Higher Education: Loans - Motion to Regret

Part of the debate – in the House of Lords at 6:45 pm on 5th April 2017.

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Photo of Viscount Younger of Leckie Viscount Younger of Leckie Lord in Waiting (HM Household) (Whip), Lords Spokesperson (Department for Education) (Higher Education) 6:45 pm, 5th April 2017

My Lords, I start by thanking the noble Lord, Lord Stevenson, for tabling this Motion. Before I respond, I shall, if I may, take the opportunity to say a few words about the noble Lord. The House now knows from remarks he made towards the end of Third Reading of the Higher Education and Research Bill last night that he is stepping down from his current spell of active Front Bench responsibilities. This is certainly a surprise to me, and I am genuinely very sorry to hear it.

I have engaged with the noble Lord fairly intensively on a number of Bills in this House over several years, as he will know, as have some of my colleagues. It is fair to say that we usually know where we stand with him. He can be direct; he sometimes tells it as is, which he should certainly take as a compliment. He also looks to be helpful and constructive—while emphasising his party’s perspective, of course. Above all, I will miss his humour, sometimes cryptic, often sharp and always quick. My colleagues on these Benches have great respect for him and regard him as a bit of a magician—a member of the Magic Circle, perhaps—for his ability to juggle several Bills at the same time with relatively little support, although I am sure it is quality support. He will not be leaving the Front Bench entirely, I understand, but we all wish him well for the future.

These words have nothing at all to do with me trying to warm the seat for the noble Lord as I move on to respond to the concerns he has raised this afternoon. We take pride in the fact that Britain has some of the best universities in the world. To make sure that this continues, it is important that we put universities on a strong, sustainable financial footing. Indeed, Andreas Schleicher of the OECD said in September 2016 that,

“the UK had been able to meet rising demand for tertiary education with more resources … by finding effective ways to share the costs and benefits”.

However, the £9,000 fee cap that was set in 2012 is now worth £8,500 in real terms. If we leave it unchanged, it will be worth £8,000 by the end of this Parliament. As my noble friend Lord Willetts alluded to in his speech, the Labour Government under Prime Minister Tony Blair sensibly put in place new legal powers in 2004, which allow Governments to maintain university fees in line with inflation through a negative procedure. Rather than increasing the fees for everyone, we are allowing only high-quality providers to increase their fees in line with inflation. Universities UK and GuildHE, the two main representative bodies that collectively represent more than 170 higher education providers in England, Wales, Scotland and Northern Ireland have made it clear that allowing the value of fees to be maintained in real terms is essential if our providers are to continue to deliver high-quality teaching.

The importance of this was expressed by Gordon McKenzie the CEO of GuildHE when he wrote that,

“fees had to rise by inflation at some point and it was fairer for students if those rises were linked to an assessment of quality.”

The vote on Report of the Higher Education and Research Bill was obviously disappointing. However, I remind noble Lords that the parliamentary process is still ongoing, and I look forward to Peers’ further engagement on this matter. Our policy intention remains to link maximum fees to the quality of provision via the teaching excellence framework as part of our wider reform package, as we are doing through these regulations. It is counter to government policy to see fee caps rise under any other circumstances.

As I mentioned, the fee link has been strongly supported by sector organisations GuildHE, as well as Universities UK, which said,

“allowing the value of the fee to be maintained in real terms is essential to allow universities to continue to deliver a high-quality teaching and learning experience for students”.

The noble Lord, Lord Stevenson, stated that the TEF was not ready and that we needed to move to the subject-level TEF. His opposition to TEF flies in the face of the support given to it by the sector bodies—and I have just added a few quotes to support that. It is absolutely our intention to move to subject-level assessment, but carefully, after two years of rigorous pilots.

I refer to the points raised in the Motion about the importance of ensuring access to university for everyone. Through universities being sustainably financed, we have been able to lift the student number cap, meaning that more people than ever before have been able to benefit from a university education, as my noble friend Lord Willetts said. Many people said, when fees were increased to £9,000, that it would dissuade people from disadvantaged backgrounds, but the opposite has happened. For this academic year, 2016-17, the entry rate for 18 year-olds from disadvantaged backgrounds is at a record high—namely, 19.5% in 2016, compared with 13.6% in 2009. So far, that has continued into 2017, with record applications for the 15 January deadline. Disadvantaged young people are now 43% more likely to go to university than in 2009, or 74% more likely to go to university than in 2006. In addition, those who go to university have more funding available to them. By replacing maintenance grants with loans, we have been able to increase the funding for living costs that some of the most disadvantaged students receive. It is an increase of over 10% in the current academic year, with a further 2.8% increase for 2017-18.

The noble Baroness, Lady Garden, stated that there were too few BME students, and of course we would always want more. However, we have record numbers of black and minority ethnic students going into higher education, and we want to go further still. We are legislating for greater transparency that will provide unprecedented access to anonymised applicant data on gender, ethnicity and socioeconomic background, as I think she is aware.

Universities, too, are spending even more to help those from disadvantaged backgrounds to access higher education. In 2017-18, institutions are expected to spend over £800 million on measures to improve the access and success of disadvantaged students, which is more than double what was spent in 2009-10 and can continue to increase if fees are allowed to keep pace with inflation. The Government’s policy will further build on this success, as stated by Les Ebdon, the director of the Office for Fair Access, that,

“TEF will ensure that higher education providers have to carefully consider about how to provide excellent teaching for all their students, whatever their background”.

On the repayment of loans, I wish to assure noble Lords that our repayments system offers a fair deal to students. The current student loan system is heavily subsidised by the taxpayer and universally accessible to all eligible students, regardless of their financial circumstances. While the Motion in front of us states that the Government retrospectively change the terms of loans, I would remind the House that nothing in fact has changed. Our repayments system is based on income and not the amount borrowed. Again, my noble friend Lord Willetts alluded to that issue. Graduates with post-2012 undergraduate loans pay back only when they are earning more than £21,000, and then only 9% of earnings above that threshold. After 30 years, any outstanding debt will be written off, with no detriment to the borrower. That is entirely different to a commercial loan. The maximum fee cap is rising only by inflation, so it will not increase in real terms for anyone going to university.

We believe that it is right for those who benefit most from higher education to contribute to the costs. We should not forget that higher education leads to a better chance of being employed compared to those holding two or more A-levels, and an average net lifetime earnings premium that is comfortably over £100,000.

The noble Lord, Lord Stevenson, asked about reporting to Parliament on student loans, which is a fair question. I reassure the House that the debt repayments and costs associated with the present system of student loans are already reported annually to Parliament in the Department for Education’s annual report and accounts, the next set of which is due to be published this summer. In addition, student loans also feature regularly in the economic and fiscal outlook publications from the OBR, which are laid in Parliament twice a year.

Finally, I reassure your Lordships that the fee increase under these regulations is open only to those institutions who meet high-quality standards. For this year this meant that they passed a quality review carried out by highly respected bodies such as the QAA, and those that wanted to charge the highest fees will need an access agreement.

As the TEF is fully implemented, the assessment process that universities will have to meet to be judged as good enough to raise their fees in line with inflation will become even more rigorous and more robust. The TEF will provide strong reputational and financial incentives to prioritise the student learning experience. We are linking funding to quality of provision, not just quantity of students, and ensuring that providers must demonstrate high-quality teaching if they wish to maintain their fees by inflation.

The TEF has been strongly supported by organisations such as OFFA and the Sutton Trust, bodies whose fundamental purpose is to support the life chances of those from disadvantaged backgrounds. The Sutton Trust, for example, has said that,

“we need to shake the university sector out of its complacency and open it up to a transparency that has been alien to them for far too long. It is good that they are judged on impact in the research excellence framework, and that the teaching excellence framework will force them to think more about how they impart knowledge to those paying them £9000 a year in fees”.

Ensuring that people from all backgrounds are able to go to university is an essential part of the Government’s ambition to support all people to realise their potential, whether they are young or mature students and whether they study full or part-time. The increases to maximum fee caps set out in these regulations are critical to achieving that objective. They ensure that our university sector has a sustainable financial footing so that it remains world-class. I remind noble Lords that we are allowing fee caps only to keep pace with inflation—and in real terms they will be less than in 2012. Equally, we remain firm that these fee increases should not be automatically given but awarded to those that provide high-quality teaching and value for money to students.

I will answer some points on student funding made by the noble Lords, Lord Stevenson and Lord Bew. We believe our student funding system is fair and sustainable. The resource accounting and budgeting charge is not an unintended loss nor a waste of public money. It is the policy subsidy required to make higher education widely available, achieving the Government’s objectives of increasing the skills in the economy and ensuring access to university for all. After I answered an Oral Question from my noble friend Lord Flight the other day, I wrote quite a lengthy reply to him on this matter, and I am more than happy to put a copy of that letter in the Library if it is not already there.

The Government’s policies increase the number of people who are able to benefit from university education, resulting in record numbers of young people from disadvantaged backgrounds applying to university. Those opposing the increase in fees in line with inflation have not explained how they will find the £16 billion of which they will be depriving our universities over the next decade, risking universities’ financial sustainability and depriving universities of the funding they need to provide a high-quality education.

Therefore, in the light of my remarks, I hope that the noble Lord, Lord Stevenson, will consider withdrawing his Motion.