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I wholeheartedly agree. The only justification for the move is financial. It is a Treasury-driven decision to save some change in the Treasury coffers at the expense of existing students and graduates and, as I shall argue, at a greater cost, which is to the trust and faith in promises made by Government.
Turning to the reasons why the Minister should agree to the new clauses, I do not think that anyone in this room could, hand on heart, disagree with the principle that when a contract is signed, both sides should keep to it. If a lender advertises a loan, they should be held to the terms and conditions that it was sold under. In fact, not only is that a principle that we would all sign up to, it is a principle enshrined in law. Thankfully in this country we have laws and regulations that apply to financial products, but with, it seems, one exception: student loans.
As a result of the decision taken by this Government, albeit under the last Administration, from next April the Government will breach a promise they made to millions of students who started university since 2012. In doing so, they will hike up the costs of those students’ loans by thousands of pounds. The Minister knows how the repayment system was sold: people were told that they repay 9% of everything earned above £21,000 per year. Government repeatedly promised that the £21,000 figure would be uprated each year from April 2017 in line with average earnings. I know that the Minister will stand up shortly and make a very important point about sticking to terms and conditions, and he will say that I am mistaken because the terms and conditions allow for this sort of flexibility.
My amendment would tighten up the issue of the terms and conditions. It would also go to the heart of the matter, because this is about not simply terms and conditions, but promises that are made by Ministers. We were told that the £21,000 figure would be uprated in line with average earnings, and that was confirmed in black and white in a letter to parents by the former universities Minister, Lord Willetts. It was there unambiguously—not with caveats or with, “We might change our mind, but it’s okay because the terms and conditions allow us to do that, even though no other financial lender would be allowed to do that.” It was there, very simply stated, in black and white. If the Government go ahead, those parents will have been misled. I am sure if we invited Lord Willetts to give evidence, he would say, “Well, that was the intention. That was the promise that I made, but of course I am no longer the Minister.” Although faces and names change, it is not fair that people can take out a loan in good faith with certain terms and conditions only for it to be changed retrospectively.
This is a retrospective hike in costs. Rather than rising to £25,000, the threshold has stuck at £21,000, so everyone over that level will repay an extra £360 per year. It is regressive. Lower and middle-earning graduates will not clear what they owe within the 30 years before the repayments wipe, so they will repay thousands more over the life of their loans.
On the regressive nature of the change, putting the retrospective issue to one side for a moment, if the Government want in the future to make changes to student loan repayment terms and conditions to save money, there are more progressive ways of doing so than freezing the repayment threshold. The Minister could change the taper, for example, and the rate at which higher earners pay. That would be more equitable. Instead, he has taken the simple approach of freezing the repayment threshold, but that has made the system even more regressive.
This is not just a financial issue; it has resulted in a serious loss of trust. The Government made a clear promise in all the communications, and they have moved back on it. The fact is that if this loan were regulated by the Financial Conduct Authority, there is no way it would allow any commercial lender to make a change to the terms and conditions in this way, given the way that the loan was sold. If it is not right for the banks, it is not right for the Government. Retrospective changes are bad governance, and they should not be allowed to continue.
Given that we have a new Prime Minister who said she wants a Britain where every person has the opportunity to be all that they want to be, and given that we have a new Chancellor—this is not his fault; he did not make the decision—I urge the Government to rethink this situation. The freeze has not actually started yet. There is time to reverse the damage before it is done. It was announced by the previous Chancellor, Mr Osborne, in last year’s autumn statement, and it could be reversed by the new Chancellor of the Exchequer in the autumn statement on
I have set out clearly why this is a matter not simply of terms and conditions but of promises and trust. I hope that the Minister will hear what we have said and agree that we have made a compelling case for the Government to clean up the mess left by the previous Chancellor in the autumn statement. I hope he will stand up today and confirm to the hundreds and thousands of students, graduates and parents who are concerned about these issues that he has listened and learned, and that he will correct this mistake before it is too late.