UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE

UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 216

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

EDUCATION AND SKILLS COMMITTEE

HIGHER EDUCATION BILL

Wednesday 14 January 2004

RT HON CHARLES CLARKE MP

Evidence heard in Public Questions 1 - 99

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the Education and Skills Committee

on Wednesday 14 January 2004

Members present

Mr Barry Sheerman, in the Chair

Mr David Chaytor

Valerie Davey

Jeff Ennis

Mr Nick Gibb

Paul Holmes

Mr Robert Jackson

Helen Jones

Mr Kerry Pollard

Jonathan Shaw

Mr Andrew Turner

________________

Witness: Rt Hon Charles Clarke, a Member of the House, Secretary of State for Education and Skills, examined.

Q1 Chairman: Can I welcome you formally, Secretary of State. It is good to see you so soon after the publication of the Bill, and it is a very good time for us to ask you some questions. You will know very well, because we see you so regularly, that we have had in recent years four major inquiries into higher education so we have a fair degree of knowledge about the subject, and you will know that we liked some parts of the White Paper in our recent evaluation of it and were not so keen on others. I know it has been a long day for you today and it is probably going to go on for a long time too so we are going to try and limit this session to about an hour and three quarters, so can I start off by saying that given that the university people, the Vice-Chancellors, have been telling this Committee that we have an overall shortfall in funding of around £9/10 billion if we are really going to get our universities up to the level we want them to be, and you know that this Committee wants expanded education and high quality higher education, if we are to achieve that could you give us some idea of how this Bill will help plug that gap? They were talking £9/10 billion; the Prime Minister today in Prime Minister's Questions talked about this bringing in a billion of new money; are we going to be having to pursue you up and down the country over the coming years to get the rest of the cash?

Mr Clarke: I do not think so, Mr Chairman. Obviously every sector of public life, certainly education, thinks there is a shortfall in funding for where they are. If you were to say what is the shortfall in under funding today for under fives, for example, according to the positions you put you could assemble a whole series of arguments as to what it would be. I mean no disrespect whatsoever to universities in saying that it is right that they, too, should make their submissions to what the "underfunding" has been and is for universities for where they have to be. It is also the case that the "underfunding" divides into two categories: Category A, the infrastructure and weaknesses as a result of under-investment for many decades which needs to be put right and, aspect B, any underfunding on the given year-on-year revenue that you might look at in a given situation. Now, we accept that there is a range of estimates in the £8-11 billion area where resource in capital would make a significant difference to moving things forward. The approach we have is not really designed to attack the capital aspect, though it does help with that, but the revenue position, and the amount of revenue that you think can be generated by our proposals depends on the set of assumptions you make about how many students will be in the universities, how many courses there will be and so on, and at what level the fee will be. We have used the figure that the Prime Minister used in Questions today of about a billion pounds; it could be significantly more than that if every university were to put every fee at £3000 or it could be significantly less if you went the other way round, and we will not know to what extent this has succeeded in generating money at the scale we want until the system has been operating for some time, but we think it is reasonable to assume of the order of one billion pounds extra coming in to help with the cost in this area and that is why we put it forward and we think it is a material extra income source. Would it "solve" any problems that exist? I do not think I would maintain that it would necessarily. It is a step towards solving them and it is a step towards helping universities develop their own income streams to be able to attack those problems.

Q2 Chairman: Lord Puttnam and others have suggested new novel ways of bringing, by a sort of bond system, massive new resources into higher education. Has your Department looked at those proposals? Have they been crawled over and rejected, or have they only just come to light?

Mr Clarke: We have looked at them but fairly briefly, for this reason. I have talked to Lord Puttnam about this in a number of different circumstances and I think it is an attractive idea and other colleagues have also raised this idea, but the bond idea falls short of the current forms of PSBR definition that is operated by the Treasury, and simply does not fall within the framework that we have at the moment. You can make all kinds of arguments about how government should address these matters, and as you know those are discussions which have taken place in political parties and elsewhere, but I think the straight bond approach as suggested by Lord Puttnam does not meet the current public spending conventions that we have, so for that reason we in our Department did not spend a lot of time investigating that particular solution because it fell outside the framework we have at the moment. There are big issues about this, as there are when you look at graduate tax versus fees as to what falls on the balance sheet and what falls off. The Treasury is very well aware of what happened with Network Rail and the various issues around that in those areas, as are we all, and in all these areas, because of the need to maintain financial confidence, it is important to proceed cautiously, so I think the Chancellor has been right to proceed cautiously in this area but for that reason, and I have discussed this with Lord Puttnam, we have not given a great deal of attention to the bond solution because it would require a total change in public finance conventions.

Q3 Chairman: Both this Committee and parliamentarians alongside have also suggested that perhaps the department and the government have missed an opportunity by not rolling out EMAs into FEMA (Further Education Maintenance Allowances) and into HEMAs (Higher Education Maintenance Allowances). I know that particularly the member of Parliament for Nottingham North is very fond of this. Is this a missed opportunity? Could there not have been a really rolled-out programme where one flows nicely into the other which could be more effective at bringing poorer students in the early initial period of 14 and then keeping them in?

Mr Clarke: I do not think I would accept that charge. Many have campaigned, and as you say the honourable Member for Nottingham North is one who has campaigned very strongly, for an effective grant package called Education Maintenance or Higher Education or whatever system that one wants to name it to encourage students from the poorer parts of his constituency to go into further education and then higher education. One of the changes I announced last Thursday for increasing the grant package from £1000 to £1500 was designed to meet that suggestion to get a smoother position of transition than we have at the moment. Is it perfectly smooth? Has it been perfectly put together? I would not say it has been but I do think we have created a framework which allows that to be established. To be quite blunt, I believe that one of the arguments for the Bill that I presented to the House is that it creates a framework within which all of this can be addressed in a much more coherent way, and we are using that framework to do it in a more coherent way, but I do not claim that in every respect the example I gave in the House last Thursday was of financial independence at the age of 18. We have taken some steps towards that but we are not yet there. You can only, because of the vast amounts of public expenditure involved in these areas, take these steps one at a time.

Q4 Chairman: Two last points from me: some of your greatest critics and critics of this proposal both in the Parliamentary Labour Party and outside say that this is going back on a manifesto commitment, that here was the government in elections elected on a promise not to introduce top-up fees, and although the present administration calls these variable fees they are in fact representing a going-back on a solemn commitment. What is your answer to that?

Mr Clarke: I do not really accept this point. The first point, which I think is very important, is that there will be none of the fee arrangements we have talked about and which we are legislating for having effect during the course of this Parliament, and a manifesto is for a Parliament and I think it is right for us to say that we have carried through that pledge in relation to this Parliament. Secondly, there is an important context of this which the former Secretary of State for Education, David Blunkett, made clear recently after Christmas which was that he was facing the situation, and the Parliament in 1998 was facing the situation, of universities wanting to use the freedom they then had to charge fees of £10,000 a year, £15,000 - very substantial fees - and he therefore legislated, and I think rightly, to say they could not do that and there would be a limit on what could be achieved, effectively a cap. The cap is what we have established too in that situation, and that is what the approach to the statement we have legislated meant. Thirdly, importantly, certainly my experience and I think others' during that election was there was a lot of public resentment at the upfront fees - and I distinguish between the upfront fees and the top-up fees. The upfront fees led people to be very concerned, and there was concern certainly in meetings I did about this question. It was that that led the Prime Minister to say "We have to look at this again", and we have and we have come to the position we have. So the combination of those factors with the demonstrable need for universities to raise more resource in the increasingly competitive international market place I think justifies where we are. I know there are concerns about it, and I note that some of those concerns are genuinely held, but I believe both the narrow wording of the manifesto can be justified and also the central proposition.

Q5 Chairman: Lastly, the other damaging allegation coming out of the variable fees structure is that you will introduce a two-tier system of higher education.

Mr Clarke: I simply do not accept that point at all. I say it almost to the point of repetition, but I think it is the case. You have a vast range of different universities running a vast range of different courses and subjects, a vast range of different types of course through the three year degree, the sandwich degree, the four year degree with a year abroad, the foundation degree, other two year degrees - the range of different tiers is immense. You have the freedom of universities today to vary fees for part-time students, for post-graduate students, for overseas students, to the extent that I think I am right in saying that about half of all students of British universities today are being charged on the basis of fees which are variable, ie determined by the university without any constraint generally. In fact, it is the exception of full-time undergraduate courses where there is that variability. That is not the rule. Now, the question is why should that particular group be in that position of no variability whereas all the others are not, particularly at a time when the university sector itself is trying, working with industry, to get a much more appropriate range of courses and qualifications available to encourage people to come into education, and in this context this Committee knows better than anybody that 20 per cent of university courses are studied in further education colleges precisely designed to encourage access in a variety of different ways, and I say that to have flexibility in those circumstances for university vice-chancellors is important. If you add to that the need to try and track students on subjects which are not otherwise attracting people so that the course can be run and the HEFCE grant be levered, I think it is seriously mistaken to say that whatever your level of fee you should not permit universities to charge lower fees if they wish to do so.

Q6 Mr Jackson: I want to explore the financial implications of the government's proposals really with a view to trying to put alongside alternative suggestions that have been made by other parties, but a preliminary point. Firstly, is the 50 per cent target for participation in our education a target in your mind or is it simply a projection?

Mr Clarke: There is a very subtle distinction which I would expect a Fellow of All Souls to give me a lecture on rather than the other way round, but I believe it is a projection which in a sense becomes a target because it is a projection. If you look at the desire of young people to go into university education, which is very strong and continues to be very buoyant, if you look at the desire of universities to provide those courses, if you look at the range of qualifications which are needed, if you look at the extent to which higher education qualification is going to be necessary for jobs in later life, all of these push strongly to an increase in numbers, and that is what countries abroad are seeing. Does the 50 per cent target as opposed to a 49 or a 51 per cent target have immense meaning? I do not think it does as such. I think it is a projection of the trends that we are moving towards, but I felt - and this is why what I said in the White Paper that we published - that moving from the 43 to 50 per cent could best be done by expanding foundation degrees and going down that course, but because we thought those are the types of courses most in demand by people in the way we are describing, so we have said explicitly that, as we get towards our 50 per cent, we should do it by increasing the number of two year foundation degrees, and I am certain that is the right way for us to proceed. So I have a target, yes, to establish foundation degrees to increase the number of foundation courses. I believe that goes with everything else happening to take the age group up from 43 per cent to 50 per cent, but some have sought to portray our policy as a slanderous attempt to say, "Here is a figure which nobody really wants", and I do not think that is true. That is why I think your comparison with projection is good - it is a projection but it is not one I want to reject. I want to say it is a projection but yes, we would like to go with this trend rather than not.

Q7 Mr Jackson: That is precisely the difference between a target and a projection, if I may make a comment. It seems to me from the Secretary of State's answer that the government's policy is simply in line with the policy of all governments since the Robbins Report which is that places should be found for all qualified young people.

Mr Clarke: I do not have Robbins in front of me at the moment, but "all who wish to and are qualified to do so" or a phrase of that type is exactly what we want. As the Committee knows that has been the trend for years and decades now.

Q8 Mr Jackson: It has been suggested that it might not only be better but also cheaper to divert potential higher education students into vocational training. Assuming we are considering that we have a choice here between new foundation degrees and vocational studies in levels 3 and 4, I wonder if the Secretary of State could tell us what the difference is in cost between those two types of provision?

Mr Clarke: There is not a straight comparison because the fact is there are so many different types of vocational courses, though it is the case that I know that, for example, a modern apprenticeship costs between £5,000 and £11,000 whereas an HE place might be £5,300 or whatever, but I do know it is not a cheap option. I was up yesterday in Liverpool and I went to Jaguar at Halewood - a fantastically impressive place by the way as Halewood is being turned, under this government I say in a sectarian way, from a hotbed of militancy to the most productive Ford unit in the whole of the world, and that is through their relationship with education, and they are developing foundation degrees through St Helen's College with the local John Moores University, and I asked them precisely this question about what the costs would be and they said that they are important and good but they are expensive because you are taking a lot of time, so anybody who thinks vocational education is education on the cheap I think is mistaken, and I think the same is true of medical courses, dental courses and engineering courses and so on, so I do not think it is a cheap option to go vocational. Of course, it varies with the vocation. It might be that the vocation to be a lawyer is one that could be a bit cheaper than some of the others, but I think it is a question of saying how we weld together the vocational ambition and the educational ambition in what we offer and the party political stuff which says, "We do not need the academic; we go for the vocational" is quite falsely based. We need to do both using the sector skills councils and the foundation degrees, and it would be unusual in my opinion to believe that vocation will be cheaper. There is no evidence for that.

Q9 Mr Jackson: In order to give a basis for comparison between these policies, can the Secretary of State repeat for the record what his estimate is based on? Assuming that all universities charge the full fee, what will the income be that will be produced with present student numbers, and how much will be produced if participation rates do rise to the projected 50 per cent?

Mr Clarke: If you took the current student numbers today unchanged and all fees were charged at the £3000 rate, we estimate it would be of the order of about £1.3 billion. That then increases by the time you get to 2006 and numbers have gone forward, and if you were to say you got to the 50 per cent target as you suggested --

Q10 Mr Jackson: Projection

Mr Clarke: -- Projection I should say, not target - you are talking about £1.7, £1.8 billion as the amount of money that would come in at that time. The precise figure between that range depends on the exact mix of courses and student numbers and so on, but that is the range, £1.3-1.7 or £1.8.

Q11 Mr Jackson: Taking the Secretary of State on to a policy proposal in the last Conservative Party manifesto which proposed the creation of an endowment fund for universities, and there is some press comment currently in favour of that, we do have a very important educational charity in the shape of the Wellcome Foundation, and I am sure the Secretary of State is familiar with its important work. Could the Secretary of State give us a rough idea of the size of the capital endowment which would be required to generate an income which is comparable to the amount which the government's proposal for fees will generate?

Mr Clarke: We have looked at this question of endowment very deeply and Eric Thomas, the Vice-Chancellor of Bristol, is chairing a task force to look into this, and there are a number of conclusions which can be drawn. The first is that endowment income is very important. Secondly, it has to be built up over years and there are no quick fixes by going down the endowment income route. We understand that Wellcome, and we looked at the range of different institutions, has investment funds of about £10 billion which generated just over £400 million of income in the last year for which figures are available, so if you took that £400 million and said you were hoping to raise three times as much as the £1.2 million, say, as opposed to the figures I was talking about earlier, that means you would need an endowment of about £30-40 billion. The amount of time it takes to build that up is very substantial. It is, of course, the massive competitive advantage that the American universities have, and obviously we are keen to encourage that which is why Professor Thomas is chairing this group to take it forward, but it would be an illusion to think that any of these figures would suddenly rise very quickly and solve the situation we have now on a timescale to taste. I saw the Conservative Party proposal and an endowment approach is fine, but nobody should believe it solves the problem we are talking about in the immediate foreseeable future.

Q12 Mr Jackson: But the money you are proposing comes in immediately --

Mr Clarke: Precisely.

Q13 Mr Jackson: Whereas this would come in after a time, unless there was some massive asset sale. Could the Secretary of State speculate about possible privatisations that might yield £30 billion?

Mr Clarke: I would be delighted to speculate, of course, at any time but I am not the Chancellor of the Exchequer and I feel he might see it as an encroachment on his territory if I were to go into speculations of that type. You will remember that one of the most successful recent sales was of the waveband, where significant resources raised well less than the kind of figures we are talking about here. Other people, I know some Conservatives, have suggested selling off Channel 4. It is not my bailiwick but the point you are making is one which is well made and I certainly take it, that whatever the desirability of endowment, and it is highly desirable, it does not provide the bucks you need right away to deliver the bonus you have to take. It is one of the most long term of policies available - and not wrong for that, but it does not solve any of the issues we are talking about here and now.

Q14 Mr Jackson: The Higher Education Policy Institute of Oxford has estimated that, on the government's proposals, the unit of account or resource per student will rise by £2008 to £6400 which would put it back roughly to where it was in 1992. Let's just take that unit or average funding per student of £6400 that would be restored to where it was ten years ago. There are, in principle, two ways of increasing the unit of resource per student: one is to increase the amount of money which is spent per student, which is what the government is proposing, the other is to cut the number of students - which is what I think I understood the Conservative Party is proposing! I wonder if the Secretary of State can tell us how many fewer students would be necessary in order to match the government's proposed increase?

Mr Clarke: Mr Jackson, you will be much superior than I at trying to understand what the Conservative policy is. I have tried to study it and get clarity on it but with difficulty. Our estimates are - and to be fair I put these across the floor of the House to the Opposition party and they have not contested them but, on the other hand, that is maybe because they do not understand them - that if you scrap the existing fee that costs about £430 million. That is what the Conservatives are proposing. We estimate that is equivalent to losing about 100,000 higher education places now, today, which is equivalent to sacking, by the way, about 13000 teaching and lecturing staff. If in addition to getting rid of the existing fee you prevent variable fees, that could cost the sector we estimate a further £740 million on the basis of 50 per cent charging £3000, more the kind of estimates you were talking about earlier. That would be equivalent to about 150,000 places, so that is where our quarter of a million comes from. 100,000 as a result of scrapping fees now; 150,000 further places now by preventing variability along the lines proposed in our Bill. Now, this is a very substantial cut in numbers. It may be that is not what the Conservatives intend. It may be they intend to raise taxes to deal with it that way, as the Liberal Democrats sometimes have suggested and maybe Mr Holmes would have a comment, in which case that is fine in the political debate that we have. What you cannot do in my opinion and integrity is say we are going to take out the fees, we are going to stop the variability, we are going to cut the money going in, but we are not going to have any impact on the number of students that are at university or the quality of what is done. That is why I have said, and it is a partisan exchange, that I thought the wheels would come off the Conservative front bench proposals very quickly. I am glad to say they have come off a lot quicker than I thought but it is a matter for yourself, Mr Jackson, and your colleagues in your Party to wrestle with how you deal with the Bill in the light of those circumstances.

Q15 Mr Jackson: So we may be talking about half a million fewer places, that is the HEPI estimate, in our education and, going from your earlier answer on vocational, no money available for vocational provision either?

Mr Clarke: That is correct and again, to make a partisan point which is out of order in this Committee, we published our Skills White Paper last July, and I would say it, wouldn't I, but I think it was a serious effort to address these skills issues right up to the level of foundation degree throughout the economy. We have put very major commitment in and will continue to do so through the Learning Skills Council and otherwise, and I am glad to say good progress is being made. As yet the Conservative Party has not responded to that White Paper, either by saying they would match what we are proposing to do or, as is implied by the rhetoric of their front bench, by saying what they would do more than what we are now doing. It may be there are proposals, in which case I would welcome it quite frankly, because I think a bidding war between us and the main Opposition party about how much money we were going to put into skills would be a very good debate for the country to have, but I would like to see that proposal before being able to comment more substantially on it.

Chairman: 500,000 places is a lot of universities but let us move on to Val Davey.

Q16 Valerie Davey: Going back to the government's proposal, what is that going to cost the government, because clearly you need a bridging loan to assist the development of a plan which is, as I welcome and I am sure many others do, a payment post-graduation?

Mr Clarke: Yes. The costing is basically divided into two parts. Firstly, we are changing the student support system, and the effect of that is to take out the upfront fee, to create a fairer repayment system for graduates and to create more targeted support for the poorer students in the forms of grants at the level of 1500 to go with the fee remission. We have costed that quite carefully; we believe the upfront cost to the government in providing these loans is that the cost of deferring the new higher fees would be around £445 million, and our highest estimate is that the cost of providing subsidised loans to defer the current fee would cost around £190 million. I announced on Thursday that we would write off any debt still outstanding after 25 years, and I perhaps could take this opportunity to correct an answer I gave in the House on that point where I said our estimate of the cost of that was about £25 million. Our estimate is, in fact, £30 million rather than the £25 I said across the floor of the House in that exchange, and finally we would provide the extra support to students by raising the maximum amount of maintenance loan they could take out, and we estimate that would be at a cost of about £65 million. So we have a set of measures which will essentially shift money in the student support system by getting rid of upfront fees and putting in place the grants establishing a better repayment schedule, we think, with the costs I have indicated. In addition, universities will be able to raise money according to the various estimates we have talked about, which we estimate is an increase of somewhere between 20 and 30 per cent on the average funding per student that universities will be able to achieve as a result of this.

Q17 Valerie Davey: So, if you follow that through, at what stage does the Exchequer think we are going to break even in terms of the money being repaid?

Mr Clarke: It is about fourteen or fifteen years down the line but I have not got the figure in front of me, I must confess. We had an exchange on this matter at an earlier Select Committee on this point when we looked at the various options, so I am speaking off the top of my head when I am talking about the timescale. Perhaps I could write to the Committee later on today to make sure I have the figure exactly right, but there is a timescale of that order.

Q18 Valerie Davey: This is on the element of the billion that we are trying to raise for the universities through this mechanism as opposed to, as I understand it, the £3 billion which is coming directly from government anyway. So the 6 per cent year-on-year for the next three years is £3 billion towards this contribution?

Mr Clarke: That is there come what may, and that is a testament of our intention to continue funding from the taxpayer, from the Exchequer, the resources of universities.

Q19 Valerie Davey: And that is not affected by the Bill?

Mr Clarke: Correct.

Q20 Mr Chaytor: Secretary of State, do you think that reducing the fee for a physics degree to zero is an effective way of increasing recruitment of physics degrees?

Mr Clarke: I would not say it is an effective way. It could be a way of doing it and I think some universities will do it. What do I think of the ways of increasing recruitment to physics? First and foremost there has to be an improvement of science education in schools and the approach we have taken in those areas, for example through the science specialist schools and developing better partnerships between the schools system and industry in this case using physics in a positive way, and it is raising the excitement students feel in physics. Secondly, in terms of motivating and incentivising universities, it has to be to encourage through the HEFCE funding regime proper support for undergraduate teaching in physics so that universities which opt to provide physics courses do deal with that in a way that gets properly funded and resourced. Thirdly, we have to establish at a research level the relationship between high quality research and physics, and schools and undergraduate education is very important. I mentioned I had a meeting with PPARC, part of the Physics Research Council, just before Christmas talking about ways in which their fundamental research could tie in with what schools are doing, because I happen to think that the work that is done on space is exciting and motivating for students thinking of coming into those areas, so that whole range of issues is important. But then the issue comes what does a university do when it sees the possibility of having to close the physics course because, despite what I have said, there are not enough applications? It happened in my own university, the University of East Anglia, about four years ago that a physics course was closed which was extremely unfortunate and everybody regretted it but, simply, the number of applications was not coming through. It might well be in those circumstances that the university might feel that to reduce the fee for students going on to those courses might encourage more students on to those courses and enable them to keep going rather than be closed as a result of still getting the HEFCE funding stream that comes through, but I would say the university should be free to do that if it wished to do so in order to deal with it, and that is an argument for variability in my view. Do I think it should be the central strategy? No. I think it should be those other things I talked about, but just to have a fixed fee which did not allow that variability would weaken a university's ability to try and deal with these situations.

Q21 Mr Chaytor: So are really saying that in terms of the relationship between the level of student support and widening participation and access, the precise financial arrangements for student support are not the main factor?

Mr Clarke: That is my view; others do not agree. But I go back to my reading last year when I read The Times Guide and the Virgin Guide to British Universities and a good read it was, because you go through for each university a great list of issues, including the quality of the beer and all the rest of it to encourage people to go to particular universities. There is a great deal of information, including likely career destinations, how well you do at getting jobs and so on and so forth, which is in those guides today, and I say to put a bit of extra information in which is about the fee for the course is a consideration - but it is a consideration, not the consideration. Some colleagues argue it is the consideration; I simply do not think that is the case.

Q22 Mr Chaytor: If you had to choose between the question of the fee for the course as the determinant of access and the school to which a young person was admitted at the age of 11 as a determinant of their chances of going to university, which is the most important?

Mr Clarke: A school. There is no question about it, I would say, and I would say that is why our whole strategy is about achieving but, as I said earlier in answer to Mr Sheerman, 20 per cent of our university courses are studied through further education and there is a whole string of means of access to university education which are not dependent on the school, and I announced last Thursday our intention to take further and stronger steps if we can achieve it on part-time and mature student entrance to universities precisely to reflect that fact. So I do not think it is just about school but if I was asked to pick one single measure I would have to say it would be the quality of schools which would be important.

Q23 Mr Chaytor: In respect of variability, have you any concerns at all about a variable fee regime being a deterrent to applicants to university and, if so, is that based on evidence of variable fee regimes elsewhere, either in the United Kingdom or abroad, or is it based on general perception?

Mr Clarke: No. The evidence from abroad is that the experience of variable fees does not deter and can, in fact, increase access. I met last week because we had a seminar at the BETT conference at Olympia education ministers of other countries, the Canadian Minister of Education, the Federal Minister, and he was very impressed with the package we were putting forward which he thought put it on to a proper basis, but in the areas, for example, in Ontario where they have made progress in these areas, it is the case that the variability is enhanced access rather than reduced. I do have a fear, and I have had it throughout and I said to it the Committee before and I will say it again, that there is a perception of debt in these areas which remains an issue, and I regard it as my responsibility after this Bill has Royal Assent to have a major communication to potential students to explain what the proposals are, because the greatest single problem we have is that most people in the country do not understood well enough even how the current system operates, let alone how the new system would operate, and it was a major obligation on my department to try and make sure people understand clearly what it is. In short I do not think it is a point of substance about what the system is which is the determinant, but the sub-issue of perception about what it might be.

Q24 Mr Chaytor: Pursuing the question, what is the difference between a fee regime in which the state legislates to allow Vice-Chancellors to fix any fee they like between zero and £3000 for any given course and a regime in which the state fixes a maximum fee and then legislates to allow Vice-Chancellors to produce variability by simply discounting the fee?

Mr Clarke: I think this is a words game. To talk about a fixed fee with discounts is very different, certainly in intellectual terms, from talking about a variable fee regime. They are identical. You could argue, I suppose, that you could go below zero in some type of variability and that should pay people to go on certain courses and so on, and that might be an answer to the physics question that you were talking about, but assuming you have a floor of zero in a situation I see no distinction between them.

Q25 Mr Chaytor: Would it not have been easier for the government to say the maximum fee will be £3000 and then divert the responsibility and the flak to the Vice-Chancellors for their discounting policy?

Mr Clarke: That is precisely what our Bill proposes to do and perhaps some Vice-Chancellors do not want that responsibility. I think that responsibility should be exercised by universities but some colleagues, for entirely genuine reasons, fear giving universities that right.

Q26 Chairman: This Select Committee a long time ago, or it seems a long time ago, Secretary of State, said to you that we thought most universities would charge the full £3000 for most courses. Would it not have given you a much easier life if you had just accepted that and encouraged them to do so?

Mr Clarke: Well, I suppose you would say, and you have said it in the House before, Mr Sheerman, that my life would be at its easiest if I accepted all Select Committee recommendations, and maybe I should --

Q27 Chairman: That was not a recommendation!

Mr Clarke: Thank you. It might have given me an easier life but I do not think it would because I think that the current £1125 going up by 2006 to £1200 flat fee which exists at the moment is just about low enough for some of the contradictions of this not to become sharp and acute. If you start talking about a higher fixed fee - some suggested £2500, some £2000 or whatever - then the lack of flexibility inherent in such a system, in my opinion, becomes very acute indeed and if you simply said for the sake of argument £2500 for every course in every style that happened, then the Vice-Chancellors say to me, "What do we do about the sandwich courses? What do we do about trying to encourage people on the physics course?" - and my example of that is a real discussion with a real Russell Group Vice-Chancellor - "What do we say about the students spending a year abroad as part of their foreign languages courses? Are we to be required to charge them during that year abroad at that same fee level? What do we say about the foundation degree we are trying to build with some local employer or business or whatever, and they say they can do it if we charge £1200 but not if we have to charge £2500 or whatever?", and those difficulties would have made my life very miserable whereas with the Bill that I have published now, when it is agreed with one bound I will be free and the problems will be those elsewhere throughout the system!

Q28 Mr Chaytor: Secretary of State, you said that the level of public funding per student will continue at the same level after the variable fee regime comes in. Can you reaffirm that now?

Mr Clarke: Yes, I can. We have said that.

Q29 Mr Chaytor: But how can you guarantee that beyond the next election?

Mr Clarke: I have said that is the policy of this government and it is carrying it through but it is certainly true following the questions raised by Mr Jackson that if a Conservative government was elected under the next election I cannot see how that could be fulfilled. I can say for this government that it is our intention to do that and that is what we said in the White Paper.

Q30 Mr Chaytor: Is that for the next CSR period, or throughout the next Parliament?

Mr Clarke: We are talking about the next CSR period but this whole process will go into the future, and the commitment of this government to maintain funding and extend it is absolute.

Q31 Mr Pollard: I have three distinct questions, Secretary of State: what is the ratio of graduate financial input to what the government will be putting in?

Mr Clarke: It is about 1:14 at the moment. There are interesting issues about what it is legitimate to contain within that estimate and to what extent you consider research and teaching, and it is the case that the cost of different courses varies very substantially, so the relationship of any fee to the cost of providing a particular course will vary very significantly, which was one of the points I was putting in answer to Mr Chaytor about the HEFCE funding systems that move through. There is not an easy answer but the global answer is about 14, and the language I have always used is that the lion's share of university spending will continue to be met, and in my opinion should continue to be met, by the State.

Q32 Mr Pollard: Following on from that, the government have raised the threshold at which payments start back from £10-15,000 which is very welcome, and many of us argue that it should be even higher than that. Have thoughts ever been given to London weighting? For example, costs across the board, housing and everything else, are much higher in London and your £15,000 will buy much less than in the other parts of the country?

Mr Clarke: We are ready to look at that through the Committee stages of the Bill and so on, but I would not want to sound too optimistic. I know from St Alban's, and I have other colleagues from other seats around London and in London, that it is an attractive option but the fact is that every £1000 you raise the threshold by is an expensive operation - I do not have the figure to hand - and we made an assessment about whether it would be better to raise the threshold to £15000 in terms of repayment or raise the student grant at the beginning, and the view we came to was that we got more result in terms of our excess ambitions by raising student grant at the outset than by raising the threshold and therefore slowing the repayment rate at the end. We consider we are making a pretty big difference by raising the threshold from £10-15000 including for current students, and we thought it was more important to make progress on the grant front with the resources we had available than by increasing the threshold. I would just say that for London, though this would not necessarily help your constituents directly, the biggest impact of our decision to increase the median rate of maintenance loan for students is upon students living in London, because the difference between what it costs to live as a student and the maintenance loan you receive for that is greatest in London according to the statistics we so far have.

Q33 Mr Pollard: One of the main thrusts of what government has tried to do is increase the number of working class students who get to university, and in Australia there has been a system similar to ours in place for many years. The evidence there is that the working class students have neither increased nor decreased. Now that says that those who worry about it will stop working class students - clearly it flies in the face of that but it does not encourage us to assume that more working class students will go along. Are there any other countries where it is contrary evidence?

Mr Clarke: That is the fundamental reason, Mr Pollard, why we think the Office of Fair Access is an important development. We have had the system for many years in this country for a different student support without a tangible impact on the class basis of what is happening. We think our proposals with the student grant regime we are establishing, the total £3000 package, does give us a real chance of making a difference there and, of course, we are committed to doing it, but all the evidence is, though there is not any serious discrimination between applications and admissions by universities, there is a serious differential across those who apply to different universities from working class backgrounds, and that is why we think the Office of Fair Access is an important vehicle to reinforce that. I was massively encouraged by the decision of Cambridge University which they announced before Christmas to put a bursary of £4000 which, let us recall, is on top of the £1500 grant and the £1200 fee omission we are talking about, so a total of the order of £67000 for a student going to Cambridge from a very poor family. I think that is a pretty significant financial incentive. Now, of course, not all universities will be able to achieve that, though I do know at least one of the major universities of that group which is intending to announce similar proposals in the next few weeks and months, but I think that kind of development stimulated by this Bill and by OFFA and its approach is the way to attack these problems.

Q34 Paul Holmes: Is the £3000 cap on variable fees to last for three or four or five years depending on the next Parliament?

Mr Clarke: It lasts indefinitely. Would it be helpful if I gave my understanding of where we are on the length of the cap? What I have said is that the £3000 in real terms would be a cap on all fees at universities. I have said that, as far as the Labour Party is concerned, that will be a position that continues until the end of the next Parliament, come what may. Other parties may have different views on this. I have said as far as the process of change is concerned, and I think this would run across parties, that we will have a review of how the first three years of variable fees has worked, because there are colleagues of mine - and I know there are many Liberal Democrats who share this concern - who are worried that the effect of variability would not be beneficial, and so I have suggested that we have a review which reviews how it has gone and what has happened, so if some of the fears of those who are worried are seen then that can be adjusted. I have said that no change in fee should be agreed other than on the basis of a recommendation from that independent commission to Parliament, so there would be that process and a recommendation would be made to Parliament in those circumstances. Then I have said that the commitment I have given for this government is that any decision on that recommendation would be taken through secondary legislation as in this Bill but by a full vote of the whole House and not sitting on the committee corridor with every member enabled to take a view on what it should be, so there is a kind of double lock before you get to a position of an increase in the cap, firstly that it would need to come as a result of the recommendation of this independent review and, secondly, that it would have to be voted on by all members of the House. Now, I think that is quite a significant double lock in the situation and I know there are some members who are exercised about the possibility of universities coming along and saying, "Let's go for £15000 fees or £10000 fees" or whatever, and people are genuinely worried about that, but I am saying that the process I have set in place offers, in my opinion, guarantees which make it very difficult for that to happen in the way some people fear.

Q35 Paul Holmes: The thin end of the wedge argument, as you will guess from the question I asked you last Thursday in Parliament is exactly the point I want to go on to: if the cap is only there indefinitely until 2010, let us say, the end of the next parliamentary term, and then it will be reviewed, once the principle of variable fees in a market has been conceded there is obviously going to be a huge pressure to raise that cap considerably. Universities UK have said £3000 is too little too late; various Vice-Chancellors - Oxford, Imperial College, LSE - have told us about £10000, £15000, £20000 at various times, and lots of academics have talked about those sorts of figures, so once the principle of variability in the market place has been conceded what is to stop, after 2010, fees going to those sorts of levels?

Mr Clarke: Let me make it clear that the principle of variability in the market place has already been conceded. We have variability for part-time student fees, for post-graduate fees and for overseas student fees, so there is variability but not for some classes of course at the moment. I do not think there is a principle position for university education against variability. There is a practical position based on what has been and how things have operated, and I think it is right that we should, if there is to be a change which I think there should be, examine what its meaning is and, Mr Sheerman, there has been speculation and your Committee has heard from various sources about what fees would be charged at what levels, and it is the kind of thing this Committee would want to look at as any system went through, as it rightly should. I do not know what is going to be charged but I think we should make a judgment based on what has happened. I know there is a thin end of the wedge argument. I could argue that today a fee of £150,000 a year could be charged to a post-graduate student going to the University of Derby to do their MBA which could happen. Why will it not happen? Not because the Secretary of State has said it cannot happen but because there is a set of conditions which make it unlikely to happen. I say let us have a discussion in the real world of where it is rather than looking at thin end of the wedge arguments, which are always interesting but not necessarily illuminating.

Q36 Paul Holmes: We have been urged by yourself and by the Prime Minister, for example, to look at international comparisons and the Prime Minister talked very favourably today at Question Time about the American example. In America there is huge variability in the market between lower quality, cheaper, state universities and the Ivy League and so on. I had a student working as an intern, a graduate, for me last summer from Chicago. She had won a place to an Ivy League university, and a scholarship - wonderful, but the scholarship paid about 40 per cent of the cost of the fees and what she had left to pay in fees was still something like $36000 a year. She could not afford to go even though on ability she could go and she had won a fantastic scholarship. She still had a huge sum to pay so she shopped around for the cheapest university, and that, of course, is the standard practice in the USA.

Mr Clarke: But I am not saying, Mr Holmes, and nor is the Prime Minister, that the American model is the ideal model and one to which we should aspire. In fact, in Questions today he mentioned not only the American example but the Australian, the New Zealand and the Canadian example, taking OECD countries not entirely dissimilar from ourselves as examples to illustrate this point. He could have gone on to other countries in Europe which had variable fees. There is a whole range of countries within the OECD which have a network of variable fees. For me the question is not "Variability or not", as I tried to indicate earlier in answering Mr Chaytor's questions. I think it is unrealistic to say there should not be variability. The question is what is the fairness of the system of repayment, how it operates, whether the bursary system operates, and I certainly would not take the American model on any basis for that because it has an entirely different culture and history to that which we are trying to establish. I hope that the kind of system we have with the loan and repayment that we have described could be taken as an example for other countries that are thinking of doing this without the sharpness, as you have described, though it is always possible to say, "There is the American example and we allege" - falsely - "that this government wants to follow the American example". Well, it does not. What the American example tells us is that you can have a system which gives very large amounts of money per head into universities by this route and they have achieved that in the States compared to what we do here, and that you can do it in a way that still allows access to their major Ivy League universities to people from the poorest backgrounds which they have also achieved, but I do not hold up America as a kind of model for what we ought to be doing. I think we need a British system and need to look at the way that the British systems have operated, and I happen to think that the proposals we are putting forward do that well.

Q37 Paul Holmes: On that aspect, one suggestion is that some universities might have an internal market and that, for example, they charge £3000 to students who are on a very popular or over-subscribed course like English, say, and very little or nothing to students going on to other courses like physics or chemistry or modern languages, where there is a shortage of people. Now, the students on the popular course who have paid their £9000 of tuition fees and got that debt to pay back might go into a relatively low paid job or be at the lower end of the graduate market; the student who has had the free tuition subsidised by the English student might go on to a very well paid job and not have to pay that money back. Is that a fair consequence of the system you want to introduce?

Mr Clarke: I think it is, yes. The fact is that the paying back, whether of the English or the science student as a graduate, will depend entirely on the amount of money that they earn at that time, so if the English student decides to go off and be a playwright and sell his or her plays in the streets of London scrubbing together an income to make it go they will not be paying anything back at all, and as a result of the statement I made last Thursday if they do that for twenty-five years they will not have to pay it back at all and it will simply be written off. I do not think that is unfair at all. In fact the way we operate will say you make your life choice after you leave university; if you want to conduct an occupation which does not make you very much money then you will not have to pay very much back, and I think that is perfectly reasonable.

Q38 Paul Holmes: But the whole justification for what you want to do is that graduates earn more so they should contribute - fair enough - but here you would have a graduate, let's say an English teacher, earning on average after seven or eight years in the job £25000 a year, and they will be paying back their £9000 fees where a modern language student working in a particular job might earn £60000 a year and be paying nothing back. Surely if the principle is that the graduate gets access to better paid jobs and should therefore pay, what is wrong with progressive taxation rather than this totally unfair system that you are suggesting?

Mr Clarke: It is not totally unfair. First, if you the English teaching example, I cannot speak for my successors but I certainly think we would want to continue the encouraging of people coming into teaching English and other subjects that we have at the moment which means there is extra money coming in for students in those areas which deals with some of these issues, and in other hot supply areas of work. But I believe it is perfectly reasonable to pay back provided the issue of your ability to pay is taken properly into account. The other point, which I think you have acknowledged, is there is a difference between the totality and the particular so in general most students earn more throughout their lives and can therefore afford to pay back. That does not mean there will not be some students who are not in that position, and in my opinion they must not be penalised and that is why we have achieved a system which brings those two things together.

Paul Holmes: I will not go further down that one!

Chairman: We will move on to student support

Jonathan Shaw: Secretary of State, the principal concerns of students while they are undertaking their degree is the amount of money they have got in the pockets, the cash in their pockets to be able to pay for things, their day-to-day living, rather than post-qualification paying off fees, et cetera. Now, we have asked you, indeed I have put to you and many other people have put to you since then that the totality, the £2,700, it would be better, rather than having fee remission, actually to take that money and make it into a grant because as our esteemed colleague said, you cannot go to Tesco's and buy much food with the fee remission and the Government are not going to give you credit, are they?

Chairman: There is a lot of advertising in this session.

Q39 Jonathan Shaw: Well, there we are, we live in that world, Chairman. You have said in the past that you accept the principle. You have said in the past that there are financial and practical issues and you are examining them. Can you shed some light on that? What have you examined?

Mr Clarke: Essentially, the logic of a pound is a pound is a pound, whether you call it fee remission or HE grant, is a powerful logic and that is why we are looking at the case that you describe, precisely to bring together fee remission and the HE grant so that a student can effectively choose whether they spend their pound on reducing the fee costs or on maintenance or whatever they want to do. That is a powerful argument, in my opinion. There are some quite difficult issues to address, however, as you go down that course. The first is the public expenditure implications because if you move in that area, there are some public expenditure implications in the costings that we operate and what we do partly for the reason Valerie Davey raised about the question of how you fund fee remission in relation to those situations or not. There are some complicated aspects about how you treat EU students in this approach which means there are some different issues that arise, and there are some issues about whether, if you were to keep the overall public expenditure costs at the same level, the only way to do that would effectively be to reduce the student loan for students who took the money in those circumstances, which is effectively what happens in Scotland. Now, there are downsides to all of these options which is why I was qualified in what I said to the House, though I think the principle is right. Now, just on process, we are intending to publish right at the beginning of next week a discussion paper addressing these precise points, giving quantifications and details so that colleagues, including the Committee, Mr Sheerman, if you wish to do so, can look at our estimates as dealing with these things in a direct way, and then to have a discussion about those things to see how we deal with it. It is not easy and I do not want to imply that it is easy, although I do think that the principle is the right direction to go, but we have been conscious all the time that if we put forward a package in the round which essentially cost more and essentially we just threw money at the problem, we would not create the solution that we need to do right across the range, so I have to be conscious of the public expenditure considerations of this change. I hope that when I publish the paper, as I say, at the beginning of next week, which I will obviously circulate to the Committee on Monday or Tuesday of next week, that we will be able to have a more substantial discussion on how we might proceed in that way.

Q40 Jonathan Shaw: What could that discussion lead to? Could it lead to what I am talking about, a change in the Bill during committee stage?

Mr Clarke: Yes, it could. Well, it could lead to change at the time the system was introduced in 2006, provided that the Bill was carried at Second Reading, as I said to one or two of my colleagues. In the event that we did decide to go down this course, we do not require primary legislation to choose this course rather than the other course, I think I am right in saying, so it would be a question of the form of secondary legislation that we were dealing with.

Q41 Jonathan Shaw: So what you are saying is that this matter is not likely to be resolved by Second Reading, but it could be during the committee stage?

Mr Clarke: In terms of the Government's approach to it and where we think we could be, yes.

Q42 Jonathan Shaw: So before Royal Assent, Parliament would have a clear idea that you would roll up that remission fee and it would all be one grant?

Mr Clarke: I could imagine that, but I do not want to give a wrong impression, Mr Shaw. It is not a straightforward question. It is not simply saying that we take the £1,200, we take the £1,500, slam it together and that is an easy option ----

Q43 Jonathan Shaw: Well, it is.

Mr Clarke: ---- because there are implications in public spending terms. I am not at liberty to say that we will put more public spending into it by this change that we have got and we, therefore, would need to look exactly at how we would meet the public spending implications of doing that, for example, by reducing access to the loan to people who had taken that option and so on. Now, I am not committing to any particular course of action relating to that, but I am saying that the principle is a right one of a pound is a pound is a pound, but the practical knock-ons are quite serious to address. That is all I am trying to say.

Q44 Chairman: But, Secretary of State, people give evidence to this Committee and sometimes hide behind a kind of fog or cloud of public expenditure implications and we would like those to be spelled out whether it is from yourself or from the Treasury.

Mr Clarke: That is the assurance I can give you, Mr Sheerman, and the Committee, that the purpose of this paper I am talking about will not just use vague phrases, but it will say, "This is how we have had to deal with it. We are going down this course".

Q45 Jonathan Shaw: Just quickly on foundation degrees, have you had any discussion with universities and vice chancellors about the costs? What are they saying to you? What are they going to fix fees at for foundation courses?

Mr Clarke: I had a discussion yesterday when, as I said, I was in Liverpool with the Vice Chancellor of Liverpool John Moores and Jaguar, with whom they are doing a project with St Helen's College, and they thought that the foundation degree for what they are doing, which would also be very valuable at the end because to work for Jaguar in this area would be important, they saw figures of the £2,500-type range as being at what that is fixed at, though I must not speak on his behalf, that kind of order being the kind of order that might operate. On the other hand, when you look at some of the types of foundation degree in other areas, I think vice chancellors are talking about significantly lower levels of fee than that which I have described. The reason why I have been very keen to make the case for variable fees rather than a fixed-fee regime is, I think, precisely the kind of explicit discussion between the employer who is sponsoring a foundation degree and the university which needs to take place; there needs to be some freedom to decide where to set the fee to deal with that in the best way.

Q46 Jonathan Shaw: Finally, just something on the review that you are going to have of the fees, the variable fees, after three years, what form will that review take and will it just be OFFA or would you include other bodies? Will you include the NUS and the AUT?

Mr Clarke: We have taken no decision on the form of it because we thought it was presumptuous in a sense to do so because we are some period away from that. It would work with OFFA, I can say, because we had already required OFFA in this to review the process, but we do see it as independent, and that is a point I would want to emphasise more than anything else. Now, whether it was an individual or a committee, the classic way, is not something we have taken a view on at this stage. The role of the Select Committee might be something that might be of interest to that process as well. We have not taken a view and I am not going at this stage, which, remember, is a couple of years at least, more likely four or five years, away from making a decision, to try and tie the hands in terms of a particular form of inquiry.

Q47 Jonathan Shaw: But it is a very important point for many people, how this issue of the variability and all the thin-end-of-the-wedge arguments that my colleague, Mr Holmes, put and the concern that many people have. If this commission was independent and it was made up of all the various component parts and then reported that to Parliament, do you not think that that would give some comfort, give some security to those people who had the concerns, such as Mr Holmes had?

Mr Clarke: I do and of the list that you just gave there, Mr Shaw, I can commit to the independence, I can commit to the reporting to Parliament, I can commit to the participation in the process of the various interests concerned, but what I am not committing to is a precise committee structure of a particular form at this stage since I do not want to prejudge what is really quite a considerable period away exactly how it would be done. The essence of what you are saying I completely agree with, that it needs to be independent, it needs to report to Parliament, it needs to be comprehensive based on proper research and it needs to work with all the various interests and stakeholders. I agree with all of that.

Q48 Jonathan Shaw: And would there be a vote?

Mr Clarke: Within that committee?

Q49 Jonathan Shaw: No.

Mr Clarke: Within Parliament?

Q50 Jonathan Shaw: Yes.

Mr Clarke: It would depend on the proposition, but there would be the right to a vote, so what I can guarantee is if there was a recommendation that we abolish the whole system, there would need to be a vote in Parliament on it. If there was a recommendation that the system was working reasonably well and with certain changes that the committee might recommend, whatever they were, that the cap should be lifted in any form above inflation, there would be a full vote of every Member of Parliament.

Q51 Jonathan Shaw: So no lifting of the cap without a vote in the House of Commons?

Mr Clarke: That is correct.

Q52 Helen Jones: Can we go back to student support, Secretary of State. In your statement to the House you said that in your estimation about 30 per cent of students would receive a full grant and 10 per cent some form of partial grant. Can you clarify for us how those percentages are arrived at? Are they based on the current income profile of students in higher education or are they based on the income profile you would expect in the future if OFFA succeeds in its work?

Mr Clarke: They are based on the family income, the income of the family from which the student comes, so in that sense they are not based on the income of the student at all, but they are based on the income of the family from which the student comes. The 30 per cent figure is relatively large because it combines students from families whose family income is less than £15,000 with students who are independent students, ie, mostly mature students going into higher education where we also feel, for reasons which many colleagues have argued with me, that it is very important that we encourage independent students and that is simply, I may say, a continuation of the current practice.

Q53 Helen Jones: So to make sure I have got it clear, that is based on the family income profile of students at university currently?

Mr Clarke: Yes.

Q54 Helen Jones: So presumably if the Government succeeds in what it wishes to do and what we would all wish it to do, which is increasing the number of students from low-income families, the number of students receiving grants and, hence, the cost would go up. Have you made any estimate of the cost of funding grants and fee remission if the Government succeeds in what it wishes to do?

Mr Clarke: Well, again we are in the land of speculation as to what we could achieve, but the point that you are making is entirely correct, that we would hope that that figure would increase in the way that you have implied and that there would, therefore, be a cost implication, but it depends entirely on your assumptions. Now, we have done some modelling on this and perhaps I had best say to you, Mr Sheerman, that if you would like me to, I will drop you a letter on the modelling around that which has been done.

Q55 Helen Jones: I think that would be very interesting because it perhaps links up with another point I want to make. Will the family income level at which a student becomes eligible for a grant be indexed either in accordance with inflation or will it be linked to the rise in fees?

Mr Clarke: It will not be linked to the rise in fees unless there were a recommendation out of this independent commission we have been talking about that there needs to be the relationship. In terms of indexation of the actual level of family income, I think I am right in saying that it is not our intention to index it at the moment, although again that is something that we could certainly consider. It is not a significant aspect of it and it would not be impossible to do.

Q56 Helen Jones: Can I take you on to bursaries then because in the package of student support that you announced, you announced that you expected a minimum bursary of at least £300 for the poorest students, but my understanding is that the Government believe that rather than have a central scheme for bursaries, each university will be allowed to set up its own scheme. I, therefore, wondered if you could tell us whether universities will be obliged to use the same income levels that the Government use for grants and fee remissions for their bursary schemes or will they be able to set bursary schemes that only come into play at a lower level of family income?

Mr Clarke: There are two points. The short answer is no, they will not be able to have a different system and we are saying that every university scheme should be based on the same definitions of income and the same scales that are there, but I should be candid and say that we are currently discussing this with UUK, Universities UK, in order to ensure that there is agreement across universities on this point. Now, I do believe there is such agreement and I do believe we will be there, so I should slightly qualify my answer in that way, but if the implication of your question is that you do not want very complicated and diverse systems of bursary operating where different universities have got different means-testing regimes, I can say that the Government agree. I can also say that Universities UK also agree with that and we are working together just to make it go in a way which will be simple and comprehensible to potential students.

Q57 Helen Jones: You did say in your evidence that a lot of the problems that students face are about perceptions and understanding. Do you accept that if we ended up with a very complicated scheme with different sorts of bursaries at different universities, that would increase the problems for students?

Mr Clarke: I do accept that and I think that is a very serious concern. I have discussed that explicitly with UUK and I believe we can solve that. Perhaps I could just say that you mentioned the point about a centralised system and actually our decision to increase the grant from £1,000 to £1,500 has the effect of having a centralised system which otherwise would not be there. Many of the earlier concerns of some universities are actually met by the putting up of the grant from £1,000 to £1,500.

Q58 Helen Jones: Can I ask you then about another concern which I think a number of us have and that is the effect on students from families which may still have fairly modest incomes, but may be just above the threshold for grants. Have you had discussions with the universities about whether they will offer some sort of bursary to those students who just miss out on qualifying for a grant and, if so, have you done any modelling on the effect that would have on support available for the poorest students?

Mr Clarke: There are two or three things to say there. Firstly, we have had informal discussions and I think I am right in saying, though I am open to correction, that the scheme announced by Cambridge does in fact do precisely what you have just said and allows support for students from poorer families, but who are not at the very poorest end. Secondly, we have not done substantial modelling on how that might operate simply because of the variety point that you made earlier on. Thirdly, I do think it is important to emphasise that a key issue for this group is perception because in terms of the actual payment back of any fees that have been incurred, that is only paid by people who, after they have graduated, earn enough money to be able to do so, so it will not be a question of that family you are describing somehow having to find money in order to deal with the situation. That would be something for the student after they have graduated to deal with, so, unlike now, no student going to university will be in a position where they have got to find money before they even get on to the campus in the form of the upfront fee or to find money when they are on the campus because their maintenance alone is not enough and that state of affairs is significantly different from now, so the position will be what you pay back afterwards.

Q59 Helen Jones: But the other problem I think we have discussed on numerous occasions is that there are some universities which have a much higher proportion of students on low incomes. Under the scheme that you are proposing about which you are in discussions with the universities, how will those universities be able to fund an adequate level of bursaries for their low-income students?

Mr Clarke: If you take those universities, I said to the House, and it is the case, that a maximum of 10 per cent of their total extra income from charging fees would go on student bursaries. That is to say, at least 90 per cent of any increased revenue that comes from charging a higher fee can go to academic salaries or whatever it might be in the particular university. That, I think, is a fair state of affairs; it means they are the major beneficiary that comes through. If they were to charge the fee at a slightly lower level, for example, the £2,700 figure, then they would have to provide nothing in terms of student bursary to meet the point that we are talking about in this conversation, so there would be a question of all that increased revenue, the difference between the £1,200 and the £2,700, would go into the universities' main resource. Now, I think most vice chancellors accept that and that is why they are supporting our proposals.

Q60 Helen Jones: But we would all accept, I think, much less opportunity for some universities to charge higher fees than others and it is, generally speaking, and it is a generalisation, I accept, but it is, generally speaking, the universities that have a higher number of lower-income students who have less opportunity to charge higher fees. Now, that being the case, why has the Government appeared to rule out some form of cross-subsidy?

Mr Clarke: Because there is already a series of subsidies that already operates within the system and the HEFCE funding regimes. There is, for example, £1/4 billion through HEFCE through the postcode system which is focused precisely on those universities to encourage it. We have the Aim Higher programmes and the way they have operated also focusing in those areas to some extent. I believe our focus on teaching excellence will help many of those universities strongly. Therefore, I would argue that we have a series of programmes that are there precisely to target money on those universities that you are talking about rather than some of the research-intensive universities in ways which I think meet the ambition that you are describing.

Q61 Helen Jones: I have one last question, if I may, which actually refers to post-graduation pay-back. I heard your answer to Mr Pollard earlier about the problems associated with housing costs, but can I ask you if you have given any thought to a further problem, that graduates will pay back according to their income, but there is a difference, is there not, between a single graduate or a graduate without children on a very modest income and a graduate with children who may be on a fairly modest income, so have the Government given any consideration to factoring family responsibilities into the pay-back scheme and, if so, what conclusion did you come to?

Mr Clarke: Well, the main issue about all of the pay-back arrangements is about complexity and to what extent you try and replicate the tax credit system as a whole in the way that it operates. Now, in terms of the disposable income point which is implied in the figure at which you start repaying, that takes account of a number of considerations in terms of establishing what disposable income is available from the point of view of making a repayment and we are certainly prepared to look at any changes that need to be made in that area. The overall effect is designed to try and ensure that we have a fair system at that point which may need to be repaid effectively.

Q62 Jeff Ennis: Secretary of State, if we can return to the £3,000 cap on variable fees and we referred briefly to this in a previous response, the Committee have drawn a conclusion, which is at paragraph 190 of its report, "The evidence we have heard suggests that the differentials in fees charged by universities and colleges will be small at best and possibly non-existent", and, therefore, we are fearful that most universities will charge the £3,000 fee, come what may. At what sort of levels do you think that universities will start charging the £3,000 fee given that they have got to comply with the OFFA situation, et cetera?

Mr Clarke: Well, the trouble is, Mr Ennis, that there is a disagreement between me and the Committee on this. I understand the conclusion that you have come to, but I do not have an estimate in this area. I do not think it is right to say that the overall overwhelming majority of courses will be charged at the £3,000 level. That is being said by a number of vice chancellors and I understand why, but actually those very same vice chancellors would acknowledge in many cases that they have not yet done the business case for what they should charge for particular courses as they come through and I think you will find a much higher level of variety than is widely acknowledged. I am, for example, certain that just about every university will have at least some courses charged at the full £3,000 level and I am also certain that there will be almost no universities where all courses are charged at the £3,000 level, but how the mix actually goes, I think, will depend on a very clear look at the situation overall. I know you have been given evidence, and you reflected that in your report, which you have quoted the conclusion from, that all universities will charge at that level, but I simply do not think that is the case. What I put to you is that I have not got a better estimate. There is not a kind of solid estimate that exists. There are all kinds of speculations, but nothing which, I think, really stacks up and I do not think that it will be until we get to the point of the universities actually deciding what they actually will charge that we will know what the answers are.

Q63 Jeff Ennis: Obviously there is a certain amount of anxiety about the debt aversion aspects and the variable fees and the impact that could potentially have on poorer students or students from poorer backgrounds. I know that your Department commissioned the work by Professor Callender from the South Bank University and one of the conclusions she drew was that debt aversion is four times more of a factor for students from poorer backgrounds than it is for those from middle-class families, et cetera. One of the things she actually quoted was the fact that under the current system the students from poorer families who do not pay a penny in tuition fees are leaving college now with debts 43 per cent higher than students from better-off backgrounds. What guarantees have we got that under the new system, this differential will not be eroded? Under your system, will students from poorer backgrounds still be leaving college in ten years' time with debts 43 per cent higher than students from middle-class backgrounds?

Mr Clarke: I do not think so. I think the reverse is true for two reasons. Firstly, the basic source of the reason that debt exists as it does at the moment in the way you have described is that the amount of money provided in the student loan, particularly in the London area, and Professor Callender's university is a London university, is simply not enough. I think that embodied in the question raised by Mr Ennis is the question that if you cannot find the money to support you while you are a student, you have to find it from somewhere and that is what leads to the borrowing on credit cards which you have described which then escalates and snowballs because you then have to borrow on the borrow, as it were, to carry it through. I think the steps I am proposing of the level of maintenance loan will really bear down on that in a way which reduces the impact you set. Secondly, the proposals I am suggesting bring in maintenance grants for students from some of those families that you are talking about and they can use those grants in order to address burning problems of spending while they are at university should they wish to do so. Therefore, I think the overall effect of the combination of support for students from those families, plus the increased level of maintenance loan will have the effect of reducing that level, particularly so, if I may say so, where university bursaries are being given at a much more generous level than what exists at the moment.

Q64 Jeff Ennis: So one of your objectives in these new proposals then, Secretary of State, is to actually reduce this differential which currently exists?

Mr Clarke: Absolutely and I believe that the effect is, for the reason that you were arguing so coherently for in a range of different gatherings, that it is critical to be able to assure students from the poorest backgrounds that a choice to go to university is one which will work for them rather than not.

Q65 Jeff Ennis: A survey carried out by the Association of University Teachers last September which looked at different family income levels said, "A highly encouraging 83% of parents on gross incomes below £25,000 would like their children to go to university. However, of these, 72% said their children would be more likely to attend a university charging £1,100 fee than one charging the full £3,000". Does this not underline the fact that quite a lot of our colleagues feel that students will go for the cheapest course closest to home?

Mr Clarke: I understand that point, Mr Ennis, but, as I said to Mr Sheerman earlier on, the fact is that the level of knowledge today as we speak about how the system operates both from potential students and potential students' parents is much lower than it needs to be and when one puts the hypothetical question, as the AUT survey did, "What if you increase fees?", then it is unsurprising to me that people answered in the way that they did, but what that reinforces to me is the obligation, once we have Royal Assent for this Bill, to explain much more effectively than we have done precisely what the nature of the system is. I believe there are many people answering questions of the type you quote, Mr Ennis, from the AUT who believe that our proposals are to change the current upfront fee of £1,125 a year to an upfront fee of, for the sake of argument, £3,000 a year and not surprisingly, confronting that, people think, "I'm not really much up for that", but actually that is not what we are proposing at all.

Q66 Jeff Ennis: I am sure you are familiar with The Guardian article by Professor Callender, entitled "Student debt truly a class issue", and this is the person that you commissioned to do the work in terms of looking at the impact of variability on poorer students. Her conclusion in that article reads as follows: "Variable fees increase both the costs of HE for students and their debt. Both deter low-income groups' participation. The £1,000 grant", which admittedly now is £1,500 and I am grateful for the right direction, "while welcome, is inadequate to offset both rising costs and debt. Rather, the new reforms will reassert elitism in higher education. Privileged students who populate top universities will pay high fees, but will get highly valued degrees. Low income and access students who populate universities at the bottom of the hierarchy will pay less and get less, but still end up with large debts. Both social class and disadvantage are reinforced by these divisions between institutions and between students. There is a danger that higher education will become more socially and ethnically differentiated and polarised than ever before." Now, I get worried, Secretary of State. This is not someone who does not know the facts of what the intended situation is. This is an academic professor who has been commissioned by you to do work on this issue and those are the conclusions she has reached in her article.

Mr Clarke: I say two things. She is a highly esteemed academic analyst and I respect that and that is why she was commissioned by the Department. I do not agree with her conclusions for one very, very important reason, that attitudes to debt, and that is the work that she has done, are based very much on perceptions of debt and on understanding the student finance system that operates at the moment, and one thing that is very clear to me is that if we do not convey, communicate what the system is, those attitudes and perceptions change, but I say to her and to you that we will succeed in communicating these changes in the way that is necessary.

Q67 Jeff Ennis: We bring in the market system for higher education. In any market system it is the law of the jungle basically, so how many universities do you see closing in the next ten years if we bring in the market system for higher education in this country?

Mr Clarke: Zero.

Q68 Jeff Ennis: There would be no rationalisation whatsoever?

Mr Clarke: I think what will happen is exactly the opposite. I think the pressure from more universities will proceed. We have actually in the White Paper signalled more universities being given university status, which I think is right, and I think you will find them becoming stronger and more effective. It is not an unregulated market situation. I know you did not use the word "unregulated", but it is a regulated market situation with the cap being the most obvious manifestation of that regulation. It is not a pure market situation and I do not think that there will be rationalisation of the kind that you describe. What I do anticipate is much more collaboration on research in particular between universities which I welcome and indeed it is the policy of the Government to encourage, but in terms of mergers, takeovers and closures, I do not see that being the course that will be followed.

Q69 Mr Jackson: I remember from the passage of the Student Loan Bill in the late 1980s many pandred speeches being made and many pandred articles being written by many learned professors, making all sorts of predictions about what would happen when we had student loans and they have all been confuted in the light of experience, and the Secretary of State can confirm that. The number of students has increased substantially, the proportion of people from the lower social classes has risen and none of the predictions that were made has been correct.

Mr Clarke: Well, I would not go anything like as far as a Fellow of All Souls' College, Oxford, in condemning the quality of contribution of academic professors on any debates of public policy and it would be quite improper of me to do so, but I observe there are many views which come in many different ways and it is certainly the case that some of the worse predictions of what would happen in certain circumstances are not being fulfilled, but I will go further, Mr Sheerman, and say that I predict that some of the predictions about the implications of this Bill will not be fulfilled and I predict that we will get better participation from students from a working-class background. I think we will get more vibrant universities and I think we will get more expanding universities and I think those are the positive conclusions which will arise.

Q70 Jonathan Shaw: Some members of the Committee might be concerned at your continual deference to the academic world, but I am not sure if that is going to advance your cause within the Labour Party!

Mr Clarke: I have learnt to doff my cap!

Q71 Jonathan Shaw: Earlier on you said that some vice chancellors have said that they can see that all fees will be charged at £3,000 and you said that you understand why they are saying that, but you do not agree with them. Why do you think vice chancellors think that?

Mr Clarke: For two reasons. One, I think vice chancellors of all universities want to believe that their university is the best and they believe that the level of fee is a marque of what they think a pukka university is and they want to say that for their university that is what they are going to do. I do not think it is a good way of doing it, but I think that is motivating some. In other cases ----

Q72 Jonathan Shaw: More is better.

Mr Clarke: Yes, well, it is the Rolls-Royce argument which says simply, "We all want to be Rolls-Royces", and I think that is one motivation. I think another motivation is the desire for some university vice chancellors, who do not favour the variable fees option and would prefer a fixed fee option, to say that they are the same because all university pressures are the same, and I do not think that is the case, but I think that motivates some of the people who make that case.

Q73 Chairman: There is one area of interest that the Committee has not covered so far and we must cover it before we move on to OFFA. That is, how much do you think the subsidy is of the zero interest rate to students? How much is that worth per year or does it cost the Exchequer?

Mr Clarke: It is a lot of money. It is something over £1/2 million/billion(?), so it is a lot of money and it is a very substantial amount. We felt it was right to do it for the reason that we think if you were to get to a situation where people were paying back on a real rate of interest, it would be a serious disincentive.

Q74 Chairman: Well, we argued very cogently, I thought, in our inquiry report that you had real potential there for even a smallish interest rate on that to students who could afford it to have brought you some real cash to help in providing bursaries and help and maintenance grants for poorer students. Why did you not seriously go into that area?

Mr Clarke: If I gave the impression we did not go into it seriously that would be quite misleading. We took very seriously your Committee. We think there are very serious points about it. I think it is a very real issue. Some of the strongest advocates of the kind of system we have think, as the Committee does, it is something which should be looked at very closely. We did consider it.

Q75 Chairman: I would hate to pull any rank at all over the Governor of the London School of Economics, it is quite a classy university down the road from here, but Professor Nick Barr has consistently said you are wasting a great deal of money.

Mr Clarke: Indeed. As I said to Mr Jackson, I try and respond to all the university professors with a deference which I was brought up with at my mother's knee and Professor Barr is certainly one of those to whom I listen very carefully. Yes, we have discussed those issues and it seemed to me there was an overriding policy issue which was that many of my colleagues across the House of Commons have been very concerned about the potential disincentive of debt for students going to university and the fact is that if you have a real rate of interest that disincentive effect could be significantly greater than what it is at the moment. Mr Jackson made a side remark a second ago about what is the evidence and I agree with his implication that there are issues. I am not convinced the evidence is there from the point of view of the disincentive effect of the real rate of interest in particular, but I would be very keen to assure colleagues that we will put in place a system which does not disincentivise.

Q76 Chairman: Eighteen per cent of the people in my constituency have benefited from higher education, 82 per cent have not and no one offers them apprentices that will pay for their own training, no one has ever invited them to come into the bank and have an interest free loan. Why is it that we have layered privilege upon privilege on this small number of people and we do not charge interest rates to these people?

Mr Clarke: Essentially because we value university education for all the reasons that we have said. Let me make one final point on this, Mr Shearman. A serious consideration in my mind was the potential disincentive for those people who decided to bring up families after they had left university and they took career breaks in going down that course, principally women but also men in those circumstances. I thought it would be wrong to be in a state of affairs where there was a further disincentive to do that as a result of the Thatcher conclusions. I do not dismiss the arguments that the Committee or you personally have made on this at all, I think they are serious arguments, but on balance we thought the package we put forward was the right one.

Q77 Chairman: Secretary of state, there was another area where you were not very courageous and ignored our recommendations and that was the other one I believe you were launching with Digby Jones yesterday from the CBI. Everywhere you go you say you accept the Dearing recommendations and Dearing said that those who would benefit from higher education should pay towards it, whether it be in society through taxation, whether it be the people who benefited individually from the education, but he also said employers. We argue very strongly that there should be some way in which those people who have benefited from highly skilled and highly educated workers should pay something, but not one bit of a reaction did we get to our recommendations that employers should pay some sort of levy or pay in some other way. We gave the levy as an example. Why did you not have a bit more courage in making employers contribute?

Mr Clarke: Because I am a practical politician and I believed that the Sector Skills Councils that we have approached to simulate the foundation degrees as the key source of expansion to the university courses that we have talked about, which involved funding from employers in each of those sectors, was, and I believe is, a good way forward in those areas. You can say let us put in a levy of some kind to do that, which I think in many sectors would not work directly, you can say do something through employers' National Insurance and there is a general issue of policy across Government in those areas about the general level of taxation on employers, or you say generate a system which will encourage employers to put in more, which I believe our system will do. At the press conference you referred to Digby Jones specifically said he thought employers would be ready to do that within our system, to take it forward and there is some evidence that is beginning to happen. On your fundamental question as to whether we should have had some kind of levy across the economy as a whole, the general view across Government was - and I support it - that to go to a state of affairs where there was a higher level of direct taxation on employers in this way was not the best way to proceed, though we have gone down this other course.

Q78 Chairman: Let me leave you with one thought. If you look at the top companies in this country and you look at the percentage they put into corporate social responsibility, and so many of them do not even get the recommended one per cent of pre-tax profits, it does lead to enormous potential. If you pushed the figure up to one per cent that flows into higher education it would transform the situation. I will not frame that as a question.

Mr Clarke: We did think at the same time of nationalising the top 250 monopolies, but we decided that was not necessarily the best way to go.

Chairman: I want to move on to OFFA and there have been two very patient colleagues waiting.

Q79 Mr Gibb: In your statement last Thursday, Secretary of State, you said, "We will establish the new Office for Fair Access to ensure that universities support students from the poorest backgrounds." You then went on to say, "OFFA will not concern itself with admissions, but with applications." Can you confirm that they will not be intervening on admissions and they will not be sitting on the shoulder of the admissions tutor of an Oxford college saying "Pick this guy, not this one"?

Mr Clarke: Yes, I can. One of the canards which have been spread most widely is that we will have an officer sitting on the shoulder of university admissions tutors saying they must admit X, Y or Z, but that is completely wrong, we will not go down that course. The ill that we have identified is that universities are not encouraging applications equally across the social range. We believe the evidence generally demonstrates that once universities receive applications from whatever background they tend to admit on a broadly fair basis. We do not see the issue to be addressed as being pre-application to admission but rather pre-application.

Q80 Mr Gibb: You said in your statement that "The focus of OFFA's work will be those universities with the poorest track record in widening participation." How will they do that? Will they be interfering with the universities or will they be intervening with the schools to try and encourage them to encourage the students?

Mr Clarke: The short answer to that question is both, Mr Gibb. It will be encouraging universities to inter-relate with schools and in fact that is happening in a different of number areas at the moment, to encourage much stronger relationships between schools, particularly schools in areas which have not traditionally sent people to some of our most research intensive universities, to understand that it really is a possibility for them to carry it through. I acknowledge the implication of the question is that it is work in schools which makes a big difference in this area. It is not so much work by the Government or by teachers in schools as work by universities in schools and it is that we need to encourage.

Q81 Mr Gibb: Later on you said that no university will be able to put up its fee without OFFA's agreement. What criteria will they base giving this permission on?

Mr Clarke: That will be a matter for OFFA, but the central criterion that we are describing is that a university should be absolutely serious about increasing applications to that university from students from across the whole range of social backgrounds and that they have demonstrated their commitment to doing it and they are making it happen. Again I mention the Cambridge example simply because it is the one that has been in public. That bursary scheme is obviously a serious effort by Cambridge to address this issue and OFFA would be an independent body, but OFFA would have to take that seriously and say that there is a serious effort being made here to address some of these issues and I feel that is a positive approach.

Q82 Mr Gibb: Is not the real problem with university admissions and applications the quality of some of our secondary schools? The proportion of students from state schools going to Oxbridge has fallen since the mid-1960s. Is not the real answer to concentrate on improving the quality of our secondary schools and not have this bureaucrat wandering around trying to encourage more applications?

Mr Clarke: The short answer is yes to the first part of your question. I have said from the outset that the key motivator of performance in this area will be the performance of the education system, not just of schools but also right down to under-five levels, throughout the whole country and that is what we have to try and achieve. We are committed to doing that and I think we have a very coherent programme for approaching that. Do I say we should do nothing about this wrong which I believe is there, that there are not sufficient applications to our research intensive universities from students from the poorest backgrounds and just ignore it and hope it will all come out in the wash in the next 25 years, I do not think we should do that. I think we should look at that too. The two are not mutually contradictory in any respect whatsoever. That is why I was answering earlier points that were made by members of the Committee. I think the fact is that when you look at the Australian model or whatever it might be in the examples that were being given, OFFA will give us an additional weapon to address this problem. Just to emphasise, Mr Gibb, university vice chancellors themselves acknowledge that there is more work to be done in these areas. They do not want this in a red-tape situation and I agree with them about that, but they do acknowledge that more work needs to be done in this area by them and by us in helping them to try and address this issue.

Q83 Mr Gibb: Finally, would that not be achieved through exhortation and is this not really a kind of minor part of the Bill, but actually it is the part that annoys most Conservative Members of Parliament and if you scrapped this, perhaps you would get the support of more Members of Parliament in the House of Commons and ease your problems?

Mr Clarke: Well, I must admit it is a very interesting proposition, if you can speak on behalf of the Conservative Front Bench, but I am not certain, Mr Gibb, that you are in a position to do that, though you may be and I would be interested to see! My actual view of this is that exhortation is always worthwhile and, as a politician, I probably spend too much of my time exhorting, but actually having a sanction to make it go is quite important and that is why we have got that range of sanctions. I do not believe that the big issue on the Conservative benches is only that, but I do not think it would be right just to abandon this issue completely, so we shall not.

Q84 Mr Turner: Could we just confirm that you do not see any evidence of discrimination in considering applications by universities like Oxford and Cambridge against applicants from certain backgrounds?

Mr Clarke: Speaking generally, I agree with that statement. I do not deny that there can be issues that can arise in particular circumstances, but I would not say that there is systemic abuse, as it were, which leads to admissions not to be properly considered.

Q85 Mr Turner: How many students as a proportion of the student body do you think benefit financially by going to university compared with people with equivalent A-levels who have not gone to university?

Mr Clarke: The overall majority of students benefit financially by their period at university. Of course there are people who decide not to use that benefit, not to take advantage of it because finance is not a particular issue for them in their lives and they are not motivated principally by that, but they are motivated by other things, which I respect entirely, which is one of the reasons why I have put in the 25-year cap on the whole process. I think there are few students who do not at least have the capacity to gain financially as a result of their university period.

Q86 Mr Turner: Do you think it would be appropriate for students to weigh that information, were it available, about courses and universities in considering whether to pay the full £3,000 and go to one university or pay perhaps a discounted rate and go to another university?

Mr Clarke: I do think it is reasonable, yes. As I said in answer to Mr Chaytor earlier, I think it is only a consideration and not the consideration. As I say, if you look at the guides, like the Virgin Guide and the Times Guide to different universities and so on, you see a vast range of issues, including the quality of the teaching, the nature of the research, the quality of the beer, whatever, and these are there and potential students will take all of these things into account. Do I say in addition that it is reasonable for them to consider the fee? Yes, I think it is reasonable.

Q87 Mr Turner: Do you think the information is available? Your Department answered a question to me which I think suggested that 10 per cent do not gain financially compared with their A-level equivalents, but I had to check the figures, though it was a substantial figure. Do you think that information should be available course by course and institution by institution?

Mr Clarke: Well, it is very difficult to give an absolute figure on this because the fact is that if you take a particular course or a particular university, to say that you are in a state of affairs where you can say that the particular mark-up through doing that is X, I do not think you can say it as accurately as that at that kind of level. You can only talk at more general levels than to say that if you do law at Oxford, or perhaps that is one of the ones you can define more sharply, but that you can define it directly. If you look at the guides I am talking about, the Times Guide and so on, they do have tables about the destinations of students and the type of earnings you can get in those professions. At four different universities today, that exists now and that is one of the factors which can be taken into consideration, but I understand that it is only one of the factors. Just to emphasise one other point, in our proposals, if a student decides to go to a particular university hoping to get an income mark-up as a result of doing a course, but fails, ie, the money does not come through, they mess it up or whatever and they have a low income for the rest of their life, they will not pay back and that is the value of our system when it goes wrong.

Q88 Mr Turner: Depending on how much lower of course, but yes, I accept the point you are making. In your statement you said that no university would be able to put up its fee without OFFA's agreement and certainly that is my reading of the Bill. Does that mean that every time a university wishes to vary the discount on a particular course, it has to seek approval from OFFA?

Mr Clarke: I think that would be burdensome, and again it would be a matter for OFFA and I am not going to prejudge it, but I cannot see them working in that way. I think they would give a general dispensation to a university or a particular course once they were convinced that the university was working hard to address that issue, so if you took law students, I can see no reason why OFFA would not say to Oxford, "What is the evidence that you are really trying to get more applicants for law from a wide range of social class backgrounds to the university?", and if the answer is yes, they are doing it, then OFFA would say okay, but if there is then some variation which came along, I cannot see OFFA wanting to get involved at that level. If the implication of the question is whether we should not be having a pettifogging type of approach, well, I completely agree and I think the role of OFFA will be a broad discussion with universities about how they are working.

Q89 Mr Turner: So the power OFFA has is to approve plans which contain a range of options in a particular institution in relation to particular courses and perhaps to courses generally rather than to specific fee levels?

Mr Clarke: Precisely.

Q90 Mr Turner: Finally, can I ask you something about your response to the Chairman at the beginning about the Manifesto commitment. Can you assure us that no element of this Bill can take effect before the General Election?

Mr Clarke: I think I can. The only qualification I am expressing is the decision to establish student grants which we are starting in September this year which is before the Election, but as to the specifics on the variability of fees, I can give you an assurance if that is what you want.

Q91 Mr Turner: The only reason I ask is because most of these clauses in the Bill commence, "When the Bill gets Royal Assent..."

Mr Clarke: Yes, but the actual implication of it, if you go through the various clauses we are talking about, we will proceed to establish the Arts and Humanities Research Council as soon as we get Royal Assent, we will establish the Office of Fair Access as soon as we get Royal Assent, we will establish the procedures we are talking about for student complaints once we get Royal Assent, and the bankruptcy provisions, I have not got the timing in front of me, but I think we are doing it immediately. The transfer of student support to Wales, there is a timetable set out for it to happen before that, and on OFFA, as I mentioned, OFFA we positively want to get going as soon as Royal Assent happens because we need to get its operation in place, so I think I am answering your question in the way you want, but tell me if I am misunderstanding.

Q92 Mr Turner: You are certainly answering my question perfectly, but the point is that an incoming government, and of course there may not be sufficient support for your Party as a result of this, would have to reverse this legislation, is that correct, to prevent it taking effect? You are not saying that it will not take effect until after the General Election?

Mr Clarke: Well, the fact is that universities will have to indicate what fees they are intending to charge at an early basis, but we would not lay the regulations that would make it happen until we are in that position to do that, so your Party would have the opportunity to say, "We're going to disentangle all this, put it back to scratch and put in zero fees". Whether your Party leadership, on considering this matter, would decide that was the most prudent electioneering course as you went to all the potential students in your different constituencies, saying, "Sorry, we will not be able to let you go to university now", is a matter for you to make a political judgment about.

Mr Turner: I am sure we will.

Q93 Valerie Davey: Back to where I started. You are a practical, pragmatic politician. The whole of this Bill is going to recommend that we raise something like £1.2 to £1.7 billion. The disproportionate time and effort apparently being spent on this must surely lead to the concern that this is the area potentially where there will be a greater income raised. Can you dispel that argument or not?

Mr Clarke: I think I can because of the timescales I have described and assurances I have given about how a change in the cap might be agreed. We are talking about a significant timescale before getting there. In answer to the question is it worth it, I would say £1 billion is not to be sniffed at for universities and they will tell you that very directly. If you can get 30 per cent more resource allocated to teaching, for example, that is something they very much welcome. I would say that restructuring student support in the way I have described and, in particular, getting rid of the up-front fee is something not to be sniffed at in what we are doing. I defend the propositions even though great economists could say we could find £10 billion here and sort out this, that and the other. The fact is, as you know, Ms Davey, much better than I, greater competition for resources in this area compared to other resources is a big one.

Q94 Paul Holmes: You said in your statement last Thursday that there will be an independent review three years down the line in conjunction with OFFA. Will OFFA become part of the independent review or will it be two separate reviews?

Mr Clarke: OFFA will be established. We have already set out in the HE White Paper that OFFA will have a role to review how the access process had gone. The reason I said "in conjunction with OFFA" in the statement I made last Thursday was it seemed to me sensible, if there was an OFFA review taking place, as was suggested in our White Paper, and this review of variability taking place, they should be brought together in some way. The precise way of bringing them together, as I indicated to Mr Shaw, is a matter for consideration nearer the time, but I agree with the implication of your question which is that having two entirely separate reviews does not appear entirely sensible, so it would be better to do them in conjunction with each other, but precisely how is a matter which I think will need to be decided significantly nearer the time.

Q95 Paul Holmes: Let us say that three years down the line they say, "This is a disaster. We have got to unravel it, stop and go back to the drawing board. Perhaps we should do what those nice Liberal Democrats suggest and put the highest rate of income tax up." Why would a future Labour Government, if it was a Labour Government at the time, take any notice of that? You said on Thursday that we should take it or leave it, there is no pick-and-mix approach and the Prime Minister has said that anybody voting against this is voting against the essential interests of the country. If it is all or nothing now and there is no alternative, why would you accept an alternative three years on and if the independent review said this is a disaster, we have got to stop?

Mr Clarke: I do not believe the review will come to that view.

Q96 Paul Holmes: What is the point of the review then?

Mr Clarke: Because it is my view, and it is the point I am making to my colleagues and I will say it to the Lib Dems as well. Others have got other views and they do not accept my view. You do not, for example, Mr Holmes, believe I am right about this. You are entitled to that view. I am saying the way to test that will be after the variable fees system has been in operation for some period, so not on the basis of a series of rhetorical exchanges but on the basis of an independent assessment of what has happened. If that independent assessment was to come to the view that all the hopes that I have set out here are completely wrong and certain things have happened in the way that the Lib Dems always predict failure, then fine, we can go down that course, but then the Government of the day would have to decide what to do about that situation. If the independent review came to the House and said this was a disaster for reasons X, Y and Z, then the Government of the day would decide how to deal with it. It was a specific effort - and one that I hope will bring the Lib Dem supporters into the division lobbies on January 27 - to say that there would be a serious assessment of this question to look at your concerns as well as others, to see where we might be and I think that is a sensible way for me to go.

Q97 Jeff Ennis: On the issue of OFFA, Secretary of State, as you know the Committee take a slightly different view to you in that we support the principle of OFFA but we would like it to come under the control of HEFCE. Does not the very fact that you are establishing the offices of OFFA in Bristol alongside HEFCE give strength to our argument that it should be part of HEFCE and not totally independent of it?

Mr Clarke: It does. I understand the strength that you are suggesting in that argument. I would be of the view that if it is located simply as part of HEFCE on a long-term basis it ends up as a kind of technical adjusting role which I do not think is strong enough for the power that we think is necessary for OFFA in those circumstances, that is why we think it should be independent. As you know, for reasons of convenience in its early phase, we think it is right to co-locate over this period, but as the OFFA is established I would expect that it will take a completely independent role.

Q98 Jeff Ennis: So you might go to new premises eventually?

Mr Clarke: I can certainly confirm to the Committee that that is something which is on the agenda.

Q99 Chairman: Secretary of State, we are going to give you the last word. What is the essential strength in terms of recommending this Bill to members of this Committee? You are obviously passionate about this Bill. You have passionately argued for it today. What is at the heart of your thinking? What makes you believe in this Bill?

Mr Clarke: I appreciate the chance for the last word, Mr Shearman. The reason I think it is so important is because I believe that education and the universities' welfare is absolutely vital to the economic and social wellbeing of the country. In the very sharply competitive market world in which we exist I think we have to give them the resources and we have to ensure that people who go to university from right across the range are able to do that. I think that means facing up to the fact that change is needed. It is always easy to drift along, but I think change is needed. The change is not easy to identify, which is the right process. Your Committee has played a major role in helping the public debate. I think now is the time to choose whether we are going to face up to that or not. It is something I have tried to deal with as Secretary of State and I am sure it is something every member of this Committee has tried to deal with. I think every Member of the House of Commons now has to make that choice, and it is a straightforward choice. Choice (a) is to go down the course that we are suggesting and of course there will be further debate in Parliament if that is the case. Choice (b) is to say no more money to universities, keep the up-front fees, do not put in the repayment regime we have talked about, do not have the student grants. That is the choice and that is the choice which the country will judge us on in my opinion. I am passionately of the view that we have to commit to the future of universities and I hope that the House as a whole will agree with that.

Chairman: Secretary of State, thank you for your attendance.