Clause 40 - Other amendments of section 22 of Teaching and Higher Education Act 1998

Higher Education Bill – in a Public Bill Committee at 3:15 pm on 9th March 2004.

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Photo of Mrs Anne Campbell Mrs Anne Campbell Labour, Cambridge 3:15 pm, 9th March 2004

I beg to move amendment No. 213, in

clause 40, page 18, line 36, at end insert—

'(2A) After subsection (2) insert—

''(2A) In determining the levels of residual income below which a parental contribution shall not be required in respect of any grant for an eligible student, regulations under this section must establish different levels for each region reflecting such indices of the cost of living in different regions as the Secretary of State considers appropriate.''.'.

Photo of Roger Gale Roger Gale Conservative, North Thanet

With this it will be convenient to discuss amendment No. 214, in

schedule 6, page 33, line 23, at end insert—

'9A In section 43(1) (general interpretation), insert—

''region'' means—

(a) Wales, and

(b) the regions of England specified in Schedule 1 to the Regional Development Agencies Act 1998.''.'.

Photo of Mrs Anne Campbell Mrs Anne Campbell Labour, Cambridge

One of the interesting things about the process of a White Paper and then a Bill is the change that takes place in the course of that evolution. I appreciate the way in which my right hon. Friend the Minister has listened to the fears expressed by Back Benchers and has managed to modify the Bill quite considerably to accommodate those concerns.

When we began this process, the White Paper originally said that there would be grants of £1,000 for those whose family income was under £10,000 a year. That was then changed to families with incomes under £15,000 a year. It later became a grant of £1,500, available to those from families with incomes under £15,000 a year. We have now seen a further change with the roll-up of the fee remission of another £1,200, making a total grant of £2,700, and a bursary of £300, which adds up to a final figure of £3,000. That is a good deal for people from lower-income families. I no longer have the concerns that I had about students from very low-income families being deterred from going to university. What is now on offer is much better than the current situation. I believe that more students from poorer backgrounds will be encouraged to go to university under the Government's proposals.

However, I have a concern and I hope to be able to push the Minister a little further this afternoon on it. There are students who come from families who do not appear to have a very low income but who live in an area that has high-cost housing. That is the case in my constituency and in those of my hon. Friends who have subscribed to the amendment. The problem was first brought to my attention by my hon. Friend the Member for Reading, West (Mr. Salter), who has great

concerns about families in his constituency who do not appear to be on very low incomes but who have small disposable incomes.

I have examined comparable house prices in different regions and areas. There are huge discrepancies. You will be sorry to hear, Mr. Gale, that I do not have the figures for every Committee member, but I have focused on a couple of places to illustrate the point that I am trying to make about the huge differences. The figures were taken from the Land Registry, and they are recent, having been last updated on 4 February this year. In the constituency of my hon. Friend the Member for Reading, West, the average price of a two or three-bedroom terraced property is £156,000; in Greater Manchester, it is just over £68,000; in Salford, it is £58,000. In parts of London, the figure is much higher. Greater London's average price for such a property is £271,000, but that varies: in Barking and Dagenham, the figure is £158,000 and in Kensington and Chelsea it is about £1.5 million. Cambridge is very expensive compared with many of those places, although not with Kensington and Chelsea's £1.5 million: the average cost of a terraced house in Cambridge is about £234,000. I am seeking to illustrate that the disposable income of somebody who lives in a very high-cost housing area such as my constituency will be far less than that of people who live in cheaper housing areas.

I have also examined the mortgage repayment for an average Cambridge terraced house costing £234,000. Assuming that the purchaser had a deposit of about £25,000, they would be paying their mortgage on £209,000. The Council of Mortgage Lenders average interest rate for the past month was 4.19 per cent. Using that figure and the Moneyfacts mortgage calculator, the monthly repayment on a repayment mortgage for that property over 25 years works out at £1,125. That is consistent with Nationwide's figure of £1,238 as the monthly repayment.

Let us consider someone in Cambridge who comes from a family at the top end of the income scale at which a grant would be payable, with an income of around £33,000. The take-home pay on a salary of £33,000 would be just over £2,000 a month, out of which one might pay £1,125 in mortgage costs, thus leaving a disposable income of about £1,000 a month. That is not a great deal for a family that may consist of two adults and two teenage children. Now let us consider the same calculations for a family in Manchester. First, I remind the Committee that one can buy a terraced house in greater Manchester for £68,000. If we make the same assumptions as before and allow for a deposit of £25,000, mortgage repayments of £43,000, and take-home pay of £33,000, the mortgage calculation would be £225 a month, thus leaving £1,941 of disposable income.

There is a huge difference between the disposable income of those two hypothetical families, who have the same income but live in different areas. In Cambridge, they would have a disposable income of about £1,000 a month, whereas in Manchester it would be almost £2,000 a month.

Photo of Phil Willis Phil Willis Shadow Secretary of State for Education and Skills, Education & Skills, Shadow Spokesperson (Education)

The amendment is an interesting one, and raises a crucial issue about differential house pricing and costs. However, does the hon. Lady accept that, in Cambridge, there will be people who earn £33,000 and live in housing association properties with relatively low rents, whereas there will be others on the same income who live in expensive homes? Does she presume that each of those students would get the same grant?

Photo of Mrs Anne Campbell Mrs Anne Campbell Labour, Cambridge

Someone who has lived in a housing association property for some time may earn £33,000, but there is no way that someone coming into the city on that kind of salary would qualify for a housing association property. The Hundred Houses Society, a housing association in Cambridge, told me that it would not be able to offer a property to anyone earning over about £18,000 a year. That makes it almost impossible for anyone earning between £18,000 and £30,000 a year to live in the city, because they would not be able to afford the rent or mortgage repayments, and they would not qualify for local authority housing or for housing association properties. There is a real dilemma there. I do not say that that situation exists in all expensive housing areas, but it is certainly true in my constituency.

For a mortgage payer in Cambridge to be as well off as someone earning £33,000 in Manchester, they would need to earn £8,400 more a year. In other words, in Cambridge, one would have to earn £41,400 a year to be as well off as someone in Manchester earning £33,000 and paying a different mortgage.

Photo of James Plaskitt James Plaskitt Labour, Warwick and Leamington

I follow the drift of my hon. Friend's argument, but as she seeks to redress the situation by establishing different levels for each region, will she define how she intends the word ''region'' to be used?

Photo of Mrs Anne Campbell Mrs Anne Campbell Labour, Cambridge

I hope that there may be a fairly liberal interpretation of ''region'', because I know that there are some low-cost areas in the eastern region. For example, houses in Suffolk and some parts of Norfolk are much cheaper than in my constituency. The sensible approach would be to say that areas that achieve area cost adjustment through their local authority funding mechanisms—

Mr. Plaskitt indicated dissent.

Photo of Mrs Anne Campbell Mrs Anne Campbell Labour, Cambridge 3:30 pm, 9th March 2004

I am sorry that my hon. Friend is shaking his head. Perhaps he is unaware of the difficulty that low-income families have surviving in expensive parts of my constituency. It would be helpful to make use of a mechanism such as the area cost adjustment, which is already in place.

Photo of Alan Johnson Alan Johnson Minister of State (Education and Skills) (Lifelong Learning, Further and Higher Education)

I thought that amendment No. 214 defined regions as those

''specified in schedule 1 to the Regional Development Agencies Act''.

That would give no flexibility and would define regions in accordance with the regional development agency's boundary. That is a genuine point. Perhaps I have misread the amendment, although I do not think that I have.

Photo of Mrs Anne Campbell Mrs Anne Campbell Labour, Cambridge

I confess that when I read the amendment again, I realised that it might exclude my constituency, so I was trying to encourage the Minister to think about it flexibly. Nevertheless, whether we take regions or county council areas, to which the area cost adjustment currently applies, the principle is the same, and the figures that I chose to illustrate my point demonstrate the problems of living in high-cost housing areas.

Photo of James Plaskitt James Plaskitt Labour, Warwick and Leamington

Let me explain why I am concerned about my hon. Friend's proposal. Let us imagine a typical terraced property in Leamington. A similar-sized property just 10 miles away in the city of Coventry would be about one third of the price, but both properties would be in the same region under any system of regionalisation.

Photo of Mrs Anne Campbell Mrs Anne Campbell Labour, Cambridge

There will obviously be big differences. People will choose to live in areas that they can afford and within travelling distance of where they want to work. It is difficult for teachers, social workers, postal workers, bus drivers and council workers, such as refuse collectors, to live anywhere near Cambridge, and they tend live outside it, where housing is cheaper. I cannot accept that families in high-cost housing areas feel anything like as well off as families in low-cost housing areas, because their disposable income is much lower. That would certainly apply to many students.

I am grateful to my hon. Friend the Member for Nottingham, North (Mr. Allen) for finding out what percentage of students in the constituencies of members of the Committee would qualify for the full grant if they managed to achieve the two A-levels needed to enter university. In several constituencies, the percentage is very high. As he said, 65 per cent. of students in his constituency would qualify for the full grant, while 41 per cent. in mine would qualify, at the current rates. That illustrates that Cambridge is not full of very high-income families. There are low-income families, who find it difficult to survive, because of the high housing costs.

I am suggesting that the family income threshold for those who qualify for the full grant should be a higher in high-cost areas than in lower-cost areas. Currently, the full grant goes up to an income of £15,950 a year, and some grant is payable to those with an income right up to just over £33,000 a year.

I am glad that Cambridge university has recognised the problem and deals with it in the way in which it structures its bursaries. Cambridge is suggesting that bursaries be available to students with family incomes of up to £35,000 a year. We may need to recognise that some families need a higher income in order to achieve the same standard of living as others. I am sure that this will prove to be an interesting debate.

We must also recognise that students from families with little disposable income are the most reluctant to go to university. It is for that reason that the Minister and Labour Back Benchers have campaigned so hard to get a grant in place to support those we want to encourage to go to university. I very much hope that the Committee will give that proper consideration and come to the conclusion, as I have, that there should be different thresholds in high-cost housing areas.

Photo of Mr Tim Collins Mr Tim Collins Conservative, Westmorland and Lonsdale

The hon. Lady deserves the Committee's congratulations on raising this issue. I suspect that she will not have carried all Committee members with her on how the problem should be tackled, but she is quite right to address a problem that is of concern in many parts of the country.

I thought that the hon. Lady underestimated her contribution to proceedings when she made her comment about how interesting it had been to observe how the Government's proposals had evolved since the original White Paper. That is slightly to understate the pressure that she and a number of Labour Members put Ministers under. I am not quite sure that it was so much a process of smooth evolution as of complex negotiation. It is precisely because she has made a significant contribution to the evolution of policy in a number of respects that what she is saying is of particular importance.

It was clear from a few interventions that the hon. Lady took from Labour Members that some people will be a little sceptical about whether it is possible to address the issue on a regional basis. For example, in my region—the north-west—there is a huge distinction between the property prices that apply in the Lake District national park in my constituency, and those that apply in the middle of inner-city Merseyside or Manchester. As other people have mentioned, there would be major distinctions even within some local authority areas or constituencies. In my case, the distinction between properties in the national park area and outside is dramatic. It would therefore be quite difficult to deal with the problem on a regional basis.

Having said that, it is worth while addressing not only the exact text of the amendment but the spirit behind it, and I hope that the Minister will do that. That is important, because there are huge differences in the housing costs faced by people in different parts of the country, and that clearly makes a huge difference to their disposable income and therefore to their prospects of providing significant support to their offspring as and when they decide to go to university. That subject needs to be tackled.

I will be candid with the hon. Lady: I am not sure that there is an easy way of doing what she suggests. The Government have chosen to go down the route of providing support on the basis of income. That is objectively measurable: it is fairly easy to ascertain the difference between people who are on high, middle or low incomes. She is right to address the difficulties that arise from the possibility that a big chunk of that income is consumed by housing costs, but there would be difficulties in some circumstances, even within the

same ward, in measuring differences in housing costs, for the reasons that I and other hon. Members have cited.

I suspect that we all have areas in our constituencies in which there is a big, or at least measurable, difference between the value of houses on different sides of the same road. The issue would get very complicated. That is not to belittle the point that the hon. Lady makes, which is legitimate and important. However, if we are in the business of finding practical solutions, I take the view that trying to address the problem at regional level would create more anomalies than it would resolve. To be perfectly candid, I have some scepticism about whether trying to address it even at local authority level would resolve the problem rather than making it worse.

I look forward to what the Minister may be able to say about the matter. Perhaps he will be able to say that the Government will reflect on it. I do not think that there is an easy answer. I have expressed reservations about the hon. Lady's solution, but I do not pretend to have a magic-wand solution myself; I suspect that none of us has. However, if the Government were to deploy great and weighty minds to think about this issue, that would be widely welcomed.

Photo of David Chaytor David Chaytor Labour, Bury North

I entirely understand the concerns of my hon. Friend the Member for Cambridge (Mrs. Campbell). I commend her for her research and for the statistical analysis that she presented to the Committee. However, I am mindful of the comment made about an earlier amendment by the hon. Member for Ceredigion (Mr. Thomas). He described it as ''anti-devolution''. Given the prospect of successful referendum results on devolution to the north of England later this year, I describe this amendment as ''anti-devolution'' also, because it works against the interests of people in the northern regions.

Although I accept the detailed analysis given by my hon. Friend, I am also mindful that such statistical projection based on house prices is exactly the sort of projection given by the Conservative Government in 1990 to justify the standard spending assessment regime, and particularly the area cost adjustment component of that regime, which for more than a decade systematically discriminated against regions in the north of England. I am therefore sceptical about whether such a solution is fair or workable.

If we base anything on house prices, we base it on shifting sand. As we know, house price differentials are not stable. What might be an enormous differential one year can turn out to be different the following year. If there is any house price trend at the moment, it is that the rate of increase in the south-east is slowing, while in the north it is increasing. We may see a convergence of house prices across the country. That is testimony to the fact that prices have been overheating in the south-east and have become unsustainable. Nevertheless, it would be misguided to legislate on the basis of a differential in 2004 that may have disappeared by 2007.

My second objection is the impossibility of generalising across regions. A few kilometres from the town in which I live, there are communities in which one can still buy a terraced house for £25,000. If one travels four or five miles in another direction, the typical price for a terraced house is similar to that cited by my hon. Friend the Member for Reading, West. It is utterly impossible to generalise across regions. As several hon. Members have already said, the variations within regions are enormous.

I do not deny that there is difficulty for low-income families in certain towns throughout the country, but almost by definition, families earning £20,000 or £30,000 a year cannot buy terraced houses that cost £150,000, because they could not secure a mortgage. It does not necessarily follow therefore that those families who live in rented accommodation, often in social housing of one sort or another, will be at such a disadvantage, because the rents are not directly proportionate to the capital value of house prices.

Photo of Mrs Anne Campbell Mrs Anne Campbell Labour, Cambridge 3:45 pm, 9th March 2004

I am grateful to my hon. Friend for making that point. Does he agree that housing associations and local authorities will not accept for properties families with incomes above £18,000 a year? Moreover, people may have qualified for that low-cost property some time ago when they were earning that amount, and continued to live in it when they have increased their incomes. Does he also accept that there is a strong relationship between the rents in the private rented sector and mortgage costs? I have undertaken research and found that, to pay the rent for a two to three-bedroom house in the city centre of Cambridge, a person would have to find about £900 a month.

Photo of David Chaytor David Chaytor Labour, Bury North

I do not deny the validity of the first of my hon. Friend's points, but I say in response to her second point that it is highly unlikely that many people on low incomes would be living in the centre of Cambridge. Her example is not sufficient for a generalised argument.

For those who are living in houses that are currently valued at £150,000 in Reading or £235,000 in Cambridge, it follows that they bought them some time ago. Therefore, they have the benefit of a significant windfall capital gain by virtue of having lived in the houses for a certain time. When discussing the matter with my hon. Friend the Member for Reading, West, I said that the difference between someone on a low income in Reading and someone on a low income in one of the towns in the north is that the family in Reading has the choice, if they choose to exercise it, of selling their house, moving to a different region and pocketing the capital asset. That choice is not available to someone in a small town in the north of England, whose capital assets are about £25,000.

My hon. Friend the Member for Cambridge has identified a problem, but her proposed solution is not appropriate. It would establish a remarkable precedent for the way in which the Government—or any Government—established a framework for all other forms of benefit payments. Does she similarly

argue that there should be regional variations for child benefit, the minimum wage or tax and pension credits? That is the logic of her argument.

Photo of Mr David Rendel Mr David Rendel Shadow Minister (Higher Education), Education & Skills

I have much sympathy with the hon. Lady's amendment. Like me, my hon. Friend the Member for Harrogate and Knaresborough comes from an area in which housing costs are extremely high, and we are both aware of the particular problem that she has highlighted. However, as has been said, there are good reasons for supposing that this is not the right way of tackling it. We keep addressing the difficulty of high house prices by providing more resources for people who live in high-cost areas to meet those prices, as a result of which house prices continue to increase. In a sense, we make the problem worse each time we provide more resources to pay for house prices rather than trying to do something to bring them down or at least make them more even throughout the country.

In the end, to a large extent, house prices are a matter of supply and demand. The fact is that many people want to live in high-cost areas and there are not so many who want to live in low-cost areas. While supply and demand are out of kilter with each other, and more money is pouring into areas where supply is low and demand high, that simply enables people to pay ever higher house prices in those areas. We have tried that with various cost of living allowances: we have given such allowances to a large number of public sector workers in London. We must do that: I have myself argued in favour of special living allowances for high-cost areas in my area and others. In the short term, that is the only answer. However, we must surely consider longer-term solutions that will provide more housing to meet demand, or change the areas where demand exists. Perhaps we should try to generate higher demand in areas where house prices are currently comparatively low, and put jobs back into areas of high unemployment where it is more difficult to obtain work so that there is lower demand for housing. If it can be tackled in that way, it will be a much more effective long-term solution to a genuine problem.

Photo of Mrs Anne Campbell Mrs Anne Campbell Labour, Cambridge

Forgive me if I am wrong, but I thought that when the Liberal Democrats had a policy on the national minimum wage, it was a regional, rather than a national policy. Perhaps the hon. Gentleman might have argued then for regional variation in the national minimum wage, whereas he now seems to be arguing against the equivalent proposal.

Photo of Mr David Rendel Mr David Rendel Shadow Minister (Higher Education), Education & Skills

Part of the reason for a regional policy for the national minimum wage is to encourage employment into areas where housing prices are low. That is the long-term solution to the problem.

Photo of James Purnell James Purnell Labour, Stalybridge and Hyde

I, like other hon. Members, have some sympathy with the amendment. As someone who was briefly a chair of housing in an inner London borough, I know that

there are genuine difficulties in finding housing for people who are not, by the standards of the south-east, particularly poor. However, now that I represent a seat in the north-west, I should also tell my hon. Friend the Member for Cambridge that there is a real anger at what is perceived to be a larger share of public spending going to the south-east to address its problems. She talked repeatedly about somebody in Greater Manchester and their housing costs. Perhaps we could turn that into the Greater Manchester question—not the West Lothian question.

Many of my constituents would say that, for example, a large amount of money goes to transport in the south-east to tackle congestion there and a large amount of money deals with social housing there. On health and equality, people in my region live five to 10 years less long than people in my hon. Friend's region. As has already been mentioned, in local government, the spending formula already distributes money unevenly. To exacerbate that by treating the symptoms rather than the causes of inequality would create quite genuine anger and make it more difficult for someone like me to sell this Bill to my constituents.

I do not want to repeat the comments made by my hon. Friend the Member for Bury, North (Mr. Chaytor), because I agree with all of them. I want to amplify a couple of points that my hon. Friend the Member for Cambridge made in response to a couple of interventions. She said that she wanted the adjustment to be more precise and more flexible than on a regional level. I can understand that, because the point made about regional variations is absolutely right. However, the danger is that if the definitions were made on the basis of local authorities, the other problem of boundaries between local authorities would become much worse. If regional policy was introduced, there would be a problem of one person in one street receiving a certain level of grant and another in another street receiving another. If local authority definitions were used, that problem would occur all over the country. It would happen between Barking and whatever the rich place next to Barking is. There would be widespread difficulties concerning house price variations. There are practical difficulties. Even at regional level, it would be such a blunt instrument that some people who are well off because house prices in their area are low would receive a benefit that they did not need, or there would be the opposite problem, and massive boundary problems across different local authorities.

There is also the practical problem of people working in one area and living in another, and how that would be dealt with. Like my hon. Friend the Member for Bury, North, I have a very well-off area a few miles down the road from where I live. Some parts of Stockport are much better off than parts of Surrey, and with similarly high house prices. In some areas of Stockport, house prices have doubled in the past two or three years. It would be very dangerous to build policy on the shifting sands of house prices.

The solution to the problem is to deal with the causes of regional inequality, not the symptoms. We need to ensure that there is greater economic

development in the regions of the north, and proper investment in their infrastructure. The Government are doing that, and we hope that the problem that my hon. Friend the Member for Cambridge wants to tackle will lessen over time as that investment is made.

As hon. Members have said, the fact that house prices are starting to converge is evidence that people are deciding that they would be better off living in an area of lower-cost housing rather than struggling and living in very cramped accommodation in the south-east. People make choices. If they live in the south-east on an income of £25,000, they will not be living in a house that is worth £250,000 or £300,000, but will be living in cheaper accommodation, sharing accommodation, or commuting. In return, they have the advantage of a thriving economy, very low unemployment, and the investment that I mentioned earlier.

My final fear about the amendment is that it would be self-defeating. I am no economist, but awarding grants to people with a higher level of income in one part of the country would make buying houses in that area more attractive. The same is true of school places: house prices rise in areas with access to local schools that people find attractive. In the end, the adjustment would simply be played out in higher house prices in the areas that received that benefit. It would serve only to accentuate the economic inequalities that we should seek to redress. I therefore cannot support the amendment, because it would be very hard justify to my constituents. It would worsen the problem that it is designed to solve.

Photo of Alan Johnson Alan Johnson Minister of State (Education and Skills) (Lifelong Learning, Further and Higher Education)

I, too, recognise the genuine problem to which my hon. Friend the Member for Cambridge refers. I believe that she will be one of the delegates whom I am meeting tomorrow to talk about it. I share the view expressed by the hon. Member for Westmorland and Lonsdale (Mr. Collins) in that I cannot think of a solution to the problem of how we deal with grants. I am, however, sure that the amendment does not provide a solution. I will take time to explain that statement, which in no way detracts from the problem that my hon. Friend the Member for Cambridge and other colleagues have described.

My hon. Friends for Bury, North and for Stalybridge and Hyde made very eloquent speeches, but I will start with the wording of the amendment. My point is technical, but it goes further than that. The amendment refers to residual income and parental contribution, but parental contribution does not come into it. It did with fee remission, and it does with loans. We means-test 25 per cent. of the loan because we expect a parental contribution, but parental contribution does not come into it in the case of the grant now that fee remission is rolled up with grants. However, that is a minor point.

It is not the case that residual income is the same as disposable income, and that house prices will therefore be a factor. This year, we are moving to residual income for the first time. Residual income is not defined like that. It does not deal with disposable income, but makes a £1,000 allowance for each

dependent child, and considers pension premium payments and maintenance payments. It also excludes any income earned during their studies by adult students whose income is assessed for grant. Using the term ''residual income'' will not do what my hon. Friend the Member for Cambridge wants it to do.

Photo of Graham Allen Graham Allen Labour, Nottingham North 4:00 pm, 9th March 2004

It is notoriously difficult to come up with answers as Committees are proceeding, but my right hon. Friend the Minister has generously accepted that there is a problem. He has also established that there is no obvious answer at the moment. There are, however, a number of commissions and inquiries that relate to the issue. He does not have to give an answer now, but will he give some thought to whether consideration of the problem that he and other colleagues have identified comes within the remit of the various commissions and whether they could come up with something that satisfies us, perhaps not in the next year, but over the next couple of years?

There is a genuine problem, and the answer is not for someone to get on their bike and sell their house. There must be something equally ingenious such as the system that we now have for repayment of fees on an income-contingent basis, which no one had thought of before. An answer can be divined, and perhaps the Minister will put that question before one of the commissions.

Photo of Alan Johnson Alan Johnson Minister of State (Education and Skills) (Lifelong Learning, Further and Higher Education)

As always, my hon. Friend makes a good point. However, he talks about one of the commissions when in fact there is only one—the independent commission that will come into play three years after the introduction of variable fees. We could ask the commission to consider the issue but, even with its brain power, it would find it difficult to solve the problem in a simple way, and if we cannot solve it in a simple way and we are going to introduce the complexity and uncertainty that the amendment would introduce, it is not worth going down that route in the first place.

There is a serious problem relating to residual income, but there is also a problem with how the proposal would work. Let us think it through. There are a lot of us northerners on both sides of the Committee—adopted northerner though I may be, along with others on the Government Benches. We could go for one of two systems. We could keep the existing baseline and say that those who are below the £15,000 level get the full maintenance grant and then it is tapered up to £33,000 a year. We could implant on top of that a shadow scale to reflect the cost of living in the area, but in that case there would be a serious problem.

I can imagine someone living in Slough selling a valuable house in the Thames valley and moving to Hull, where it is probably possible to buy a whole street for a relatively low price. The person might have an income of £25,000 or £30,000, which meant qualification for the full grant, but next door might be someone on £25,000, and only £900 of the grant would be received. Then the grant would have to be

reassessed because the person was living in a different area, with all the complications that that entailed. That would involve an enormous amount of extra money, because there would be the grant, which is expensive as it is, and we would be adding an extra tier on top. From reading the amendment, however, I think that what my hon. Friend the Member for Cambridge suggests is worse than that, because it would establish different levels for each region, so there would be, for example, a Yorkshire and Humber scale, a north-west scale and a Merseyside scale. There would be a regional scale as defined by the regional development agency boundaries.

Photo of Mrs Anne Campbell Mrs Anne Campbell Labour, Cambridge

Last November, my right hon. Friend the Chancellor of the Exchequer announced in the pre-Budget report the introduction of geographically differential pay across the public sector. He also talked about a stronger local and regional dimension for the pay review bodies. That encompasses the principle that I am asking the Minister to take on board this afternoon. He is arguing strongly against that principle, but all I am saying is that it has already been accepted in another Department.

Photo of Alan Johnson Alan Johnson Minister of State (Education and Skills) (Lifelong Learning, Further and Higher Education)

That reflects back to a point made by my hon. Friend the Member for Stalybridge and Hyde: the answer is to look at increasing the prosperity of the country as a whole. That is very much part of the regional agenda. The initiative announced by my right hon. Friend the Chancellor of the Exchequer in last year's Budget was to get retail price indices on a regional basis.

I was a trade union negotiator and remember that we had a dispute about a similar issue in the late 1980s, because places such as Cambridge and other areas did not qualify for London weighting. We introduced something called the difficult recruitment area supplement. The Chancellor made the point that such issues need to be examined much more closely, and he will produce those indices every four or five years rather than annually. However, for us to meet the terms of the amendment, we would need annual indices, because we reassess the entitlement to the grant every year of a three-year degree course or every two years if it is a foundation degree, so I do not think that that helps the argument put forward by my hon. Friend the Member for Cambridge.

The alternative to the system that I quoted, which has its problems and is very expensive, would be to set up those different levels. That would open up the prospect of someone in my constituency or other constituencies not qualifying for the full grant on an income of under £15,000 a year, because the whole basis of that argument is that there would be a different scale, and qualification for the full grant might occur at a lower level. That would create much more antagonism than already exists. I am not saying that the people of Hull, West and Hessle were chairing me round the streets because of the Higher Education Bill, because, although many of my constituents support it,

it is not top of their agenda. However, there would be outrage in my constituency and in others if we went down the route suggested.

On the amendment, the question of where the boundary is set is a real issue. A situation could arise in which a student or a family moves just down the road, crosses a boundary and thereby loses or gains their grant or finds that their grant decreases between one year and the next. That would be a real problem. There is no reliable measure of regional variations at present; the Chancellor might produce one eventually, but even if he were to do so, I do not know whether it would be produced annually.

The point has already been made about variations within regions that are as big as those between regions. We did not just pluck that concept from the air; it was demonstrated by a very detailed analysis carried out by the Joseph Rowntree Foundation. The hon. Member for Westmorland and Lonsdale was right that the process would come down to ward level, with all the complications that that would involve.

As my hon. Friend the Member for Bury, North said, there is no means test applied by Government anywhere else, as far as we are aware. There is no means test or variation of that kind for tax credit, nor is there a variation for benefits. In the summer, we are rolling out the education maintenance allowance nationwide. My hon. Friend the Under-Secretary is responsible for that. It is horrendous to think of having to introduce such a measure for the education maintenance allowance, which we would have to do if we introduced it for grants for higher education. That would cause huge difficulties.

My hon. Friend the Member for Stalybridge and Hyde spoke about the disparities between the regions. However, another problem with the amendment is that it would create losers among exactly the sorts of people whom we are trying to encourage into higher education. If one examines the percentages of those entering higher education in conjunction with the cost of living index, there is an interesting dichotomy. For instance, London, which we would seek to help with this, has the highest density of people entering higher education—almost 24 per cent. The money that we would be taking away would come from Yorkshire, where there is the lowest density of those in higher education—19.7 per cent. That neatly flips the chart right round; it is an opposite equation. Those that would benefit from the amendment tabled by my hon. Friend the Member for Cambridge would be those from areas where the percentage of people entering higher education was highest, and vice versa. That is an important point.

I want to pick up on a couple of points that have been raised in an excellent debate. First, I want to chastise the hon. Member for Westmorland and Lonsdale who made the point that the Government's policy did not evolve smoothly, but through messy negotiation. It is right that my hon. Friend the Member for Cambridge, who by and large was not thrilled with variable fees, played a role in making representations about the issues of student support. However, so did my hon. Friends the Members for

Bury, North and for Nottingham, North and many other hon. Members who supported us and who would have voted with us all along on the basis of the principle of the Bill. They were continually raising points about the need to get the fee remission rolled in with the grant and to increase the grant. Therefore, we ought to set the record straight. Yes, there were people who were hostile to the whole concept, and they spoke to Government and persuaded us. However, others who were absolutely in line with the concept did the same thing. We listened to all sides of the argument, but this was a particular issue on student support that united everyone on these Benches.

Photo of James Purnell James Purnell Labour, Stalybridge and Hyde

Will my right hon. Friend tell me whether the Conservative party's policy had a strong influence on his evolution of the policy?

Photo of Alan Johnson Alan Johnson Minister of State (Education and Skills) (Lifelong Learning, Further and Higher Education)

In terms of how it evolved, it told me the roads not to go down. Conservative hon. Members, in particular the hon. Member for Daventry (Mr. Boswell), were telling me at one stage that I had a difficult hand to play. I think that the Conservative's policy is the most difficult hand to play.

The other point that I wanted to make was that the hon. Member for Newbury (Mr. Rendel) made a telling contribution. However, my hon. Friend the Member for Cambridge intervened and pointed out that the Liberal Democrats did not begin with a policy of a national minimum wage, and that is an issue. We have a national minimum wage, and the logic of going down this route is that we should not. The Liberal Democrats had a policy of a regional minimum wage, and they stood at the 1997 and 2001 elections on that policy. It was abandoned.

I had ministerial responsibility for the minimum wage and I remember the hon. Member for Twickenham (Dr. Cable) telling me that the Liberal Democrats had seen it work to such a degree that they admitted frankly and openly that they were wrong. I have every hope that the same procedure will be gone through by the Liberal Democrats on tuition fees and student contributions when the Bill goes through and that, after a couple of years, they will see, like a blinding flash, that that was the route to go down.

Photo of Phil Willis Phil Willis Shadow Secretary of State for Education and Skills, Education & Skills, Shadow Spokesperson (Education)

The right hon. Gentleman is always so generous with his barbs. We changed our position on that, in exactly the same way as the Government have changed their position since 1998—the Teaching and Higher Education Act 1998 introduced up-front fees and so on—and, of course, since the manifesto of 2001.

The hon. Member for Cambridge needs some support on the legitimate issue that she has raised about regional variations. All political parties, with the exception of the Conservatives, are examining the matter, and whether we like it or not, the Chancellor is right to examine those regional indices. If one examines what has happened in Scotland and Wales as a result of the Barnett formula, they can do other things because they receive, in terms of their percentage of regional GDP, an additional sum of money. I do not think that it is fair to chastise the hon. Lady totally, because there is room for manoeuvre in using the region as a method of finding a different

solution to some of the problems. That has been proven in Scotland and in Wales, by the Welsh Assembly.

Photo of Alan Johnson Alan Johnson Minister of State (Education and Skills) (Lifelong Learning, Further and Higher Education) 4:15 pm, 9th March 2004

I am not chastising my hon. Friend the Member for Cambridge—quite the opposite. It is my duty to point out the flaws in approach. I support decentralisation and regionalisation. I believe that the answer lies in that, in improving the economy throughout this country and in ensuring that the success in some regions is reflected throughout our country. However, we in government will continue to reflect on these real problems, and we understand the concerns. However, the amendments would create more problems than they would solve.

Photo of James Purnell James Purnell Labour, Stalybridge and Hyde

I should like to comment on the point about reflecting on regional variations, and the suggestion from my hon. Friend the. Member for Nottingham, North that perhaps the issue currently being discussed could be incorporated into a commission's thinking for further reflection. If the Minister goes down that route, will he assure those of us from northern constituencies that issues such as how to retain graduates in our constituencies in the north once they have been to university will be considered so that there is a balanced view of regional equality?

Photo of Alan Johnson Alan Johnson Minister of State (Education and Skills) (Lifelong Learning, Further and Higher Education)

My hon. Friend raises an important point—and I think that another important point will come from another hon. Friend.

Photo of David Chaytor David Chaytor Labour, Bury North

No one is denying the significance of regional differentials, but any solution that depends on putting more taxpayer's money into making it easier for people to handle the effect of excessive house prices in certain regions will result in the opposite effect to that which is intended. That is pouring petrol on the fires of house price inflation. We must get to the root cause of the problem and shift the levels of collective investment in the regions, not compensate individuals for high costs in certain regions.

Photo of Alan Johnson Alan Johnson Minister of State (Education and Skills) (Lifelong Learning, Further and Higher Education)

I accept my hon. Friend's point. The independent commission will report to Parliament on the success, or otherwise, of this policy three years after it is introduced. I am not trying to turn that into a forum to discuss the regional problem. I think that if there are specific concerns about this package, it makes sense for the independent commission to consider those problems, if they exist. However, the main aim of that commission will be to look at the effect of variable fees on the success of attracting widening participation and people not dropping out of university courses. That is the crucial element. The other issues are, to some extent, peripheral.

Photo of Mrs Anne Campbell Mrs Anne Campbell Labour, Cambridge

Can I take it from what the Minister said that he would be prepared to refer this point to the independent commission, so that it can be asked to consider how regional variations have affected the intake of universities?

Photo of Alan Johnson Alan Johnson Minister of State (Education and Skills) (Lifelong Learning, Further and Higher Education)

That sounds like a good idea, but I want to reflect before giving a positive response and I should like to consult my right hon. Friend the Secretary of State. I should be able to do that before the meeting with the delegation tomorrow. I hope to give a final answer then. I hope that my hon. Friend will withdraw the amendment.

Photo of Mrs Anne Campbell Mrs Anne Campbell Labour, Cambridge

I want to answer a few of the points that have been made in the debate, which has turned out to be more interesting that I anticipated. Far from being born and brought up in the south and living there all my life, I was born in Dewsbury and brought up in Huddersfield. My daughter and two of my grandchildren live in Stoke-on-Trent, which is one of the cheapest housing areas. My family does not stand to gain personally from such an amendment.

I agree with those people who have said that regional discrepancies are not economically healthy. We need to ensure that there is a more even spread of jobs and prosperity. I hope that will, in time, lead to more equal distributions in house prices, but I am concerned that that may take some time with the sort of discrepancies that currently exist. I shall not stray far in this direction, Mr. Gale, and I know that you will not allow me to do so. However, it is important to say that one of the reasons for spending money in areas like mine is that we need more affordable housing. Not everyone can take the advice of my hon. Friend the Member for Bury, North and move out if they find it too expensive. Some have jobs and families. It is not always possible to move, and moving could make things difficult. It is bad enough now trying to recruit teachers, bus drivers, postal workers, refuse collectors and others on low pay in areas such as mine.

Photo of David Chaytor David Chaytor Labour, Bury North

I was not advising people to get on their bikes. I was pointing out that wealth comes in two forms—income and capital. Would my hon. Friend not agree that the worst thing that could be done to increase house price inflation would be to use more public funds to make houses more affordable in high-cost areas? That is the central issue. Raising the public

subsidy to enable people to buy excessively priced houses is the best guarantee of house price inflation, and regional differentials will thereby increase.

Photo of Mrs Anne Campbell Mrs Anne Campbell Labour, Cambridge

That, of course, is not what is being suggested. Other Government policies have encouraged house price inflation. For instance, I was in favour of the starter home initiative, but it affects house prices. However, the amendment would not do so, because it would not contribute directly to housing costs. It would support students from those families who live in the high-cost housing areas, but who have low to modest incomes. It would not have the effect suggested by my hon. Friend.

My right hon. Friend the Minister said that the amendment would benefit those who live in areas that already have a high university uptake. Unfortunately, uptake varies. My constituency has pockets of severe social deprivation. I illustrated that earlier by mentioning two schools in my constituency that I visited during the autumn term. At one school, I asked 40 or 50 young people aged between 13 and 15 how many intended to go to university, and about 15 per cent. put up their hands. I asked the same question in the other school, only two or three miles away, and 85 per cent. of the children put up their hands. That illustrates the difficulty of trying to categorise and target young people.

We want to raise aspirations and to ensure that more people go to university. That brings me back to the point made by the hon. Member for Westmorland and Lonsdale: it is difficult to decide whether we should be talking about regions, areas, counties or wards. I can see difficulties with all of those. I hope that my right hon. Friend the Minister will take up the suggestion made by my hon. Friend the Member for Nottingham, North about an independent commission. That might be the best way forward. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.[Continued in column 599]