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Lord Skidelsky: My Lords, would the noble Lord accept that the proportion of students getting first-class honours degrees and 2.1s has been steadily rising over the period about which he is talking? If he would accept that, why does he think that that has been the case?

Lord Morris of Castle Morris: My Lords, the proportion has gone up. The reason for that is much more complex than saying simply that standards have risen or that standards have remained the same. There are many ways of getting through examinations, as the noble Lord, Lord Skidelsky, will know better than most; and 2.1s and Firsts are not a very simple register of the full educational achievement of a student on a university course. It may be an indication that the students have learnt how to pass certain examinations, which may now be set in quite different ways from the traditional ways. But there is no simple relationship between rising standards and the number of Firsts and 2.1s.

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The present system of financial support for students is chaotic, inequitable and inefficient. It is chaotic because it is, as we have heard from all sides, an ideological mishmash of maintenance grant, loan and the so-called "access" funding, which is really a pitifully small hardship fund.

The value of that maintenance grant declined steadily through the 1980s—by 24.1 per cent. between 1978-79 and 1990-91. In 1979, the standard maintenance grant was 24 per cent. of average earnings; in 1993-94 the grant plus loan amounted to 18 per cent. of average earnings. Access funds provided for universities to give that "targeted" assistance to the most needy are utterly inadequate at a mere £27 million this year.

What sticks in the Government's throat is that the maintenance grant is a grant—that is, it does not have to be paid back. That is anathema to them. So the loans scheme was established in 1990 and, after the banks refused to take it on, a new scheme was produced and a new company —the Student Loans Company—was set up to administer it. The result, to which I shall return in some detail, is chaos.

The Student Hardship Survey conducted at Aberdeen University in September 1994 shows a picture which is as typical as it is disgraceful: 39 per cent. of students had a job during the past academic year; the jobs averaged 12 hours a week; the average wage was £2.90. Yet 77 per cent. anticipate that they will need a job in the next academic year; 78 per cent. said that they were in debt at the end of the last academic year; the average debt, excluding student loan, was £233; and 54 per cent. said that they received money from parents or relatives, excluding the parental contribution, at an average of £371.

But it is not only chaos; it is inequitable chaos. As we heard, postgraduates, part-time students and mature students over 50 are simply not eligible for loans—loans which are shortly to amount to 50 per cent. of all student support. The present scheme, created since 1990, remains geared to full-time undergraduates, even though the composition of the student body has radically changed in recent years, as the Government fully knew that it would.

By 1991-92, 35 per cent. of higher education students in Great Britain were part-time. There are now approximately 30 per cent. more of those students than there were five years ago. Despite their number and despite their importance, they are not eligible for student loans or for other forms of support. It is as clear as day—and has been for many years—that the distinction between full-time and part-time students is vanishing like the morning mist; and that it is the part-time, the postgraduate, the mature and the further education students who are suffering most.

Mature students, as any university teacher will tell you, are often among the very best students. When I was a Principal in the University of Wales, we recruited them joyfully, and they usually out-performed their junior colleagues every year. The Liverpool John Moores University has the highest proportion of mature students in the country, most of them from the local area. At present, the benefits available to them are greater if they are unemployed and claiming income

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support and housing benefit than if they are mature students. And of course the phasing out of the older students' allowance will exacerbate their position. If they happen to be over 50, it is hardly worth bothering to apply.

Let us take one particular case. There is a mature, divorced student. She had qualified and worked as a nurse, but because of illness she was unable to continue working as a nurse and so had to retrain. She decided to go to university. Poor woman! She is over 50 and so cannot apply for a student loan. She had been unable to work before entry to her course, and so she was not eligible for the mature student's allowance. So her basic and only grant is £2,040. Not surprisingly, she has arrears and an overdraft to contend with. She is in her first year of study. On top of that, come the cuts in grants over the next two years. The only other assistance is from the Access Fund and that is extremely limited. What would Her Majesty's Government advise that woman to do—get on her bike?

The student support system is chaotic and inequitable. But it is also pathetically inefficient. That from a government which exhorts us all to adopt good business practice, seek value for money, set targets and achieve them, make efficiency gains every year and cut the costs to the consumers of education.

The story of the Student Loans Company since its birth in 1990 is a well known disaster. If it were not so ruinous to so many potential students, it might well make a hilarious farce of the kind that the noble Lord, Lord Rix, used to adorn at the Whitehall theatre. At all events, the Student Loans Company has been caught with its trousers down.

Perhaps I may present to your Lordships the information that I have gathered, from usually reliable sources, and ask the Minister to comment on what I say, item by item, when he comes to reply. To assist him to do so, I have given him some notice of what I intend to say.

As I understand it, only 47 per cent. of eligible students took out loans in the academic year 1993-94, and only £19.8 million was repaid. A total of £751.6 million remains outstanding on previous years. At 31st July 1994, 20,628 borrowers (7.7 per cent. of those in repayment status) were in default. I do not think that there is much argument about that.

The "fast-track" application system was introduced last May. Students who had received loans in 1993-94 were sent their application forms during last summer. I repeat what, to my surprise, my noble friend Lady David has already told the Minister. There were 320,000 forms sent out, but only 60,000 were ready for processing at the start of the new term. Is that correct? Loans were significantly delayed, and thousands of students spent weeks trying to secure them. The company was forced to take on extra staff and extend its hours to cope with the problem. Is it true that at one point it was receiving an estimated 11,000 telephone calls per day? Is it true that at the end of last month the company admitted that 35,000 students had still not received their loans?

I am informed that the company itself has been the target of allegations of corruption and incompetence, which suggest serious abuse of corporate expenses and

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contravention of Whitehall rules on the acceptance of hospitality from clients. Is that true? Is it true that the Department for Education has been forced to employ Coopers & Lybrand to investigate those allegations, and that its report will be presented to the Public Accounts Committee next month? Is it further the case that, notwithstanding that report, the concerns of the National Audit Office are such that it has announced separate plans to conduct a further investigation into the company's operation?

Finally, is it true that the Department for Education documents leaked last November show that the Government have considered privatising that loans scheme and that under one of the options considered students would be charged a commercial interest rate on their loans? If so, it would add a pleasing touch of grim graveyard humour to an otherwise sorry situation, since it would be another example, like British Rail, of the Government failing to control a situation and then crying out to the private sector to haul them out of the soup. If those facts are correct, I must ask Her Majesty's Government "What do you allege as your excuse?"

Student support is chaotic, inequitable and woefully inefficient under this Government. Student hardship has never been greater or more widespread. Students have only two options: walk out or take paid work. Evidence is now emerging that student poverty and indebtedness have led to increased drop-out rates. The CVCP report that full-time students leaving their courses for reasons other than failure between 1991-92 and 1992-93 increased by over 30 per cent.

The Chief Executive of the Higher Education Funding Council for England said recently,

    "While the number of entrants held up, the system as a whole was under-recruited last year which indicates a fall in numbers in the late years of courses. It looks as though people are taking career decisions to break their courses—my guess is that the reasons are financial, with people building up debts, looking round and saying 'I have to do something about this'".

Hear also the words of the Cadbury Report for the CBI—the CBI, not all of whose members are fully paid-up members of the Labour Party. The report said,

    "The Government's approach should be fundamentally revised so that the UK aims for a minimum graduation target of 40% ... of young people by the year 2000. Significant increases in higher education participation by mature people should also be expected. This would meet the vital need to upskill the existing workforce".

I agree with every word of that, except the nasty word "upskill", which makes me want to outwalk and upthrow.

We on these Benches have great sympathy with the protest against these orders implicit in the Motion of the noble Lord, Lord Addington. But the orders are subject to the negative procedure and would only be withdrawn by the Government if there were a prayer against them. Whatever we may think about the Motion moved by the noble Lord, Lord Addington, it is certainly not what I would understand—I speak in deference to the right reverend Prelate—as any form of prayer. The Motion, therefore, would be simply an expression of the House's opinion—if it were to be passed —which the

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Government can ignore or accept as they see fit. As such, it could be seen as something of an exercise in futility.

Nevertheless, it makes important points and I would emphasise that we on these Benches are wholly opposed to the implications of the two orders. Having said that, I hope that the noble Lord will be content with the expression of opinion in debate and not press his Motion to a Division. The reason for this is simple. Power, as Mao Tse Tung is reported to have said, grows out of the barrel of a gun. If the orders are to be withdrawn, there are procedures for so doing—the prayer, the gun out of which power grows. We would not support them for reasons which my noble friend Lady Hollis gave the House last week in the debate on the Cleveland order, and the whole matter of our attitude to secondary legislation. If there is no serious gun, while welcoming the expression of opinion, we see no point in firing off blank shots.

6.45 p.m.

Lord Lucas: My Lords, we have had a constructive and often passionate debate. I can assure the noble Lord, Lord Morris of Castle Morris, that although, as he says, this Motion would not in any way annul the orders, we shall pay close attention to everything which was said today.

We believe that students are properly provided for in a fair and flexible system of support. I shall enlarge later on why we hold to that view. However, we keep an open mind on the issue. We are ready to listen to criticism and noble Lords who have spoken may think that that is a good thing in the context of today's debate. We fully accept that we should pay careful attention to the needs of specific groups of students within the broad framework of support. Quite clearly we are not thinking in the same terms as the noble Earl, Lord Russell, or the noble Lord, Lord Morris, when they talk implicitly of an extra £1 billion for student support.

As noble Lords will know, we are conducting a wide-ranging review of the higher education system. Once we have crystallised our views on its aims and purposes, on what education it should be providing to whom, we shall turn to the questions of funding and student support. All that has been said today and any further evidence which noble Lords and others may subsequently offer, will be a welcome contribution to that review. My noble friend Lord Beloff will no doubt be comforted by that commitment.

In 1979 one in eight young people were going on to higher education. Now, almost one in three enters higher education, and those from social classes C1 and C2DE are in the majority. The numbers of mature students have also increased dramatically. The Government are proud of those achievements.

There was some opposition to student loans when we introduced them in 1990. The debate now is not about whether students should contribute, but about how they should do so. There seem to be plenty of models to choose from, each with its own protagonists. Some call for a graduate tax or for a national insurance surcharge. Some want a system for student support based entirely

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on loans, yet others call for students to contribute towards the cost of their own tuition as well as their maintenance.

I shall not venture on to those farther shores today. I can give the right reverend Prelate the Bishop of Chester and the noble Baroness, Lady Williams of Crosby, the comfort that we shall seriously be considering all the alternative models proposed. If they have specific points at which they want us to look, they should add them to the many submissions that we are already receiving on the review.

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