that my right hon. Friend has introduced must be at the heart of the legislation, not just an add-on.

Alan Johnson: I agree with my hon. Friend. I would argue that they are at the heart of the Bill, and I shall come to that in a moment.

Dearing said that there were no easy options. He looked at graduate tax and different ways of proceeding. New clauses 8 and 9, tabled by the Liberal Democrats, provide that there would be no fees anywhere in the UK apart from Scotland. That would be the result of those new clauses: there would be no fees apart from in the one place where the Liberal Democrats are in coalition

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government. They say—I love to listen to this, because it is a really good line— "Ah, but that contribution of £2,000 is actually for the grant"—

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I am sorry to interrupt the Minister, but I remind him that he should be addressing the Chair. When he turns to address his side of the House, he is largely cut off from my hearing.

Alan Johnson: I apologise, Mr. Deputy Speaker.

The Liberal Democrats argue that the contribution in Scotland goes towards a grant, not towards teaching. We are giving the grant free and putting the money towards teaching, but graduates still make a contribution. However, Dearing said that the real problem with underfunding in higher education is that relying on the taxpayer alone means that underfunding will always materialise. He said that, as well as the taxpayer putting in the lion's share—let us not forget that we are putting in an extra £3 billion of taxpayers' money, which is a 34 per cent. increase—universities need a substantial stream of funding that should be paid for by those at universities contributing once they have graduated. That is the essence of what Dearing recommended.

Mr. Willis: Does the Minister accept that, after the introduction of the Teaching and Higher Education Act 1998, the Government removed grant funding pound for pound with what students paid in fees? In the United States, which has a similar system to the one that the Government propose, as soon as there is an economic downturn—the latest is in California—the state removes funding and increases fees to compensate.

Alan Johnson: That is wrong. We explained this issue in Committee. When we came into government, Dearing was told that, for the next two years, there would be a further 6.5 per cent. reduction in university funding thanks to the previous Government. Dearing recommended that it should be a 1 per cent. reduction and said that that was all that universities could take. Given that we had the same spending commitments as the previous Government, it was as a result of our using fees that we managed to meet the Dearing recommendation of a 1 per cent. reduction. Since then, in this spending review and the next one, there will be a considerable increase in funding per student.

The other point that I want to address relates to amendment No. 128. My hon. Friend the Member for Norwich, North (Dr. Gibson) said that he believed—I accept that this is his belief—that what the amendment would ensure is in effect a fixed fee, deferred. What he means to ensure, and what he argued for, is that we should have no extra money for universities and that we should put in a huge amount from the taxpayer to defer just £1,000, rather than nought to £3,000, as we propose. There would not be a penny extra for universities and, in a sense, we would stay where we were and remain neutral in terms of the higher education funding gap.

It does not take a Philadelphia lawyer to look at what the amendment would do. It would do what the official Opposition originally intended—take away every aspect

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of control over fees, as set out in clauses 22 to 27. That would be fine if we were not also repealing under schedule 6 the current rules in the Teaching and Higher Education Act 1998. Her Majesty's official Opposition have tabled two other amendments seeking to retain those provisions, but in the absence of those two amendments, the result of amendment No. 128 would be an unregulated higher education market with top-up fees in their true sense. That is the first crucial point.

The second crucial point is what the result would be if my hon. Friend's amendment were carried with the support of the Conservative party and we also put back the two provisions that we would otherwise repeal from the 1998 Act. The result would be that we could not have the £2,700 maintenance grant that Labour Members, primarily, have convinced us to introduce by rolling up fee remission with grant. Under the 1998 system, fee remission must always equal the fee, which leaves no money for a grant. It would be possible to increase the fee and the fee remission, but extra taxpayers' money would have to be put in—there is a lot of taxpayers' money in there already—otherwise there would be no single, non-repayable maintenance grant of £2,700.

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