Higher Education

Part of the debate – in the Scottish Parliament at 2:39 pm on 13th June 2007.

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Photo of Fiona Hyslop Fiona Hyslop Scottish National Party 2:39 pm, 13th June 2007

I am delighted to be given this opportunity to announce to the Parliament details of a proposal from the new Scottish Government that will benefit graduates, their prospective employers and the Scottish economy in the widest sense.

As Cabinet Secretary for Education and Lifelong Learning, I am committed to taking an holistic approach to lifelong learning, focusing on education in our children's earliest years; on supporting children and families; on improving learning in schools; on developing skills for, and in, work; and on promoting excellent teaching and research in our colleges and universities. Together, those policies will contribute to ensuring that learning will be lifelong for everyone.

This Government's pledge is to create a more successful country that will flourish through increasing sustainable economic growth. That is the overriding purpose towards which we will work in government. To do so, we must ensure that a modern Scotland is one where everyone can fulfil their economic, social and personal potential to the fullest possible extent and that any barriers that prevent them from doing so are removed.

That is why I announce our determination to honour our manifesto commitment to abolish the graduate endowment fee. Subject to other parties in the Parliament agreeing to legislate, students who are about to graduate this summer, students who are currently at university, students who are about to enter university this autumn and all subsequent students will no longer have to pay the graduate endowment fee.

The fact that around 50,000 students will no longer be asked to pay a graduate endowment fee of more than £2,000 is good news for them, for their families and for Scotland, but it will happen only if other parties who already have commitments in that area support us. I am hopeful of persuading others that our proposal is in not only the national interest, but the interest of the public purse.

Although the cost of abolishing the graduate endowment fee is approximately £15 million net, after allowing for administration and accounting charges, I can still guarantee that the amount of money that is distributed to students through bursaries and grants this year will not be adversely affected by our proposal—we will continue to fund them directly.

Some 10,000 people a year are liable to pay the graduate endowment fee, which is set at the beginning of a student's course and which stands at just under £2,300. The background to it is well known. It was introduced by a previous Government in 2001 as part of a new system of student support, which was based on the principles established by the Cubie committee that student support should promote social inclusion and enhance civic society, and that barriers to widening access and participation should be removed. Those are sound principles, which apply just as much today as they did when Dr Cubie published his work. However, the graduate endowment fee is a tool that has failed to deliver those aims in a modern Scotland.

I believe that the basic principle of Scottish education is that it should be based on the ability to learn, not the ability to pay. My announcement is a critical step towards achieving that vision not just for today's students, but for tomorrow's, as well as for their families, for our society and for the whole of Scotland. Opening up access to higher education for everyone, regardless of their location, background or personal situation, is a key component of fully releasing the potential of Scotland's people.

Our country's demographic challenges over the next 20 years mean that we must make the most of the opportunities for all our people and must give everyone the chance to make the fullest possible contribution to economic and civic life. Our vision of a smarter Scotland is one in which the benefits of education are spread widely and equitably. That will be possible in the context of higher education only if access to it is driven by ability alone. For some people who have the ability to succeed, the existing structures act as barriers to their future success. The graduate endowment fee is one such barrier. We cannot let it stand in any young Scot's way.

The graduate endowment fee is an example of a policy that was formed when parties with different views adopted a compromise that has benefited no one and which has clearly failed. It has failed our graduates and their families by burdening them with excessive debt; it has failed our most vulnerable youngsters by creating financial barriers to accessing higher education; and it has failed the Scottish taxpayer by not raising the level of income that was initially projected.

The graduate endowment fee is clearly an inefficient way of raising income. In the three years in which it has been in operation, two thirds of the students who were due to pay the fee have not paid it back directly, but have simply added it to their student loan. The costs associated with the resulting interest rate subsidy mean that the taxpayer loses around one third of the income collected. In fact, the taxpayer recoups the income in real monetary terms only after 13 years—that is how long it takes for the money to be repaid in full to the Government.

As well as being inefficient, the graduate endowment fee is difficult to collect. More than 1,400 of the graduates who were liable in April this year have yet to respond to payment letters from the Student Awards Agency for Scotland. That is equivalent to almost £3 million in potential income.

Three cohorts of graduates are liable to pay the graduate endowment fee, their liability having arisen on 1 April in 2005, 2006 and 2007. At the very most, £12.7m has been paid back in cash, with more than twice as much—£26.3m—having been added to student loans. In three years, the princely sum of only £47,000 of that £26.3m has been returned to the taxpayer.

It is clear to me that the graduate endowment fee is a complicated and inefficient way of generating money for student support. Not only does it impact on graduates as a back-end tuition fee, but the law on the matter states that not one penny of the fee can go towards paying for learning or teaching at university. That is the worst of both worlds. With the taxpayer, graduates and Scotland losing out, it is difficult to see whom the arrangement has ever benefited. Abolishing the complicated and inefficient graduate endowment fee is the smart thing to do.

Fear of debt is a real and growing concern for many prospective students. The average amount of debt has increased to around £13,000. Many people who have benefited from access to higher education, including members of the Parliament, may not have participated if faced with the fear of such debt, particularly at a young age. The age participation index, which measures the proportion of young Scots who are engaged in higher education, has fallen since the graduate endowment fee was introduced from 51.5 per cent in 2001-02 to 47.1 per cent in 2005-06. Believe it or not, for the first time since the reformation, there has been a drop in the share of the population studying in higher education in Scotland. Given that participation had previously risen each year, it is clear that the fear of debt is real and is a factor in the choices that young people make when they leave school.

Evidence also shows that young people from low-income backgrounds are the most debt averse. Our system should contain the widest possible incentives so that as many people as possible with the ability to enjoy and participate in the higher education experience can do so. Young people from areas of multiple deprivation should have wider access to higher education and, although efforts on this have increased recently, the proportion of entrants to university who come from deprived areas of Scotland has still not changed significantly over the past five years.

Fear of debt can and does act as a brake on the aspirations of people from our poorest and most disadvantaged communities and moves us away from a Scottish education system that should be based on ability to learn. Therefore, it must be wrong to burden our graduates with debt and deny them every possible opportunity to contribute to a wealthier and fairer Scotland. It is wrong that they should begin their working lives encumbered by financial pressures, and that is a wrong that the new Scottish Government intends to put right.

If we reduce the burden of debt, graduates will start to gain the full benefits of employment as soon as they leave university, get on with their lives freely, make the ambitious career decisions that will help to power Scotland's economy and make personal choices that will allow them to lead a fulfilling life in this country. Is it not much better that a graduate's money should go towards buying their first home or starting their first business than that it be lost and spent instead on the first of many debt repayments?

I will now set out how and when we plan to deliver the abolition of the graduate endowment fee. The fee was introduced by the Education (Graduate Endowment and Student Support) (Scotland) Act 2001, and we will introduce primary legislation to repeal the relevant parts of the act. We want as many people as possible to benefit from the change as soon as possible. That is why I am announcing that with, and only with, parliamentary approval, students who are about to graduate this summer, students who are currently at university, students who are about to enter university this autumn and all subsequent students will no longer have to pay the graduate endowment fee. That will relieve all those who become liable to pay the fee on 1 April 2008 and all students who graduate in subsequent years.

To achieve that, we will introduce legislation that we hope will come into force by 1 April 2008. I am aware that that is a tight timescale but it is the most effective way of abolishing the graduate endowment fee. It will give the Student Awards Agency for Scotland enough time to notify students who graduate this summer and notify people who will enter university this autumn of our plans, subject to parliamentary approval. I look forward to support from across the chamber for what I have announced. I ask parties who may not have called for abolition previously to consider the compelling public finance arguments in favour of our proposals.

I intend to consult on the principle of abolishing the graduate endowment fee this summer—I will seek the views of all those involved on the benefits that that will bring. Following that consultation, and subject to the views that are expressed to me, my intention is to introduce a bill in the autumn. With parliamentary support, we have an opportunity to make an important difference for students currently at university—many of whom are sitting their final exams now or are waiting on their results as we speak.

I have no doubt that student loans and the graduate endowment fee act as a disincentive to our youngsters when they consider going into higher education. This Government has three central proposals to reform the current student support arrangements: the abolition of the graduate endowment fee; replacement of student loans with means-tested grants; and relieving the burden of debt repayments by Scottish students. In my first few days as cabinet secretary I began working with my officials on the options for the second and third of those proposals. That work is continuing actively and detailed proposals will be considered as part of the spending review. Abolishing the graduate endowment fee is an important first step for us in delivering those commitments and I am pleased to announce our intention to do so today.

I look forward to working with parties across the chamber to deliver a package of student support that delivers the smarter, wealthier and fairer Scotland that this Government seeks.

We live in a global economy and our key economic resource is our people. Graduates from Scottish universities are among the brightest and the best in the global pool of talent and they contribute enormously to the economic and social lifeblood of our country and other countries across the world. Reducing graduate debt is therefore an investment in our future, in our people and in our economy. It is a statement of belief in Scotland's people and it acknowledges that, in order to compete, we need to remove obstacles that hold people back.

We need to take active steps to ensure that in the future the Scottish economy is supplied with the graduates that it needs in order to prosper and that everyone who has the ability has the opportunity to be involved in the higher education experience.

We made it clear in our manifesto that we would cut student indebtedness. I believe that abolishing the graduate endowment fee will show the people of Scotland that we are committed to that and that we are making progress in the early days of this Government.

Abolishing the graduate endowment fee as soon as possible is an integral part of realising our vision of a smarter Scotland; a Scotland in which educational and academic achievement throughout life are possible; a Scotland—renowned through the years as a "learning nation"—where people learn for their and our future. That will inspire a competitive, sustainable economy for a wealthier and fairer Scotland.

That is why we want to move quickly, and why I call for the support of the Parliament. We need that support to do what we know will make a measurable difference to our people, our society, our economy and the future of Scotland.