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The hon. Gentleman should also ask why the hon. Member for Havant proposes-we heard it again this afternoon-a 10 per cent. discount for graduates whose parents are rich enough to pay off loans early. That is clearly another equivalent to the Opposition's inheritance tax cut for some of the wealthiest estates in the country. He said that he would fund an extra 10,000 places, but that is money that he would not have to spend, and that the Government certainly do not have to spend, because the Government borrow the money from the banks in
order to meet those tuition loan repayments. His proposal would therefore cost Government an additional £240 million across those academic years. Where would that money come from? What kind of a way is that to run the economy? How is it that he has failed to add up properly and proposed a policy that would actually plunge us into further debt?
Mr. Andy Reed: Although we welcome the expansion in higher education, is my right hon. Friend aware that one of the consequences of increased student numbers in Loughborough and other small towns is the rise in the number of houses in multiple occupation? It is imperative that he always considers the impact of that on the local community and does not increase student numbers just for the sake of it. I wanted to intervene on the hon. Member for Havant (Mr. Willetts) to ask how many of the extra 10,000 places that he is proposing could be sustained in relation to growth in those communities, because the figures just do not add up. Will my right hon. Friend ensure that not only the universities but the communities are taken into account when we expand higher education?
Mr. Lammy: I recognise that there are genuine issues in constituencies such as Loughborough about houses in multiple occupation. My hon. Friend will know that the former Secretary of State, my right hon. Friend the Member for Southampton, Itchen (Mr. Denham), who shares that concern and sees its effect in Southampton, has now found his way to the Department for Communities and Local Government, so action can be taken on two fronts.
Ms Dari Taylor: I had hoped that the hon. Member for Havant would give way on that point. Does my right hon. Friend acknowledge the veracity of the statement from vice-chancellors-perhaps not all, but certainly some-when they say: "If we are to have a further 10,000 places, is someone going to tell us where the classrooms and lecturers are coming from?" Those are very serious considerations.
Mr. Lammy: My hon. Friend is absolutely right. She recalls a moment in time during the early 1990s when the Conservatives increased participation but lowered the unit of resource-class sizes grew and facilities were poor. They failed to invest in research, and we subsequently had a Save British Science campaign. We cannot go back to that. She is right to remind the House of the hard choices that we face in government as we, by necessity, manage growth in the system.
Mr. Willetts: We have heard a quite extraordinary set of allegations in the past 10 minutes. There is no Conservative policy for an 8 per cent. interest rate for students, there is no £620 million cut, and the 10,000 extra places would be properly funded with extra cash going to the Exchequer. I suggest to the Minister that in the remaining 10 minutes of his speech he focuses on a practical problem facing students and their families now and offers some explanation of what has gone wrong with the Student Loans Company system and what he is going to do about it.
Mr. Lammy: It is my speech and I will make it as I want to.
The hon. Gentleman's constituents will also be concerned that according to today's edition of the Evening Standard, the Conservatives are saying, in advance of an independent review, that students should pay £7,000 in fees. That is what they are saying to the country. That is extraordinary given that we have said that we will set up an independent review and we have sought to consult Opposition parties on it. I was surprised to read that proposal before I came into the Chamber.
Mr. Willetts: So was I. I can tell the Minister that there is no such Conservative policy; as we make clear in our motion, we believe that student finance is something on which there should be a cross-party higher education funding review.
Mr. Lammy: On the sale of the student loan book, the hon. Member for South Holland and The Deepings (Mr. Hayes) supported that measure in this House back in 2007, before the global economic crisis made raising money from assets a necessity, as it is now. In March, I said clearly that the time was not right and we would suspend that sale. It is now October. As the Prime Minister, the Secretary of State for Business, Innovation and Skills and the Chief Secretary to the Treasury have made clear, following the progress that Volkswagen and Lloyds have made as regards the securities market, we will test the market. We will of course seek to get value for money on behalf of the taxpayer, but it is right that we test the market to see whether we can make that sale possible.
Mr. John Hayes (South Holland and The Deepings) (Con): The Minister is right. We support the principle of selling the student loan book-when the time is right. He will remember that my hon. Friend the Member for Reading, East (Mr. Wilson) and I made it absolutely clear at the time that a value-for-money criterion was critical. Following today's debate, will he commit to making that funding criterion-a framework that he must have in the Department; he would not be diligent if he did not-available to the House so that we can see on exactly what terms the loan book will be sold?
Mr. Lammy: As the hon. Gentleman knows, the Treasury will make that assessment on the basis of the market as is appropriate at the time.
Let me turn to recent events at the Student Loans Company. We have already heard something about that from hon. Members. This year, the whole university applications and admissions process has faced unprecedented demand brought on by the effects of the recession. Unemployment, especially youth unemployment, has risen, and it is clear that this has caused many more young people to apply to university, and for student support, than might otherwise have done so.
Faced with these pressures, the Student Loans Company has fallen short of public expectations in responding to increased demand. While it is true that, as at this moment, 640,000 students in England have been paid by the SLC this year-more people than ever before at this point in the year-I share the concern of Members in all parts of the House that a minority of students have not received their funding in good time ahead of the new academic year. That in unacceptable and falls short of what the public can expect.
This year's problems have had a profoundly regrettable effect on individual students and their families. Even when they have not led to financial hardship, they have undoubtedly caused worry and frustration, particularly for parents attempting to get through on the phone lines. The company's chief executive has already publicly apologised for the difficulties that customers have had in contacting it. Its chairman has also apologised to customers for their experiences this year, and I repeat that I, too, am sorry for what parents and students have experienced. I also share Members' frustration at the disappointing customer service provided by the Student Loans Company. Many students and parents have not been able to get through to speak to an adviser and find out about their application. Others have been confused about the process and what is happening with their application at an important time in their life.
In anticipation of increased demand, I provided the SLC with all the resources that it asked for in this financial year-an additional £6.9 million-to fund increased costs to the organisation. Problems began to emerge in early September, and I met the chief executive and deputy chief executive of the SLC on 8, 10, 14 and 24 September to express my concern and ensure that action was taken. To support the SLC further, I made available an additional £230,000 of funding in September to help put a number of measures in place. They included a 70 per cent. increase in the number of phone lines, recruiting additional staff to answer phones, paying more staff to work overtime, increasing call centre operating capacity by about 35 per cent., reminding students and parents that they could check the status of their application online and improving answers to the most common inquiries.
The SLC has now stated its target that anyone who submitted an application on time, with the correct information, will receive their full payment by the end of October. It is now vital that it learns the lessons of this year and plans for improvement next year. I have received a letter from the chairman of the SLC setting out his initial view of what happened in the first year of the transition to a fully centralised system of financial support for students in England. However, there needs to be a thorough consideration of the matter. To that end, I have invited Professor Sir Deian Hopkin, the former vice-chancellor of London South Bank university, and Bernadette Kenny of Her Majesty's Revenue and Customs to bring external scrutiny, expertise and challenge to the company's review of lessons learned from this year and its preparedness to meet the challenges of next year. The SLC itself is on record as acknowledging the need for such an exercise, but I am determined that the process should involve the external challenge and expertise needed to provide a frank assessment of what went wrong and a series of thorough proposals for the future.
Mr. Willetts: I am grateful to the Minister for the much more sober tone that he is now adopting. Will he clarify two points? First, he said that 640,000 students had got their money through. What is his latest estimate of the number of students who have applied, or are going to university, but have not yet had their financial assessment completed and are not yet receiving funding?
Secondly, the Minister mentioned the target for anyone who submitted their application on time. It is extremely difficult to pin down on the website what "on time" means. A lot of students are asking when the deadline was.
Mr. Lammy: The deadline was at the end of June. The hon. Gentleman will appreciate that many people who apply for student finance do not ultimately go to university. Others apply solely on the basis that they have entered the clearing process. With the increase in demand this year, there was a huge growth in the number doing that. The SLC says that it is currently receiving about 5,000 applications every week, but he will understand that not all those applications result in students actually going to university. The company has to process them, but some people are assessing what their finances might be if they went to university, and some are not successful in getting to university at their first attempt.
There has been a big increase in the number of applications. In fact, 830,850 applications have been processed, which is 49,000 more than last year. There are 77,000 applications in processing, and we understand that 71,200 students are not eligible or have withdrawn. It will be a moveable feast over the course of the next few weeks as students enter university. Of course, some students apply at that point, and this year there has been a growth in the number doing that. Some enter university and decide that it is not for them and drop out in the early months of their course, or switch institutions.
There are complexities to the numbers, but of course I do not withdraw from what I have said-that the standards of service that the public have come to expect from other big call centre operations, be they NHS Direct or HMRC, have not been met. The review will consider governance, programme management and processing, and I want it to report quickly so that its recommendations can be incorporated into the SLC's preparation for next year's processing.
Stephen Williams (Bristol, West) (LD): In his response to the hon. Member for Havant (Mr. Willetts), the Minister said that many students drop out of their studies at this stage. Does he recognise that the reason why a lot do so in their first year is financial hardship, and that the current situation makes it more likely that students will drop out?
Mr. Lammy: There are a range of reasons why students drop out of university, and the hon. Gentleman will be aware that through the widening participation component of the block grant that we make to universities, particularly those that specialise and have considerable expertise in supporting more vulnerable students and those from more deprived backgrounds, we provide money that supports the retention of such students at university. As the hon. Member for Havant said, we also provide £45 million to our universities through the access to learning fund, to support students through what are normally called "hardship funds". Those funds are being drawn on to support students at this time in particular.
It is important that we bear in mind that it is 14 October, and most universities' terms began two weeks ago. We are at the beginning of the process. However, the situation has not been good enough, the demand was not anticipated, there have been problems with scanning and technology and trialling has not been effective enough. Too many people have not been able to get through on the phone, and automated e-mails have driven people to want to phone, increasing demand even further. That must be the subject of a lessons learned exercise.
David T.C. Davies (Monmouth) (Con): The Minister is, as always, talking the good talk, but does he not accept that the reality in Members' constituencies is a lot of frustrated students? They are not just those going to university but students such as those in my constituency who want to study at The Hill college in Abergavenny but are unable to do so because the Welsh Assembly have cut their funding. I know that he will say that that is not his responsibility, but my constituents are suffering as a result of the policies of his Government both here and in Cardiff bay.
Mr. Lammy: That is a nice try, but as I have said before, the hon. Gentleman will be aware of his party's commitment to £610 million-worth of cuts and the effect that that would have at this time.
The SLC's current operational difficulties are unfortunate, and I have described to the House the measures that are in hand to deal with them to ensure that they are not repeated. However, they should not distract us from the real issue, which is the Government's success in building our world-class higher education system, our resolve in ensuring that the system is truly fit for the challenges that we will face as a nation in future, and our unswerving commitment to building aspiration among young people from ordinary and, especially, underprivileged backgrounds, for the many benefits that higher education brings.
That is in stark contrast to the Conservatives, who offer not a renaissance, but a risk that the country cannot afford. They asked to be judged on how they treat the poorest in society, only to offer unworkable and wasteful discounts to students from the richest families in the country, and they have nothing to say on social mobility and widening access to university. They promise to peg down debt, only to make spending commitments that they cannot afford. Having promised people that they have changed, they revert back to a Thatcherite core, opposing the help that businesses need to stay solvent, the help that families need to stay in their homes, and the help that young people need to invest in the future.
The past few months have reminded us that the Conservatives are in opposition for a reason. Neither credible nor compassionate, they offer nothing more than the echoes of their discredited past. As the country emerges from the economic shock of this century, what people need, especially our young people, is not hollow rhetoric, but support, and opportunities to contribute to this country's renewal.
2.52 pm
Stephen Williams (Bristol, West) (LD): Many of us will have a sense of déjà vu today. Just before the summer recess, we had many debates and discussions about the crisis and shambles over which the Minister of State was at that time presiding-the lack of places in higher education to meet demand. This summer, on behalf of my party, I covered A-level results day. In previous years, the debate has been centred on standards. This year, after seeing television pictures and photographs of elated students receiving their results, we saw some heartbroken students who had realised that their place was not guaranteed and who had no idea what was going to happen to them in clearing. We will not know until next week, when UCAS releases its final figures, the status of such applications and how many people's success at obtaining results has led to disappointment at not obtaining a university place.
Today, however, we are concerned with yet another shambles presided over by the new Department. According to various press reports in the past few days, at least 100,000 students are yet to receive confirmation of their grants or maintenance loans. It has also been reported that first-year students have been hard hit. According to information released to the BBC under a freedom of information request-it is a shame that the BBC had to obtain the information that way and that the Student Loans Company or the Government were not more open with students and their parents-28 per cent. of applications by first-year students had not been processed by last week.
We know that universities are able to be flexible, particularly with first-years, regarding, for instance, hall fees, which after all are entirely under university control, but what about students who are having to pay private landlords, rental deposits or the finding fees that letting agencies demand? Hon. Members who represent university constituencies, including my hon. Friend the Member for Manchester, Withington (Mr. Leech) and I, will know about those fees. What about students who have child care considerations and fees to pay? They cannot at the moment be certain that they will have access to the money that they need to meet those obligations.
I am especially concerned about non-traditional students who have accessed university for the first time. On Monday, our first day back following the summer recess, it was my great pleasure to host a reception in the Members' dining room for the Helena Kennedy Foundation, at which Baroness Kennedy gave awards to people who have received bursaries from the foundation. Many of them are from very difficult backgrounds and were going to university for the first time. Following my intervention on the Minister he addressed the fact that people drop out of university. Many who are going to university for the first time drop out because of pressing financial circumstances, and it would be a tragedy if the drop-out rate increased because people's fears of the financial pressures of accessing a degree were realised.
This is the first year that the SLC has had responsibility for handling grant applications; many hon. Members will have gone through the old local authority process. The hon. Member for Havant (Mr. Willetts) has already referred to that most unfortunate quotation in yesterday's edition of The Guardian of Mr. Derek Ross, the deputy chief executive of the SLC, who said that the problem was akin to losing one's car keys. We have all done that at some point and it is a personal inconvenience, but Mr. Ross has mixed up personal inconvenience with the financial hardship and uncertainty faced by others. I hope that those remarks are withdrawn and, indeed, apologised for.
Why were the problems not foreseen? The SLC should have prepared for its new responsibilities. As I understand it, consultation on moving to the new system took place three years ago, in 2006. It was welcomed by many at the time, including the National Union of Students, because it was a move away from the fragmented system of local authorities processing applications using different procedures, which produced different outcomes up and down the country, to a uniform system. The NUS was given assurances that the SLC would prepare for the day and time when it took over responsibility, but it is now clear that those assurances were not worth much.
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