Student Finances (Cornwall)

– in the House of Commons at 7:56 pm on 13th May 2003.

Alert me about debates like this

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jim Murphy.]

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury) 8:08 pm, 13th May 2003

I very much welcome this opportunity to raise a subject that has, to say the least, been of some controversy on both sides of the House: tuition fees and the Government's plans for top-up fees. I shall say a little more on both in a moment, but I want to focus on the impact that tuition fees have already had on Cornish students and, more specifically, on the impact on Cornish students of top-up fees in future.

I am delighted that my three Liberal Democrat colleagues from the county are in the Chamber, as we think that the matter is of the utmost importance in relation to the Government's wider policies on social inclusion, to give poorer students the opportunity of higher education and to ensure that people with a high level of skills and qualifications can work, set up and expand businesses and make the Cornish economy successful. That, too, forms part of the Government's wider policies, through objective 1 programmes at European level and in other welcome respects, to try to tackle the acknowledged poverty in Cornwall, which is the poorest county in the country.

The existing policy of student tuition fees has already led to typical students amassing a debt, by the time they graduate, of £12,000—a substantial amount for anyone embarking on life and a career. Although the Government argued originally that that was a way of getting extra money into higher education, those extra funds never materialised. Looking at the graph of expenditure, it is clear that it substituted the trend growth from the Treasury in terms of investment in higher education for money from students in the form of tuition fees. Now, however, the Government propose to allow top-up fees of up to £3,000. For a typical student having to meet those top-up fees, the debt that they could expect on graduation would double from the existing £12,000 to £24,000. It is true that the Government say that they will reintroduce a grant system, which has been taking place—grants of £1,000 a year, some £20 a week, which are substantially less than the grants that young people in my constituency currently receive if they go to further education college, which are £30 a week. Again, the Government have said that it is all about getting further money into higher education. Simply put, doubt exists in all our minds about whether that will happen, given that it has not really happened in the past.

In deprived areas such as Cornwall, amassing a debt by the time of graduation of £24,000 gives rise to the question whether students from poor areas such as mine will be able or willing to take up such a debt at the start of their lives. A couple starting a marriage, having children and looking for their first home, if both were graduates, could have a debt of nearly £50,000. Not so long ago—within my time in Parliament—that level of debt would easily have bought a house in Cornwall, yet, now, before such a couple even start to have thoughts of a house, they will be saddled with such debts.

Of course, given rapidly rising house prices and the gap between local wages and house prices in Cornwall—one of the greatest in the country—and the fact that mortgage companies will take into account the debt that students have as a result of getting through university in deciding how much they can extend for a mortgage, the chances of even professionally qualified graduate couples on local incomes in Cornwall affording a house are next to none.

Photo of Mr Paul Tyler Mr Paul Tyler Liberal Democrat, North Cornwall

My hon. Friend is too young to have had the same experience as me of getting two children through university. My point is that the disincentive factor in Cornwall is already very strong. The number of contemporaries of my daughter and son who simply could not contemplate higher education, even now, is considerable. I therefore think that the starting point is even worse than he describes. With new increased costs, and therefore increased debt, the situation will deteriorate further.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

I am sure my hon. Friend is right.

I want to turn for a moment to what is happening in Cornwall already, because the figures are significant. If we look at educational achievement in the county, at GCSE level, Cornwall has been consistently above the national average. For that part of education that is not optional, through which all young people go, it outperforms substantially the national average. By A-level, as the poorer students start to peel away, trying to earn some money within the family and perhaps contribute to the family home, we start to see that advantage worn away.

At A-level, Cornwall compares almost exactly with England. Therefore, although we know that young people in Cornwall start off doing better, by that stage, fewer of them are taking and getting A-levels or other vocational qualifications. There is an almost exact match between Cornwall and England, however. By the time we get to higher education, when people start to contemplate the debt that they are taking on, Cornwall falls behind the national average.

The key is that, until the introduction of tuition fees, the proportion of Cornwall's young people who went into higher education was gradually increasing. However, at the point at which the fees were introduced, the number fell back and since then there has been no trend upwards. The figure for participation levels has bounced around at about 20 per cent. By 2001, fewer 18-year-olds were entering higher education than in 1997. The reason for that appears to be directly linked to income levels.

It is not possible to extract from the data nationally specific figures for Cornwall, but we know what has happened nationally because the Department has commissioned research. Participation in higher education among people from professional backgrounds increased by 21 percentage points in the 10 years between 1991 and 2001. However, the increase in higher education participation by young people from manual and unskilled backgrounds increased by only 7 percentage points. Therefore, the existing system, which already discriminated against the young people from poorer backgrounds who are typical in Cornwall where there are relatively few professional managerial jobs and very low incomes, has widened social divides. The problem is directly linked to the debt situation that has accumulated, and top-up fees can only make it worse.

I have asked young people in the county what they think. Over the past few years, I have written to all young people at the age of 18 and asked them about their choices in relation to education and how they are affected by tuition fees. Consistently, year by year, half of them have said that tuition fees make them less likely to go to university. That is even without top-up fees. Of last year's cohort, 46 per cent. specified that tuition fees deterred them from going to university. Near on 60 per cent. also believed that, in five years, they would not return to or work in Cornwall, because they would go elsewhere to earn higher incomes. They would not be able to afford to live in Cornwall because of the high home ownership costs and the low wages. Again, that is even without the threat of top-up fees.

Clearly, the large debts associated with top-up fees will make these problems very much worse. That is a double whammy for the county, because there will be two effects. The fees will deter young people from going to university in the first place and, when they have graduated, they will be deterred from coming back because it is a low-income area where it is harder to repay the debts. The county will be locked into a low-income, low-wage economy that has few graduates. In other words, that is a definition of the problems that we already have, but made worse.

The Government say that students should be expected to pay the high top-up fees because of what they term the "graduate premium". The Department claims that a typical graduate will earn £400,000 more in their lifetime as a result of the opportunities granted by university education. Those figures are, of course, flawed, because they are based on a study of the existing graduates in the work force. Most of them came through when only 12 or 15 per cent. of the population went to university. They are therefore a premium section of the work force and they are understandably and typically in the top 12 to 15 per cent. of earners.

The Government are now aiming for a figure of 50 per cent., and 50 per cent. of the population cannot have a £400,000 lifetime premium in their earnings ability. In fact, if the figure is 50 per cent., many of them are likely to be on average earnings even though they have gone through university and graduated. The Government's justification is certainly flawed.

The position is not necessarily uniform across the country. If one lives and works in the south-east or London, one may get a very high return on the investment involved in going to university. One may get a high return simply because of where one lives. Wages are very much higher in that part of the country. If people choose to live and work in Cornwall, their wage expectations will be substantially lower. Even skilled wages in the county are 20 per cent. below the national average. That has a significant effect on those students who have built up large debts because it takes significantly longer to repay them.

An average male graduate could expect to take 14 years to pay off a debt of £24,000. It could take a woman 17 years to do that because women's earnings are typically lower, something that the Government do not mention when they talk about the graduate premium. In Cornwall, men could take 17 years and women 20 to pay off the same debt. The Government are hanging a mortgage around those young people's necks. Students who return to the county will not only sacrifice income and have to find a way to pay for much higher than average house prices, which are forced up by people moving out of the south-east and buying retirement or holiday homes, but face possibly 20 years of hard labour before they pay off the debts that they have run up as a result of the Government's top-up system.

The Government need to think hard about that. They are about to open the new Cornwall university base at Penryn. That big investment has been made possible by European funding, a great deal of Government commitment, and support from the Liberal Democrats and just about everyone in the county. The justification for that investment is that it will create opportunities for the poorer people in the county to study locally and not to have the same costs that they might encounter if they went away. It would also bring graduates into the county.

Photo of Andrew George Andrew George Shadow Minister (Environment, Food and Rural Affairs), Shadow Minister (Environment, Food and Rural Affairs)

Does my hon. Friend agree that if the Conservatives got into power, their proposals announced yesterday would adjust student finance in such a way that student numbers would be slashed and the combined university project and the enhancement of higher education places in Cornwall would be dead in the water?

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

I do not want to dwell on Conservative policy because I welcome the fact that they oppose tuition fees. They have not done that consistently before and it may help us to defeat the top-up proposals. Some 140 Labour MPs have signed an early-day motion opposing top-up fees. If they have the courage of their convictions and vote with the Conservative party and the Liberal Democrats, the Government will either be defeated or have to withdraw their proposals and think again. That is why I hope that the debate will have an impact.

However, I have to acknowledge that the maths of how the Conservatives will pay for their policy does not add up. Telling students that they will not have to pay a tuition fee is not much help if they also tell them that no places are available. It does raise the question of how we will finance those extra student places planned for Cornwall if they are not funded.

Having said that, there is a more immediate problem for the Labour Government. We welcome and support the need to improve the Cornish economy and to give people new opportunities, but the new university might have to introduce top-up fees. It will inevitably find that its finances are stretched and that it can offer courses only if it charges those fees, but that would be counter to the purpose. The first thing that the poorer students who are meant to be welcomed into the university in Cornwall will be told is that they have to pay thousands of pounds in top-up fees and therefore face debts amounting to a large mortgage—probably larger than any mortgage that their parents have ever had—if they walk through its gates.

I hope that the Minister will at least promise to make every effort to ensure that the combined universities in Cornwall have the funding they need so that they do not have to introduce top-up fees in the county. We want the Minister to pledge that there will be no top-up fees for higher education in the county. If there are, it will contradict every reason that the Government have given for backing the Cornwall university. Moreover, Liberal Democrats do not believe that tuition and top-up fees are the right approach. We have explained, most recently in our alternative Budget, that the right thing to do is to ask the growing number of very high earners—people earning over £100,000 a year—to pay a little more tax to fund greater fairness in the tax system. That would allow unfair increases in council tax to be cut, and nearly half of the additional revenue could be used to fund improvements in higher education. At the same time, students would not be asked to pay tuition and top-up fees, so would not have to should an unfair burden at the start of their adult lives.

It is in everyone's interest that students get that educational opportunity and become highly qualified people who will successfully lead the country through their innovation, skill and business investment. It is of fundamental importance that Cornwall encourages its young people to take advantage of the basic skills that I have described and develop them all the way through university. It is important for the future of Cornwall that we attract those people back so that they can invest in the local community and use their skills to build a thriving and successful county. I believe that the Government believe in all those things too, but if they pause for a moment, they will realise that none of them will be possible if they go down the appalling route of top-up fees for students.

Photo of Margaret Hodge Margaret Hodge Minister of State (Education and Skills) (Lifelong Learning, Further and Higher Education) 8:26 pm, 13th May 2003

I congratulate Matthew Taylor on securing this debate on an important issue that we have been debating widely outside Parliament today in response to the ill-thought-out proposals finally submitted by the Conservative party.

I had the pleasure of visiting Cornwall recently to discuss with various institutions their proposals for the combined universities in Cornwall. I had the pleasure of visiting Truro college, a further education college which, as the hon. Gentleman will know, recently gained beacon status and is an excellent college. I congratulate everyone associated with it on providing terrific opportunities of a very high standard for a large population in Cornwall. I am excited and interested in the emerging partnership between universities in Exeter and Plymouth, the Open university, the college of St. Mark and St. John, Falmouth college of arts and the FE colleges, which is extremely positive. I hope that the hon. Gentleman agrees that we have demonstrated our confidence in it by saying that we will invest nearly £100 million of Government and EU money to provide the campus and other facilities. I shall certainly do all that I can to encourage that important local provision.

The hon. Gentleman will be interested to learn that since we published our White Paper on higher education I have been approached by six or seven regions, all seeking to establish a university, both because they want to provide higher education for a wider group of people in the locality and because they believe that universities play an important role in regenerating the local economy. That demonstrates a change in the past 10 years in people's view of the role of universities, and I hope that the hon. Gentleman accepts that that is an important part of the White Paper proposals currently out for consultation.

Participation in higher education among young people in Cornwall is equal to the national average. The hon. Gentleman's figures demonstrated a slight fall-off in post-16 education, which is worrying. I shall consider whether the Department can do anything more to support local initiatives to try to encourage more students to stay on, but I hope that he will welcome the introduction of the educational maintenance allowances, which will be available nationally by 2004, as a financial incentive in support of that aim. I am a bit suspicious of his contention that the current fee regime has had a disproportionate impact on people in Cornwall. I cannot trace that in the figures that I have seen. Although we would all accept that there was a blip in applications in the year when the new regime was introduced, there has since been a steady and welcome increase in applications and in attendance in higher education, which demonstrates what we well know—that all young people who go through higher education see it as providing excellent value and good investment in the future. That is why I want the hon. Gentleman to join us in promoting higher education as a way forward in his county and elsewhere.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

I do not want to exaggerate the point. The numbers in higher education have fallen back in terms of the numbers who started at GCSE. I am worried about that, as the Minister would be. Nationally, once the initial effect of the tuition fee had worked through, although participation did not rise as fast as the Government would have wished, it continued to rise. In Cornwall, the participation rate has flattened off, and I think that tuition fees had an effect there.

Photo of Margaret Hodge Margaret Hodge Minister of State (Education and Skills) (Lifelong Learning, Further and Higher Education)

I will take the opportunity provided by the debate to examine that in detail and write to the hon. Gentleman.

I recognise that many of those who participate in higher education in Cornwall come from lower income backgrounds. That is reflected in the fact that almost three out of four Cornish students, many of whom study in the south-west even if they do not study in Cornwall, get full or partial contribution to the fee that currently exists, which is only a contribution to the current costs of tuition.

I do not accept much of what the hon. Gentleman said about the drivers for increased participation. In all the work that I have done over the past 18 months to two years in this job, I have come to learn that if we want to raise participation in higher education—and we do, because of the benefits for social inclusion and for the development of a much more skilled and competent work force—the key is to get more young people to stay on in school beyond the age of 16. Nine out of 10 of those who achieve two A-levels go on into higher education.

The real problem that we have in Britain, which seems from what the hon. Gentleman said to be particularly acute in his county, is encouraging young people to make that extra investment of time and money to stay on in education, so that they can expand their earnings later in life. Staying on in school and achieving the prior attainments necessary to pursue a university education unlock the opportunity that we want for individuals.

The other issue that we need to tackle, and which I am sure is true of Cornwall, is that far too many young people from low income families do not see university as an option for them. They see it as something for other people. That is why today's proposals from Opposition Front Benchers are so deeply damaging. If they were put into effect, we would revert to a situation in which only a few would see university as an opportunity for them, and the many would fall by the wayside and not develop their potential or contribute fully to the economy. Changing aspirations and achieving prior attainment are key to ensuring that the new combined universities of Cornwall are a success and are attended by many local people.

We need an appropriate funding regime. The hon. Gentleman would do a huge service to his constituents in getting them to aim higher and participate if he were a little more honest about what we were proposing. We recognise that debt aversion is a particular issue among young people from low income backgrounds, which is why we have put together a package of proposals that addresses debt aversion among people from low income backgrounds, while ensuring that we get more money into the sector and that those who benefit from a higher education in increased earnings during their lifetime pay a little bit back into the system.

Only four out of 10 people currently pay the contribution to the fee. With our new system, that will continue. Only one in four of the hon. Gentleman's constituents currently pay the full contribution to the fee. If there is no change in the income distribution in his constituency, that will continue, and he should tell his constituents that that is the case.We also believe—he should applaud this—that it is important to get rid of upfront fees, which is why we have said that we do not expect people to pay when they are getting their education, but we do expect them to contribute when they become graduates and earn much more.

We are bringing back grants; let us again have a bit of honesty and straightforwardness about that. A third of our students will get a grant of £1,000. That will be on top of the loan, which, as the hon. Gentleman will know, is offered on extremely generous terms. A student from a low-income background will get a £4,000 loan, will not be expected to pay the £1,100 fee and will get a grant on top of that. That scheme, which reaches a third of students, is much more generous than the scheme that currently applies in Wales, for which his party has some responsibility.

We are also raising the repayment level to £15,000. From a graduate on £20,000 a year, we are asking for a repayment of £8.60 a week, which is about the price of two bottles of wine or three glossy magazines. I believe that that is affordable. The loan scheme bears no real interest and is income contingent, so it will meet the needs of women, who may take time out of the labour market. People will pay only according to what they earn and pay back only what they borrowed in real terms. I think that that is a fair way forward.

On variable fees, I do not accept that debt will double. We have clearly said that we will expect institutions that wish to introduce variable fees to have in place a bursary scheme that will give additional support to people from low-income backgrounds. We will also ensure that, if universities such as the combined universities of Cornwall wish to take that route, they properly engage with their local population to encourage young people to aim higher and go to university.

The Conservative proposals were advanced today, and I agree with Andrew George that they would threaten the expansion of place numbers in his county. However, the Liberal proposals do not add up. Interestingly, both Opposition parties have made proposals that simply do not make arithmetical sense. The Liberals not only want to abolish tuition fees, double grants and pay benefits in the long vacation—we reckon that that would probably cost significantly more than £1 billion—but have said that they will be generous about research and meet the Bett pay settlement. Again, that does not add up.

I say to the hon. Gentleman that a 50 per cent. tax rate will not be the magic pot of money that funds every student in Cornwall. Our proposals will ensure fair access and expansion that will give us the inclusion and economic growth and prosperity on which our policy is built.

Question put and agreed to.

Adjourned accordingly at twenty-two minutes to Nine o'clock.