Student Loans

Part of Prayers – in the House of Commons at 11:43 am on 20th October 1989.

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Photo of Mr Keith Hampson Mr Keith Hampson , Leeds North West 11:43 am, 20th October 1989

It is, in part, the reason why there should no longer be a debate about the principle. As my right hon. Friend the Secretary of State pointed out, a student should invest against his or her future earnings. Obviously, we should like students over 18 not to he so dependent on their parents. I am sure that Opposition Members would advocate that, as has the National Union of Students many times.

The figures on what has been happening are damning. About 300,000 students in higher education are not getting their full whack of parental contribution or are getting no contribution. We have seen the value of the grant fall steadily under all Governments, but it fell most during the financial crisis of 1976, under the last Labour Government. That Government were the only Government since the war to reduce the rate of student participation in higher education. However, Opposition Members want to forget their track record.

We must produce a scheme that does more than produce only a modest financial gain to the system. We need a scheme that genuinely opens up access. That is the key reason why I changed my mind. Critics of the Government, such as the team from the London School of Economics, have been critical of the scheme, but all have said that the present extraordinarily generous grants system is an incubus on the growth of higher education. The high extra unit costs it causes deny us the ability to open up access. We have the only university system in the western world to have put hard limits on the numbers of students that universities and polytechnics can take. They could take more students—and they must—but we have said no, because that has been the edict from the Treasury. If it is at all possible, it must make sense to recycle money in the system so that more people can be put through it for the given available resources.

I wish to reiterate what my hon. Friend the Member for Cambridge (Mr. Rhodes James) said to my right hon. Friend. The context cannot be ignored. My right hon. Friend has already made a strong statement, but I urge him to acknowledge the vital importance of distinguishing between the cost of education and the cost of maintenance. At this stage we should not be talking—or encouraging the universities and polytechnics to think—in terms of full-cost fees being paid by students through loans. We should certainly be encouraging a more open-market system of providing courses and drawing people into education.

However, we should be realistic about it. If 80-odd per cent. of medical students are already from social groups 1 and 2, where will we suddenly find a great new surge of students who are willing to pay the huge fees that medical courses would involve? If we are to open up the market, it must be with automatic funding of fees as now, so that students can shop around and we can have a more competitive system between institutions as students carry the money with them. Indeed, that is the trend we have begun by reducing the amount of direct funding and providing it more through students.

For heaven's sake, however, the impression should not be given that students will have to take loans to cover full-cost fees. That is what some vice-chancellors have said, and possibly they have done so to try to blackmail the Government to put more resources into higher education.

I must enter one caveat. If we are to have a more competitive and open system I urge my right hon. Friend to allow polytechnics, if they so wish, to change their names to incorporate the word "university". My right hon. Friend's predecessor did not allow that when we were discussing the Education Reform Bill. If we are to have an open market we should have level playing fields for all parts of the system. The polytechnic part of that system is regarded by most people as the second division, and that is unfair.

It is already true that the university system is not monolithic. There is diversification of standards and provision within that system and it is not fair that polytechnics are regarded as second best by so many parents, students and teachers. We should be able to refer to the university, or institute of science and technology, in Leeds or wherever. If the universities and the polytechnics were all considered universities, as in the United States, that could have a profound effect on achieving the open and competitive system that my right hon. Friend wants.

I cannot understand why we so rigidly deny polytechnics their freedom in this respect. We gave them the power to change their names, but then we tell them that the Minister will veto any use of the term "university".

Some of my hon. Friends raised their voices at the comment of the hon. Member for Blackburn that I had likened what we are getting into with student loans to the community charge. I did that with an eye on my right hon. Friend the Member for Brent, North. Many of my colleagues welcomed the principle of abolishing the rates, but they did not look too closely at the details of the community charge until it was well down the line. That is my principal objection to the Government's current proposals.

My hon. Friends—one of them is not present at the moment —may have been critical of my remarks, but I believe that it would be better if we were talking about private money issued by the banks and collected by them.

To the extent that that money is an unsecured loan, it needs Treasury guarantees. That is exactly where we started in 1979–80. We are now, however, talking about public money which the Government are paying the private sector, through a quango, to disperse. They will then pay the private sector to collect that money back. It will not be additional private money, but public money and considerable administration costs will be attached to it.

Time and again we start by trying to make things simpler, but end with more confusion. Students will be involved with at least four basic bodies. They will still be dependent on their parents because the £400 that we are offering will not avoid that. They will also be dependent on their banks and their credit cards, just as now. The German system provides £190 a month, not £400 a year. Our students will still be involved with their parents, the banks, the new quango, their own education institution —university or polytechnic —and with their local education authority. Why is all that necessary? In 1979–81, my right hon. Friend the Member for Brent, North was largely instrumental in the work done on a banking scheme. Some of the issues were outlined in a document which said that the student "armed with his certificate" —from his institution could go to the local bank to negotiate a supplementary loan up to a set maximum".What is wrong with that simple system? When one signed on at the college one could take that certification to the bank and receive an overdraft just as now.