Clause 39 - Effect of bankruptcy
Higher Education Bill
2:30 pm
Mr Phil Willis (Shadow Secretary of State for Education and Skills, Education & Skills; Harrogate and Knaresborough, Liberal Democrat)
I welcome you back to the Committee, Mr. Gale. I thank the Minister and the usual channels for allowing us to begin the afternoon sitting by briefly discussing bankruptcy. Although I hope that the debate will be short, it is an important issue to consider. From the outset, I say that this is a probing amendment and we will not ask the Committee to divide on it. I hope that we will receive a satisfactory response from the Minister.
The reason behind the amendment and for raising the issue of bankruptcy is that the whole Committee would agree that, whatever way we dress it up, future students will leave university with significantly more debt. We can call it an investment, but the reality is that, as far as the usual terms of financial prudence and credit worthiness are concerned, students will have significantly more debt.
We must recognise that, since 1992, the number of students filing for bankruptcy has significantly increased. In 1992, eight students filed for bankruptcy. By 1997, that figure had reached 77. By 2002, it had reached 276, and the latest available figures for 2002-03 show that the number has jumped to 899. There has been a huge growth in the number of students filing for bankruptcy over the last few years, and in particular in the last financial year.
The maximum that a student can borrow from the Student Loans Company is roughly £12,000, but under the proposals, that will rise to £19,650. That is a significant jump, and I am not including other debts that a student might have, which might increase with their debt portfolio. However, there is no evidence, despite the rapid increase in bankruptcy over recent years, that there are widespread plans for students to file for bankruptcy. There are roughly 1.8 million students in the system, of which 1.1 million are full time, and most of them take out some sort of loan. The fact that only a relatively small number of students file
for bankruptcy is an indication that this is not a massive problem for the state to consider. Nevertheless, it is a problem all the same.
I flatly reject the views of the former Minister for Lifelong Learning and Higher Education, the right hon. Member for Barking (Margaret Hodge), when she said:
''Graduates should not see bankruptcy as an easy route to repaying the money they have borrowed through the generously subsidised student loans system.''—[Official Report, 15 May 2003; Vol. 405, c. 13WS.]
I agree with what she said, but she is fundamentally wrong to suggest that students see bankruptcy as an easy way out of their debt problems. The reality is that students have significant debts. I say that because the penalties for filing for bankruptcy are significant, and the Committee should not run away with the idea that it is an easy decision for anyone to file for bankruptcy, particularly someone starting out on their career. It affects not only a graduate's credit worthiness, but their employment opportunities. It would preclude them from becoming a solicitor, chartered accountant, accredited accountant, architect, stockbroker, surveyor, and valuer for an auctioneer and from entering many other professions.