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Lord Davies of Oldham: My Lords, I beg to move that the House do now adjourn until 8.40 p.m.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 8.26 to 8.40 p.m.]

Higher Education Bill

Further consideration of amendments on Report resumed on Clause 31.

Lord Rix moved Amendment No. 40:

The noble Lord said: My Lords, my probing amendments, Amendments Nos. 40 and 43, relate to the tax and benefit implications of bursary schemes.

It was said of John Erskine, the Earl of Mar—a distant kinsman of my noble friend Lady Mar, who is certainly non-Jacobite—after he had lost the battle of
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Sheriffmuir, that he was a better Churchman than he was a general because his right hand knew not what his left hand was doing. I have tried to imagine our present Secretary of State for Education and Skills clad in tartan, claymore in hand, striding through the heather; on the whole, it is an exercise in the imagination best left unattempted. Yet there are concerns that the Secretary of State's policies have a passing resemblance to those of the ill-fated Jacobite general.

There is a concern that our current taxation and welfare benefit systems will take away with the Chancellor's left hand what the universities through their schemes of financial assistance provide with their right hand. There is a concern that all these arrangements will generate much churning of finances but leave few of the neediest students better off. Indeed, there is also concern that mature students and part-time students will be at particular risk of being net losers.

At the very least there needs to be an urgent ministerial statement to confirm that students will not lose benefits or be penalised through the tax credits system if they are in receipt of bursaries. I look forward to hearing the Government's response. I beg to move.

Baroness Warwick of Undercliffe: My Lords, noble Lords will know that I am deeply concerned about the lack of clarity about whether bursaries and government grants will be taken into account in the assessment of eligibility for means-tested benefits. It is not at all clear that the very poorest students will not have the support given to them with one hand taken away with the other, as the noble Lord has said. Furthermore, it is by no means clear that universities will not be required by OFFA to use precious resources to provide bursaries to students, only to see the Government claw back the same amount or even more by reducing the appropriate benefits. We are particularly concerned that students with children might lose tax credits.

I understand that there are complicated arguments involved but I should be grateful if the Minister could assure the House that the Government will recognise that university students from poor backgrounds will not lose benefits as a result of the Bill. After all, the Government are committed to providing a significant increase in support for students on the grounds that that will enable and encourage the poorest to participate.

Universities have agreed to offer bursaries and to submit their plans in this regard to OFFA for approval on the grounds that the poorest students may need additional financial support and incentives to apply to university. We know that, when striving to attract poor students to apply to university, the perception can be as important as the reality. The perception that students will lose income from benefits may constitute a major barrier to participation from this group. I urge the Government to consider that university students are a special case and should be treated as such by government. I look forward to the Minister's reply.
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That said, I note that the amendment tabled by the noble Lord, Lord Rix, refers to OFFA having a role in approving provisions for financial assistance. That is not what OFFA will do, as I understand it. I think that it is important to hold on to the principle that OFFA will look at an institution's widening participation strategy as a whole and make a summative assessment, rather than approving individual components of it.

I am also not convinced that it should be OFFA's role to sort out the problem of eligibility for means-tested benefits. That is a matter for the Government. Having said that, I support the thrust of the presentation by the noble Lord, Lord Rix, and I look forward to the Minister's reply.

Lord Triesman: My Lords, happily devolution means that my right honourable friend Charles Clarke will not have to go to Scotland on any war-like missions. I ought to tell the House that so expert are the civil servants who are helping us on this that they have already given me a briefing note on Sheriffmuir and the battle of 1715, just in case there was any gap in your Lordships' knowledge. Apparently, there are some who say that we won, and some who say that they won, and some who say that no one won at all. I think that I have got it right.

I welcome the opportunity that these amendments provide to explore the impact of bursaries and other financial assistance on students' entitlement to welfare benefits and their tax status. I am grateful to the noble Lord, Lord Rix, for providing this chance to debate further an issue that has been raised by Universities UK and by the noble Baroness, Lady Warwick, who has played a vital role in advocating this case.

Let me deal first with the question of tax status and tax credits. Section 331 of the Income and Corporation Taxes Act 1988, the ICTA, states that income arising from a scholarship held by a person receiving full-time instruction at a university, college, school or other educational establishment shall be exempt from income tax, and no account shall be taken of any such income in computing the amount of income for income tax purposes. In this section, "scholarship" includes an exhibition, bursary or any other similar endowment. The Inland Revenue has advised us that in practice any grant of money for support of students in full-time education would qualify. As for tax credits, we have been advised that income that is exempt from income tax by virtue of Section 331 of the ICTA is disregarded in calculating a claimant's income. Therefore, it appears that bursaries and other financial assistance that institutions will offer to full-time students will not affect students' tax status or entitlement to tax credits.

The position with benefits, as was explained to noble Lords in Committee, is more dependent on the purpose for which the additional assistance is given. Assistance towards fees or course costs is normally disregarded for benefits purposes. I expect that institutions' proposals on financial assistance will be many and varied. The impact of different schemes will
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no doubt vary according to students' individual circumstances. For example, a student who had the option of cheap lodgings with friends or relatives might not be persuaded by cheap halls of residence, should an institution decide to offer its financial assistance in the form of subsidised accommodation. The same principle will also apply in the case of welfare benefits. In other words, students on welfare benefits can look at the bursary options available to them in deciding which best suits their needs.

We are working closely with the Department for Work and Pensions to reach an agreement on arrangements for the small proportion of full-time students who can simultaneously be eligible for benefits. Our objective, like that of the noble Lord, is to ensure that students receive real additional benefit from grants and bursaries, although I cannot give a firm commitment at this stage on the precise outcome of those discussions. However, in the interim period, I do not think it right to pass the burden of responsibility for this issue on to institutions through the Director of Fair Access. I hope that the noble Lord agrees with that point and will decide to withdraw his amendment.

I confirm that we are working actively with the DWP on this. Only a small proportion of full-time students receive benefits, but they are in the most vulnerable groups, and it is therefore right that we should pay the greatest attention to their position. I am referring to lone parents and those with disabilities. Fee support and targeted support are not set against benefits, but support for living costs is taken into account in assessing benefit entitlement.

We have reached an understanding with the DWP that the HE grant, which will be introduced for new students in 2004–05, will not be taken into account in assessing entitlement to means-tested benefits. Looking forward to 2006–07, we are working with the DWP to reach agreement about arrangements for the proportion of full-time students who are in receipt of benefits. Our objective, like that of the universities, is to ensure that students receive real additional benefit from this grant and bursary. We hope to be able to ensure that.

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