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Lord Baker of Dorking: My Lords, most of the arguments on this issue took place about two hours ago, so I shall be very brief. By the vote that took place earlier, the House has accepted the principle of tuition fees. I can see there is no going back on that. What we are really debating now is how we can give help to those students who will have difficulties when there are tuition fees.

I could only get the student loans system through Cabinet by saying that we would introduce it slowly--which is what I was condemned for, but I can assure the House that it was the fairest way--and that it would get to a balance of 50:50--50 per cent. grant and 50 per cent. loan, which is what it is now. It has taken three or four years to get to that point, and I think it is a reasonable balance. However, the proposals in the Bill completely change that. The grant element will disappear. There will be a 100 per cent. loan with some relief for the tuition fee element, which will involve an elaborate system of means testing.

I hope that the amendment will be passed. I believe that the Government should think again about a combined system of tuition fees and maintenance grant, modified in some way. I think the point raised by the noble Lord can in fact be met with ingenuity and a little subtlety. That would be much better from the point of view of students. I hope the House will take this opportunity to deal with what my noble friend Lord Renfrew called the double whammy.

6.15 p.m.

Lord Tope: My Lords, before the Minister replies, I should like to comment briefly on the amendment. When I explained on the first amendment my party's package for the funding of higher education, I said that an important part of the package was the abolition of maintenance grants. It was long and keenly discussed at our party conference a couple of years ago, but that remains my party's position. We would replace maintenance grants with income-contingent loans, loans which would be repaid on the basis of so many pence in the pound of the graduate's eventual income, which would mean that he or she would not inherit a debt of so many thousands of pounds or a mortgage repayment model of so many pounds a month but instead inherit an obligation to repay so many pence in the pound of his or her income. However, because it is our party's policy and an important part of our package to fund higher education that we have to abolish maintenance grants, I am afraid that we are unable to support the amendment.

Baroness Dean of Thornton-le-Fylde: My Lords, I oppose the amendment. I declare an interest in that I was a member of the Dearing Committee. This is a difficult area to consider and I know that the decisions are difficult for all of us. On the Dearing Committee, we were talking about a compact. Tuition fees and

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maintenance are linked, and that is how we approached the matter. I accept that we are dealing with maintenance grants, but the Dearing Committee proposed that for tuition fees there should be a flat 25 per cent. contribution. We never considered that students from lower income families would pay nothing. We never considered that students from lower income families would pay just a portion. The proposal was for a flat 25 per cent. contribution which would be repaid as a loan when the student graduated and found employment. The contribution would then be gathered through the Inland Revenue--I am delighted that the Government have accepted that point--so if the person was not in work he would not pay. It was hoped that if he was on a very low income he would not pay.

One has to consider this issue in terms of the compact. The proposals in the response to Dearing published last week show clearly that, on the means testing which the Government will apply, around a third of students will not have to pay tuition fees--40 per cent. in Scotland--and another third will not have to pay the full amount. That has to weigh in the balance of what Dearing called the compact.

These are serious matters to consider. I hope that the amendment will not be carried for the reasons I have given. There has been a long debate and so I will not take up too much time. I would point out that we are talking about a compact and we talking against a background of the tremendous success of getting 30 per cent. of young people going into higher education. However, the figures show that the numbers of students from low income families have not increased in the same way as the numbers of students from middle and upper class families. We have made hardly a dent in that area. I would suggest that means testing so that a loan does not have to be taken out will encourage children from lower income families to go into higher education. I hope the amendment is rejected.

Baroness Park of Monmouth: My Lords, I hesitate to speak when it is so important to get on and vote but I am very concerned about two points. First, I regard the maintenance grant as a vital safety net. So many of our young people will come up with no money. They will have rent to pay and books to buy. If their loans are delayed--let us face it, the record of the Student Loans Company and the Student Support Agency is not impressive--they could wait two or three weeks. There will be chaos and a very demoralised group of young people.

Secondly, the Government think it is perfectly reasonable for students to pay back their living costs eventually. Eventually, yes, but today many students are desperately worried about the size of the loan they will have to repay. They are working in term as well as working in the vacations when they ought to be either doing academic work or some academic related work. The result is that they will get much worse degrees than they really merit. That in turn means that they will not get the good jobs that everyone believes that they will get. Employers expect a certain standard. More than that, they expect a CV which shows that the students have been able to benefit by the many other

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extra-curricula activities that a good university offers such as music, sport, debates and learning how to run things. Employers look for that, but students today will be putting on their CVs, "I filled shelves at Sainsbury's" full stop. That is not going to get them very far. So the whole purpose of this exercise, which is to get more people into higher education--and let them actually have that education--will be nullified because the students will be in a state of very considerable anxiety. They will be doing all the wrong things with their lives. So I urge that we consider restoring the maintenance grant.

Earl Russell: My Lords, I believe that the difficulty on these subjects is that we all tend to want incompatible things. We all want a large increase in student numbers; we all want a reasonably low level of taxation; we all want--if we can have it--free tuition; and we all want a maintenance grant. I agree in principle with everything the noble Baroness, Lady Park, said about the maintenance grant. The trouble is that, with our present number of students, it seems that we cannot have free tuition and a maintenance grant both at once. We simply cannot make the arithmetic work.

For what appear to me to be good reasons, we on these Benches have decided that our priority is to keep the principle of free tuition, first and foremost because there is a charge on the parents, it is a lump sum and it cannot be dealt with on the arrangements we have now by an income-contingent system of repayment which seems to be the fairest way of doing it. So we cannot have everything. We believe that what we supported as regards the first amendment is more important. We cannot manage both because the arithmetic does not work.

Baroness Blackstone: My Lords, I spoke at length in Committee in response to an identical amendment tabled by the noble Baroness, Lady Blatch. I hope that your Lordships' patience will not be tried too much if I again speak in some detail about the issues that have been raised because they are obviously very important ones.

I have listened carefully to the views expressed by your Lordships both in Committee and in our debate today. I genuinely appreciate that there is concern on all sides of your Lordships' House that students should receive the support that they need in a way which ensures that they are not deterred from entering higher education, regardless of their circumstances. Before going on to explain again how our proposals meet that objective, I would like to take a little time to separate the facts from the fiction because there is still some misunderstanding here.

I am disappointed that some noble Lords are seeking to either detect confusion where it does not exist or else create it at this late stage in the Bill's progress through your Lordships' House. As the Prime Minister made clear--not in a display of ignorance, but in full knowledge of what we have done--we support the

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principles of Dearing. We support a contribution to fees. We support improved loan repayment arrangements, and we support--

Baroness Blatch: My Lords, I am grateful to the noble Baroness for giving way. With the leave of the House, may I repeat the precise words used by the Prime Minister in another place?

    "First, on student finance, since we said specifically, as indeed the Conservatives said, that we would abide by the outcome of the Dearing Report, I think it is the richest possible hypocrisy for the Conservative Party, having supported those proposals, now to denounce them".

That is what the Prime Minister said. He said that the Government would support the Dearing proposals in principle and that we would denounce them. We have accepted them; it is the Government who have denounced them.

6.30 p.m.

Baroness Blackstone: My Lords, no, we have not denounced the Dearing recommendations. As my noble friend Lady Dean indicated, we have accepted the principles of the Dearing Report and built on them. We have accepted the proposals as regards ensuring that there should be access for students from all social backgrounds to higher education. My right honourable friend the Prime Minister made that absolutely clear. We accepted the principle that fees should be charged although we decided to mitigate them by means testing them.

We support a contribution to fees. We also support improved loan repayment arrangements. I must put the emphasis here on "improved". We support improved arrangements to encourage access. It is true, as some Members of your Lordships' House, including the noble Baroness, have been at pains to point out, that we have not adopted all the detail of Dearing's recommendations on student funding. However, our plans are in accord with the principles of Dearing. I am grateful to my noble friend Lady Dean for her clear explanation of the Dearing Committee's position and the Government's modification of it by means testing the fee and balancing that with the abolition of grant.

I say to the noble Baroness, Lady Park, that I very much share her view that we want to maintain the highest possible standards in our higher education system. As someone who has worked for many years in our universities, I have always fought personally to do that and I shall continue to do so. I say to her that no student will pay any more up front under the scheme. From what the noble Baroness was saying, I believe that she was implying that they would; that they would be unable to afford to live and would have to take jobs because they would have less money. But they will not. They will have exactly the same amount of money as they have at the moment, but it will be in the form of a loan. It is very important that we do not have any misunderstanding.

We are abolishing grants because we believe that they have no place in a modern student support system. It is right that students' living costs should be met out of their future earnings and in part by their parents where

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they can afford to do so. We stated clearly in our manifesto that on those grounds we would abolish grants and replace them with income-contingent loans. So no member of the electorate and no Member of this House or student can have any doubt about that. We are talking about a manifesto commitment.

It has also been said, by the noble Baroness, Lady Blatch, in particular, that the Government rushed their response to the Dearing Committee's report. The Government responded rapidly and decisively. Having inherited a worsening funding crisis--some noble Lords are laughing. I do not believe it a laughing matter that a government should respond decisively to a very important set of recommendations of this kind.

Having inherited a worsening funding system in higher education, we could hardly stand idly by once Dearing had reported. We had to act quickly, and that quick response has resulted in an extra £165 million for the higher education sector for 1998-99. I know that that has been widely welcomed by many of my former colleagues in the university sector. In fact, I have not heard of a single person who has not welcomed it.

Nor did we want to leave students and their parents in the dark over the summer as they made important decisions against UCAS deadlines. That is why we mobilised our information campaign as quickly as we could. LEAs and institutions have already been notified of the detailed procedures. We have consistently kept them informed of developments and will continue to do so. The Local Government Association and the CVCP have had a key role in the development of the implementation arrangements for the new system.

When one considers the scale of our information campaign, and the positive response we have had to it, it is rather unconstructive for noble Lords to persist in suggesting that students are in the dark. Our freephone orderline has received about 33,000 calls, and sent out over 1 million booklets, posters and other materials explaining the new student support arrangements. Over 80 per cent. of those organisations which received initial copies of the leaflets have ordered more for their students. Clearly they recognise it as a worthwhile and informative read. We also know from research that a high proportion of would-be students have read the information and understand what the new arrangements mean for them; 99 per cent. of them were aware of the introduction of tuition fee contributions; 87 per cent. knew that the contribution would depend on income and 80 per cent. knew that increased maintenance loans would be available. Equally encouraging awareness was shown by potential mature students, even though those students are harder to target with information. I have already recognised that and said that we want to address that concern. I think that the vast majority of people know what our plans are. Our intentions in this area are clear.

My noble friend Lord Davies referred to the previous government's legislation. I would remind Members of your Lordships' House that when the current mixture of grants and loans was introduced by the previous government we were assured before the publication of the student loans Bill that loans would be introduced

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gradually, and would not constitute 50 per cent. of the total maintenance package until the year 2007-08. But only four years after the Bill was enacted the previous government announced without any consultation or debate that the process would be accelerated, and indeed the 50 per cent. target was reached by 1996-97. So I am surprised that some noble Lords opposite have developed an attachment to grants when before they were eager to reduce the value of the grant as quickly as possible.

We have heard some alarmist statements about what the effects of our proposals might be, but little hard evidence, I am afraid. I gave some evidence about the impact of loans in Committee, and I shall repeat it here. In the five years before the current loans scheme was introduced, participation among younger students from lower socio-economic groups rose by only two percentage points. In the following five years, between 1990 and 1995, when students received an increasing amount of support through loans, the rise was some seven percentage points. I am sure that the noble Lord, Lord Baker, will remember that and that he will be pleased that that was the impact.

Of course there were, and there remain, many reasons influencing a young person's choice to enter higher education. By far the most important of these is the level of educational attainment reached at school. Quite simply, if a young person gains good A-level results--or the equivalent in vocational qualifications--he or she is likely to go into higher education. Financial considerations are secondary. Nevertheless, the key point is that providing maintenance support in the form of loans does not act as a disincentive; or, to put it another way, there is no evidence to suggest that grants help to encourage students from lower socio-economic groups to enter higher education. What matters is that students have access to the funds that they need while they are studying.

The noble Baroness, Lady Young, referred to the impact of our arrangements on applications. I have already said in answer to an earlier group of amendments that applications from students under the age of 21 are down by less than 1 per cent. Indeed, the National Union of Students has accepted that it is reasonable to expect that maintenance costs should be repaid later on the new basis that we are introducing.

Several Members of your Lordships' House have argued that under our proposals, students from poorer backgrounds will incur the highest debt, and that this is unfair. I would remind your Lordships that it is a fact of life--a hard fact of life, I acknowledge--that students from wealthier backgrounds are likely to receive more support from their parents, and so need less support from other sources. Our proposals take account of that fact by ensuring that students have access to the resources that they need when they are studying, regardless of their or their families' circumstances. Of course, the amount that individual students borrow will depend on a variety of factors, including where they decide to study and the length of the courses they take, as well as their family income.

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In judging the fairness of our proposals, I would also ask Members of your Lordships' House to take a somewhat longer view of the support that the Government are making available to students from poorer backgrounds. I have already made it clear that the terms on which we are proposing to make student loans are generous. Loans will be heavily subsidised to ensure that graduates repay no more in real terms than they borrowed, however long the loan is outstanding. In most cases, graduates will repay their loans over a longer period than they would under the current arrangements. On this basis, therefore, students from poorer backgrounds who take out the full loan available to them will be eligible to receive the largest public subsidy over time. This subsidy is, of course, additional to the support that students from poorer backgrounds will receive towards the cost of their tuition. Indeed, they will not pay a tuition fee.

The introduction of fair and progressive repayment arrangements under our proposals was a key factor leading to our conclusion to abolish maintenance grants. Income-contingent loans will be quite unlike other forms of borrowing in that the level of repayments will be commensurate with the borrower's ability to repay. In this respect, our proposed arrangements are more attractive (as far as potential lenders are concerned) than the existing loans scheme, as the right honourable friend of the noble Baroness, Lady Blatch (the shadow spokesman on education in another place) has publicly admitted.

We have consistently made it clear that our proposals are aimed at generating additional resources for investment in further and higher education. The Government are not ashamed to admit that abolishing maintenance grants, rather than keeping them at their present level, will make much more money available for colleges and universities. The effect of this amendment, however, would be to deny institutions and students the benefits of this additional investment. I note that the noble Baroness, Lady Blatch, has failed to suggest an alternative way of bridging the funding gap that would result were her amendment to be accepted.

The noble Baroness asked me to reflect on her amendment between Committee and now--and I have done that. I have also listened to the arguments that noble Lords have advanced in favour of retaining maintenance grants, the most compelling of which relate to access. Like all other Members of your Lordships' House, I want to be sure that we do not in any way damage that access. However, I would invite your Lordships again to consider the evidence that I have cited. That evidence shows that grants have not discouraged participation by students from lower socio-economic groups; that even the flawed system of loans which currently exists has not deterred them from entering higher education; and that graduates are not disadvantaged by a system which enables them to contribute to the costs of their education on an

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income-contingent basis. I would, therefore, again urge Members of your Lordships' House to reject this amendment.

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