Baroness Garden of Frognal:

Moved by Baroness Garden of Frognal

1: Clause 1, page 2, line 10, at end insert— “(1A) For the purposes of this Schedule, one credit corresponds to 10 notional learning hours.”Member's explanatory statementThis amendment puts the number of hours that constitute a credit on the face of the Bill.

Amendment 1 proposes the widely accepted requirement that the learning hours associated with credit must be consistent with sector-wide standards. It would be beneficial to have 10 hours written in the Bill in order to cement its definition, because that would mean that no new definition could be introduced or imposed at a later date for the purposes of setting fee limits.

We continue to express concern that the lack of detail in the Bill could mean that in the future the policy could significantly change from the intentions of the current Government, and there is little constraint against decisions made by the Secretary of State—often a “here today, gone tomorrow” Minister—but I recognise that on Report we are unlikely to be able to change the powers of the Secretary of State.

Amendment 2 proposes the insertion of a new clause to review the provisions in the Act. Businesses are reporting having difficulty recruiting employees with the relevant skills. In August 2022, the Federation of Small Businesses found that 80% of small firms faced difficulties recruiting applicants with suitable skills in the previous 12 months. The Recruitment and Employment Confederation estimates that if labour shortages are not addressed, the UK economy will be £39 billion worse off each year from 2024.

Despite the rising population, many employers are facing skills gaps. Some 28,300 London employers report that not all their employees have the right skills for the job. Almost a quarter—23%—of all vacancies in London are due to a lack of applicants with the right skills, while almost half of firms—42%—are not confident that they will be able to recruit people with the higher-level skills their organisation needs over the next five years. It is possible that many of the migrants waiting to be processed will have the skills that the country urgently needs, so when will the Home Office speed up the processing so that we can see if that is the case?

We are not convinced that the introduction of the lifelong loan entitlement will help to plug the gaps. The Liberal Democrats have called for grants, rather than loans, to encourage adult reskilling, concerned that many adults will be reluctant to take on debt for their further training. Will the LLE allow people to upskill effectively? Will they want to take out loans to upskill? It will be important for the Government to review the impact of the provisions of the Bill to assess whether these measures alleviate the skills shortages.

I am not my party’s expert on sharia finance, but I am aware of the Islamic belief that benefiting from lending money by charging interest or repaying more than the initial amount borrowed—riba—is forbidden. The investments made by loan companies, which might be in industries such as gambling or alcohol, are also considered problematic. For these reasons, Muslim students are deterred from taking out student loans from the Student Loans Company to cover the tuition fees and living costs associated with higher education. Research has shown this can act as a barrier to higher education for Muslims or cause financial hardship for those who do choose to study at university.

The UK Government first proposed a student finance product consistent with Muslim beliefs about interest-bearing loans in 2013. The Higher Education Research Act 2017 allows the Government to introduce such a product, but it has yet to do so. The issue has been raised in Parliament a number of times, with the delay described as shameful by my noble friend Lord Sharkey, who is indeed an expert on sharia finance.

In March 2023, in their response to the consultation on the lifelong loan entitlement, the Government said that a sharia-compliant alternative student finance product would not be available as part of the launch of the LLE in England in 2025. In July 2023, the Government said that they remain committed to delivering alternative student finance as soon as possible after 2025. Can the Minister say why the Government have yet to do this? It would be useful to understand their thinking behind the delays and whether they could explain how the introduction of the LLE would impact those who require sharia-compliant loans.

The other part of the amendment calls for a review before the end of 2026, and preferably earlier. I have also added my name to Amendment 4, which Labour will introduce. I look forward to the Minister’s response, and I beg to move.

My Lords, I rise to speak to Amendment 4, which would require the Secretary of State to publish a review of the lifelong loan entitlement before bringing in further regulations on fee limits. I welcome the Minister's comments in Committee, and I fully understand her feedback about what information will accompany further regulations as these changes are rolled out.

We have brought this amendment back to further raise the point about ensuring that students, the sector and Parliament are given clear information on the details of the LLE as soon as possible. Throughout the passage of this Bill, we have raised concerns, often after input from those in the higher education sector, that so little about the LLE in terms of course provision, maintenance, credits, transfers, and further rollout of modular study at other levels is confirmed in any meaningful detail.

I am none the less grateful that, following Committee, the Minister outlined further details of the LLE that relate to this Bill in a letter. However, as we know, this huge shift in higher education policy goes further than fee limits. We all want this change to work, but for that to happen the sector will need much more clarity than has been provided through this very narrow Bill.

The accounting officer assessment for the LLE states:

“The main feasibility risk of LLE is meeting the 2025 delivery timescale”.

Is the Minister still confident that the department will be able to deliver on time, particularly in the light of current pressures arising from the major emergency that the department is currently dealing with in school buildings across the UK?

My next question follows on naturally: what is in place if this timescale turns out to be unworkable? There are a great many sector stakeholders—as well as the students themselves, of course—who will need clearly communicated timelines. Amendment 1 from the noble Baroness, Lady Garden, puts in the Bill the number of hours that constitute a credit. We understand why she tabled that amendment: it is important that the sector is given clarity and control over the definition of working hours and that it is consistent with the QAA’s higher education credit framework. As she noted, her concern is about the lack of detail. This is one of many areas in which the higher and further education sectors still have questions about how a credit will be defined.

The concept of a credit in education terms will also be completely alien to the general public, and there is a risk that employers simply do not understand its value. The Government need to think about how this can be communicated. We do not believe that putting a number in the Bill at this point would be beneficial. However, we would like a commitment from the Government that they will not seek to amend the value of a credit and will be led by the sector’s understanding of it.

On Amendment 2, I am glad that the Minister has outlined the Government’s plans to ensure sharia-compliant loans in writing; we look forward to receiving further engagement on this issue as the LLE progresses. But, as the noble Baroness, Lady Garden, pointed out, there is a distinct problem with skills gaps—a lack of applicants with the right skills. The economy cannot move forward appropriately with skills shortages.

My Lords, the amendments reflect widespread cross-party support for the Bill and its principles; they are not intended to destroy the Bill in any way. I see the case for the Bill, which of course I warmly welcome, as opening up new possibilities. We genuinely do not know the circumstances in which people may take them up and we do not know whether debt aversion is much more of an issue among mature learners than among young people aged 18 or 19; we will find out only if we give this a try. Similarly, we do not know how much suppressed demand there is for level 4 or level 5 qualifications because of the way in which loans are currently structured; we will find out only if we give this a try. So this is definitely worth going forward with.

I have three brief comments on the amendments. First, one of the temptations we have in this House— I have occasionally succumbed to it myself—is to try to determine the details of policy through primary legislation. That is one of the risks in Amendment 1, with its specification of the definition of “one credit”. Of course, it is an important and interesting area but, as we are embarking on a journey with a new and more flexible system, trying to put that into primary legislation would inhibit necessary policy flexibility—a point that I think the noble Baroness, Lady Wilcox, referred to.

Secondly, I agree with the point made by the noble Baroness, Lady Garden, on sharia-compliant loans. We have been at this for 10 years now, and it really is time that a scheme such as this were available and in force. There were initially some tricky problems, but I think that the long work that the department has done over the years has resolved them. My understanding is that the technical and theological issues have been addressed. I know that the Minister herself is keen to get on with this, so anything that she can say to the House about her commitment to that timescale would be very welcome.

Finally, on Amendment 4, I am proud to say that I am acting as the spokesman for the noble Baroness, Lady Wolf. She very much regrets that she cannot be with us; she briefly appeared, but I think she had to catch a plane to Lithuania. In many ways, she is the intellectual origins of the Bill. I know that her spirit is that she wants to get on with it. Her concern about this amendment—which I completely understand and support—is that requiring another review before we can get on with things will slow down the pace still further. I think that the mood across this House is that we want to get on with it; we do not want reasons for further delay. I fear that Amendment 4 would constitute another obstacle to this potentially important and significant innovation in policy, which I warmly support.

My Lords, many interesting points have been made about the amendments. I agree with the noble Lord, Lord Willetts, and the other speakers that we would like to see this progress; it is a good idea. We want to improve access to education, which means having more and better information about fees and recognising the fact that they cannot just continue uncontrolled.

Another point I endorse is that which the Minister said in a previous speech on this subject: that the Government had a “phased approach” to this. I think consideration has been given to the many points that have been very intelligently raised; I am sure that the Minister is grateful for them.

My Lords, ahead of speaking to the amendments tabled, I thank all noble Lords across the Chamber for their contributions and the support they have expressed, both for this Bill and for the wider programme to transform opportunities to build qualifications over one’s lifetime. We heard from the noble Baronesses, Lady Garden and Lady Wilcox, about the importance of filling skills gaps so that the economy can grow. I thank both my noble friend Lord Willetts and the noble Lord, Lord Berkeley of Knighton, for their support and acknowledgement that the Bill will open new opportunities for learners.

Amendment 1, tabled by the noble Baroness, Lady Garden of Frognal, would define a credit as equivalent to “10 notional learning hours” in the Bill. The Government believe that it is crucial that the definitions of credits in the fee limit calculations align to standard practice in the sector—a point the noble Baroness, Lady Wilcox, made. The Government plan to set out this detail in regulations, rather than in primary legislation. The power to do so is provided for in new paragraph 1B of Schedule 2 to the Higher Education and Research Act 2017, introduced through Clause 1 of this Bill. Specifying learning hours in secondary rather than primary legislation means that providers that might choose to use a different number of learning hours per credit will simply have those courses treated as non-credit-bearing for fee limit purposes. If we took the approach of this amendment, those same providers could instead be considered in breach of the fee limit rules as a whole, with all the regulatory consequences that might bring. I am sure that is not what the noble Baroness intends with her amendment.

To be clear, as I think the noble Baroness’s amendment seeks to do, the Government do not intend to change the number of learning hours in a credit unless standards in the sector change. Learning hours are, and should continue to be, based on sector-led standards. Regulations on learning hours will follow the affirmative resolution procedure, so Parliament will get the opportunity to debate and formally approve any changes to those regulations.

Amendment 2 and Amendment 4, tabled by the noble Baroness, Lady Twycross, and the noble Lord, Lord Watson of Invergowrie, would require the Secretary of State to publish a review of the impact of the future Act on the progress of the rollout of the lifelong loan entitlement. Amendment 4 sets out that such a review must be published ahead of regulations being laid, and Amendment 2 would require the review to be presented to Parliament before the end of 2026. I thank my noble friend Lord Willetts for being the very eloquent messenger of the noble Baroness, Lady Wolf. We absolutely agree with her point and that made by the noble Lord, Lord Berkeley. Amendment 2 specifies that the review should include the impact of the credit-based method on sharia-compliant loans and skills gaps.

I thank your Lordships for these amendments. The Government agree with the sentiment behind them, if such sentiment seeks the department’s commitment to monitoring the impact of these measures on the transformation of student finance under the lifelong loan entitlement. As your Lordships will be aware, the Government published an impact assessment alongside the Bill upon its introduction in the other place in February this year. Subsequently, the department published an updated and more extensive impact assessment of the lifelong loan entitlement, more broadly, alongside the publication of the consultation response in March. As was committed to in the impact assessment published in March, and in accordance with the Better Regulation Framework, a more detailed assessment of impacts will be published at the point when the Government lay the necessary secondary legislation to implement the lifelong loan entitlement fully. Therefore, the Government already intend to publish an updated impact assessment covering all aspects of the LLE, including the measures in the Bill, when regulations are laid.

In addition, parliamentary accountability mechanisms are already in place to review Acts of Parliament and the impact that they have on policy, including post-legislative scrutiny in particular, but not exclusively. There will be continued scrutiny of the LLE and the impact of these measures in both this place and the other place, including the role of the Education Select Committee in scrutinising the work of the department.

I will just rest for a moment on the point about post-legislative scrutiny, which I understand the noble Baronesses raised at the briefing yesterday. The noble Baroness, Lady Wilcox, will be aware that under the current government guidance and as proposed in 2008, between three to five years after an Act is passed it should be reviewed by the government department and Parliament. I can assure the noble Baroness that the Government will seek to work together with the relevant Select Committee in line with that guidance. However, while we recognise the importance of reviewing the implementation, it should be not just of this Act but of the reform of the system—and again, I can commit that the Government would like to see that review happen.

On the specific details within the amendments themselves, the timing requirement in Amendment 4 would require a review of the impact of the Bill on the rollout of the LLE prior to regulations being laid. I want to be clear here that any impact assessment which is conducted ahead of laying regulations would not be any different to the impact assessment currently available for the Bill and the consultation process. The next point at which impacts can be assessed is when the regulations are laid and, as stated, the Government are committed to publishing an impact assessment at that time.

Amendment 2 relates to the impact of the credit-based method on sharia-compliant loans and skills gaps. First, it is important to note that fee limits are set on courses, not on students. Therefore, the credit-based method—like the current fee limit system—will not depend on any characteristics of individual students. All students on a course will have their fees determined in line with the same fee limit rules, regardless of whether they use their LLE, self-fund, or use alternative loan arrangements.

I take this opportunity to assure your Lordships that the Government remain committed to delivering an alternative student finance product compatible with Islamic finance principles. The noble Baroness, Lady Garden, questioned why it was taking so long. I will not rehearse all the arguments, but I think she will remember that we touched on this in Committee, and it really is linked to the complexity of implementation. Every element that changes within the student finance systems needs to be mirrored for the alternative finance product, so it is a more complicated process and is contingent, and it has to follow the building of the systems which will allow us to deliver the new approach.

The noble Baroness, Lady Wilcox, questioned our commitment to being able to deliver by 2025. I remind the House of the measures that we set out in the letter that I sent your Lordships on this point following Grand Committee. I am pleased to confirm that in August, the Student Loans Company commenced delivery planning for alternative student finance, and it is supported on this phase of work by experts in Islamic finance, the Islamic Finance Council UK. I continue to meet on a quarterly basis with the Student Loans Company, the Islamic Finance Council UK, the noble Lord, Lord Sharkey, Stephen Timms MP and representatives from the Islamic community to discuss the steps the Government are taking to deliver alternative student finance as swiftly as possible. Because of the delays there have been, we need to be as transparent as possible to make sure that we build or rebuild trust with the community that we really will deliver on this. I will provide a further update on alternative student finance later this year.

On skills gaps, in response to the LLE consultation, the Government made it clear that they will be taking a phased approach to modular funding, as the noble Lord, Lord Berkeley, reminded the House, focusing on higher technical courses which have the clearest employer value. It is important to note that fee limits are not a means to address skills gaps; they are to ensure that students have affordable access to higher education provision provided by those higher education providers who receive government funding to support course delivery.

Finally, it is worth noting that the LLE policy is much wider than the provisions of the Bill, and as such, the reviews sought through these amendments would focus narrowly on fee limits and not on the impact of the LLE as a whole.

For these reasons, while the department understands the sentiment behind these amendments, they would either have unintended consequences or would be unnecessary, as there will already be mechanisms in place to provide such review. Therefore, the Government cannot accept these amendments and I hope that your Lordships will withdraw or not move them.

My Lords, I thank the Minister for her response and her reassurance, and I thank the noble Baroness, Lady Wilcox, and the noble Lords, Lord Willetts and Lord Berkeley, for their comments on this short debate.

Of course, we are all committed to encouraging lifelong learning—it is essential for the well-being of the country and of individuals—and we all want to make sure that it is encouraged. As I say, we continue to express concern that adults may not prepared to take on loans for this but, obviously, only time will tell. I thank the Minister for her remarks about sharia finance, because it is a concern that Muslim students are deterred from entering higher education because they cannot get the means to do so. With that, I thank all your Lordships and I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

Amendment 2 not moved.