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David Taylor (North-West Leicestershire) (Lab/Co-op): Will the hon. Gentleman give way?

Mr. Gill: I would feel ashamed that my Government had introduced top-up fees, which they promised the people of Leicester and the country that they had legislated to prevent.

David Taylor: Will the hon. Gentleman give way?

Madam Deputy Speaker (Sylvia Heal): Order. Clearly, the hon. Gentleman is not giving way.

Mr. Gill: Today, prospective students embark on an educational journey starting with a deterrent of debt. If they go on to study, they experience the stress of debt and of work while they are studying. Finally, when they graduate, they face the reality of debt.

On behalf of many thousands of students at De Montfort and Leicester universities, I ask the Minister to explain why his Government went back on their word and, in the light of the increasing debt crisis in my constituency, I respectfully request the opportunity to bring a small number of students—students who start with a passion for knowledge and end up with a massive debt—to meet him to discuss their problems.

8.8 pm

The Parliamentary Under-Secretary of State for Education and Skills (Derek Twigg): I congratulate the hon. Member for Leicester, South (Mr. Gill) on securing the debate. I am pleased to see my hon. Friend the Member for Leicester, East (Keith Vaz) also in the Chamber. He is a true champion for Leicester and he does tremendous work in that area.
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I am delighted that we have this opportunity to debate higher education again. It is an important topic and key to our country's success. Everyone in the House now agrees that higher education needs additional funding. The question is how we achieve it and who pays. The Government's position is clear, and we spent much of last year debating it. The hon. Member for Leicester, South has made some proposals, but they are not viable. I shall return to them shortly.

The Government have three main priorities in their higher education reform programme. First, we want to expand and widen participation. The needs of the country, now and in the future, depend on the knowledge and skills of our people. All the evidence says that the need for graduate-level skills will increase. We are wasting too much talent, and too many of those born into less advantaged families still feel that university is not for them. Secondly, we want to give universities the freedom and resources to compete successfully in the international market. We need to give institutions the financial security and stability that will allow them to back our world-class researchers, invest in infrastructure, and provide first-class teaching and services to their students. Thirdly, we want to make financial support for students fairer, abolishing the requirement to pay fees upfront, providing for fair and affordable repayments for graduates, and helping students from poorer backgrounds with additional grants.

The recent Higher Education Funding Council report illustrates starkly that where one is born is the biggest single factor in deciding one's education life chances. The introduction of tuition fees and replacement of grants by loans, however, have not affected the choices of young people from disadvantaged groups.

We are working in schools to raise attainment levels and the aspiration to enter higher education of young people in disadvantaged areas. That has helped to increase applications to universities from such areas. Our goal is to provide access to world-class higher education for all those with the potential to benefit. We are determined to widen participation so that everyone with potential has the opportunity to go to university, irrespective of background.

I want briefly to deal with Conservative policy, which suffers from some serious drawbacks. The principal problems relate to where the money comes from and whether the sums add up. First, where does the money come from? The Conservatives have said that there will be more money for universities. Ultimately, the only sources are the taxpayer or the students. They have made it clear that the taxpayer will not pay any more, so students will pay more through higher interest payments once they have graduated. But which students? That is where it goes wrong for them. With income-contingent repayments, how much one pays, and how long it takes one to repay, depend on how much one earns. The burden of higher interest rates therefore falls unfairly on those on the lowest earnings. If one earns a lot, one repays quickly, so one does not pay much interest. If one earns less, however, one pays slowly, so one ends up paying much more in interest. If someone takes a career break, or perhaps starts a family, the interest really mounts up. Two years ago, we exemplified some case studies for the Select Committee that demonstrated that clearly.
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Secondly, on whether the sums add up, we identified at least three serious holes in the arithmetic, and overall, the Conservatives' sums are out by £1 billion a year. The policy is grossly unfair, and as I said, the sums just do not add up.

So what are the Liberal Democrats' policies?

David Taylor: Is not it revealing that the importance of this debate to the Liberal Democrat parliamentary party is such that the number of Labour MPs present is almost quadruple the number of Liberals? Does not that show that they are not serious?

Derek Twigg: There is no doubt about the importance that my hon. Friends put on this subject.

The Liberal Democrats would fund higher education entirely from the taxpayer through a new super tax. They have said how much super-tax they would spend on higher education, but have not made it clear how much higher education needed to expand or how future expansion would be funded. There could be no guarantee that the funding would be forthcoming or would be maintained over time as other priorities emerge.

There is a real question as to whether higher education would get the money. That is the nub of the problem. Being centrally dependent on the state means that higher education must take its chances with other competing priorities in public spending decisions. The record shows that, over the long term, that does not work well. During the 1990s, there was a large reduction in the unit of funding for higher education—a fall of 36 per cent. in real terms between 1989 and 1997.

We should remember two things. First, not everyone goes into higher education—currently, 44 per cent. of 18 to 30-year-olds go into higher education. Secondly, higher education confers substantial benefits, both social and financial. In particular, the rate of return to having a degree is substantial.

It is therefore fair to ask those who benefit from higher education to make a contribution to the cost of higher education. It is important to stress that it is a contribution—the Government still make substantial funding available to universities, and will continue to do so. Our point is that it is not fair to the taxpayer for graduates not to be asked to contribute. The advantage of Government policy—fees supported by income-contingent loans—is that the graduate still pays, and through the tax system, but universities are much more masters of their own destiny, with an independent source of revenue.

Every Member knows of, and values, the contribution made to national life by Lord Dearing. He has done great work in education for this Administration and the last one, and we have valued his independent approach. His national committee of inquiry into higher education in 1996 and 1997 espoused the principle that students should make a contribution
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to the cost of higher education. That led to the introduction of fees in the first place. The logic is as strong today, if not stronger. Students should make a contribution, but it is better for them to do so when they are graduates. Our fee-deferral arrangement allows that.

Government is about tough choices. The future economic success of the country depends on our getting our higher education policy right. There could be no more important topic than this. It simply is not realistic to think that we can fund higher education now, when 44 per cent. of people aged between 18 and 30 are going into it, in the same way as we did in the mid-1960s, when only 8 per cent. did so. We accept that going for tuition fees is not an easy option, but it is the right one, and the only realistic way forward.

Dan Norris (Wansdyke) (Lab): The Minister mentioned the Liberal Democrats. They have spoken of a 50 per cent. higher rate of income tax. If the sums are done correctly, is it not nearer 83 per cent.?

Derek Twigg: Their sums have never been all that good.

Let us consider the international competition. The United States, Canada, Australia, New Zealand and Japan all have fees. In mainland Europe, more and more voices are joining the chorus in favour of fees. Universities in Germany are pressing the federal government to change the constitution to allow fees, and the Netherlands is proceeding with tuition fee pilots. Even in Sweden, which has traditionally espoused high public spending financed by high taxation, voices from the higher education sector are beginning to be heard arguing for fees. The Organisation for Economic Co-operation and Development's 2004 UK economic survey praised the Government's approach to higher education, saying that it could be a role model for other European countries.

The message is very clear: if our economy is to remain competitive, our higher education must remain competitive, which means fees. Either we face up to that, or we face long-term decline as a nation. Put that way, it is not such a tough choice. It is what we have to do—and our Higher Education Act offers a coherent strategy for reform, unlike the proposals of Opposition Members.

I did not go to university. I come from a background where it was not the thing that people did. We were never encouraged to do it. I support this policy so strongly because more and more disadvantaged young people from backgrounds similar to mine will, with the backing of the £2,700 grant and the bursaries from universities, have an opportunity to go to university and make a great start to their lives.

Question put and agreed to.

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