The Government are very grateful—as I am personally—to Sir Ron Dearing, the chairman of the inquiry, and to the 16 members of his committee. Their work has been completed in record time, and in a manner for which we are all extremely grateful.
Today, the Government announce a new deal for higher education, involving new funding for universities and colleges, free higher education for the less well-off, no parent having to pay more than at present and a fair system of repayment linked to ability to pay.
Our university system is in crisis. Our competitors in north America and the far east—the Asian tigers—have many more young people in higher education. In the United States, the proportion is about 40 per cent., and in Canada it is 44 per cent. Those countries recognise the need to invest in their people, mirroring the investment in fixed capital and equipment of the past. Such countries are expanding higher education rapidly. Business in this country recognises that need as well.
One young person in three now enters higher education, compared with one in 20 in the early 1960s. Half the students in higher education are over the age of 21, and a third of them are part time. Public funding per student has fallen by about 25 per cent, over the past decade, with consequences for the quality of teaching, seminar work, materials and investment. Yet the increase in participation among socio-economic groups A to C has been double that of groups D and E. The present system is clearly not working.
The same level of funding for students today as existed in the 1970s would cost the taxpayer an extra £4 billion per year. That level, with increased participation— towards 40 per cent.—would cost an additional £2 billion by 2015. Taken together, such changes would add up to 3p in the pound to the basic rate of tax.
The previous Government placed a cap on the expansion of higher education, created the present mix of loans, grants and parental contributions and failed to address the financial implications of the further development of the sector. However, with cross-party agreement, they established the Dearing inquiry, accepting that the status quo was no longer an option. Everybody recognised that our higher education system was in dire need of attention. It has faced both funding problems and huge anomalies.
Tuition is free for some, but 500,000 part-time students in higher education and many of the 2 million further education students are expected to pay fees and receive little or no maintenance support.
The committee was given the task of ensuring maximum participation in higher education, enhancing standards and quality and ensuring fair and transparent means of student support, while obtaining value for money.
The Government endorse the aims and purposes of higher education set out by the committee, building on the Robins committee report of 30 years ago. "Higher Education in the Learning Society" is a coherent and thoughtful report that provides a vision of the future.
The committee's recommendations cover the local and regional role of higher education, the qualifications framework, academic standards, the role of information technology, management and governance of institutions and the quality of teaching and research. We shall consider those recommendations over the summer.
We welcome the committee's proposals for widening participation, including its emphasis on groups that are currently under-represented. Later this year, we shall set out our comprehensive response in a White Paper on lifelong learning. Today, I shall give an initial response to set out a clear direction.
The committee recognises that we cannot afford further improvement or expansion of higher education on the basis of current funding arrangements. Students should share both the investment and the advantages gained from higher education: rights and responsibilities go hand in hand. The investment of the nation must be balanced by the commitment of the individual: each will gain from the investment made. Graduates gain considerably from higher education. Compared with non-graduates, graduates see their earnings rise on average by as much as £4,000 for every £20,000 of earnings.
Dearing believes that the present loan system is unfair, unworkable and ineffective. He recommends that loans should be paid back over a longer period to help poorer students; that parents should not be asked for higher contributions; that a £1,000 tuition fee for everyone— which is roughly 25 per cent, of the average cost of a course—should be added to the loan; and that some element of maintenance grant should be retained.
We accept a great many of the broad principles laid out by Sir Ron. We intend to build on the committee's preferred option, and to take it together with the proposal in our policy statement, "Lifelong Learning".
We must develop a more efficient system than the present confusion of loans, grants and parental contributions. For lower-income families, instead of the remaining grant, students' living costs will be covered by a maintenance loan of the same value as the current grant and loan package. An additional maintenance loan equivalent to the tuition fee will be available to students from higher-income families. We shall, however, ensure that the poorest students do not have to pay fees. That is the best way of encouraging access to free education for the least well-off. We are equally determined to ensure that there is no increase in parental contributions.
Our response to Dearing ensures that fees and maintenance together do not place an increased burden on middle-income families. At present, parents are expected to contribute up to £2,000 for maintenance.
The committee proposes that repayments should be made on an income-contingent basis. We accept that, but the committee's funding options also assume that repayments should begin when a graduate's income reaches £5,000. We do not believe that that is acceptable. We shall consult on a higher starting point for repayment. We also believe that repayments should be over a longer period and set at a lower level of annual repayments than is proposed by the committee. A supplementary hardship loan of £250 per year will also be available.
We are also minded to accept the committee's recommendation that students with special needs should receive the specific grant on a non-means-tested basis. We shall consider the need for appropriate measures, such as bursaries for students entering teacher training and some health and social care professional courses. Employers in other fields may wish to consider similar measures.
We intend that these proposals should apply to all new students and we are examining how best such changes might be phased in. In addition, I assure the House today that top-up fees play no part in the Government's proposals. No university or college should proceed on the basis of introducing such additional fees.
The Government will also be considering how the new arrangements will apply to the particular situation of higher education in Scotland.
The proposals will mean more money for universities. The Government will ensure that savings are used to improve quality, standards and opportunity for all in further and higher education. Change is essential if we are to maintain the skills and research base of our country. We cannot defer action to another generation. Our preferred solution secures equity, access, quality and accountability. Our proposals retain the principle that repayments should be made on the basis of future income, not present circumstances.
Today's report presents major challenges, which every Member of this House will have to address. I recommend to the House that we take on this challenge with clarity and courage. To do otherwise would be to betray the next generation. Building on the report, we shall produce a system that will be fair, and will be good for students, for parents, for the universities, for business and for Britain.
This Government are facing the future with confidence. We have the will to take the difficult decisions and to ensure the investment needed for the future of our nation.