Higher Education Bill

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Chris Grayling: Surely the Minister must accept that if a student leaves university today with the average student loan debt of about £9,000, even with the full benefit of all the grants that he has described, the introduction of fees will mean that that student will still leave university with a debt of £9,000?

Alan Johnson: Yes, absolutely. Students from whatever background, studying a three-year, £3,000 course, will leave with that to repay. The argument was that that would not have been the case if we had retained fee remission, and we changed that. A perfectly good intellectual argument was made by Opposition Members and the Select Committee, as well as by my hon. Friends the Members for Southampton, Test and for The Wrekin. The argument concerned fee remission, which was fine and is needed when the fee is up front.

However, the onus of the fee repayment will now be transferred from the family of the student applying to university to the earnings of the graduate when they

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are in work and earning more than £15,000. The hon. Member for Hertsmere is shaking his head, but as my hon. Friend the Member for The Wrekin said, nobody can pay their supermarket bills with a fee remission. That is why we pushed it up front. If, for example, two 28-year-olds—one from a poor background and one from a more prosperous background—work together in the City, both earning £40,000 per year, why should one pay £9,000 in education fees and the other one less? They are in exactly the same situation. It is really important to understand the basis of the argument.

Under the income contingent repayment scheme, which the Inland Revenue will administer through payroll deductions, payments will go up when earnings go up, they will go down when payments go down and they will cease altogether when earnings drop below £15,000. That is a far better system than the mortgage-type repayment scheme presided over by the hon. Member for Daventry (Mr. Boswell). It had a higher threshold, and once people went over it by one penny, they had to pay everything back within five years. Ours is a much better system; indeed, it is just about the best system one could devise to hit all the buttons—more finance, expanding higher education and a fair deal for poorer students.

Several hon. Members rose—

Alan Johnson: I will give way to my hon. Friend the Member for Cambridge

Mrs. Campbell: I am grateful to my right hon. Friend, who is making a powerful case, but is he saying that the debt that graduates acquire will not affect the choices that students make before going to university? We have had some debate about courses for which there will be a low fee or no fee at all in the supposition that that will attract extra students. I believe, as I think that my right hon. Friend does, that people's choices will be affected by the level of the fee, even though they will not pay it until after they graduate.

Alan Johnson: My hon. Friend is absolutely right. How can we argue that that is not a factor and then, as we have just done, debate paying medical students' fees to attract them on to courses? That is not the argument. We are arguing about the difference between a £3,000 fixed fee and a variable fee and for students to be charged less. If a university decides that it can charge less, why should it not do so? Why the rigidity? Why the communism of a rigid, fixed system—that is what Nick Barr and Iain Crawford were referring to—with no discretion to charge less? The point that my hon. Friend raises is an issue, but not in this debate, which is about fixed versus variable fees.

Mr. Boswell: On the Minister's point about the threshold, and his criticism of the old, mortgage-type repayment scheme, which may, indeed, have had some faults, will he not concede a point that troubles my hon. Friend the Member for Hertsmere? The Minister proposes a repayment threshold of £15,000, but the threshold under the old scheme would now exceed £20,000.

Alan Johnson: Yes, I accept that, but I would like to ask a student which scheme they would choose. I

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would tell them that the threshold in one scheme would increase from £10,000 to £15,000 and that they would only pay 9 per cent. on their earnings above that level. I would tell them that there was a 25-year cap and that the scheme was income contingent so that when their earnings went up, their payments went up, and when their earnings went down, their payments went down. Then I would ask them whether they wanted a scheme in which they would have to pay the money back in equal amounts over five or seven years—there were two types of scheme—if they went a penny over the threshold, although the threshold may be higher, and graduates earn much more than they did when the hon. Member for Daventry was the Minister responsible for higher education. Finally, I would mention that no account would be taken of the fact that their earnings might go down afterwards and that they would still have to make the payments. I know which scheme they would choose, and knowing the hon. Gentleman as I do, I know which scheme he would choose if he were a Minister again.

Mr. Rendel: If I understand correctly, the Minister said that the £2,700 grant would not be instead of a loan, and students would still be able to take on a loan for maintenance. Am I right in saying, therefore, that those who use the grant for maintenance, take on a loan—it can now be up to a maximum of £3,550 a year—and have to repay fees will have to pay back £9,000 in fees and £10,650 in maintenance loan? That would give them a total debt on graduation of £19,650. Is that not rather a lot for a graduate to have to pay back?

5.30 pm

Alan Johnson: The hon. Gentleman's figures are spot on for someone taking the loan. However, there is a problem because the National Union of Students wants the loan to be higher, as do we. We do not want university students to have to go to credit card companies or banks, which charge a real rate of interest. We want them to take this soft loan, as would any future Government. I know that the Liberal Democrats have not won an election since 1918, but they are in power in Scotland in a coalition Government and they charge graduates a fee on an income-contingent basis once they have graduated. I do not understand the hon. Gentleman's argument. The higher we make the loan—we are pressed by the NUS to make a loan available—the more will people say that students have more debt. We could refuse to give students a loan and stand here and say that his figures are wrong, but students would be driven to accept loans from shysters at the street corner.

Mr. Mudie: I do not want to cut across this technical argument. The Minister is putting a skilful case, but it is based on an early-day motion. It is not accurate to say that the only difference on this side of the Committee is between whether the fee is a fixed £3,000 or a variable fee involving the £3,000. The two elements put forward were not a personal view; they were a collective view held by a large number of hon. Members. If I have failed to get point that across or made the argument appear too personal, I have done the Committee a disservice. Some Labour members of the Committee are strongly opposed to variable fees,

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but the figure of £3,000 also seems excessive to many Labour Members.

Alan Johnson: I will move on to other parts of my hon. Friend's argument when I have a chance. However, the point is that the debate that we are having is on fixed versus variable fees. I set the figure at £3,000, and my hon. Friend the Member for Cambridge made the point that she would leave it to Ministers to set the level of the fee, but that it must be fixed. The figure of £2,500 has wide credence. Everyone who has argued with me, and who supports fixed fees, has said that the level should be £2,500. A perfectly reasonable argument for that has been made by my hon. Friends the Members for Southampton, Test and for The Wrekin. However, I do not accept the argument that a poor kid will be put off going to university by variable fees of up to £3,000. We are attacked over our manifesto, but I cannot see how charging all students a fixed fee of £2,500 would resolve any of the problems that the supporters of fixed fees tell me exist with variable fees.

Mrs. Campbell: That is not the argument. The argument is about whether that affects the student's choice of university. The point made in the early-day motion was that if the choice is between a university charging no fee and one charging £3,000, a debt-averse student from a low-income background is more likely to choose the cheaper university.

Alan Johnson: That is another part of the argument.

Several hon. Members rose—

Alan Johnson: I will take one more intervention and then I will make progress.

Mr. Allen: Does my right hon. Friend accept that, either for party political reasons or simply through ignorance, there is an attempt to confuse the equivalent of credit card debt with income-contingent repayments? It is as much nonsense to say that someone will have a cloud over their head of allegedly £9,000—many will have far less than that, but let us use that figure—as it is to say that people will live in fear when they graduate because they face, on average, a £500,000 income tax debt for the foreseeable future. People do not think like that. People, especially those that have struggled to get an education, are well aware that the debt referred to by the Opposition is nothing like the income-contingent repayments, which they can easily take care of—paying about £4 a week once they are earning £18,000 a year. It is a deliberate confusion. I get annoyed about it because it puts ordinary kids off going to university. The sooner Opposition Members get used to that and stop using such language, the more their pontification about getting youngsters into university will come—

The Chairman: Order. I call the Minister.

 

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Prepared 26 February 2004