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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 369-ii House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE EDUCATION AND SKILLS COMMITTEE
TUITION FEES AND STUDENT BURSARIES
Wednesday 6 April 2005
MS LORRAINE DEARDEN, MS EMLA FITZSIMONS and MS ALISSA GOODMAN Evidence heard in Public Questions 137 - 235
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Education and Skills Committee on Wednesday 6 April 2005 Members present Mr Barry Sheerman, in the Chair Jeff Ennis Mr Nick Gibb Mr John Greenway Jonathan Shaw _______________ Witnesses: Ms Lorraine Dearden, Director, Centre for Early Years and Education Research, Ms Emla Fitzsimons, Research Economist, Education, Employment and Evaluation, and Ms Alissa Goodman, Director, Education, Employment and Evaluation, Institute for Fiscal Studies, examined. Q137 Chairman: Can I welcome you and thank you very much for responding to our invitation. This will be the last sitting of the Committee in Parliament and this will be, I think, a session that the Committee has been looking forward to basically because there has been a great deal of confusion over the impacts of student finance and student funding both on the universities, on students and on the taxpayer. When we came across your report, we thought it shed a great deal of light on the situation and seemed to, some of it, correspond with the predictions that we had made two years ago in our report on repayable fees. Which of you would like to open up and just say a few words to introduce your report? Ms Goodman: Thank you very much for inviting us to come and talk about the report. As you say, what we did in our report was look at the three different parties' proposals for higher education funding from the point of view of taxpayers, universities and students and graduates and we tried to throw some light on the effects that different sorts of policies would have on each of those players in the system. First of all, we looked on aggregate at who the gainers would be under each of the different parties' plans and then who would pay for those gains because of course nothing ever comes for free; if one player gains, then somebody else has to pay for it. We, therefore, set out the fact that universities are set to gain both if the Government's proposals are fully enacted or if either the LibDem or Conservative proposals are put in place and we saw that student funding would rise by around 30 per cent in real terms under all three parties. We saw that students would actually gain under all three sets of proposals as well both because of new grants and in some cases bigger loans for maintenance, so who pays for the gains differs between the parties and this was quite illuminating. We thought that under both the Conservative system where all tuition fees would be scrapped and no top-up fees would be introduced and under Labour's where of course tuition fees would be increased by the amount of the top-up fee, the cost would be split between taxpayers and graduates, so we put some numbers behind that. Under the LibDems' proposals, taxpayers would foot the whole bill. We pointed out that if universities needed further increases in funding per student in the future, so more than the initial plans allow for, or if you wanted to hold funding per student constant, but student numbers were to increase, then the costs would be shared between taxpayers and graduates under the Government's plans, but would be paid for entirely by taxpayers under the Conservatives and the Liberal Democrats. Those were the kind of gainers and payers on aggregate. We set out what the different proposals would mean for student living standards and for student debt under all three sets of proposals and we pointed out that the amounts would provide a better standard of living for students compared to their counterparts today, but that they would still fall short under all three parties with the NUS cost of living estimate, so there would still be a shortfall. We worked out if, under the Government's proposals, students borrowed fully for their fees, what sort of debt levels we would imagine that students from different family backgrounds would end up graduating with and we have those set out in our report . Then we went on to estimate what those different graduating debt levels would mean for graduates across their lifetime earnings and in order to do that, we applied some quite new and innovative techniques to estimate future graduate earnings profiles and we are very pleased with the progress we made there. It is something where in the past we and others have tended to use just example graduates kind of made up or based loosely on wage data, but we came up with a much more robust set of future earnings profiles. We were able across the whole distribution of lifetime earnings both to compare graduates and non-graduates for a start and to try and shed some light on how much lifetime earnings are higher for graduates compared to non-graduates and also we pointed out that there is a wide distribution for earnings both for graduates and non-graduates over their lifetime, and it is by no means the case that all graduates earn more than all non-graduates, so we set out some new things about the earnings distribution. Then we went on to look at what the different earnings distribution would mean as to how long people ended up repaying their debts if they went to university and what the effective taxpayer subsidy would be from the subsidised loans under Labour and of course the Liberal Democrat proposals, but not under the Conservatives' as they would scrap all loan subsidies. Therefore, we have some ranges for different taxpayer subsidies depending on whether people have low, medium or high lifetime earnings, what parental backgrounds they come from and how much time they take out of the labour market, and there is quite a wide range of different taxpayer subsidies implied and we can talk maybe more about that, if you like. We also spent some time thinking about the private market for maintenance loans which the Conservatives' proposals would entail and we thought about the possible, what we would call, 'adverse selection problems' which might be involved in a private market for student loans. We wondered whether banks would be able to offer a viable interest rate under that scheme just because we thought it would be a real risk that the type of students who might take out the maximum loan in the private market would be those who would be the least likely to pay it back and ones that the banks would have to end up writing off, or a considerable proportion of, after 25 years. I hope that provides you with a summary of what we have said. Q138 Chairman: Yes, fascinating. One of the interesting things, certainly which interested this Committee, was that when you are deciding in the Institute on where you are going to go next, what piece of research you are going to focus on, how do you come to choose a piece of research like this? What is the process where you say, "Ah, we think we really ought to look at this"? What are the criteria which guide your choice? Ms Dearden: I guess we have been writing on this issue now for about two or three years and the three of us did a report actually a year ago and we felt frustrated by the fact that all the parties were coming out with policies and on their example graduate, their policy was much better than the others'. We knew the limitation of our research in that we did not know how it applied across the whole distribution and it seemed like the interesting stories were not for the median person, but probably for those in the tail. Then Greg, who is not here, came up with this idea about how we might model this lifetime earnings distribution because he has got a background in finance and he had this clever idea and we sort of investigated it and then we applied to the Nuffield Foundation for funding to do it and convinced them that it would be an important bit of research before the election. Q139 Chairman: Certainly it shines a light on this because when we were looking at this before and as the process has gone on, people out there, many of them, do not understand the proposals at all and the impact on them and we were disturbed when the vice chancellors that we had before us four or five weeks ago suggested that there was a very large surge in student applications for this September because people were worried and perturbed about possible higher costs if they delayed it until September 2006 and the vice chancellors seemed to be suggesting that students by and large would be better off by deferring until 2006 rather than better off by going in in 2005. Were they right in that? Ms Goodman: I think that, as students, they would do better this year because they can benefit from the new grant at £1,500 and they do not yet have to pay later in life the top-up fee if they went to a university that chose to charge it. Q140 Chairman: One of the vice chancellors said that as a poor, able student, you would have in September 2006 the ability, if your parents paid nothing and you paid nothing until afterwards, where you would have an up to £3,000 grant possibly and a bursary. Ms Goodman: Yes, whereas if you went now, you would just get the £1,500 grant. If you went in 2006/07 and you were prepared to borrow fully for your fees and you were not worried about the future repayments that that entailed, you would be better off as a student then because you would be able to get a slightly enhanced level of maintenance loan on very specific parental income levels and you would get the full grant, but you would have to be paying off a larger amount of debt because you would have the possibility of top-up fees as well. Q141 Chairman: When we did our report, we started on the basis that when the original evaluation of the whole higher education funding was undertaken in the Dearing Report, which you must remember ---- Ms Dearden: Yes, we remember the Dearing Report. Q142 Chairman: ----- the cost of higher education was shared amongst those who benefited from it all as key beneficiaries and we said that we believed that principle was correct and should be supported. Can you tell us a bit more about how the balance works out, and I know you touched on that, Alissa, in your introduction, but how the balance works out under the three different proposals? Ms Goodman: Under the Liberal Democrat proposals, the vast majority of the costs are borne by the taxpayer, so it is only the graduate's own contribution to the maintenance which is the personal contribution, but all of the amount for tuition and a subsidised amount for their maintenance would come from the taxpayer, so the Liberal Democrat proposals were at one extreme. Under the Conservatives and Labour, there is actually more of an even balance between the taxpayer and the graduate than you might initially think from the fact that the Conservatives have said that they would abolish tuition fees, so what that would mean is that under the Conservatives, the taxpayer would pay the full whack for the tuition fee element, but then they are withdrawing support for the maintenance loan element, and, depending on exactly what costings you are willing to believe, those two balance each other out somewhat. Under Labour, although they are asking graduates to pay more in tuition fees, there is also an increased taxpayer subsidy for higher grants than under the Conservatives' scheme and more loan subsidies. Therefore, if you had to rank them, and we have also revised our costings since this report on the basis of new government estimates of the potential fee revenues and the cost of student support that Kim Howells put out on 23 March, so we work in our analysis on the basis of those new costings, it looks to us as if the biggest taxpayer subsidy would be under the Liberal Democrats, then the Conservatives in the middle and Labour with the lowest taxpayer subsidy overall, but with the Conservatives and Labour closer than you might think in terms of the split between graduates and taxpayers. Q143 Mr Gibb: I have a quick question on the Liberal proposal. In your paper you say that it is funded by the introduction of a 49 per cent income tax rate on incomes in excess of £100,000. How much would that raise, this 49 per cent? Ms Goodman: That would raise considerably more than the amount required to pay for higher education. Ms Dearden: I think they said £4 billion and their reforms are only going to cost 2.4. Ms Goodman: On the latest costings, we think it will be 2.4. Q144 Mr Gibb: So about half of this? Ms Dearden: Yes, and I think it is also going to fund some reforms for pensions and they have listed some others. Q145 Jeff Ennis: Personal care, social services and that sort of thing. Ms Goodman: Yes, and we can check that for you. Ms Dearden: We have not heard from the other parties where the taxpayer money is going to come from. The Liberal Democrats have been quite explicit as to where they are going to get the money from. Q146 Mr Gibb: You also talk about the lifetime earnings, and you mentioned it in your introduction, for graduates and you say that lifetime earnings for male graduates will be about £325,000 on average higher than the non-graduate for men and for women £430,000 higher. It would appear that in principle both the Conservatives' and the Labour proposals are right, are they not, in principle, to say that the graduates should bear the burden of these costs? Ms Dearden: Well, there is no doubt that on average there is a large private return to graduates and under both the Liberal Democrat and the Labour schemes, yes, they are recognising that the graduates are one of the major beneficiaries of undertaking higher education and that they should contribute. The way that they contribute is slightly different because they contribute when they are paying back their loan and under the Labour system, it is graduates who totally pay for it, whereas under the Liberal Democrat system, it is people earning above £100,000 which will consist of both graduates and non-graduates, so it is not as clearly falling on graduates. Ms Goodman: In terms of this question of principle, I certainly think that pointing out that there are larger private returns with higher education would tend to point towards a principle that those who gain should pay more, but there are many different criteria against which you might form your principles. In terms of economic efficiency, then most economists would probably say that yes, the presence of the large private return would suggest that those who get that return should pay, but you may employ other criteria and principles. For example, if you were interested in the distribution of income, then you could think quite carefully about how different funding schemes would affect that and, similarly, if you were interested in making sure that the system was as flexible and as transparent as possible, then you might think through the different implications of that, so I think there is no single principle that applies here, but many which you would apply. Q147 Chairman: We tend to talk only of the HE world, but the bulk of our constituents, whether they become apprentices or they go to FE or part-time, they do not get any of these benefits, do they? In fact we have had evidence about this. Ms Dearden: Well, there are arguments that there are spillovers and it is not just a private return to graduates. That is possibly true, but the evidence is not robust or rigorous and there has been quite a bit of debate. I think the one clear thing that you can say is that there is on average a large, private return to higher education. Q148 Chairman: Have the IFS done any work on the last figures, I think, given to this Committee that a child's education from going to school through to 16 costs something like £50,000 and then the add-on between 16 and 18 was in the region of £15,000. The differential between the whole system and how much the taxpayer puts in for full-length education to 16, 18 and then through to graduate, do you have figures on that? Ms Goodman: We have not explicitly looked at that. Ms Dearden: The Social Market Foundation has just published a report looking at expenditure over the lifetime on education. It has just recently been published. Q149 Chairman: I do not think we have seen that. Ms Dearden: It was released about two or three weeks ago. Q150 Chairman: I think that would be useful for us to have. Ms Dearden: They were just looking at the amount spent at different points over the whole education cycle and very much arguing that we should be putting more money into early years rather than later. Q151 Mr Greenway: Can I just be clear about a couple of things. Firstly, on the philosophical argument, Ms Goodman, are you saying that the philosophical justification of the Liberal Democrat proposal is that because people who earn over £100,000 are likely to have benefited from a university education, they are then paying for this through this higher rate of tax? Is that how you see the justification? Ms Goodman: I think you would have to ask the Liberal Democrats about that. Q152 Mr Greenway: Well, we might do that during the election because there are a lot of people earning over £100,000 who did not go to university at all. Ms Goodman: We point that out. Q153 Mr Greenway: Yes, you make that clear. Has your Institute done any work on the potential for tax avoidance or literally the effect of high marginal tax rates on enterprise? The Liberal Democrats presumably extrapolated the effect of their nine per cent increase in tax for higher rate taxpayers over £100,000 based on current earnings, but what we know from the past is that when we have had these higher rates of tax before, it has tended to make people find ways of not paying it. Ms Goodman: I do not think that there is a strong consensus on whether, or how much, avoidance or evasion might ensue from increasing higher rates of tax. We have made the same observation that you did, that in the past there have been relatively few people who have paid the very top rates of income tax when they were very high and higher than those that the Liberal Democrats are suggesting. Ms Dearden: But we have produced a press release on the Liberal Democrat proposal and it is on the website. It was not done by us. Q154 Mr Greenway: I must look out for that. I will resist the temptation, or I will not resist it because I will make the point that on top of that, there would be local income tax which would sit on top of the 49 per cent. The thing I am least clear about is that you say in paragraph 5 of your note under, "What would the reforms cost and who would pay?" that, "Students would gain most from Labour and least from the Liberal Democrats", yet it is the taxpayers who are footing all of the bill under the Liberal Democrat proposal and not the students. Ms Goodman: But the graduates would gain a great deal from it if you think about students as separate from graduates, so students would not gain as much under the Liberal Democrat proposals as under the Conservatives' and Labour ones because the maintenance loan amount is not being increased which the Conservatives would be doing and the grant would be raised to £2,000, but not to £2,700 which is what would happen under Labour, so that is why the situation occurs with students, but it is graduates under the Liberal Democrats who will not be required to make the same contribution as they would be under the Conservatives or Labour. Q155 Mr Greenway: That is very helpful. The conclusion then that we draw from this is that if, as many of us from our constituency case work feel, the real pressure is actually on the financial position of students and less pressure on what it is they are likely to be asked to contribute back in later life, then the clear difference between the policies that are available in the election is that under the Liberal Democrats the students will not be as well off, but they will not pay as much money back when they actually are graduates and go to work, and I am not sure that that is a particularly clever idea, but under Labour and the Conservatives they will be better off more or less in equal measure while they are students and not much different in terms of what they are going to pay back. Ms Dearden: Under the Conservatives, yes, students with incomes coming from sort of better-off families will actually be much better off because everybody can borrow £5,000 to support them. Q156 Mr Greenway: When you say "better off", as the last thing I want to ask you is about the means test, is it not also a fact here that whilst the better off at the higher end of the income scale may well find students have everything paid for by their parents, there are an awful lot of students from families that are just above the means test, but by no stretch of the imagination could be called wealthy? Ms Dearden: Yes, and there are other factors, like family size, which no party takes into account, so all parties treat a kid coming from a family earning £25,000 with five siblings being as well off as a kid with one sibling. In all other policy areas we always 'equivalise' to take account of family size, so there are lots of circumstances that mean that people just above the means test but with a large family size might face much more, so there are lots of issues. Q157 Jeff Ennis: This is really a follow-on to the point John has been making in terms of the fact that one of the driving forces behind the Bill was to widen participation and get students from poorer backgrounds into higher education. Looking at the three models available, which one of those three models, in your opinion, would be more successful in achieving that goal? Ms Goodman: I think it is impossible to know in advance and it depends on the balance between how young people from different parental backgrounds view taking out different levels of debt vis-à-vis how much money they get upfront in grants and loans, so if you took debt to one side and just did not think about it for a moment, then students from the poorest backgrounds would do best under Labour because they have the biggest grants and the amount of grant they could get combined with the amount of maintenance loan would make them the closest to this NUS acceptable standard of living than under any of the other parties. If you then bring debt back into the equation and you think that students base their decisions not just on whether they will be able to afford to live while they are at university, but also they think about how much they will be repaying over their lifetime, then under Labour, as we have shown in our report, they will graduate with the highest debts. In some cases it does not mean that you pay for your debt for as long as under the Conservatives because there is a real interest rate which means that you actually end up paying more. There is a balance between paying a loan at a zero interest rate on a larger amount of debt or a positive interest rate on a smaller amount of debt and the calculations that we have been able to do with our lifetime earnings profiles show that for some graduates, you would end up paying longer under the Conservatives even though you start with a lower amount of debt. For other graduates, they end up paying longer under Labour, so there is a real trade-off where any individual might not know where they would fall in that. Ms Dearden: And the lowest levels of debt are under the Liberal Democrats. It is a question of whether this fear of debt impacts on their decisions. Jeff Ennis: Judging from my experience as the representative of a constituency with the lowest level of GDP per capita of any in the UK, then I can tell you that debt-aversion is a big consideration for working-class families and for working-class students, so it is a factor that needs to be factored in, as it were. Q158 Chairman: That is anecdotal though, Jeff, and it is not based on any research that we have heard before. Ms Goodman: In terms of debt-aversion, there is, I think, an open question about how much there is, but also let's say it is the case that students from some parental backgrounds will be much more debt-averse than others. There is a real question as to how much providing information will improve that as opposed to just asking people not to take any debt, so maybe people need to know what the potential gains are to them. Ms Dearden: As we say in our report, under the Liberal Democrat and Labour schemes, a student should take out the maximum level of debt that is available to them because it is highly subsidised and the biggest subsidy goes to those who do worst in the labour market. Ms Goodman: I think most people do not realise that. I was listening to a financial advice programme on the radio a while ago where there were some independent financial advisers giving advice to people who phoned in, and someone called in who had just stopped being a student and they asked, "Have you got student debt?", to which she said yes, and they said, "Well, the first thing you should do is pay off your student debt". Now, that is absolutely the wrong advice and I almost phoned in to say something. I did not, but I think that that shows the degree to which people do not realise that. Q159 Chairman: It was Moneybox Live on Radio 4, yes, I heard that. It was totally the wrong information. Ms Goodman: I think that shows the extent to which people do not realise that a zero real interest rate is a subsidy and it is the equivalent of a grant, but spread over time rather than upfront. Q160 Chairman: So taking the maximum loan is the best deal for a student? Ms Goodman: Absolutely, yes, whether you needed to spend it on student outlays or not. If you did not, that is when, if you put it in an interest-bearing account, you will always make a gain out of that. Chairman: As many middle-class families already did in terms of the previous loan system. Q161 Jeff Ennis: On the Conservative and Labour models, obviously students or graduates are going to pay the bigger share of the money back, shall we say. What impact do you see that having in terms of student mobility, particularly in terms of students from working-class backgrounds? As someone who left Grimethorpe in the 1970s to go to Bristol for four years, I can foresee under either the Tory or the Labour model more students doing higher education from home or from a close family background. Have you done any research on that particular aspect in terms of future student mobility trends? Ms Dearden: You mean students choosing to reduce their level of debt by choosing to stay at home? Q162 Jeff Ennis: Yes, within the close family environment. Ms Goodman: I do not think that the reforms will change it more in favour of staying at home. It is certainly cheaper to stay at home. You can borrow more if you live away from home than if you live at home, but certainly the costs that you incur are going to be less at home. I am not sure that the balance is shifted in particular through the reforms, but maybe. Q163 Jeff Ennis: I guess it is something you will be keeping an eye on. Ms Goodman: One thing that we have pointed out is that if you think about London compared to elsewhere, for example, the maintenance loan amounts differ according both to whether you live at home or away from home and inside London or outside London, whereas the grants do not, so it may be that by not having a bigger grant if you lived inside London, that would discourage students from going to London relative to elsewhere. Q164 Chairman: Would you like to elaborate on that? Ms Fitzsimons: Yes, the maintenance loan amounts vary according to whether you are inside London or outside London quite substantially because it is much more costly to live in London. I think it struck us as quite surprising that the grant for the poorer students is the same right across the board regardless of where you are attending university. Q165 Jeff Ennis: So there could be an impact there on students looking at London, for example? Ms Dearden: Given that the grant is meant to be for maintenance and clearly the cost of maintenance is very high in London. Q166 Jeff Ennis: Going back to the widening participation agenda, looking at the three models, what impact do you foresee the different regimes having in terms of actually achieving the goal of widening participation and getting more students from working-class backgrounds going to university? Then perhaps you could possibly go on to the detail as to whether there is any sort of information available in terms of what type of university students from poorer backgrounds will go to. Ms Goodman: My sense was, as I said before, that it is very hard to know in advance and it depends on how students will view upfront support as compared to debt and then again in terms of debt, it depends on how people view taking a relatively large amount of debt with a small interest rate against taking a smaller amount of debt with a larger interest rate, so if you thought that access was all just about money upfront, then you could say unequivocally that the Labour system would be better for students from the poorest backgrounds, but if you thought that debt mattered, then it is much harder to judge in advance. I personally cannot hazard a guess on that. Ms Dearden: But compared to the current system, yes, kids from poorer socioeconomic backgrounds do not pay fees, but they do not get a grant for maintenance and maintenance is by far the biggest cost, so the balance is that I think it must help kids from poorer socioeconomic backgrounds. Q167 Chairman: Have researchers other than you pointed out that it is not debt-averse students, but risk-averse students? That is different and some of the research that this Committee has been given just points that out, that it is not debt-averse, it is risk-averse. The evidence shows that people are risk-averse and the new proposals are very low risk, are they not? Ms Dearden: Yes, and those who do badly get subsidised more. Q168 Chairman: We have looked at this and the evidence we took showed that you can get a situation where you say that those from lower socioeconomic backgrounds are terrified of debt, but actually in terms of the research that I have seen, I do not see that. It is almost that there is some bit of it which is really rather patronising to people on lower incomes that they do not understand, that there is some cloud hanging over them. The people in my constituency from working-class homes are pretty savvy about what is on offer. Ms Dearden: I still think there is a big information gap and people do not understand. I think I am right in saying that for existing students, the repayment threshold next week changes, so existing students can pay less of their salary back, but I have got a graduate sitting next to me, saying, "Oh no, I'm going to keep paying the same amount", even though she is an economist, so I think there is a lot more work to do in explaining to graduates. Q169 Jonathan Shaw: In looking at the debt and different socioeconomic groups, we hear the point that the Chairman makes time and again of people from less-well-off families being averse to debt. Do you consider who takes out the highest interest rates for borrowing money from store cards and, the most extreme, loan sharks, and that those who get the best return, the best rates for borrowing money are the more wealthy people, so rather than people being put off by higher interest rates, et cetera, it is about information, is it not? I know when I have done surveys in my high street on store card repayments, people have not got a clue, many people have not got a clue. Ms Goodman: I think that was Lorraine's point about information. Ms Dearden: I think that information is the key. Q170 Jonathan Shaw: Absolutely, information is the key, but before people can even consider the information and ask themselves, "Am I going to go to university?", they have got to get the grades, they have got to get A-levels, so in terms of carts and horses, the whole point is that young people need to attain a level before they can consider a commercial loan, paying it all through the taxes, or the sort of combination of the Labour Party proposals, and that is where the information needs to go, into schools. Ms Dearden: I do not think that kids from poorer socioeconomic backgrounds have any worse access contingent on A-levels, but it is before that where they are coming from poorer socioeconomic backgrounds. Q171 Jonathan Shaw: But attainment in the first instance in secondary school and then information about how advantageous this type of loan regime is compared to your store card or your loan shark, at the extreme. Ms Dearden: That is why we also put in the documents what the lifetime tax and national insurance contributions would be, and I do not think people say, "I am fearful of earning too much because I'm going to pay too much tax", but the overall tax a person will pay over their lifetime, we have shown that the loans they will face are by a factor of between nine and 13 lower than their tax burdens. Ms Goodman: Can I return to the Chairman's point about risk, that it is actually under the Conservative plans that students would face the most risk because of the removal of the zero interest rate on maintenance loans, so although the repayments would remain income-contingent, the longer you take to repay your loan, the more you pay and the less you reach this 25-year cut-off, in which case it gets written off. It is probably very difficult for people to calculate exactly what side of that boundary they are going to be in any case except for that 25-year cut-off and it is the student who bears the risk for earnings and I guess it is the students with unexpected differences in their earnings from what they thought they would be when they made their higher education decision and their loan decision, whereas under the Liberal Democrat and Labour proposals, it is the taxpayer that bears that risk through the zero real interest rate. Jeff Ennis: Chairman, we have had a few anecdotal statements recently and I think the main thing that needs to come out of those anecdotal comments is the fact that we need more research on debt-aversion and the impact that will have on future student populations and I think there is no doubt about that. In my experience, the main reason why poorer working-class people in my area go to loan sharks and things like that is because they cannot actually get secured loans, so they are paying higher percentages because that is the only type of interest loan they can have. It is not because they do not understand the difference, but they have got limited options and that is why I am concerned. Mr Greenway: But that is why the funding to the student is more important, in my view. Q172 Jeff Ennis: I think Jonathan is absolutely right, that the problem is actually getting students to make the transition from 16 to 18 because we know that 91 per cent of students who do A-levels go on to higher education, so we need to farm that particular principle more than we are doing at the present time. On that specific point, because this is interrelated to the issue we are looking at today, I notice that you, Lorraine, have been doing some research in terms of education maintenance allowances and that is directly related to widening participation. I know we are looking at higher education here, but it is actually key, in my opinion, to widening participation. Ms Dearden: Yes, I think it is and it has had an impact, particularly on boys from poorer socioeconomic backgrounds and actually girls, which is quite interesting, from low socioeconomic backgrounds. It is a bit strange that the two systems are segmented. You have reintroduced a grant system now and you have in effect got a grant system and a system which is sort of operating independently. If you look at, say, the Australian system, it is a completely integrated grant system from the age of 16 and above. Q173 Chairman: This Committee did recommend that the EMA system should be a smooth transition straight through from 16 and into university. Ms Dearden: In terms of setting it up, it seems that administratively it would be much easier. Q174 Chairman: Did your research on EMAs, education maintenance allowances, cover the period when it was a pilot? Ms Dearden: Yes, our evaluation is solely based on the pilots in the nine local education authorities, but we are actually talking with the DfES at the moment about doing a national evaluation for that. Q175 Jeff Ennis: I have just one supplementary because of the positive response I have had back in terms of EMAs. If EMAs are going to be successful on a national model, do you see there being an increased demand on universities to provide more vocational-type university qualifications? Ms Dearden: I do not know. We have in our pilot viewed people making the transition to university, but I cannot tell you off the top of my head what they have done over this sort of combination of sort of course choices. It has been Sue Middleton who has actually done the analysis and I cannot tell you off the top of my head. We could compare it, and I am sure that she has done that, compared it to the control group to see if there is a different composition of higher educational courses, but I am not sure that they have actually specifically looked at that question, but potentially with our data from the pilot in the control areas and our pilot survey, you could look at whether it has changed the structure, the composition of what people do in higher education between the control areas and the pilot areas, but I cannot tell you now. Q176 Chairman: Your research chimed with our constant theme of evidence-based policy and we rather liked the fact that the nine pilots had added value in terms of the research that has been done and we commended the roll-out because it was based on the pilots which were seen to be extremely successful. Ms Dearden: Exactly. Q177 Chairman: Can I just switch the questioning now. One of the central aspects of the change in university funding was the student contribution. We applauded it in our original report two years ago because it gave an independent source of income to universities. In terms of the research you have done on the three party policies approach, how much of that new source of income is left intact? In other words, are universities going to be better off in terms of how much money they have got to pay staff, to run facilities and so on as a consequence of this? We have talked to many university vice chancellors and others who said, "We really welcome the fact that we have an independent source of income that is our own to do what we want with". Ms Goodman: Can you clarify what you mean by "independent"? Do you mean not from the taxpayer? Q178 Chairman: Not under the control of the Government, the Department, or HEFCE. Ms Goodman: Tuition fees are under the control of the Government because it sets the cap. Chairman: It sets the cap, yes. Q179 Jonathan Shaw: We mean the money coming back into the institution. Ms Goodman: So if you thought that the cap was not a binding one, then top-up fees would mean more independent income for universities, so we pointed out that according to the policy statements from each of the parties so far at least, universities would all gain by about the same amount once all students were under the top-up fee regime, so that by about 2009 the universities would gain the same amount under all three parties' proposals, though the increases would be all from the taxpayer under the LibDems and the Conservatives, but would in part be of course from graduates, so if you thought of that as an independent source of income, then that would make the difference. Of course the level of the cap means that the Government to some extent determines how much graduates pay, so that might question the very strict definition of what an independent source of income was. It is also the case that part of the way in which the Conservatives propose to increase the money to universities comes from the gifting of the student loan book, the outstanding value of the student loan book, and they want to give it to a not-for-profit organisation that is then obliged to give it to universities. I do not know if you are familiar with that, but the idea is that they have a kind of scheduled programme of payments that would go to universities, some of which would rely on matched raised funding from the universities themselves, so the idea is that they could get some of the student loan book asset if they could raise pound for pound external sources of funding themselves. Therefore, instead of the Government continuing to hold this public asset and giving out a public spending stream each year, they are handing over to the universities once and for all and to some extent you might think that that then meant that it was a more independent source of income for the universities from the moment that they hand it over. Q180 Chairman: Something we have not touched on is the NUS estimate of just how much the costs are for students to live on. In this Committee, we always bear in mind and in the balance that unions of all kinds have a vested interest of making a case, so we understand that the NUS quite rightly and legitimately make the case as strong as they can for their members. Do you feel the NUS have got it right in terms of how much it costs for a student to live at university? Is this something Emla has researched? Ms Fitzsimons: Yes, it was the most readily accessible source that we had and it was also the most transparent in terms of how they got to that cost of living. They had it broken down according to accommodation, expenditure, spending on food, laundry and things like that. To our mind we see it as a minimum estimate of the cost of living and then we used it as a best minimum estimate. However, I do not think we would want to go any lower than the £6,890 per annum because students might be pushed to achieve a comfortable standard of living. Ms Goodman: It is also true to say that we did not verify those numbers independently so although they provided a breakdown we did not see whether it had been inflated in any particular direction. Ms Dearden: There is this student expenditure survey which the Department for Education has and on which Labour based the new maintenance loan, on the median living costs. Q181 Chairman: Those two are very different, are they not? One is conducted by MORI, I believe, for the Department. Ms Dearden: We have not had access to that. Q182 Chairman: The NUS survey was conducted by whom? Do we know? Ms Goodman: I am not sure. They have a release which has all the details which we can supply to you. There is also a logical problem with going and seeing how much students live on in terms of thereby defining basic adequacy because if students are constrained they are not living on enough and by going to a survey and looking at how much they are living on and saying that must be adequate because that is what they are doing, there is a circularity there which we need to somehow break out of. Q183 Chairman: There are two voices you hear, are there not? Some of my constituents in Huddersfield would look at the fact that the whole of the university is ringed by rather smart bars in which students consume an awful amount of alcohol and a students' union where they used to serve pretty minimal drinks and so on almost closing down through lack of custom because the students like to drink in the more fashionable areas. There is a balance, is there not, between how people view what is necessary for a student to live? Ms Goodman: I do not think that we are especially qualified to advise you on that but it could be worth having the NUS here. Jonathan Shaw: Can you do the research? Q184 Chairman: We will do the research, but one would expect on the one hand students to live, as far as they can, within their means. On the other hand, one of the worst pieces of evidence we have from any of these surveys is when students do get into very expensive loans on credit cards. Do you know of any evidence of the percentage of students getting very expensive debt on credit cards? Ms Goodman: We have not studied the students' income and expenditure survey. We have thought that it could be fruitful future research. I have seen what Nick Barr has said about students having expensive debt as well as subsidised debt but I could not comment really beyond what he said. That is not our expertise at the moment. Q185 Chairman: So on the one hand we have a system which if properly explained ‑ and I think you have put your finger on it, Alissa, when you said you listened to Radio 4 Moneybox Live where poor information was given about paying off your students loan - and on the other hand the real financial educational job which would help students to understand at an early stage, perhaps even before 16 but certainly from 16 on, what the implications are of taking out a student loan or getting into debt on credit cards. This Committee has been very interested in how people are educated about managing their own finances. Ms Dearden: You have got to realise that under all the systems you make assumptions about how much the family is going to contribute. People who are coming from families who are rich you assume the parents are going to make a certain contribution. That is not going to happen in all families and those kids cannot borrow enough of the subsidised loan to live on if their families do not contribute. There are certainly going to be some students where even when taking out the full subsidised loans is not going to be enough to live on. It is very difficult to design a system where you could do that. You could extend the generous subsidised loans across all incomes but then what you will do is change the behaviour of parents who would have otherwise supported their kids. So it is quite complicated. Q186 Chairman: Would it be simpler if you had given more figures on the cost per month to a student of the three different proposals because many students still do not know there is a cap? Ms Dearden: We have given a table in the report. I have done it per year and per week. It is in section 7.4 on page 52. Q187 Chairman: Can you take us through that? Ms Dearden: It just shows you how much a student would contribute. If they earned £25,000 their gross income would be £480.77 a week and they pay £19 a week out of that gross income on their repayments. Q188 Chairman: Under what system? Ms Dearden: Under all systems. Q189 Chairman: £19 under all systems? Ms Dearden: Under all systems the repayments are identical. It is nine per cent of any earnings above a certain threshold. This table applies to the Conservative system, the Liberal Democrat system and the Labour system. So you are talking at £25,000 a student contributing just under £1,000. On £50,000 they are contributing about £3,247. Obviously on £10,000 they are contributing nothing. These contributions are identical under all three systems. Q190 Chairman: I think that was very well worthwhile putting out. Ms Dearden: I have put it as a percentage of gross income and how much of their income they are actually paying. You can see it ranges from paying nought to, if you are on £50,000, paying 6.5 per cent of your income on the repayments. Even on a good salary it is £62 a week when you are taking home probably £600 or £700 a week. Q191 Chairman: On a £50,000 salary? Ms Dearden: Yes. Q192 Chairman: Okay, let's move on and talk about Government intervention in fees and bursaries. You do go into that in your report. You do ask the question, which is most interesting, how far is the Government justified in subsidising the cost of higher education? Why did you get into that territory? Ms Dearden: I just think we are economists so we wanted to look at the economic justification behind Government intervention. Some people would say there should just be a free market, everybody should pay, it will all work out, and we are pointing out and explaining the market failures we think justify Government intervention in this area. I think the most important one is the credit market. Students cannot go along at 18 and borrow £50,000 unsecured on the promise they are going to go to university and they will be able to pay it back. Banks will not settle for that collateral. It is just going through what I think are quite standard arguments but thinking why the Government might intervene. I think it is also important just looking at the different arguments because if you think that the main reason why the Government intervenes is because there are all these spillovers for the economy, then you might think that the approach would be very different. If you think that the major problem is credit market failures and students not getting access to money, the way you approach the problem is going to depend on what you think the most important failures are. There are different ways of correcting the different economic failures. We just thought it was important to outline them and to then come back and assess what each of the policies is good at addressing and not so good at addressing. Q193 Chairman: To what extent do you find that it is a positive policy to offer greater subsidies to students undertaking courses that are in short supply - engineers, mathematicians and any other shortage subject? Have you come to an opinion on that? Ms Dearden: We have not in this. Ms Goodman: We did not consider that explicitly but I imagine that for those that were in short supply the returns to a degree would be higher in the sense that you would end up being able to command a bigger wage when you graduate. So if you were looking only at the principle you pay according to what you would gain, then you would not necessarily want to provide a bigger subsidy for something that would be very valuable in the labour market to someone later. Q194 Chairman: The Government has introduced a whole lot of "golden hellos" in the teaching profession, have they not, in the shortage subjects? Ms Dearden: That is a bit different because the wages are regulated. Ms Goodman: Yes, once you have regulated wages there may be other interventions that you start to put in to compensate for the fact that the teacher wage is not just a bid-up in a private market. Q195 Chairman: Yes, that may be the case but what about the Government intervening to stimulate particular areas that are in the national interest and good for the economy? That may not lead to higher salaries in some professions. Is that not the case? Ms Goodman: You would have to ask why it did not. You can always draw a distinction between what is in the national interest and what is in an individual's private interest. If you thought there was a big divergence between the two, for whatever reason, you might want to increase subsidies to fully reflect the difference between the private and national interest. That is the general spillover argument. It may be for some professions you think there are very large spillovers and of course research is one area where that is likely to be the case, so if somebody finds a cure for AIDS, for example, whatever private return they might get for that is likely to be absolutely dwarfed by the returns to society, and that is a good reason for subsidies but you would have to do it on a case‑by‑case basis would be my view on that. Ms Dearden: It is just very, very difficult finding evidence of the size of these spillovers. It is very hard. Q196 Chairman: Is it? Ms Dearden: Yes. Q197 Chairman: There are no international comparisons on this? Ms Dearden: There are international comparisons but the evidence is not clear‑cut. It is just very, very, very difficult to estimate. Q198 Chairman: Has Emla done any work in this area? Ms Fitzsimons: On the externalities, no. They are very, very hard to measure. To quantify externalities is very, very difficult whereas private returns are much easier because you observe the wages of individuals and from that you can estimate. Ms Dearden: There are some new studies from the United States where they try to use regional variation and they find some evidence of spillovers but they cannot get down to the level of detail, the very specific things you want to know - which particular courses or occupations are going to provide the big spillovers. Most of the evidence is qualitative, for example the view that we need more scientists. It is not based on hard, sound, empirical evidence and I am not sure that you would ever get it. I just do not think you could design the perfect survey. Q199 Chairman: That is an interesting light on the case we have in the chemistry departments which have closed in Exeter and Swansea. Your argument is that was because the economy does not need so many chemists? Ms Dearden: Or it could be there is a lack of teachers in schools motivating the kids. There could be all sorts of reasons. There could be failures earlier down with the type of kids who have the aptitude to do these things. In a world where kids had perfect information and knew there was a shortage of chemistry graduates, they would optimally choose that but because of all sorts of other things that might get in the way of them achieving that, it is very difficult. Again, I think it is information. Q200 Chairman: So you are really coming down to transparency, information and the free market? Ms Dearden: No, we are definitely not saying a free market. Q201 Chairman: No? Ms Dearden: No. There are lots of arguments why a free market would not work in this area. I do not think I am saying that at all. Ms Goodman: This was in response to your specific question about whether extra subsidies ought to be channelled to specific professions rather than thinking about the market for higher education altogether. Ms Dearden: I just do not know enough about the issues. Q202 Chairman: Do not worry about it. We always like it when our expert witnesses say, "We have not done the research and we do not know about it." Ms Dearden: In the Australian model they charge different prices for different courses so they have actually said that those who gain the most from going to university, which lawyers do ‑‑‑ Q203 Chairman: This is what I wanted to bring you to. The original concept of the Government was that there was going to be a market. We pointed out that everybody was going to charge the same and there was not going to be a market unless the cap was much higher. We made that case very, very strongly indeed. Ms Dearden: You were right. Q204 Chairman: We were right. It is very interesting, is it not, that on the one hand that market did not appear because the cap was too low if you wanted a market. On the other hand, we have something that surprised all of us. We have had this competitive market in bursaries. It is a very classic case for us of an unexpected consequence of the changes, certainly in terms of Government policy. Would you have predicted that and how is that going to work through? Have you any views on that? Ms Goodman: We did not predict that and we have not specifically looked in detail at what has happened to bursaries and what different universities are coming up with in terms of what they say they will do. I guess the main thought we have had about it is that we think it is important for the system of bursaries in place not to alter the universities' incentives to take particular students from particular family backgrounds nor to change the incentive for what fee they are going to charge. We were not sure that the system of compulsory bursaries as they are now up to £300 fulfils those criteria. Beyond that we have not looked explicitly at this. Q205 Chairman: You have not looked at Cambridge offering up to £5,000 in bursaries for students from poorer backgrounds? Ms Dearden: No. I guess one concern we have about these compulsory £300 bursaries is that it seems like it is introducing perhaps a slight distortion. It seems to us it means that universities who charge a full fee are going to have to set up a whole lot of administrative systems and it strikes us it would be easier to increase the grant by £300 for everybody and give the universities less money. You still have an opportunity for a market in bursaries for those who want it but it will not penalise universities who have a high proportion of poorer kids. It just seems a bit silly the way it has been done. Q206 Jonathan Shaw: Do you not think that by requiring £300, although it has an effect in terms of the administration that is required, it has a profound effect? Ms Dearden: You could do that. Q207 Jonathan Shaw: That is what you do not know, is it? You cannot say it would happen anyway. The fact is that this system has been put in. You can say bits of it are wrong and bits of it are bureaucratic but ultimately what it has meant is that it has stimulated, as the Chairman said, large bursaries. They were not there before but they are there now and so even if it is not quite the right regime nevertheless something has been done to bring universities to offer these sort of bursaries and that is a good thing, is it not? Ms Dearden: Yes. It just slightly worries me that some universities who maybe take 60 per cent of their students who are effectively capped at £2,700 because they have to set up a bursary scheme. As Alissa said, it is something we have not really thought about so I do not think I have a particular view. Q208 Mr Greenway: There is just one question I want to ask you and I am going to go back to what we were talking about before. Did you do any work on trying to calculate the different potential take‑up rates of these maintenance loans by the fact that both the Liberal Democrat and Labour maintenance loans are means tested? In fact, the means-tested loans are what exist now under the present system whereas, Alissa, the point you made earlier in answer to one of my earlier questions on the Conservative proposal is that there should be the availability of a loan up to £5,000 which is not means tested and will undoubtedly be more beneficial to those families where there are two or three siblings (which is often the case) at university at one and the same time. Have you done any research on what the impact of the loan not being means tested would have on take‑up? Ms Goodman: We have not done any specific research on that. In order to assess the effects of student debt on later graduates we had to come up with a view of how much students would borrow under each of the three systems, but the way that we did that was we wanted to put all of the parties on an equal footing as graduates borrowing to achieve the same standard of living as students. That is where our so‑called take‑up rates come from. They are simply to put the graduate comparisons on an equal footing across the systems. But in terms of research of what will happen depending on family size and background, we have not done that. I agree it would be very interesting to do. Q209 Mr Greenway: It seems to me that in the practical implementation of each of these different models, there is likely to have to be a decision taken by those students whose parental income is such that they are not getting the means-tested loans for maintenance about whether or not they decide to take the loan because your figures are predicated on people taking these maximum loans, and there is clearly a trade-off between on the one hand having the zero real interest rate applied to the loan to cover tuition fees and having a commercial interest rate applied to maintenance loans. In reality it may well prove that these maintenance loans are not taken out under the Conservative system. Ms Goodman: We pointed out that for the zero real interest rate it would pay everyone to take out the full loan. For the commercial one I guess it depends on what your alternative sources of finance are. If your alternative source of finance was more expensive --- Q210 Mr Greenway: --- Jeff's point. Ms Goodman: --- then you would probably choose to take the cheaper source. If your alternative source of finance was to get it free, for example from your parents, and your parents were willing to do that for you ‑‑‑ Q211 Mr Greenway: --- Or if they have to do that now because they do not get the maintenance loan because of the means test. Ms Goodman: I am talking about under the Conservative system now where the means test would be removed. There if you could get it for free then it would be better. If you had to get it more expensively then the commercial rate under the Conservatives' scheme would be better. Q212 Mr Greenway: To take the commercial rate loan rather than having to borrow at higher rates and run up credit card debts, which is why I agree with Jeff that in different parts of Yorkshire this is the respective experience of our constituents - that students have ended up with significant credit card debt at quite expensive rates of interest. Ms Goodman: I guess under all three systems you would expect the amount of people who have to do that to go down. Q213 Mr Greenway: Yes, you would hope so. Ms Fitzsimons: It is worth remembering that if you take out a loan under the Conservative system the repayments are fixed at nine per cent of income above the threshold, whereas if you go to a bank or use a credit card or more expensive forms, the interest rate might be lower but you pay it back. Ms Dearden: If you have low labour market earnings or do not work for a significant proportion you are not going to pay off your loan under any system so you pay the same amount under all three systems. The people who do worst under the Conservative system are those who take 24 years to pay off their loan. They pay the maximum. It is the middle group. Q214 Jonathan Shaw: Teachers, people like that? Ms Dearden: It is the middle group because the high earners pay it off quickly. Q215 Chairman: So the high earners pay it off quickly, the low earners never pay it off and the middle earners ‑‑‑ Ms Dearden: --- are the people who pay it for 24 years and pay it off. Q216 Jonathan Shaw: Someone who is more likely to be a man in teaching or social work or something like that? Ms Dearden: We could work it out. We have probably got an example of where it takes 24 years. Q217 Mr Greenway: What kind of income is that? Ms Dearden: That is an interest rate of six and a half per cent so four per cent real. Q218 Mr Greenway: But what income level? Ms Dearden: I would have to look at an example. Q219 Mr Greenway: It would be interesting to know that. Ms Dearden: We would have to look at an individual because this is just the average so the whole distribution is truncated. We could tell you the range of salaries from our data but we have not worked it out here. Ms Goodman: That is why it would be a very difficult calculation for somebody deciding whether or not to take out debt under the Conservative system where in that spectrum they were going to fall in terms of whether they would be a low earner or middle earner and whether they would have a large amount written off or not. In terms of the graduate bearing the risk, you can see from what Lorraine said that would be more so under the Conservative system because it depends on your exact earnings path how much you pay. Q220 Chairman: In a moment I want to come back to where we started. The reason we are holding this meeting is to clarify, for those people out there who want to make a judgment on these alternatives, what obviously does not appear in Radio 4 finance programmes and does not appear certainly when we talk to people on the doorsteps. We have got the summary of the report. Is there not something the Institute for Fiscal studies could do to look hard and say, "Here are the options. If you choose this option, it will cost you that. If you choose this option, these are the strengths and weaknesses"? Is there not a simple thing that parents and students should be getting or is the IFS too intellectual? Ms Dearden: The original aim of this was also to illuminate students. Before we do that we want to see who gets elected and which system is going to be in place. Q221 Mr Greenway: This operates at two levels, does it not? Because there is about to be an Election there is clearly interest in what is the impact of the three different systems. What I glean from this morning, to be perfectly frank about it, is that there is good news and bad news with all three whichever way you look at it. I think we have to accept that. In the end the advice people will want is not what is going to happen over the next four weeks, important though it is, it is what they should do in relation to the system that is in place under whatever party is successful in the Election. Ms Dearden: We have got a contribution to make there. Q222 Mr Greenway: That is where I think you could divert. Ms Goodman: Once a system is in place and it is defined, it does not require people like us to explain it. I would think that the kind of careers advice that people get at school ought to incorporate more information about the potential costs of university, and we would be happy to do that but I am sure it is not just us who are able to do that. Chairman: Your research in this is invaluable. Mr Greenway: That is the whole point. Chairman: What you are suggesting is something that this Committee is very interested in, which is ensuring that there is a reasonably good level of education about financial choices for young people quite early on. There is a real gap in the curriculum in what most schools provide and of course for the student who begins on that course from 16 to 18 into higher education that is very important. Q223 Mr Greenway: Except I think the conclusion that you can reach from this and all of the questions that have been asked seems to me to be this: that what you have to do is to persuade this army of 16‑year‑olds who are not persuaded at the moment that it is worth staying on at school, getting A‑levels, going to university and getting a degree, and that if they do that, even though they are going to pay nine per cent of their income above a certain level for 15 or 20 years, once they are in work, they are still going to be significantly better off than if they take the alternative which is to leave school at 16 and get a job. I do not know where the financial argument lies with that but I think that is the issue for government and for politicians. Ms Goodman: If you were a client at a Job Centre Plus programme and you were attending a work-focused interview you will have a better‑off calculation --- Q224 Chairman: There is a certain amount of humour going on here! Ms Goodman: If that were to happen to anyone in this room, if you are a client of the Job Centre Plus and you are attending a work‑focused interview you will be given a better‑off calculation which says if you go into work at this particular wage level, taking into account the tax you may have to pay, the benefit tapers that you may end up on, and the benefits you may lose, this is how much better off you are going to be from going into work relative to staying at home because it is an extremely different calculation for any individual to make. It may well be that there is a case for applying a similar type of advice to sixth form equivalent students or even before. The potentials are unknown to them so you would have to make it quite a bit more assumption-laden so if you end up in the middle portion of graduates then you are likely to be this much better off even though you are paying student debts. If you are in the bottom fifth of earners then you may be only however much it is better off. To give people an idea of what that might mean year on year would be perfectly possible to do and I would think would be quite sensible. Q225 Jeff Ennis: This section of the discussion is very interesting, Chairman, because it strikes me that under all three models that have been put forward, given the fact that we have got more women attending universities now than men and given the fact that under all three models men graduates will pay back more than women graduates under the system, is there not a case to make ‑ and it is not a very politically correct point to make ‑ for positive discrimination to be given to male students to go to university? That is the conclusion. Ms Goodman: Men pay back more because they have higher earnings. Is there not a case for equalising wages and reducing the gender wage gap? Q226 Chairman: Alissa? Ms Goodman: The reason why women get higher taxpayer subsidies on their loans and men get lower is because men earn more once they are in the labour market so if you want to equalise it you could narrow the gender wage gap and achieve the same outcome as altering subsidies. Jeff Ennis: I am being a bit flippant here but the point I am making is we do need to attract more men to university. Mr Greenway: Jeff and I agree on that. We are coming from different political perspectives but we do agree. Jeff Ennis: Particularly working class men. Mr Greenway: Of which there are many in Ryedale. Chairman: The Committee has always in every report on higher education emphasised that entry into university must be based on merit and, as I always say, I think it is obvious that women are brighter than men. At every level they are achieving higher in tests and scores and examinations and getting into higher education in larger numbers, but the Daily Mail seemed to think that was a dangerous and difficult idea. I do not think we can accept the Ennis proposal. Jeff Ennis: To get more men into university ---? Jonathan Shaw: No, positive discrimination. Jeff Ennis: --- Because that was the thrust of my argument. Q227 Chairman: Can we round up then, and I will start with Emla and work across because she has had less chance of answering questions. What advice would you give based on your research to someone contemplating in this Election period life as a student? What advice would you give me on how much it will cost? Ms Dearden: If I were to advise a potential student about going to university under each of the three systems? Q228 Chairman: Yes. Ms Dearden: If they were to face a Labour or Liberal Democrat system, I would certainly advise them to take out the maximum loan that they are entitled to, regardless of their family background, regardless of whether they need to channel that towards university education, and to use all of their fee allowance and to channel that towards fees and to channel all of the maintenance loan and grant support towards maintenance. If they have money left over, put it in the bank and let it earn interest. Under the Labour or Liberal Democrat system, that would be the rational economic choice for a student to make. In terms of what loan they should take under the Conservative system, as Alissa said, if they can obtain free sources of finance from parents or some other external sources then they would be better advised to do that so they do not have to repay that. In terms of whether they take a Conservative loan or a loan from a bank, it depends on the difference in interest rates being offered. Also it is a merit of the Conservative system that the repayment of the loan would be income contingent and it would be fixed at nine per cent, so that is certainly something to bear in mind. Something that might get lost in the debate is that regardless of the loan system, all repayments are fixed and every graduate will pay exactly the same amount unless they choose to pay higher than the nine per cent if they choose to. Q229 Chairman: That was pretty succinct. Alissa, would you add anything to that? Ms Goodman: No, I felt you were trying to lead us to say which party we felt students should vote for. Q230 Chairman: No, I would not be so crass. What good advice would you give to a student? Emla started us off. This is what we really want ‑ good advice for a student contemplating higher education. Ms Goodman: Regardless of the fact that there is an Election coming? Q231 Chairman: Yes. Ms Goodman: I do not think that I have anything to add to what Emla said except that free loans are free money so do not be afraid to take them out. Ms Dearden: Choose the university which is going to fulfil you and satisfy you the most and do not be put off by the fact that might be away from home and stuff like that. It is very important that you do something that is going to maximise your potential and I think it is really important that students trust their instincts and go for the university and are not put off by the fact that it is in London or it is away from home. I think that systems of finance offer them the potential to do that. Chairman: That is excellent advice. Mr Greenway: From all three. Q232 Chairman: The one anomaly we have had evidence on is the fact that here you have this system, which is very generous in many respects for those who get into university and all the rest, yet part‑time students in higher education and indeed those doing higher education in FE seem to be discriminated against. Are they discriminated against by all three proposals or is there a better deal for part‑time students? Ms Goodman: We have not looked into that. Ms Dearden: No. Ms Goodman: That would be a useful thing for us to be able to tell you but I do not think we can. Q233 Chairman: Is it something that the Institute might look at? Ms Dearden: Potentially, yes. It is just something that we have not looked at and it is an important issue. Q234 Chairman: We have got good advice for students. Ms Dearden: I think that each of the parties can use the report too because it throws new light on all of the parties' policies. There is room for improvement in each one. I do not think these are the final schemes. I know certainly for the Government scheme it is still in transition and the details have not been finalised. Q235 Chairman: The picture I have got from this evidence today is that the differences between the three proposals are not as great as some of us our colleagues are proclaiming. On that note, can I thank you for your attendance and hope that those of us who retain an interest in education in the future can work more closely with you. Ms Goodman: Can I add a point of information which is that I mentioned earlier that the Government had come up with some revised revenue projections and cost of student support projections since we wrote our report. We have a revised summary of the public expenditure implications which we have now released as a separate small press release and I wondered if it would be useful for us to also submit that to the Committee? Chairman: Could we have that. Thank you very much for your attendance. Colleagues, can I wish you well. |