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Baroness Park of Monmouth: My Lords, I have always warmly supported income-contingent loans, but I am concerned because the Government seem to be concentrating on getting people to university but they are not thinking about the effect of these changes on students when they are at university. Many students now, because they are increasingly concerned about money--and the poorer their background, the more likely they are to worry about that--are working in term and damaging their academic prospects. They are also removing any prospect of having a good extra-curricular life. We must consider the fact that the Confederation of British Industry and all those who will be employing the graduates--all those who are the source of all these well paid jobs--will ask, "Did this man (or woman) take part in an expedition to the Maldives? Did he act? Was he president of the union?", and they will find that all that that student did was to stack shelves in Sainsbury. Full student CVs will no longer exist.

That sounds cynical but it is a practical fact. Everyone is supposing that all of these unfortunate undergraduates will go out and automatically find well paid jobs. If they have bad academic results, they will not get such jobs. Moreover, I am concerned about the people who do not want such jobs, but who want to serve the community as teachers, social workers or in other such roles. They

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will be worrying too. It is terrible short-termism to think only of getting people to the starting post and not about how they will run the race.

5 p.m.

Lord Renfrew of Kaimsthorn: My Lords, I am not sure whether the Minister speaks to students any more. If she does, she will find that there is widespread dismay at the financial package with which they are now confronted. I refer to student fees as well as student loans.

The noble Baroness referred to the Salisbury convention. Let us nail that canard at once. I do not recall any statement about student fees in the manifesto. What we on this side of the House and many students firmly object to is the package which will have a disincentive effect on students. When speaking in his report of his preferred option, the noble Lord, Lord Dearing, spoke of maintenance grants. He said that,

    "their withdrawal ... [will be] a disincentive to potential students".
That is surely right. The Minister implied that if she thought loans hindered access they would not be something she favoured. Of course loans have a negative effect. It may be that we cannot accept the reality of student loans as part of the package, but that is what the amendment is about. It limits the extent of loans. That is all it seeks to do. The amendment provides that the loan that students take out will not be more than one half of the overall maintenance costs.

Many of us are concerned at the cumulative effect, and the burden on students. The noble Baroness, Lady Blatch, referred to the heavy burden that students from low income families will have to bear when they enter the wage-earning world. If one talks now to students, there is no doubt that that is a powerful disincentive. The noble Baroness, Lady Blackstone, spoke of a culture of learning. I was interested to hear the concept. I agree with it. I found the speech of the noble Baroness entirely appropriate as she outlined the need to generate a culture of learning among those who might come to university. We might have heard a great deal more about that in earlier debates on the Bill. However, those perfectly valid points do not justify the extraordinary financial burden that the Bill is likely to put on would-be students and on students at the time of their graduation.

For those reasons I firmly support the amendment of my noble friend Lady Blatch.

Lord Dearing: My Lords, as the villain of the show and one who has not spoken before on the issue, perhaps I may contribute to the debate, although I suspect that we have made up our minds separately.

The committee was appointed because there was a crisis in the funding of higher education. I read what the three main national political parties said, in particular in the run-up to the election. The first priority was education. But the first priority was not higher education; it lay elsewhere. It was clear that there was little prospect of higher education receiving more money from whatever government were elected.

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Yet our terms of reference made clear--it was the first item--that society aspired to maximisation of participation in higher education. Where was the money to come from to meet that very desirable aspiration? We were driven reluctantly to the conclusion that we must look to the graduate in work to make an income contingent contribution. To help us judge those issues, we set up a number of working groups. One was to judge the justification for asking the student to make a contribution. The evidence was that on average the benefit to the student from participation in higher education was about twice that to society as a whole. That provided the justification for calling upon the graduate, depending on the income, to make a contribution.

We set up another group to consider on what basis that contribution should be founded. The majority of the group initially was minded to recommend that the contribution come through the conversion of maintenance grants into loans. However, as our work proceeded and we debated the issues, the opinion of the group progressively moved. The considerations that weighed with us were these. Financial issues are not the major cause of the low participation by young people from poorer homes. That was not the main cause of the inverse correlation between social class and participation; it was the earlier experience in life. As the Minister said, it is in response to that that the main answer must lie.

Nevertheless, we were concerned that the one differential advantage for children of the poor might be removed. We concluded that the better course was a tuition fee with an equal contribution from all students. We were concerned that the 25 per cent. contribution to tuition fees would amount to £1,000 whereas the loss of the maintenance grant, with its conversion to a loan, for the poorer student would be £1,500.

There were other considerations too. As an old civil servant, a former Treasury official, one learns to be careful. We were mindful that by drawing from the maintenance grant, as opposed to asking the student to contribute towards tuition, we were in a less strong position to say to the Treasury, "That money is for education." If the contribution came from a tuition fee, people would never forget in three, four or five years' time from where the money came. We were clear in our mind that the justification for asking for this money from the student, or the graduate in work, was the need to discharge our remit to maximise participation in higher education. We saw that as the greatest security.

We believed that over time we should move the funding more to the student so that it was channelled through the individual student--rather than through a funding council such as that I chaired--so that the individual was more responsible for his or her choice. To treat all students the same in relation to a contribution to tuition fees was moving in that direction.

It was not an easy decision. We understood the alternative argument: that the contribution would be out of income after graduation rather than related to parental circumstances. But we felt that there was an overhang of parental backgrounds and attitudes towards debt.

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There was also a realisation that the student who came from a well-heeled family might look to the family if circumstances were adverse, whereas a student from a poor home might feel an obligation to contribute to the family budget. Therefore on balance we came down in that direction.

I wish to acknowledge that the Government changed their position from that in the manifesto. Noble Lords asked why the Government were able to move so quickly. The truth is that I went to see the Secretary of State at my own request. I was desperately concerned about the urgency for decisions because of the crisis in the funding of higher education. I outlined the options as I saw them. I told the Government that I believed the option in their manifesto was wrong; it would not work well. I was glad to find that the Government moved a substantial way towards us; they accepted and enlarged our proposals for support for the poorer part-time and full-time student, and moved to help the disabled student. I was delighted when the Government agreed to monitor and publish the implications of participation. But, on balance, being suspicious of my Treasury past and concerned about participation of the poor, I remain with the Committee's original recommendations.

Lord Desai: My Lords, a great attribute of the British middle classes is that they can justify any subsidy for themselves by invoking the working classes in their defence. I have been teaching for 32 years and during much of that time have been grossly subsidised with free tuition and free grants. They have always defended their free education by invoking the working classes.

The working classes never had access. Therefore, as my noble friend cogently explained, we should leave the access of working class students out of the debate. It has nothing to do with it whatever. It will not be improved by cutting all the maintenance grants and tuition fees because we have lived through a golden period when working class access was practically negligible. Money is not the issue.

Let us deal with the equity of the present system of loans. I believe that noble Lords obliquely opposite have almost understood the economics of it--not quite, but almost--and I welcome their education. They are still a little confused about tuition fees, but we will respect them for that.

Noble Lords opposite still have a problem about understanding income contingent loans. The noble Baroness, Lady Park, cogently made the case for the Government. I put it to her that at present many of my students are not given grants by their parents. Many of my students work overtime and at nights because the loan system is not a good system. The loan system is a very bad system. The present system entirely reflects the concerns of the noble Baroness. However, if students had a full loan payable from future income--I will deal with low paid people in a moment--they would not have such anxiety and would not have to work overtime.

What happens if someone wants to become a monk? Why not? The income contingent loan is simple; that person will not have to pay back very much. Therefore, the income contingent loan taken for a whole cohort of

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students is a very redistributive arrangement where the lower paid people--those who do not want to apply for highly paid jobs--will not pay the full amount. No one will pay more than the full amount, but many people will pay less than the full amount. That progressivity will be decided by the future income of the people who have graduated.

Once we understand that, the equity of the system is clear. Access is a fake argument and we have an equitable system. All the talk about people being burdened with debts and so forth is irrelevant. If the system were like the present student loan system or a mortgage debt I would agree, but it is not like the present system. People will not be burdened with a particular size of debt which they must repay or their house will be repossessed. They will pay from a income stream and when they retire from their jobs the loan will be finished. It will be burnt out even if they have not paid the full amount.

Once one understands that, the beauty of what the Government have done is obvious. One must accept that the way in which the maintenance grant has been constructed presents an equitable system. If people understand that and get parental income or students' present income out of their heads and think in terms of future income--which, in terms of economic theory, is the correct way to think of such things--they will see that we have an equitable system. I urge your Lordships to reject the amendment.

5.15 p.m.

Lord Milverton: My Lords, in this intricate issue my main concern is how fair will it be to students who must pay back loans when they have finished university. The Minister said that those who earn £10,000 or less will pay nothing. It was nice to hear that because, whatever salary the graduate receives, he should not accumulate too many loans. One knows that in life there will be other loans. Indeed, one is being encouraged too often by too many people to borrow money, saying, "Come on, let me help you to get this or to do that with a loan". Some of us know that we must be firm. As a clergyman, I know how firm one must be because only in recent years has a clergyman's salary become reasonable. When I started it was very low.

I am in a difficult position. I understand and see the principle put forward by my noble friend Lady Blatch because it is terrible when people are enticed to take out too many loans. Yet--perhaps some of my noble friends will be surprised to hear me say it--the Minister and the noble Lord, Lord Dearing, have almost persuaded me not to vote for the amendment if there is a Division. I do not think that I would vote in the same lobby as noble Lords opposite. I believe that most probably I would abstain because there is a conflict. I am voting with my thinking, my mind and my spirit and not just on the party Whip. That is how Members on this side sometimes ought to vote. I apologise if my noble friend Lady Blatch is sorry but, although I agree with the

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principle she put forward, I have been able to see clearer, especially after listening to the noble Lord, Lord Dearing.

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