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If I were desperate to go to university, I would probably have to go to one of my local universities to avoid the extra living expenses, rather than the best university that would accept me based on my ability and grades. That seems to be what the Secretary of State for Business, Innovation and Skills intends people from my constituency to do. I would also most likely have to take a significant amount of paid part-time work, reducing the amount of time that I could dedicate to my studies, and consequently my attainment.
Even then, when I had struggled through three years and racked up a debt of £15,000 to £20,000 for the privilege-assuming that I had received some of the grants that the Minister of State outlined-my debt would continue to grow at a rate far above that at which my earnings would be likely to grow. An interest rate of 2.2% plus RPI, which would currently be 6.8%, does not compare favourably with a typical increase in median income of 3% to 4%. By that logic, somebody finishing university this year with £20,000 of debt would see that debt grow by more than £1,300 in a year and would need to find a job paying more than £30,000 just to keep up with paying that off. Today, though, we have heard that someone earning £30,000 could be liable to pay even more interest. That will mean millions of young people never paying off their loans and quite a number of those loans-not just the odd one-probably being written off after the end of the 30-year period. The thought of being 16 or 17 and realising that I would still be paying for my education in my 50s would definitely put me off higher education.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op): Unfortunately, I am one of those Members of Parliament who are still paying back their student loans, even though I left higher education more than a decade ago. Does my hon. Friend share my concern that no one in government seems to consider the aggregate effect of people having these levels of debt for so long, when house prices are rising, mortgages are hard to obtain and contributions to the pension system will have to be higher? No one seems to look at the fact that the sheer amount that people pay out on their loans every month diminishes their capacity to spend their money on other things, which is detrimental to family life and their prospects.
Mrs Hodgson: I certainly agree. We should also remember that some of the young people being burdened with huge debts will be from families that have no other mechanism to support them in making further life choices, such as getting into the housing market, or in paying unexpected bills. Having large elements of their earned income tied up for the next 30 years will be more of an ask for those young people than it will be for young people from a more middle-class background, but that has not been taken into account. For people from some of the backgrounds that we are talking about who might want to strike out and go to university, such factors will have a big detrimental impact on the decision that they take.
Mr Gareth Thomas (Harrow West) (Lab/Co-op):
Following on from the intervention from my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds), will my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) join me in asking the
Minister to comment on the impact of today's announcement on undergraduates who want to go on to postgraduate education? We heard nothing about that impact in today's statement, and it would surely be useful to hear whether those from lower-income backgrounds who have heavy loans to pay back will be deterred from going on to postgraduate study.
Mrs Hodgson: That is an important part of the debate, but it has not been discussed yet, and I certainly hope that the Minister will refer to it in his closing remarks. Even during my time as an MP, I have seen a change among the people who have applied to work for me as a researcher, with those who apply now having chosen not to do postgraduate qualifications for the reason that my hon. Friend sets out. Degree-level qualifications will therefore probably be the maximum attainment for some children from working-class backgrounds.
I want now to touch on the education maintenance allowance. At the same time as the current changes are being made, the Government are planning to overhaul the EMA system, which has been instrumental in ensuring that talented young people from less well-off backgrounds get the necessary qualifications to apply to university in the first place. There was a debate on this subject in Westminster Hall yesterday, which was secured by my hon. Friend the Member for Glasgow North West (John Robertson). He is a great advocate of the EMA, and I see from Hansard that he put the case for its retention impeccably, so I will not repeat it.
My hon. Friend has plenty of evidence to back up his case. The evaluation of the roll-out of EMA showed that it reduced the level of those not in education, employment or training and encouraged those receiving it to work harder. Indeed, Institute for Fiscal Studies research showed that attainment among recipients has increased by 5% since the introduction of the EMA. If the Government remove something that encourages less well-off children to stay in further education and to aim higher, and they couple that with huge disincentives to apply for higher education, applications from that group will almost certainly drop significantly, particularly to the better universities.
Paul Farrelly: In his intervention, the Minister talked about the importance of encouraging further applications. When I was growing up, I was one of those people whose family encouraged them to go out to work at 16. The EMA, which I argued for in my maiden speech in 2001, has been really important in changing that, but the Government gave us no indication of the implications of scrapping it when they announced the changed regime today.
Mrs Hodgson: My hon. Friend makes a good point. I always tell people that the EMA would have been the one extra thing that would have given me the confidence to resist the push to go out to work, because I would have had just that little bit of money that was mine.
I note from Hansard that the Minister who answered yesterday's debate tried to shift the blame for the decision to remove the EMA on to the previous Labour Government, much as I expect the Minister, unfortunately,
to do today. The fact is that there are alternatives to those choices that have been made-ones that would have put more of the burden on the people who caused the situation that we are in, rather than on a generation that has had nothing to do with it.
The Minister for Universities and Science is not representing the Government here today, but he is apparently the author of an interesting book called "The Pinch". I regret to say that I have not had time to read it yet, although perhaps a friend will be watching the debate and get me a copy for Christmas-if they do, I will be sure to pop along to the office of the Universities Minister to request an autograph. In his book, he argues that his generation-it is not quite my generation, because I am not that old-has benefitted from all the things that it is now unwilling to fund for the current generation and the next generation, including subsidised higher education. Does he not think that the Government's reforms enforce that attitude, which he clearly sees-or saw-as hugely detrimental to young people?
I have a copy of today's statement by the Universities Minister; he spoke of introducing a progressive system. The only progress that I can see between when he wrote his book and his speech today is a kind of backwards progress, which is, I believe, an oxymoron-a bit like his claim that the Government's changes are progressive.
I represent Liverpool, Wavertree, which has one university, Liverpool Hope, within its borders and two, Liverpool John Moores and Liverpool university, just outside. Many members of Liverpool's student and academic community live in my constituency. Along with my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds), I am probably one of the Members who was most recently in the higher education system and I am still paying off my student loan. I was also one of the 500-plus candidates who signed the National Union of Students pledge not to vote for an increase in fees, and I will be upholding that pledge.
I recently met representatives of Aimhigher Greater Merseyside and I heard in great detail about the fabulous work that they continue to do across the region for 35,000 young people. As many of my hon. Friends have said, the goal of the Aimhigher programme is to widen participation in higher education and to encourage young people from disadvantaged backgrounds to apply for university.
Lisa Nandy (Wigan) (Lab): Will my hon. Friend join me in paying tribute to the work of Aimhigher not only on the issues that have been mentioned, but in providing advice and guidance to much younger children, who might never have thought about going to university? I am sure that there are far too many young people in her constituency, just as there are in my constituency of Wigan, whose talent and ability are not matched by their aspirations. Will she join me in urging the Minister to make sure that the invaluable work that Aimhigher does with young people from the ages of 13, 14 and 15 continues?
Luciana Berger: I thank my hon. Friend for that intervention; she raises some valuable points about the fantastic work that Aimhigher has done not only with young people in further education, but in schools, and I will go on to mention some of the wide range of activities that it is involved in. Most specifically, Aimhigher helps young people from families with no other members who went to university to consider higher education. For many of them just going on to further education is a massive step.
I want to expand on the list of Aimhigher's activities, because it does so many things. It has made more than 1 million interventions to encourage young people to think about university-an incredible amount of activity. That extends to more than 2,500 schools in the UK, and 300 colleges. We have heard about its summer school, which gives young people a three to five-day taster experience of what it means to go to university. It offers one-day master classes, given by university staff, in all subject areas. It also offers continuing professional development for teachers in school and staff in further education colleges, to make them aware of changes in higher education and the opportunities that are available.
Aimhigher offers impartial workshops on university life, finance, choice and how to make an application-because for many young people filling in the UCAS form is a massive step forward. It also offers bespoke programmes for those with disabilities, and for people who were looked-after children. In Liverpool we try to do a lot of work to help looked-after children to take that step, because so many do not go to university. Aimhigher also offers additional support for vocational learners-especially apprentices, as there is no reason why they should not go on to university if they want to.
I was therefore incredibly alarmed to learn from the Universities Minister a few hours ago, when I asked him about the Aimhigher programme, that responsibility for the activities that it currently pursues will fall to universities. I am incredibly concerned about that, because there is not enough detail, and a massive vacuum will be created during the transition. There will be a £150 million national scholarship fund. I welcome that, but it is only a fraction of the investment that the Labour Government made in the widening of participation-and it assists only the brightest, as we can see from today's statement, to the exclusion of those who may still be good enough to apply to university, but who will not qualify for a scholarship.
My hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) quoted something that the Deputy Prime Minister said the week before the election, and I want to return to that, because the next line is very pertinent to the debate. He said:
"If fees rise to £7,000 a year, as many rumours suggest they would, within five years some students will be leaving university up to £44,000 in debt. That would be a disaster."
"If we have learnt one thing from the economic crisis, it is that you can't build a future on debt."
Nic Dakin: Does my hon. Friend think it is ironic that the Deputy Prime Minister, who was so correct when he said that, should now use the excuse of the debt caused by the bankers to transfer the problems of and payments for that debt to the young people of today and tomorrow? It seems completely wrong.
Many of my constituents talk to me now about the challenges they face because of their current debts, when fees are only a third of those proposed by the new Government. Access to higher education should be about students' ability, not the ability to pay or willingness to shoulder thousands of pounds of debt. That is my greatest concern.
Mr Thomas: Will my hon. Friend join me in asking for more clarity from the Minister about what will happen to the widening participation grant that is currently in his Department's budget? We have had no information about whether it will be increased or decreased, or stay the same. I am sure that universities and students will be attending to this debate, and will want that information too.
Luciana Berger: I thank my hon. Friend for asking that relevant question. Given the fraction of money that will go from Aimhigher to the national scholarship fund, and the scarcity of detail in the statement about how widening will be funded, I too would be grateful to know what grant there will be.
Paul Blomfield (Sheffield Central) (Lab): I congratulate my right hon. Friend the Member for Tottenham (Mr Lammy) on securing the debate. I know how passionately he feels about participation, and was pleased to join him, when he was the Minister for Higher Education, on a visit to Sheffield's Aimhigher programme. We were both impressed by the excellent work done by the programme team. I congratulate him also on the timeliness of the debate, on a day when we have heard the Government's proposals for the most fundamental remodelling of our higher education system for 50 years -shifting the responsibility for the funding of universities from the state on to students, and creating a market in which it is clear that a 50% higher fee for the best courses at the best institutions will lead many families, after discussion, to base choices not on a potential student's ability to learn, but on their ability to repay greater debt.
Bill Esterson (Sefton Central) (Lab): My hon. Friend is talking about choices, and I want to mention the impact not just on participation but on subject or even career choice. Students in my constituency have said that they must seriously consider courses on the basis of how much they might earn after qualifying, rather than on the basis of interest or the career they want. That is a grave concern and perhaps the Minister might be asked to respond to it.
Paul Blomfield: My hon. Friend makes a good point. There is a further message within the Government's announcement, about social sciences, arts and humanities courses. The Government are sending out the message that they are not valued by the country. That will, I am sure, also be a factor in students' decisions.
We know from talking to constituents, from research and from looking across the Atlantic at the United States model that the Government seem intent on creating, that the cost of courses is a significant disincentive for
those who can least afford them. The levels of debt that the Government seem intent on students taking on will be a disincentive, particularly for those on lower-and, indeed, ordinary-incomes, who cannot contemplate such financial risk.
Apart from the impact on participation, the Government's proposals fail their own test on the funding of the higher education system. I refer hon. Members to the remarks made by Professor Steve Smith, president of Universities UK, who wrote recently in The Guardian:
"The government should be in no doubt about the risks these cuts in funding pose to the world-class standing of our higher education system, and thus to the country's future economic growth and prosperity. The UK's competitors face the same deficit reduction challenges as we do, but they have decided to invest in higher education at this crucial time, not cut it."
"We believe that this package of proposals represents the best available funding system for universities."
Paul Blomfield: I understand the messages that the Government have been sending about the available options, and the way the universities are being forced to accept a way forward that is deeply unpalatable for many of them. Steve Smith went on to point out in the article I quoted that the spending review set the context within which to understand Browne. That is a crucial point. The previous Labour Government set up the Browne review as an independent review of our higher education system, but clearly the steer that was given to Browne on the resources that would be available, and the way they would be allocated, shaped the recommendations and took away any pretence that the final report was the independent review we had sought.
Luciana Berger: Is my hon. Friend aware that in 2007 we, as a country, spent only 0.67% of GDP on higher education when the OECD was recommending 1%, and that that figure is now likely to fall as a result of the announcements made today?
Paul Blomfield: That is a very important point on our position in relation to competitors in the OECD. We have made enormous progress in the funding of higher education over the past 13 years. We did not get to where we needed to be, but we were moving in the right direction. This Government are reversing that direction and taking us backward.
Let me return to the point about the negative message being sent out about arts, humanities and social science courses, and share with Members the views of the vice-chancellor of the university of Sheffield, Professor Keith Burnett. He is an outstanding leader of an outstanding university, and a scientist. He said:
"In the last few days I have been thinking about how I would feel if my subject - Physics - had been identified as fundamentally unimportant to the UK, or at least unworthy of its investment, in the way that many of our colleagues' subjects have been. I would be gutted....When I see what richness the work of our colleagues...has brought us...Sir Ian Kershaw's books on Hitler...shed a unique light on how fascism emerged...offered insights and judgement which can't be ignored. Mike Braddick's new book on the Civil War...helps us understand how we came to be who we are as a
nation...Focusing on a period when fundamental questions were being debated...casts new light on the transition of Britain's passage from one era to another...One of our most powerful resources as a country, and as a University, is our cultural insight, our deep questioning of our own society and ideas - perhaps we have never needed that analysis more as we consider how best to go forward. In a world of global competition and profound change, we want our children to have more than just bread to live on."
I turn now to the point that my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) made on education maintenance allowances. Fundamentally-the Minister himself acknowledged this-participation in higher education is in many senses determined by people's experience of the education system in their early years. We know that for many people who aspire to go to university the critical decision is at the age of 16, and that in low-income families with no history of post-16 education there is huge pressure not to be a further drain on the family's financial resources. I have talked to constituents across Sheffield, and have been left in no doubt that education maintenance allowances have transformed life chances. Last year, almost 7,000 EMAs were awarded across the city. In the comprehensive spending review, the Chancellor talked about replacing
"education maintenance allowances with more targeted support."-[Official Report, 20 October 2010; Vol. 516, c. 964.]
I suggest that that is a deeply cynical use of language. What could be more targeted than allowances that are assessed according to family income, with the level of payments being determined according to need? The Minister cuts a rather lonely figure today, and I regret that there are not more Members of other parties interested in the debate. I hope that the Minister will address my remarks in his contribution.
Ms Diane Abbott (Hackney North and Stoke Newington) (Lab): I am grateful for the chance to take part in this valuable debate. I congratulate my friend and colleague, the right hon. Member for Tottenham (Mr Lammy), on obtaining this important debate. My Government had an excellent record in further and higher education, particularly when he was a Minister in that Department.
Like my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger), I signed a pledge not to vote for an increase in tuition fees, and I had to fight through a crowd of Lib Dems in this House to do so. I had imagined that that same crowd of Lib Dems would be here today; I cannot imagine what has happened to them. As I said, my Government had an excellent record in further and higher education, but I voted against tuition fees in any form or fashion because my view was that society as a whole benefits from education and society as a whole should pay.
It was also my view that I had benefited. As the child of people who left school at 14, I have benefited from an education at one of our better education institutions, nestling as it does in the mists of the fens of East Anglia, and I was not prepared to draw up the ladder behind me to another generation of young people.
I also knew that this is where it would all come to. It was all very well for us to introduce tuition fees in a very careful way, hedged about with all sorts of support-very judicious-but I knew that it would end in a Tory-led Government ramping up fees unconscionably, leading to a more divided education system than we have ever seen.
Ms Abbott: I am afraid that I did not attract the Minister's attention. I have always been against tuition fees; I have marched through the Lobby against them. It gives me no pleasure to say that I knew it would end up like this, with Tory Ministers such as the hon. Member for South Holland and The Deepings (Mr Hayes) ramping up fees-[Interruption.] Members will see how I cast my vote in the coming debate.
The point that I wanted to make is that in a world of markets-all of us here, even my good self, believe in markets nowadays-price is an indicator and, as I said earlier, if there is variable pricing, the indicator to students is that the higher-priced universities are not for the likes of them. Over the years, I have counselled many young people in my constituency, including ethnic minority young people, to try to encourage them to go on to higher education. They are held back not because they do not have the qualifications-their teachers bring them to me precisely because they think they are bright enough to benefit-but because their parents and they themselves are worried about leaving home, about the sorts of people that they will meet, and that the environment might be snobbish. And now that we see a gap of perhaps £6,000 or £7,000 between fees, what will those working-class students think?
I was the first in my generation of my family to go to university. I always remember my father, who was a committed and kindly parent, saying when I was in the sixth form, "Girls of your age are out of school." He was not being cruel; all the black girls of my age that he knew were out of school. I voted against tuition fees in the first place because had someone told my father, who left school at 14 and worked all his life, that not only was I staying on into the sixth form, not only was I going on to university, but I was going to pile up upward of £40,000 debt to go to my chosen university, he would have said, "No. You leave school and you become a nurse like your mother," not because he was cruel, but because he was looking out for my future. For someone from his kind of background, that level of debt would be more than they would earn in a year, and more than my father in his day would have earned in several years, which would have been completely unthinkable.
I agree with Government Members who said that the issues that face young people from communities such as mine when going forward into further education are not just about money. They are very complex issues, and that is why for many years I have run a programme that is designed to encourage black young children, specifically, in London to raise their achievements. We have conferences and seminars, and we give out awards. There are, of course, hundreds of ethnic minority young people doing very well in school, in spite of everything and, as I am
sure my right hon. and hon. Friends will agree, this measure will hit not just people from communities such as mine, but middle England also. In some ways, the people who will be worst off are those who are just in the middle, who are not eligible for the help but cannot afford to contemplate their children going on to pile up £40,000 of debt, not when they will have to think about their pension and their jobs, and interest rates on mortgages are rising. I believe that the introduction in this way of a crude market mechanism into higher education is wrong. I believe that it shows the reality of our invisible Lib Dem colleagues' commitment to equality and fairness. I look forward to hearing the Minister responding to my colleagues' points today, but I look forward even more to seeing what the electorate in Southwark, in Hornsey, and in Lib Dem constituencies up and down the country, will say in response to the way in which the Lib Dems have today walked away from signed commitments not to have higher tuition fees.
Mr Gareth Thomas (Harrow West) (Lab/Co-op): It is a privilege to join the debate led by my right hon. Friend the Member for Tottenham (Mr Lammy), not least because he has a distinguished record championing the widening participation agenda as a Minister, a point others have touched on. Although I have a slight problem with his constituency, I welcome the opportunity to put on record my appreciation of his record in Government. Given his profound knowledge of the subject, I hesitate to speak so soon after my appointment to this shadow brief.
My right hon. Friend and my hon. Friend the Member for City of Durham (Roberta Blackman-Woods) rightly praised the improvements in access to participation under the Labour Government. Those from the top three social classes are twice as likely to go into higher education as those from the bottom four classes, and 19% of the poorest 20% go into higher education compared with 57% of the richest 20%. As my right hon. and hon. Friends made clear, there has been encouraging progress since 2004. Higher education participation by the poorest 20% is up by some 32% compared with a rise of 4% for those from the richest 20%, which means an extra 33,000 students from the bottom four social classes going into higher education between 2003 and 2008. My right hon. Friend and the previous Government can be proud of that record. As hon. Members have rightly said, we need to do more work in that area, so I share the profound scepticism of all those who have spoken from the Opposition Benches that the package announced today by the Minister for Universities and Science will help the effort to increase access to participation.
The hon. Member for Reading East (Mr Wilson), who, sadly, is no longer in the Chamber, intervened on my right hon. Friend the Member for Tottenham. As my right hon. Friend said in his answer, the one bit of good news in the Government's response to the Browne review was about access to loans and better support for part-time students. There were interventions and speeches by my hon. Friends the Members for Hackney North
and Stoke Newington (Ms Abbott), for Stalybridge and Hyde (Jonathan Reynolds), for Newcastle-under- Lyme (Paul Farrelly), for City of Durham (Roberta Blackman-Woods), for Washington and Sunderland West (Mrs Hodgson), for Liverpool, Wavertree (Luciana Berger), for Wigan (Lisa Nandy), for Scunthorpe (Nic Dakin), for Sheffield Central (Paul Blomfield) and for Sefton Central (Bill Esterson). I hope to pick up on some of the points that they made.
The hon. Member for Wolverhampton South West (Paul Uppal) made the perfectly fair point that barriers to widening access to education are not simply about finance, but I hope that when he reflects on his intervention he will recognise that a substantial cut in the teaching grant-of which more shortly-will have a big impact on the effort to increase participation. My right hon. Friend the Member for Tottenham referred to the research by the Sutton Trust, which has long championed better access to the oldest universities-Oxford and Cambridge. It will be interesting to hear the reaction of the Minister for Further Education, Skills and Lifelong Learning to the work that the Sutton Trust published and the profound concern it raised about the impact of the Browne review on the ability of universities to increase participation.
My right hon. Friend has also championed the future of Aimhigher. In answer to questions that I tabled about its future, the Minister for Universities and Science made it clear that Aimhigher has made a significant difference to access to higher education for those from low-income backgrounds. I hope that the Minister for Further Education, Skills and Lifelong Learning will give us more detail about the future of the widening participation grant. Does he expect it to go down?
I hope that the Minister will deal with the Opposition's profound concern about the scale of the cut that universities have to contemplate. It has been largely hidden away and not referenced until today's statement and debate. It is not the 40% spending review cut that the Department for Business, Innovation and Skills owned up to, but the 80% cut in the undergraduate teaching budget that is set to have such a profound impact, and is the prime driver behind the increase in fees that we are set to see.
As I said in response to the statement by the Minister for Universities and Science today, we expect universities to lose millions of pounds over the next four years. I hope that he has the courage to recognise that the universities that have done the most to increase participation are set to see the biggest drop in teaching grant funding. As a result of the cut in the undergraduate teaching budget, the university of Bedfordshire is set to lose more than £25 million; Sheffield Hallam university, which serves the constituency of the Deputy Prime Minister, is set to lose £63 million; Leeds Metropolitan university is set to lose almost £61 million; Manchester Metropolitan university is set to lose £60 million; and Liverpool John Moores university is set to lose more than £48 million. A series of universities are set to lose all their teaching grant funding.
In response to the statement from the Minister for Universities and Science today, my right hon. Friend the Member for Lewisham, Deptford (Joan Ruddock) referenced Trinity Laban, which serves, in part, one of the most deprived communities in London, and is set to lose all of its funding simply because it does not teach
science, technology, engineering or maths. There is huge concern in the higher education sector, as I hope the Minister will acknowledge, about how the transition to the new system will work, about the pace of cuts in higher education funding and about the extent to which the income from increased fees will come on stream.
The key question for the Minister is how such a huge cut in the undergraduate teaching budget will help universities to increase participation. My hon. Friend the Member for Sheffield Central mentioned that we are one of only two countries in the OECD that is decreasing spending on higher education-we join Romania in that regard. In the US, President Obama wants the highest number of undergraduates in the world to be from the United States by 2020, and he is backing up that commitment with substantial additional investment in higher education and research. France, Germany, our allies in Europe, Australia and our allies in the Commonwealth-all OECD members-are substantially increasing their investment in higher education, because they want to increase and widen participation. They recognise both the importance to their economies of having highly skilled graduates and the social justice argument for ensuring that those from low-income backgrounds can go to university.
Although a huge number of Labour Members are interested in this debate, it is telling that not one Liberal Democrat has turned up to take part. They are skulking away in the corners of the House, no doubt embarrassed by what their party has signed up to. It is extraordinary that back in April the Deputy Prime Minister signed his headline manifesto commitment opposing tuition fees-wanting them abolished-yet he now supports trebling them as part of the package today.
What is the future for the widening participation premium? What will be the impact of much higher fees and loans on mature students? What analysis has the Minister commissioned about the impact of the package announced today on those from low-income backgrounds? What will be the impact on postgraduate teaching, and what will be the impact on people from low-income backgrounds in terms of participation in postgraduate study?
Will the Minister tell the House how the new access agreement that each university will have to sign with the Office for Fair Access will work? Will there be targets in the access agreement? How will they be set? Will the access documents be public, so that universities and those outside the higher education sector can compare like with like? What will be the penalties if universities do not achieve the targets set out in the access agreement? That point was raised by my right hon. Friend the Member for Tottenham.
The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes): It a pleasure to speak in this debate, Mr Betts, and I congratulate the right hon. Member for Tottenham (Mr Lammy) on securing it. I acknowledge that we both care deeply about this subject, and we have debated it over many years. It was especially fortuitous of him to secure the debate for today. He applied for it and secured it before he knew about the statement that would be made-a remarkable achievement.
I have always listened to the right hon. Gentleman with interest. His journey from Tottenham to this place is one that we all believe more people should be able to take. Like many other hon. Members who have spoken, I was the first person in my family to go to university and, as the right hon. Gentleman knows, I want that opportunity for more people from working-class backgrounds. Like the hon. Member for City of Durham (Roberta Blackman-Woods), I believe in what she described as the transformative power of learning, and the way that learning changes lives by changing life chances.
However, let us be frank during the course of our affairs this afternoon. The previous Government knew, just as this Government know, that we have to think again about how we fund such opportunities. That is precisely why the previous Government commissioned the Browne review. I have a series of quotes from Lord Mandelson and others. It would be tedious to read them out, but they state that we need to think afresh about the way that we fund universities and think carefully about the contribution made by graduates. That was why we needed to commission a review that looked at such matters. The terms of reference of the Browne review could hardly have been agreed on had it not been anticipated that the outcome would address such subjects. That is precisely what Lord Browne did.
We have heard from a number of hon. Members about the problem of the disincentive effect of higher fees. We heard about that issue from the hon. Members for Sheffield Central (Paul Blomfield) and for Liverpool, Wavertree (Luciana Berger), and the hon. Member for Harrow West (Mr Thomas) mentioned it in his summing up. That stands in contrast to the simultaneous and accurate claims made by hon. Members that since fees were introduced, things have improved in terms of widening access. Rather than being a disincentive, there is little evidence to suggest that people have been put off by fees. As we heard, more people from less-advantaged backgrounds have been going to university since the introduction of fees.
Paul Farrelly: My hon. Friend the Member for Hackney North and Stoke Newington (Ms Abbott) and I were veterans of the bloody battles that were fought in the Labour party over a market in higher education. The Conservative party and the Liberal Democrats agreed with us. The key achievement all those years ago was to stop the variability, which would have led to people from poorer backgrounds choosing cheaper universities.
Paul Farrelly: This will be very brief, Mr Betts. The price paid for a degree sends a market signal to employers that the higher the price, the more a degree is worth. Therefore, more universities will charge higher fees simply because of the signals that that will send to employers. There will be many effects that have not been researched.
Mr Hayes: I rather suspect that that depends on the degree. There is much more evidence to suggest that degrees in applied sciences, for example, and some of the practical subjects, tend to increase employment potential, whereas some other degrees do not-we could share that discussion offline, Mr Betts, if we have not got time to share it now. I do not write off those other degrees. My goodness-I am a politics graduate and I ended up in this place. As a social scientist, I do not want to make a case against social sciences, and as someone interested in the arts and humanities, I am not going to make a case against those subjects. None the less, if the hon. Gentleman looks more closely at the evidence, he will find that the issue is more about the type of degree.
Much has been made in the debate about the issue of prior attainment. I want to emphasise and amplify the point that the key problem with widening access is prior attainment. If the number of applications were greater, the number of admissions would be greater too. There is not much evidence to suggest that the admissions system is skewed against people from less well-off backgrounds. Many studies have been done to try to establish that, but such a claim is not evidentially based. The issue is about the number of people who apply to universities from less well-off backgrounds. We have to get the school system right and put people on the starting block in the race for higher learning.
We must get advice and guidance right. All too often, people from disadvantaged backgrounds are not given the right kind of empirical advice about the opportunities available to them. When people are advised properly, equipped with the qualifications necessary for their applications and encouraged to apply to university, we see the widening of participation and the fair access that both I and the right hon. Member for Tottenham would like.
Sheila Gilmore: No one would disagree with the need to improve attainment, but I do not think that those issues are necessarily in conflict-I will ask the Minister for his view on that. Over the past few years, if people wanted to get into housing, those who could go to the bank of mum and dad did so. Are we going to see a position where those who have the bank of mum and dad, or perhaps an inheritance from mum and dad or grandparents, will in future be able to make choices about higher education that other people cannot make?
Mr Hayes: It is more the case that people who get advice and guidance derive the wherewithal that turns their aspirations into reality because of a familiar understanding of opportunity. Research suggests that people tend to get that wherewithal from social networks or familiar experience. That is why my children will benefit from advantages that I did not have because of my understanding of the options that are available for higher study. The issue is not only about money, although money is part of it and I shall come on to that in a few moments.
Mr Hayes: I will not. I am terribly sorry, but I want to make progress. A lot has been said about Aimhigher. I charged the right hon. Member for Tottenham with the claim that he cut the budget for Aimhigher-that was perhaps a little unfair given that he will not have access to the same figures as when he was a Minister or a Front Bencher. However, I would like to give him the facts and I know he will also want them on the record. In 2007, the budget for Aimhigher was £102 million; by 2009 it had dropped to £81 million, and by time the right hon. Gentleman left office, it had fallen to £78 million. The faith that he and others expressed in Aimhigher was not supported by a financial commitment in the budget over which he presided.
The quality of achievement at state schools and the prior attainment of students is critical. The right hon. Gentleman makes an important point about the success of black students in getting into Russell group universities. That is a matter of profound concern and something that the Government should look at, particularly in light of the recent research that he and I discussed yesterday. I want to see what we can do to address that issue.
I also wish to speak a little about the point made about arts subjects. It is important to understand that we will continue to support the arts. It was suggested that arts subjects will no longer receive funding, but we will continue to focus the Government subsidy for teaching on that.
I have a couple of other points. First, the increase in support for part-time learning will do more to widen participation than any other single measure. As the right hon. Gentleman and others know, disadvantaged people are disproportionately represented among part-time learners. Raising the income threshold to £21,000 will have a profound effect-
Mr Mark Spencer (Sherwood) (Con): I am grateful to have been allowed this time to debate this issue, which is crucial to my constituency. The A614 is a rural single carriageway road that runs down the spine of Sherwood and is a key stage of many commutes in my constituency, providing essential access to the city of Nottingham. The A614 is, however, an historically dangerous stretch of road. It is the site of frequent incidents. In the past 18 months alone, two horrendous fatal accidents have claimed eight lives.
The people of Sherwood have been lobbying hard for improvements to the road, and I am today calling both for better funding for the local county council to make the necessary improvements and for a look at the wider lessons that can be learned from roads such as the A614.
"On an average day, nine people die on Britain's roads; six of them are killed on rural roads."
"Two-thirds of fatal and serious casualties on rural roads happen on 60 or 70 mph speed limit...roads."
It is also relevant to note that half the casualties in rural Great Britain are injured on dry roads in dry weather and that more are injured in daylight than in the dark. Those figures show that rural road safety as a whole needs to be considered when the House can commit more time to the subject than this debate allows, but the A614 is of particular relevance to Sherwood and its people.
I would like to acknowledge for the record that the county council has done excellent work in bringing down the numbers of accidents and particularly fatalities on the A614, but there are a number of areas in which I believe that the Government could support the county to make further improvements in the A614's safety record. I shall specify where improvements are necessary.
The A614 attracts the vast majority of its accidents in dry, light conditions, with no other hazards detailed on the accident reports. That begs the question, why is the A614 a consistent source of road incidents? There are several hot spots along the route that warrant improvement. Between 2004 and 2009, there were 11 accidents at the junction with the B6030, locally known as the Rose Cottage junction. The installation of traffic signals at the junction was investigated but not proceeded with, as the necessary funding was not available. Any resident of the village of Edwinstowe who tries to gain access on to that busy road will know the dangers of pulling out. When that is combined with the Center Parcs traffic coming in and out of the same junction, there are enormous delays, which lead people to take risks that they should not. An improved road junction at that site would really assist and lower the number of accidents.
Mickledale lane is a little further south. There have been three accidents there since 2004. Residents of Bilsthorpe, a local village, use the junction to gain access to this busy road. It is an horrendous pull-out. Anyone who has used the junction will know the dangers of pulling out into high-speed traffic.
A little further north is Ollerton roundabout-a source of much congestion and debate in the past. The county council has worked long and hard to try to improve that roundabout. There have been 16 accidents along that stretch of road since 2004, and 13 of the 16 involved vehicles turning into or out of a junction. One occurred at a private driveway near the railway bridge, four occurred on Station road-a rat run for people avoiding the congestion at Ollerton roundabout-and eight were associated with the two service stations south of Ollerton.
Although safety is the clear priority at all times, there are major issues with traffic flow, resulting in major tailbacks. Heavy and slow traffic has its own safety consequence, with several bumps occurring in slow-moving traffic. I must, however, give credit where it is due. After years of inaction, the Conservative county council has finally taken action with a small improvement scheme and is delivering that as we speak. However, I expect that the hold-ups will remain. The issue needs solving.
Gravelly Hollow is the junction by which the residents of Calverton gain access not only to the A614, but to the M1 motorway. Due to lack of funds some time ago, the county council decided to close that road junction completely. Funding was not available to improve it, and it had such an horrendous safety record that it was closed to the residents of Calverton. They are now pushed south to an equally dangerous junction at Ramsdale and turn at an acute angle northbound, taking a great risk.
Inevitably, money must raise its ugly head, but I think that investment from Government through the LTP3-local transport plan-settlement would offer a number of clear benefits. Sherwood has had no firm commitments to transport infrastructure improvements, but an increase in the LTP3 settlement would allow the county council to make the vital improvements that Sherwood needs to improve road safety and traffic flows. As improvements have been made to the road over a number of years, accidents have reduced slightly. If the county can commit to improving the remaining sites, the numbers will inevitably fall further. Investment is a prime means by which the Government can support the localism agenda. With relatively modest investment, the Government could support local improvements and ensure that the county can invest in the right places to save lives.
However, although certain physical improvements to the A614 would benefit Sherwood enormously, it cannot be overlooked that the road attracts the vast majority of its accidents in light, dry conditions in which no other hazards seem relevant. I am haunted by the statistic I read that the biggest killer of teenage girls is their male drivers; they are killed as passengers in those cars.
The accident investigation department at Nottinghamshire county council has looked at the accidents caused on one of the worst stretches of the A614-Lockwell Hill roundabout to Ollerton roundabout. Almost 20% of the accidents there were caused by drivers aged 16 to 25, despite that age group constituting only 12% of licence holders. Indeed, more than half the single vehicle accidents on that stretch of road involved under-25s.
It is not my intention to penalise young drivers, but it is an unavoidable truth that at some level our driver education system is failing and that we are still producing, though clearly by no means exclusively, drivers who pose a risk to themselves, their passengers and other motorists. In recent years, there have been a number of
changes in the driving test procedure, including the six penalty point limit on all new drivers, but there are other measures that, rather than punishing new drivers, could support better learning and long-term motoring skills.
"Learner drivers should be encouraged to gain as much practice as possible before taking their tests."
"Newly qualified drivers need to gain more experience as learners, particularly to build better hazard perception."
I share its belief that the best way to facilitate that is to support the addition of learners to the policies of qualified drivers-it is usually a parent-to allow them to learn over a longer and more extensive period of time than is allowed by expensive weekly driving lessons. As things stand, such an arrangement is often prohibitively expensive. The cost of adding a 17-year-old learner driver to the policy for a 1.1-litre Renault Clio ranges from the fairly high figure of £2,500 a year to an incredible £20,500. That was the most expensive quote that we could find on the internet. That is a major financial commitment for any family.
I and various motoring organisations believe that such a premium does not reflect proportionately the risk posed by a supervised learner. Insurance companies must distinguish between the 17-year-old who has just passed his test and is inclined to show off to his friends and the one whose mum is sitting in the passenger seat with a firm eye on the speedometer. The AA has said:
"Government should work with the insurance industry to review the premiums charged to parents wishing to include their learner driver children on their policies so that premiums follow actuarial risk."
"it was dark, however the visibility was very good, aided by street lighting...All the road markings were in good condition and clearly visible",
The reality is that, while we must ensure that all road safety tools are physically in place-bright lines, proper lighting, adequate junctions-such measures will never completely exclude the occurrence of accidents. Drivers who lack the experience to use the roads will always cause problems.
Furthermore, the key point is that young drivers are not trained on the roads and the conditions most challenging to inexperienced drivers-rural single carriageways, often travelled at night or in the wet. I would like to discuss the idea that such roads and conditions should appear in the driving test or in a reformed approach to driver training that encourages young drivers to get as much experience on as wide a range of roads as possible. Such young drivers have a lower risk of crash involvement in the key early months, as found in Sweden. Advanced driver training has also been suggested by the IAM, as a key component of any approach to reducing crashes-positive encouragement and awareness raising of how extra training can save the driver's life on a rural road.
For those concerned about learners in an urban context, for whom the countryside is half a lesson away, the reality is that inner-London drivers are less likely to
come a cropper on rural roads than are Northampton or Nottingham drivers, and yet it is perfectly possible to get out of those towns for a rural experience. The test could reflect local driving environments and casualty reasons, rather than being a national exam in which instructors all focus on low-speed urban driving, such as reversing around a corner, to pass the test. It is worth noting that hardly any casualties result from anything currently tested by the DSA. While that could be a testament to the success of the test, that is unlikely.
Various post-training schemes exist, including the IAM's of course, but young drivers have little incentive to partake. I am not proposing graduated licensing, but anything that the Government can do to introduce and encourage continuous development will deliver reduced casualties.
Pass Plus was a start for the UK, but the Austrian system whereby new drivers have to undergo three training events in the first year seems more likely to deliver results-it also appears to go down well with the drivers. The training is not seen as an onerous task but as a normal part of building someone's skill as a driver-it is certainly worth studying for lessons that we could learn.
In conclusion, I ask the Minister again to look at the A614 and its accident record, but also at the role that young people play when driving on our roads. Anything we can do to encourage those young people to keep themselves, and ourselves, safe would be greatly appreciated. Thank you for the time.
The Parliamentary Under-Secretary of State for Transport (Mike Penning): I congratulate my hon. Friend the Member for Sherwood (Mr Spencer) on his tenacity in standing up for his constituents, in particular those concerned with safety on the A614, and, more openly, for the whole issue of driving with safety on our roads. We have answered my hon. Friend's parliamentary questions and he has already met the Under-Secretary of State for Transport, my hon. Friend the Member for Lewes (Norman Baker), the Minister responsible for local roads. I am answering the debate today purely because of the road safety remit of my ministerial role.
I would like to touch on two aspects of the debate this afternoon: the problems of the A614, and what can be done with the limited funds available. I also pay tribute to the work of the local authority, the police and the other agencies in Nottinghamshire, which have done remarkably well on this stretch of road, in particular along the length of the road, taking 102 deaths in 2005 down to 24 in the first half of this year-24 too many, I fully accept. However, things are difficult in rural areas and, even when conditions are dry, bright and safe, and things are done with the road markings, as the coroner indicated, deaths still, sadly, occur.
In my previous incarnation as a rescue tender driver in the fire and rescue service in Essex, I attended all too many road traffic accidents. They involved young drivers in particular-something I shall come on to again in a moment-and people could suffer serious injuries, on roads that gave no explanation as to why the accident had happened.
The other day I experienced a horrendous accident-on the M62, I believe-in which someone was changing the wheel on their car. For no reason at all, a lorry swerved from the inside lane and completely wiped them out-very sadly, they were both killed. There was no reason. The driver was not drunk or under the influence of drugs and was certainly not exceeding his tacho hours limit, but for some unknown reason we sometimes have such accidents.
We can do a lot with education, in particular on this stretch of the road, perhaps, and not only is work being done as we speak on the Ollerton roundabout, but the local authority is now looking at whether average-speed cameras could be funded along that stretch of the road. I want to reiterate some guidance to do with speed cameras which I will be sending to all local authorities in the UK that come under my remit-there is, of course, a difference between speed cameras and average-speed cameras.
One of the things that the new Government have done in the past six months, with our restricted funding, is to say to the local authorities that, instead of hypothecating money specifically for speed cameras, we will let them make local decisions on local areas. They do not have to use some of the money specifically for speed cameras-they can if they wish-but they can spread the money across myriad road safety features. The old system meant that some of the money had to be spent on speed cameras no matter what, which skewed a lot of decisions.
What will happen now is that, if speed cameras are wanted, the local authorities can use the funding in that way, but we are saying, "Please, look at whether speed cameras are the only option, whether there are better options and whether, in particular places-this road might well be one-average-speed cameras could be used," if the authorities wish to reduce the speed limit from 60 to 50 mph. They would have to apply to me, as the Minister, to reduce the limit to 50, but if they did I would be minded to do so. However, if we do that, the indication must be that it is enforceable. With the limited resources that the police have-the police are very involved with accidents along the road, there is no point putting in a speed limit that we cannot enforce one way or another.
My theory is that if we had single speed cameras just staggered along a road, on a long stretch of undulating road such as this, if we were not careful, we would have people braking for the speed camera-everyone knows where they are-then speeding up and being away again. That adds to the problem. However, in certain circumstances, in particular on motorways, interestingly enough, but also on dual carriageways, we know that average-speed cameras have worked very well. Putting in average-speed cameras would be a new approach for such a road. There is an expense, of course, but the money is available in the existing budgets for local authorities, if they wish to use it in that way. It is very much their choice.
The Under-Secretary of State for Transport, my hon. Friend the Member for Lewes, when he met my hon. Friend the Member for Sherwood, indicated that it is not for central Government to tell local authorities the best way to address the situation. We can help; we can give guidance, but it is very much their decision.
Mr Spencer: That is the point that I am making. If we can find a facility to give Nottinghamshire county council an improved LTP3 settlement, it can find a means by which to solve its local problems at a local level.
While I am on my feet, I am grateful that the Minister has taken the time to come here today, but could he find time in his busy diary to come and have a look at the road? I would be delighted to show him the issues and for him to meet some of the residents who live near those junctions, so that he can experience the dangers that they face.
Mike Penning: I would be delighted to respond to that kind invitation. I love that part of the world-I know the Center Parcs to which he referred earlier very well indeed, from when my children were much younger. If it is not me, it will certainly be the Under-Secretary of State for Transport, my hon. Friend the Member for Lewes, depending on our programme.
When we come to funding, things are difficult-improved funding means more funding, and my county would like that, the same as Nottinghamshire, but we have to look directly at what can be given and what can be spent. That is where the pressure of hon. Members and their councillors can ensure that the money is spent in the right, most feasible way.
I shall spend a little time on the serious subject of young drivers, particularly boys between the ages of 17 and 25-and in some parts of the country up to the age of 30. I was heavily involved in this matter not only as a Back-Bench Member when I first came to the House but in my previous occupation in Essex fire and rescue service.
It is the most horrendous thing for policemen, ambulance paramedics or firemen to see young lives being wiped out. There are times when there seems to be no logic to such incidents. I have been to many incidents that, to our knowledge, did not involve drink or drugs, and where the road conditions were fine and the vehicles were of a low horsepower.
The vehicle of choice for the young and particularly for boys is the Saxo or the Corsa. Such cars are not built for speed, although attempts may be made to change the baffles in the exhaust pipe to make it sound like a grand prix racing car. Nevertheless, those cars can speed quite well and with the wrong road conditions speed is one of the biggest problems.
We have been in government for only a short time but we are giving careful consideration to the driving test-I shall return to that subject in a moment-and to projects to educate young people so that they understand that they are not immortal. What fascinates me is that many young people who get into such difficulties when driving are intelligent.
I am sure that his family will not mind my mentioning this, because it adds to the debate, but a wonderful young man came to do some work experience for me when I was newly elected to the House in 2005. He had worked hard to become the head boy at the local comprehensive school and was going to one of the top universities, and I hope that his work experience with me added to his curriculum. After taking a morning exam, he drove down one of the country roads in my constituency. The end result was that he put the car into an oak tree. That happened for no apparent reason-apart
from adrenalin, excitement, the thrill of driving and, not least perhaps, peer pressure from some of the others in the car. The old-fashioned phrase for that is showing off, but it puts other people's lives at risk as well as that of the driver.
I passionately believe that we can work with some of the measures introduced by the previous Government, including the six points rule, which is good. However, we must be careful. My hon. Friend touched on insurance, and I note that the fine for not insuring a young person to drive is vastly less than paying the insurance. I assure my hon. Friend that we are working with the Ministry of Justice to ensure that fines act as a deterrent rather than an incentive to remain uninsured.
We are working closely with the insurance companies to make it mandatory for vehicles to be insured. There are millions of vehicles on our roads that are not insured. People say, "Well, it's sitting outside on the road outside my house. I'm not using it. It's taxed but doesn't need to be insured." It has to be insured, because if someone decides to use it even for an emergency they will not be covered. We are moving fast on that.
I am very keen to have a national framework for educating young drivers on the dangers of driving. When I was on the Back Benches, I went to see a scheme in Cheshire called Drive to Survive. It is an excellent scheme. If my hon. Friend wants, I shall drop him a line telling him about other schemes around the country. The schemes are a bit of shock but have a little compassion; they shock young people, and not only those who have been breaking the law by showing them what they could have done to themselves and to those whom they love dearly. At the end of most courses, someone is there to tell how they lost a loved one, and to talk about sons or daughters who had been maimed or killed at the same age. I pay tribute to Mr Beatty in Scotland and Mr Kerr in England; both are to advise me from personal experience how that campaign works. We may have wonderful, big organisations, but I want people from the grass roots to work with me on how to skill up our young people.
I turn to the changes to the test that were touched on earlier. They are being implemented as we speak. People, and not only young people-this is so true-are trained to pass a test and not to drive. One thing that I have asked during the six months during which I have had the honour of being a Minister is the question, "Is the test fit for purpose?" Are we training people to drive in a fit and safe way so that they can enjoy the road?
That applies not only to cars and HGVs but particularly to motorbikes. Even though we have some of the safest roads in the world, our motorbike death rate is going in the wrong direction. Although we had only a 2% increase last year in motorcycle use, the motorbike death rate has increased by 4%, which is going in exactly the opposite direction of all other motor and cycling deaths. I have therefore announced a review, which is ongoing, of the motorcycle test. As my hon. Friend is aware, our undulating roads are a big problem for motorcyclists as well as car drivers.
The previous Government introduced the two-part test. Part of it was to be taken off-road. That sounds eminently sensible-ish-until one realises that the only way to get to the test centre is for those learner drivers to drive on the road. It can take anything up to two or two and a half hours to reach the test centre. Then comes the off-road test, and we have had some nasty
accidents there. Those who fail are sent off home to drive on the roads again. It seems to me that if we are training people to drive on the highways and byways of this country, testing them on the roads is the best way forward.
Other things concern me about the car driving test. My hon. Friend insinuated-it was right and proper for him to do so-that those teaching people to pass the test are doing so in order to get paid and move on to the next test. As a result, they have learned the test routes. I know that my young daughter will not mind me saying this-I know that because I am always doing it, and sometimes in front of her. She passed her test first time. We live in Hemel Hempstead in Hertfordshire, and the test centre is at St Albans. She took all her driving lessons in St Albans. On the day of her test the instructor said, "Turn left; then turn right," and she smiled. She knew the route like the back of her hand. She will admit that that is not the best way to test people, and we are desperate to change that. I have therefore banned the routes being published. New routes will be worked in the test centre areas so that there will be no knowledge of the route; instead, there will be knowledge of how to drive.
Another change has been introduced. Once people have passed the test they are likely to drive on their own. My daughter came home after her test and parked the car. At about half-past 5 she went out of the front door, put the keys in the ignition and sat there for half an hour. Like a good parent, I was staring out of the window so that she could not see me, but eventually I went out to her and said, "What's the matter, mate?" She was crying. She was petrified. She had never driven a car on her own, yet the law-and I as the Minister-had given her a piece of paper that said, "Off you go. You're as good as everyone else on the road." That is not the case. We need to work with the Institute of Advanced
Motorists, the AA and other organisations on post-test training, and to ensure that the test itself is fit for purpose.
I thank my hon. Friend again for introducing a subject that I would like to debate more often. People take an interest in their local community and its roads, and are concerned about the deaths and accidents that take place there. It is something that every Back Bencher should do. It is a great honour to stand here as a Minister and listen to someone who understands his constituency so well, who understands its topography and layout and who knows where the problems are.
Of course it is my hon. Friend's job to ask for more money, but with the limited funds that we have I must ensure that the money is spent on the right projects and that we do not pick on the same ideas each time but look outside the box. That is particularly so for rural roads, where white lining on the edge of the roads is so important. White lining has saved millions of lives-that is an overstatement, but it has certainly saved thousands of lives-since it was introduced in the 1960s. Some of those white lines are now wearing out, but white-lining technology has improved and we now have retro-reflective white lining that absorbs light and throws it straight back at the source rather than onwards. That sort of technology should be used, as it is very cheap. When we go to look at the roads in my hon. Friend's constituency-I do not know whether it will be me or my colleague-it will be interesting to see whether the white lining was improved at the same time as some of the other works that have been approved. On rural roads, it is very useful.
Finally, I turn to the cost of insurance. As a parent, I put both of my children on my policy, but they were not the main drivers. In many cases, however, children are the main driver, but are not listed as such. That is breaking the law, and it is not fair on the insurance industry.
Mr Mark Field (Cities of London and Westminster) (Con): Amid the feverish analysis of the size, scope and impact of the Government's chosen spending cuts, a fresh debate is emerging about a desirable blueprint for Britain's economic future. Such is the near-universal distaste reserved for financial services, that a determination no longer to rely on their economic contribution seems one of the few certainties in the debate. As a result, rebalancing is the new economic watchword. For sure, the financial crisis has painfully highlighted the UK's dependence on the City and our collective exposure to the risks taken by the global banking fraternity. My worry, however, is that the phrase is being used-even, I fear, by some Conservative coalition Ministers-for playing to the gallery as part of the general banker-bashing sentiment.
It is superficially convincing to promote attempts to stimulate growth more evenly through the regions, and stepping up our game in the innovation and incubation of companies in the high value-added areas of high- tech manufacturing, engineering, pharmaceuticals and biotechnology. I acknowledge my own part in that: I have played a role in ensuring the incubation of those small companies in the City of London. The Corporation of London is to be complimented for finding premises in double-quick time for such companies.
I wholly support the initiatives of the Government, in particular funding the £200 million science park in St Pancras. That is both welcome and highly commendable. However, we should be wary of how the aim of rebalancing is pursued. Unwisely, most of the focus so far has been on how we might shrink the City to reduce its relative importance, rather than providing a positive economic climate in which all other sectors can flourish.
Before we pursue what I believe would be such a dangerous policy any further, I wish to make the case why financial services must remain a central plank in Britain's bid for continuing relevance in a fast-changing global economy. A strong financial services sector is overwhelmingly beneficial to our nation. It will provide the critical mass to draw business to this country. It offers diversified sources of capital to small business. It makes huge contributions to the Treasury's coffers, in terms of tax and employment, and it supports a wide range of complementary industries, from law to leisure. It is also one of the very few areas where we might envisage significant growth in the decades to come.
The tens of millions of people who join the ranks of the global middle class annually from India and China have a greater cultural propensity to save, and they will seek expertise in investing their savings for the future. It seems evident to me that the entire drive for the west is directed towards capturing the growth of the developing markets. It is an argument that has been put to me in recent weeks by German industrialists. Here in the UK, we have already secured such an important competitive advantage. It is in the financial services sphere. Why throw that advantage away? Aside from that, there are several reasons for us to believe that the task of rebalancing might well prove trickier than we may wish.
It is time that we changed our attitude towards the City, from one of punishment, which has taken place in the past two or three years in the aftermath of the
financial crisis, to hard-headed realism. How we treat our nation's most valuable economic resource in the years ahead will be a litmus test for international business in determining how serious Britain is in its wish to be dynamic and have an open economy that embraces global talent, promotes aspiration and welcomes business.
I hope that the Minister will consider this: the UK should perhaps, for example, look at the way that the Isle of Man has quite successfully rebalanced its economy through promoting new growth areas but, crucially, in a way that has not undermined or diminished the importance of its own very important financial services sector. The Isle of Man has embarked upon a diversification drive that has built a thriving hub for high-tech manufacturing, including aerospace, which of course has strong links to the north-west of England economy. It has created a propitious environment for world-class e-gaming companies; it has established world-class high-quality aircraft and ship registers and created a diverse and thriving space commerce sector, with many of the world's leading operators established on the island. Crucially, it has also continued to support-very vocally-and promote its successful financial sector, which is wholly compatible with, and supports, other sectors of its diversified economy. In essence, the Isle of Man Government have not picked winners at the expense of penalising other sectors, but have shown that they can build a balanced and diversified economy, while maintaining a strong and thriving financial services sector.
While the banking crisis was in full swing in 2008, it seemed that almost overnight the financial sector had become a useful scapegoat for all our economic ills. Many of the criticisms levelled at the banking fraternity have been legitimate, in part at least. The failure in that sector of the economy exposed the domestic taxpayer to such mind-boggling sums that it was, in many ways, scandalous, and seemed to confirm suspicions that the wealth created by the City was simply a mirage. Irresponsible risks were taken. Debt instruments certainly became too complex. Money was lent to those who could ill afford the repayments. Incidentally, I fear that one of the difficulties is when policy makers seek out so-called socially useful banking-the genesis of the sub-prime problem that occurred initially in the US and in the UK subsequently from the mid-1990s. Regulators-if not regulations-proved ill equipped at times for their job.
The City's dominance in the domestic economy in the past two decades had some wide-ranging social consequences. For a large proportion of British people working outside the gilded corridors of the financial services industry, the growth of the City's power increased the cost of living and reduced, at times, to just a wistful dream any prospect they may have had of getting on the housing ladder, except via colossal personal debt. It could also be argued that the City precipitated a brain drain from other professions and industries, with so many of our brightest and best graduates over the past quarter of a century tempted away by unrivalled starting salaries in the banking sphere.
In some senses, the City's success has merely masked-until its failure uncovered-some more fundamental problems that had developed in the western economies. Governments had been spending far too much money. As individuals, we had also racked up far too much debt. We found it cheaper and easier to buy cheap goods from abroad, import migrant workers and pay
off our own citizens with welfare, rather than confront the difficulties of either finding sufficient employment for blue-collar workers who were losing ground to eastern competition, or tackling the dearth of skills among the indigenous population. I am glad to say that with some of our welfare policies, the Government are definitely going down the right route to try to counter some of those issues.
Neil Carmichael (Stroud) (Con): I do not think that it is inconsistent to have a thriving financial sector and other thriving sectors, including small and medium-sized businesses. Thriving businesses will deal with the problems to which you just alluded, in terms of migration, skills training and so on. A financial sector would welcome further opportunities to invest in its own territory and internationally. The two things go hand in hand.
Mr Field: I would not disagree with my hon. Friend in any way. It is the rhetoric, I think, of some policy makers, both in the present, but particularly in the past, that could have applied something of a barrier to that very ideal goal.
Rather than openly confronting some of those issues post-crisis, the implicit and perhaps all too easy assumption has been that, had the banking sector not collapsed through the profligacy and greed of some its employees and key players, we might have continued as we had before. There is also an assumption that to solve our current problems we need simply to return to what used to be the strength of a couple of generations ago-rebalancing the economy towards making things. The intensity of the rhetoric that has built up around the role of banks in the economy is such that politicians and even bankers themselves have often been unwilling to stand up for the sector.
Alas, that rhetoric has not subsided as time has passed. In fact, it is likely to intensify in the months ahead as the cuts bite and questions are asked about how and why Government money can be found to prop up the banks and pay out what I suspect will be another bumper round of bonuses this year while public sector jobs and services, as well as benefits, face the axe.
In response, Governments approach the financial services sector as something to be outwardly chastened, while they privately recognise its importance to the wider economy and rely on the continued income and jobs that it provides. In public, banks are told to lend to inherently risky start-ups-small businesses and first-time buyers. They are berated for trying to take the collateral that small business owners will often have tied up in their own property. At the same time, however, banks are told-indeed, they are required-to meet stringent new capital requirements. The new £2 billion bank levy is announced with a fanfare and the 50% income tax rate remains in place, yet the Treasury quietly acknowledges that it cannot put further pressure on balance sheets while storms are still gathering in the eurozone, which I think will be one of the big stories in the months ahead.
Anne Marie Morris (Newton Abbot) (Con):
This is a very interesting and timely debate about financial services. I declare an interest as a former City lawyer. I note with
interest that you say financial services include lawyers, accountants and so on. Given that your concern is about publicity, do you agree that sometimes it is what some of the professional services have done themselves that has given rise to those problems? Furthermore, do you agree that, although it is not so much a City phenomenon as one related to smaller firms, the "no win, no fee" approach that law firms have adopted-as I say, it is usually adopted by smaller firms-has not really helped the cause of financial services?
Mr Field: As someone who is also from the "former lawyer" fraternity-I worked for a City law firm and I know that my hon. Friend worked for another City law firm over the years-I agree. There are elements of the ethics of business that concern me; I have never been a wide-eyed supporter of everything that has been done in the context of the City. Equally, it is important to recognise the City's importance if this country is to get off its knees.
We witness, to an extent, the public baying for more blood after the banks have posted healthy profits, due, of course, to a combination of low interest rates, a lack of competition and a cut in corporation tax, yet the public are bemused when Government restrictions lead to increased bank charges for consumers.
David Mowat (Warrington South) (Con): The right answer to the question of how to rebalance the economy is not to shrink the financial services sector. However, the fact remains that we have the largest financial services sector in relation to the rest of the economy of any advanced economy; the financial services sector accounts for something like 27% of our economy. The interesting policy question is whether we want that percentage to increase as a percentage of the whole or whether we want everything in the economy to increase together.
I think that you also raised a point about the public relations problems that banks are suffering at the moment. Of course, banks have made a huge contribution to our economy, but during the last two years they have sucked in something like £150 billion-worth of Government money and they are not really answering the question about how they should restructure themselves. That question has been left to the Bank of England and others-whether through the Glass-Steagall Act, or whatever-to answer. Until the banks do that themselves, they will continue to be criticised over bonuses.
Mr Clive Betts (in the Chair): Order. I want to say something to the three hon. Members who have made interventions. It is fine that you made interventions, but on each occasion you have used the word "you" as part of your comments. This is just a small reminder-I did not want to stop you in mid-flow.
I think that there is a lot in what my hon. Friend just said. As he rightly pointed out, in many ways a huge amount of money has been pumped into the financial services sector, yet there seems to be very little idea of what the global landscape of banking and finance will look like in the future.
The Government have a part to play in the process. We are, after all, majority stakeholders in two of the big four banks-the Lloyds Banking Group and the Royal Bank of Scotland-and we need to utilise that muscle to try to make a case for how the banking world should look in the future.
To some extent, there has been a somewhat confused strategy that has been of no benefit to the Government, the banks or the public. In essence, the risk is that we are now penalising our single most competitive economic sector, while somehow fooling ourselves that a miraculous rebalancing of the economy can occur by default. In truth, the rebalancing will only be threatened by diminution of the financial services sector. Let us not forget why, on the whole, a thriving City makes for a successful Britain.
Since time immemorial, the City of London has enjoyed an international reputation as a bastion of commercial certainty and reliability. It has promoted financial innovation, it has provided an international market for global merchants and in commercial affairs it has rightly been seen as a watchword for justice, neutrality and fairness. Of course, it also has a number of innate advantages that ensure that companies' loyalty to London runs deeper than just appreciation of its tax regime. Those advantages include, of course, a time zone that lies between those of north America and Asia, which makes the City an excellent base for international company headquarters, and the lifestyle assets of a culture, an excellent educational offering and a population so diverse that all can feel at home.
As a result, London has emerged as the global financial centre. Indeed, so successful has the British financial services sector been that it now contributes more than 10% of Britain's economic output. We should also remember that although the sector is focused in central London, a significant amount of its activity takes place in a range of regional centres in the UK.
Of course, it is not only banks that benefit from our financial sector but complementary industries such as law, insurance, retail and entertainment, as my hon. Friend the Member for Newton Abbot (Anne Marie Morris) pointed out. Our top-flight universities, the arts and the charitable sector also gain, the latter two from cultural funds or corporate responsibility grants that are, of course, often provided by the City's top banks and bankers. The presence of our large financial sector gives London the critical mass to attract the best professionals from across the globe.
Banking bail-outs notwithstanding, the financial services sector contributes massively to the Treasury's coffers in tax revenues, with an estimated contribution of £61 billion in 2008-09. Of course, it also contributes massively in terms of employment, with more than 1 million people employed directly in financial services across the UK.
The financial services sector also plays a critical role in supporting business, not only in attracting huge inward flows of foreign capital to help to fund our infrastructure but in propping up our companies and providing British companies with access to a diversified source of capital, to enable them to invest and expand.
Even if opposition to City dominance is practical rather than simply ideological, I suspect that it is unlikely any time soon that any other economic sector will be a world-beater in the way that the financial services sector is. I am afraid that the industries in which we are hoping
to diversify are ones where competition will be very stiff. For example, the Chinese are as keen to develop their manufacturing capacity when it comes to green technology as we are.
Moreover, we should not assume that people in developing countries will start to spend their savings as the western world weans itself off debt and consumption. Britain is just one of the nations that have been pinning some of their hopes on export-led growth. However, despite a 20% depreciation in the value of the pound, the UK's trade deficit has continued to widen. Meanwhile, with uncertainty infecting the financial system, British corporations have shown little appetite for expansion any time soon, as they accumulate cash cushions instead of investing.
I am not convinced that London's population is sufficiently equipped to deal with significant growth in new industries. Few people outside the capital may realise that, at 9%, London has one of the highest levels of regional unemployment in the UK. With Britain wedded to a model of high welfare and unemployment benefits, those living in the capital need to earn considerably more than the minimum wage to make it worth their while to work. As a corollary, it has of course been far easier in recent years to encourage hard-working migrants to fill the jobs that Londoners have been unwilling or unable to take up themselves. In the capital, a large proportion of the indigenous working-age population are without the skills or inclination to fill jobs of any kind.
Put simply, our financial services sector is a huge asset. With vast numbers of employees in the developing world entering the middle classes each year and earnestly looking for ways to save and invest, it is also one of the few sectors in which we can confidently predict significant growth in the years ahead. A nation of only 60 million people should be grateful to have one absolute world-beating industry that is, in normal times, incredibly lucrative and that feeds a wide range of other sectors.
By all means, we should focus on trying to help build up other sectors if we can, and on reducing the exposure of taxpayers to risk. However, economic diversification will not be an easy option and it should not lead to the neglect or diminution of the City. Indeed, if it leads to that, the task of diversification will become even harder. Global businesses and their highly skilled work forces do not necessarily have any innate loyalty to the UK. They will go where the legal, fiscal, regulatory, physical and social environment works best for them. I fear that the continued rhetoric of hostility towards banks and regulatory uncertainty only serve to deter such businesses. Why stay and put up with ever more grief?
In that respect, more pressing than diversification is the need to make the UK a place of possibilities, enterprise and entrepreneurship. It is not for this or any Government to pick winners and losers, or indeed to prop up losers and penalise winners. The continuing attacks on our financial services sector no longer serve any purpose. I understand the need, just before the
election, to play a bit to the gallery-one had to recognise public sentiment-but we are now four and a half years from the next general election. I hope that the Government will have the confidence to make the case for our financial services industry. As long as we get the regulation right, we should not be fearful of confidently articulating the terrific benefits of a robust and expanding financial sector. Let us draw a line under this period of uncertainty and hostility while we still have that fantastic springboard to ensuring the UK's great relevance in a fast-changing global economy.
The Financial Secretary to the Treasury (Mr Mark Hoban): I congratulate my hon. Friend the Member for Cities of London and Westminster (Mr Field) on securing this debate. He made some important points that I will address. I think that we all recognise that our financial and professional services industry is world-class and that the UK can rightly be proud of it. It affects every constituency in the country. For example, my constituency has more than 2,000 people who work in financial services and related professions-1,600 of them are in financial services-and Fareham is not the centre of the global financial sector. As my hon. Friend mentioned, the sector contributes to employment in regional centres. Belfast, Birmingham and Bournemouth all host processing centres that support the work of international financial businesses based in London and headquartered overseas.
For centuries, the UK has been at the heart of international finance. Our openness is an asset to our economy that we are keen to maintain. The recent global financial centres index once again ranked London as the most competitive financial capital in the world. We should seek to preserve and enhance that competitiveness, but it is also important that we do not lose sight of the other areas of our economy that make the UK an excellent place to do business.
It is right that we should support investment in areas of our country where it has been absent during the past decade. That is why, as part of the spending review, my right hon. Friend the Chancellor introduced the £1.4 billion regional growth fund to tackle the gap that opened during the last Government between the south-east and the rest of the country. The money is designed to lever in long-term investment in the capacity of our transport system, science and green energy across all parts of the UK.
I share the sentiment expressed in an intervention by my hon. Friend the Member for Stroud (Neil Carmichael). Many people, including me, have called for a rebalancing of the economy, but we will not achieve that by cutting down the tallest flowers; we need to make others grow taller and faster. I believe that we can have a more diverse economy and be home to the world's leading financial centre. Indeed, the fact that the UK is home to a global financial centre can help us develop that more diverse economy.
Going back to the roots of the City and its success, the City flourished because it supported trade through insurance of trade finance. It found capital to invest in new enterprise and developed new and innovative ideas to provide security and certainty for businesses and
households. It is an important part of the process of restoring confidence in financial services for the City to reconnect with commerce. We need banks to lend to businesses if they are to take advantage of new investment and trading opportunities, but it is not only banks that need to do so. That is an important priority for this Government.
We welcome the work done by the British Bankers Association on that issue, involving commitments to improved data, greater transparency and an army of business mentors to get businesses ready for finance. However, we also need to broaden the sources of finance available beyond banks. We need sources of new equity. Banks will be contributing to a £1.5 billion equity fund to support growth, but we know that there are other sources of capital from equity, such as business angels. Insurers have raised funds to invest in debt for businesses. We need to lever the skills, enterprise and success of London's global financial centre to help businesses grow.
My hon. Friend the Member for Cities of London and Westminster referred to the opportunities emerging in the far east and South America. Again, the City has an important role to play, not only by exporting its own services to emerging and growing economies but by supporting other businesses in their attempt to exploit those markets.
However, support for the financial sector cannot be uncritical. As my hon. Friend recognised, there were flaws in City practices in the run-up to the financial crisis, as well as a failure of the regulatory architecture. We need to resolve those issues if we are to provide a stable foundation for the financial services sector to grow. That is why the reforms that we have set out since the formation of the coalition Government in May are rooted in economic and financial stability, not the size of the financial services sector. That is an important distinction to draw. We want a stronger, more stable structure. That will require a reform of regulation, but it is not about the size of the sector.
We have been clear in the reforms that we have introduced that we want more effective supervision and a new structure to tackle emerging threats to financial stability. That is why we are setting up a Financial Policy Committee as part of the Bank of England to consider emerging threats to our financial stability and determine what response is needed to enhance the stability and resilience of the UK financial sector.
It is an important debate, and there is no clear consensus on what structure the banking sector in the UK should have. That is why we decided to set up the Independent Commission on Banking, under the chairmanship of Sir John Vickers, to consider structure as well as competition in financial services. Over the course of the financial crisis, we have seen a significant concentration of financial services and the banking sector-there are fewer banks from overseas operating in the small and medium-sized enterprises sector, and Lloyds has taken control of HBOS-and we want the independent commission to consider that and decide whether structural changes are needed to improve the
resilience and strength of the banking sector, and whether we can introduce measures to improve the competitive landscape and provide greater choice for businesses and consumers looking for financial services products, whether they are loans, current accounts, business accounts or other products. We need to consider the structure carefully, which is why we set up the Independent Commission on Banking.
To return to the point about regulation, we recognise that there were flaws in the structure of regulation; that is one reason why we set up the Financial Policy Committee. We also want to examine how the Financial Services Authority operated under its dual mandate to consider prudential supervision and consumer protection. We decided to create two new regulatory bodies to replace the FSA. One is the Prudential Regulation Authority, which will be a subsidiary of the Bank of England and will focus on the strength and resilience of banks and insurance companies particularly; the other is the Consumer Protection and Markets Authority, which will ensure that consumer markets in the UK work effectively to support the long-term aspirations of consumers as well as considering how wholesale markets in the UK work. That is an important aspect of the financial services sector; a great deal of work on that issue is going on at an international or regional level through the EU, and it is important that the UK takes a strong lead in ensuring that those markets are regulated effectively. If we get the regulation of the financial services sector right-if we
take steps to improve markets' transparency, resilience and strength-I believe that it will provide a firm foundation for the continued growth of the sector in the years to come.
On the diversity of the economy, we must recognise that there is more to our economy than financial services. We have strengths in other areas, partly as a consequence of language, time zone and other aspects of the UK. My hon. Friend the Member for Newton Abbot (Anne Marie Morris) referred to the legal system, which is a huge asset for businesses seeking to work here due to the legal certainty that comes from our world-class legal framework. We have a deep and highly skilled talent pool and strengths in pharmaceuticals, construction and business services.
We need all those sectors to grow, but their growth does not mean that we should diminish the size of the financial services sector. A strong financial services sector can help develop the diversity the UK economy needs to demonstrate that we have learned the lessons from the financial crisis. We cannot have an unreformed financial sector, given the scale of the crisis that we have been through. Reform has been introduced to help the sector's stability and resilience and produce a better outcome for businesses and households.