Top-up Fees

– in Westminster Hall at 2:00 pm on 16th July 2003.

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Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 2:00 pm, 16th July 2003

The Minister for Lifelong Learning, Further and Higher Education has been in post for less than a month but, so far as I am aware, this is at least the third occasion on which he has been called on to respond to a debate on top-up fees. He should certainly be on top of his brief by now. Hon. Members may wonder what the point is of another run-through on top-up fees, because we had two major debates on them in the House at the end of June. Will we all say the same things and go away having achieved nothing?

This afternoon, I want to return to the subject in the light of the publication of the Education and Skills Committee's report, which has obviously contributed new perspectives. I am pleased to see the Chairman of the Committee present. I also want to discuss the particular perspectives that my constituents gave me in a consultation exercise that I undertook with them earlier in the year. They gave me insights that have perhaps not always been emphasised enough in our debates on the subject.

By way of background, I should say that in a previous life I was an academic and a university admissions tutor. That has given me one or two perspectives on the process of applying for university, which I shall try to bring into the debate a little later. Therefore, I hope that our debate will not simply be a run-round of what we have already said, but tries to move things on a little.

In my consultation exercise with my constituents on top-up tuition fees, I consulted roughly 1,000 local residents, a group of people who have opted into being consulted by me by e-mail. They are from across the constituency and across the political spectrum. They include first-time voters, pensioners and everything in between, and supporters of all parties and of none. Although politician surveys are quite rightly treated with some scepticism, I maintain that the basis of my remarks is an attempt at rigour and to reflect the representativeness of my constituents.

I occasionally put questions to that group of 1,000 people in as neutral a way as I can. On this occasion, I asked them about the Government's policy on top-up fees and referred them to the Department for Education and Skills website for the case in favour and to campaigning websites for the arguments against. I invited my constituents to register a vote for or against top-up fees and, if they wished, to give me reasons for their position. When I have undertaken similar consultations in the past, the division of views has been fairly gentle on many issues. For example, when I asked about building new nuclear power stations, the group divided 2:1 against. On genetically modified crop trials, they voted 2:1 against. However, on top-up fees, the view was 4:1 against. Of all the questions that I have asked my constituents, this was the most divisive. [Interruption.] From his reaction, perhaps the Minister thinks that that is a relatively high level of support for top-up fees; I do not know. If he wants, I can introduce him to the supporters. However, there was a clear, strong 4:1 vote against.

The significance of the exercise was not the crude aggregate figures, but the insights that the respondents gave. Some teach at university. Many are young, first-time voters thinking of going to university; others are parents of people coming up to that stage. A whole cross-section of people gave me insights. I want to draw the House's attention to those this afternoon.

Perhaps the strongest single insight that I gained, on an aspect of the debate that I do not think has had enough attention, is the impact of top-up fees on women. Top-up fees are the same for male and female students, but the implications may be quite different. A woman, on average, will expect to earn less. A woman, on average, will expect to spend time out of the labour market for the birth of children and perhaps when children are young. As a result, although she may graduate with the same debt, she will have to pay it back over a much longer period. A young woman considering whether to go to university may be more disinclined to go down that avenue than a male student when she realises that she will be in debt for a very long period.

I quote from a response from a constituent who was in charge of university halls of residence:

"My impression was that the students"— the current students—

"who were the first generation of their family to be coming to a University were especially worried about the debts they were accumulating."

The theme of debt and its impact on women in particular is one to which I shall return. I must stress that that response was entirely unprompted by me. Nothing in my questionnaire asked specifically about women. My constituent continued:

"Amongst them the women students were particularly anxious because they could not see how they could repay their debts if they should become pregnant . . . and want to look after their child."

That is a particular issue for women.

Another entirely spontaneous response from another female respondent said that

"it is discriminating against women who will either have to work longer before taking a break to have children (not ideal for the health of the woman, child or family) or will have an almighty debt hanging over her until she can return to high-paid work (assuming she can get it)."

I began to discern a thread in the responses and a concern about the position of women. So as to assess the scale of the issue, I asked the House of Commons Library earlier this week to prepare some fresh analysis for me on the effect of tuition fees and debt on women. I tried to ensure that the example on which we based the figures was as typical and realistic as possible. Complex spreadsheets are available to hon. Members. We assumed that someone graduated not with the maximum possible debt, but with the average debt to which the Government refer—some £15,000. We assumed that the debt rose in line with inflation, rather than at the faster rate that the Select Committee might have suggested in its recommendations, and that real earnings grew as they have in the past. We assumed that the woman earned a typical woman's graduate salary and that her salary followed the profile that someone in a graduate career might expect—in other words, the increments, promotions and seniority that went along with the profile.

We also considered the effect of children, assuming that a woman who has two children would typically have the first child in her late 20s and the second in her early 30s. Clearly, those are generalisations, but they are meant to be illustrative of the scale of the problem. The woman may go back to work full-time and continue her career completely uninterrupted, or she might work half-time or job share until her children are in primary school. We considered the impact of those choices.

The interesting point to come out of the analysis is that a woman with a typical debt who does not have children would pay it back in 13 years. We then considered the case of a woman who has children and goes back to work part-time after her children are born, perhaps on a job share. Assuming that something silly does not happen—she does not go to work on a Tesco checkout but simply works half-time in her previous professional job, then goes back to work full-time when the children are at school, which, in itself, might not be straightforward—it would take not 13 years but 20 to pay back the debt.

Photo of James Purnell James Purnell Labour, Stalybridge and Hyde

I am interested in the hon. Gentleman's example. If the universities were funded out of general taxation and the woman went back to work part-time with earnings of about £8,000 a year, she would pay back the money, whether through a graduate tax or through the increased general tax that she would have to pay, whereas under the student fees proposal she would pay back the debt only if she earned more than £15,000 a year. If she earned less than £15,000 a year for the rest of her career, she would never pay back the debt.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

The hon. Gentleman raises several important issues. She would not pay back the debt while on half salary. I assume that the £15,000 is price indexed, but I do not know what the policy is on that—I am assuming annual price indexation. Even on half salary, a woman graduate will tend very quickly to go above the threshold, because real earnings grow with career progression and so on.

In a sense, the hon. Gentleman makes my point for me. If there is a period in which the woman is not working or is earning so little that she pays nothing back, it merely postpones further repayment of the debt. She would still have to pay back the whole amount plus nominal interest. The point at which student debt no longer overhangs her would simply be further postponed.

The instance that I have given of a debt being paid over 20 years is based on fairly cautious assumptions. Therefore, the woman will have paid that off by the time she is 41. In my example, she has two children. I do not imagine that she will still want to live with her mum and dad if she is a female graduate who is aged 40 and has two children. It is reasonable to assume that she will want a mortgage, perhaps at 30, which is about the time that she might want to start a family. For 10 years, she will effectively be servicing two mortgages—the mortgage on the house and the mortgage that is the student loan debt, which starts at £15,000, grows a bit and tails off as her salary increases. Some women—I will quote examples later—will think twice about whether they want decades of debt, as it will have a differential effect on them compared with men.

There are two distinct issues with general taxation. With general taxation—that is, the whole tax pot—there is no named debt. If there is no name on the debt, people will not delay having kids until they have paid off their debt, feel that they owe thousands on the house, or know that they must clear thousands on their student loan. The effect is different if they know that they must pay back fees through higher taxes when they graduate. That of course depends on the part of the taxation system used, if at all. For example, a female graduate on a part salary obviously would not repay fees at the higher rate.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions)

The hon. Gentleman will not be surprised to learn that I substantially agree with his analysis, which is consistent with what we have found out. Does he agree that the long and the short of it is that the student debt of a male graduate under normal circumstances will persist for at least one third of his working life, and, for a woman, it will persist for approximately half her working life? Those are substantial overhangs on anybody's career.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

Certainly, the figures that I have just given for a 20-year repayment for a woman with children assume a pension age of 60, which means that the repayment would cover almost exactly half her working life. As a university academic and an admissions tutor, I found that the mature students entering in their mid-30s were some of the best and most committed that we had—we most wanted such students to enter higher education. If they take, on average, 20 years to repay their debt—and, if they enter the labour market in their late 30s, they may not have the career progression of a 21-year-old female graduate—they could, quite credibly, be repaying their debt while drawing their pension. That does not seem to be the world that we want to move towards, because I assume that debts will not stop at pension age. In a world in which recently retired women pensioners are still trying to repay their student debt, they will have probably tried to pay off their mortgage, and we apparently want to encourage them to save for a pension as well. I do not see how we can square all those circles.

Photo of Mr David Rendel Mr David Rendel Liberal Democrat, Newbury

I am sure that I do not need to draw to my hon. Friend's attention—although I may need to for other hon. Members—the current Liberal Democrat policy, which is to impose a charge on those earning more than £100,000 a year by raising their income tax. Does he agree that—the unfairness of life being what it is—not many women are earning that sum, and the proposal would therefore be of particular value to them, not only in removing the charge at the level that he discussed, but in imposing a greater charge on those men earning the highest salaries?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

As ever, my hon. Friend is perceptive. He makes the point that if one uses funding that is not a named debt against a named person, the impact is bound to be different. Very little of the debate has focused on the differential impact of top-up fees on women. I will pursue that point by considering some other responses on top-up fees in my constituency survey, all of which are from female respondents. One woman, who is subject to the current system, said:

"I face the prospect of finishing the repayment of my student loan just in time to retire."

Even with fees of £1,100—not £3,000 or £5,000 as has been suggested—people are repaying those debts in some cases throughout the whole of their lives. I wonder about the world we want to create if those debts are overhanging people.

Another woman said:

"I came from a background with working class parents who didn't believe in spending money you didn't have."

Such young women will be discouraged from applying for university by the prospect of a £15,000 debt. That is the average figure, but it could be £21,000 or even more if there are credit card debts and so on. People look at those figures and are horrified.

I have two children at primary school, so I have time to save. However, if I do not want them to be blighted with a lifetime of debt, the available strategies are to find £30,000 to see them through university without debt or for them to find jobs when they are at university. When I was a university academic, I was aware of the detrimental effect that having a job had on a student's studies. If we force students to work more and more hours to avoid debt on graduation, they will have hardly any time to spare for their studies. Surely it is wrong, when an increasing proportion of students are desperate and worried about the debt that they will end up with, that they spend so much time working that their studies suffer. Society, and the economy, suffer as a result.

Another female respondent, Nicola, said:

"The thought of being £15K in debt would have put me off from going to university."

That is a first-hand observation. Another constituent said:

"I am looking forward to going to university later this year, and if the payment does rise, I will not be able to afford to go. I do not want a huge bank loan over my head when I leave uni, it will be bad enough as it already stands."

Another person, who has children of university age, said:

"I know many young people are now thinking twice about going to University because of the debts that they will incur."

Debt is a central theme to the debate on top-up fees. It has an impact in two ways. First, the anticipation of debt discourages people from applying. Secondly, there is evidence that it is the principal reason for drop-out among people who have overcome the first hurdle and then find that they cannot service their mounting debts. The Government's policy will surely make matters worse.

A second problem is obvious when it is pointed out. However, I had not grasped it hitherto, but James Purnell intimated it in his intervention. The system is progressive because the low-paid do not pay much back and the well-paid pay a lot back. That applies in any year but, over a lifetime, everyone repays the same amount for the fees that are not rebated for low-income families. Lower-paid graduates, such as women, repay a fairly small amount if they earn only just above the threshold, but they spend more of their life repaying the debt. They do not have less to repay; they merely repay it over a longer time.

Photo of James Purnell James Purnell Labour, Stalybridge and Hyde

Surely anyone who is earning less than £15,000 a year would not repay any of the loan. The loan is only a small part of the total cost because 95 per cent. is financed by the state. The people who pay higher taxes will repay a greater proportion of the cost of going to university.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

In a fair system, the better-off should pay a larger proportion of the total cost of a university education. With fees of £3,000, £1,900 is not rebated even for low-income households. I hope that the Minister will update us on the Secretary of State's thinking on that because he seemed to intimate in evidence to the Select Committee that he was considering whether the whole £3,000 should be rebated for low-income households. Perhaps the Minister will tell us how he views that suggestion. Even the £1,900 is a flat rate. Whether people are rich or poor, they face a debt of £1,900 a year for tuition fees. The hon. Member for Stalybridge and Hyde is right to say that if people spend their lives earning less than £15,000 a year, indexed to prices, they will never pay it back. However, typical graduate salaries are well in excess of that when allowance is made for real earnings growth compared with the prices index threshold and the career progression that many graduates will enjoy. Most graduates will pay the money back, but those at the bottom end—those nearer the £15,000 threshold—will pay it back over a longer period. They will not pay less. With progressive taxation, people on lower incomes pay less. That is the fairness difference that I want to draw to the attention of hon. Members.

A range of other issues linked to top-up fees came up in responses from my constituents. One argument for top-up fees is that they enable the Government to achieve their 50 per cent. target for students entering higher education. My constituents stressed the importance of not forcing people into inappropriate courses. They were sceptical whether 50 per cent. of people are fitted for three-year honours degrees at traditional universities, although I know that the Government are not driving towards that. My constituents strongly support the money raised by the top-up fees being used to facilitate vocational training and courses that include academic content and on which people learn trades. The Government should not try to increase the numbers just for the sake of it. I am glad that I am not a graduate in media studies because, judging from their responses, my constituents would not think well of me if I were. They are not great fans of that course.

The Select Committee's insights into differential top-up fees are interesting. What would happen if some institutions charged top-up fees and others did not? How would that affect people? One of my constituents said that

"top up fees will create a two tier University system and this is likely to mean that middle class students will go to the prestigious high fee Universities and others will go to the 'teaching factories'".

That comment is obviously linked with the Government's agenda to separate teaching and research.

If the Select Committee is right and practically every institution charges £3,000, there will not be a differential effect but an aggregate effect, which I discussed in relation to debt. There will not be a differential effect because a market will not be created. I understand the logic of the Select Committee's position—if fees of up to £5,000 are allowed, it may create differentiation and if the Government want a market that is how to do it—but given my remarks about aggregate debt and notwithstanding some suggestions about grants, I would have great difficulty in supporting a threshold of £5,000 for tuition fees.

Photo of Mr David Rendel Mr David Rendel Liberal Democrat, Newbury

I am grateful to my hon. Friend for giving way on the interesting point about the creation of a market, which the Minister, in his last speech in the House, suggested that he wanted to achieve. Those universities that consider themselves to be less prestigious tell me that even if tuition fees go up to £5,000, they must still charge the maximum. The point about marketing is that if a university markets itself as having a lower fee—that may be attractive because students will not have to pay so much—that immediately makes it less prestigious.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

My hon. Friend is right. In the luxury car market, if Rolls-Royce were to charge less for its cars, it might well sell fewer because they would not be seen as an elite product. I do not know how far that analogy works, but there is danger that if a university signals that it does not think that the market will bear the full fee, it is signalling that its course is not popular or that the people who take it will not tell their friends to do so. Prices have a signalling effect, which is a concern.

The flip-side of the top-up fees policy is the access regulator. Only institutions that satisfy the access regulator will be allowed to charge top-up fees. Even my constituents who liked top-up fees did not like the access regulator. Most of their replies are printable, although they are not polite. They referred to "a lousy idea"; "an army of bureaucrats"; and "needless bureaucracy". One mentioned:

"The elimination of this ghastly 'Access Regulator', a function that only a politician of the worst sort could have dreamt up."

The Minister was not in the Department at the time, so it was not him. Another reply said:

"The access regulator is another half-witted way of wasting the taxpayer's hard-earned money".

My constituents are deeply hostile to the creation of an additional quango.

One of my constituents made a more constructive comment:

"I also worry about the access regulator because it may come down to meeting quotas of people, who are not the most suitable for the course but fit the statistics".

That is the danger posed by such intervention.

I shall make a couple more observations. To return to the intervention by the hon. Member for Stalybridge and Hyde, we are aware that graduates, by dint of being graduates, will, on average, tend to earn more than others. There is clearly an issue for those who go into public service and the voluntary sector, and who do not earn a great amount. They will be in debt for a long period. On average, however, graduates tend to attract a premium, will pay more in tax and will therefore contribute more to the cost of their fees. The Government say that those of us who do not support tuition fees think that graduates should pay nothing, but that is not remotely the case because they will pay extra tax by dint of their being graduates.

There are issues about how the top-up fees will affect people on longer courses such as architects, medics and so forth. The Government are so keen to get graduates into certain key occupations that they will subsidise their fees, but that is not true across the board. The policy will have a different impact in that case.

I am very concerned about the position of mature students. I am not aware of preferential rates being charged to them—I am happy to be corrected about that—but if they are charged the full fees, they really will face a lifetime of debt until retirement. Surely we want to encourage such people to go back into higher education.

My premise is not that higher education does not need additional funding. If we are to compete internationally as a nation we will not do so by paying sweatshop wages. The country in which we want to live would compete not on sweatshop wages but on a value-added basis, and with a highly educated, highly skilled and highly trained work force. That has to be the right strategy—we do not query that. An expansion of higher education—albeit of a more diverse form than we have traditionally seen—is to be welcomed.

It is not cheap keeping our universities at the forefront of research, and I have received representations from my constituents who are concerned about the low salaries for academic, research and support staff in universities. All those things have a price tag attached. My contention is that the top-up fee route of paying for them has very grave consequences that make it unacceptable.

The debt issue is critical, and debt for women is a particular problem. If we are not to expect parents to find tens of thousands of pounds to prevent their offspring from getting into debt, if we are not to expect students to spend their entire university careers working full-time to prevent themselves from getting into debt and if we are not to prevent women—and young people in general—from going to university because of the fear of debt on graduation, the top-up fee policy must be reconsidered. I hope that the Minister will respond specifically on the position of women, and more generally on the effect of debt on the scale envisaged among the people about whom I am concerned.

Several hon. Members:

rose—

Photo of Frank Cook Frank Cook Labour, Stockton North

Order. I remind the Chamber that it is customary in these 90-minute Adjournment debates to commence the first of the three winding-up speeches 30 minutes before termination. I am giving fair warning that we have only 33 minutes of general discussion left. I ask hon. Members to bear that in mind when making their contributions, and when accepting and responding to interventions.

Photo of Barry Sheerman Barry Sheerman Chair, Education & Skills Committee, Chair, Education & Skills Committee 2:27 pm, 16th July 2003

I am grateful to Mr. Webb for allowing me to speak. As you know, Mr. Deputy Speaker, I wrote to him and to you. I want to be brief because I realise that many people want to speak in this important debate. The Select Committee on Education and Skills, which I chair, was in the final stages of agreeing its report when the two Opposition days—one for the Liberal Democrats and the other for the official Opposition—took place. I took a vow of abstinence in those debates, so it is a pleasure to have five minutes today.

I would like to put a rather different case to the Chamber. The Select Committee listened to many experts when taking oral evidence. We received evidence from around the country in Belfast, Edinburgh, Oxford and Cambridge. We met the Russell group, and talked to many people, including parents and others. What the report came down to—it is good when one gets to this stage—was the fact that the unique nature of British higher education is quality.

Our universities have a reputation for such high quality that people from around the world still want to come here. They do not want to go to many American universities. They want to go to those in the Ivy League, but there are many universities in the United States that do not attract overseas students. Overseas students are not attracted to the universities of our fellow members of the European Union because they long ago gave up quality and went for quantity, with large classes, little tutorial intervention and poor pastoral care.

Anyone who can do so likes to come to Britain to study in higher education. What is our unique selling point? It is quality and the combination of teaching and research under one roof. In any one institution, research and teaching are carried out by the same people. That does not mean that they do that all the time and that some researchers are not less available than others. However, the principle exists, it is right and it underpins the very nature of our university system. That is the unique selling point of our higher education system.

The problem with preserving that system, however, is that it is expensive, and it will get more expensive as we go on. As the Select Committee report said, it is vital to have a vibrant, expanding and high-quality higher education system to encourage the development of individuals' potential. Most of us came into politics because we believed that the potential of all the people born in our country should be expressed and developed, and that is good for society at large. I still believe that a good society is a well-educated and trained society.

We must be frank and admit that the economic challenges to our country mean that we will increasingly have to invest in innovative products and services and in a range of industries and sectors, some of which have not yet been dreamt of. Such developments will come out of university research, participatory research and partnership research. The challenge facing our country is to stay wealthy and to continue providing good, well-paid employment for the individuals who live in it. That will depend on the higher education sector. I speak to many politicians who still do not understand the fact that the largest employer and wealth creator in many constituencies is probably the university.

By far and away the largest employer in my constituency of Huddersfield is the university, not manufacturing, the big chemical or dyestuffs companies, the wool textile industry or engineering, although they are still around. The real employment of the future is in the university. We can look at Manchester, Birmingham and London in the same way. Let us take the 43 university institutions out of London and see what damage could be done to this great metropolis of ours. Taking the university institutions out of Edinburgh, Cardiff, or Swansea would have the same effect. The universities are so important to our future that we need to spend an increasing amount of the national treasure on developing them. There is the rub. We are taking part in a debate that I think is too centred on the issue of top-up fees.

I want briefly to take us back to the Dearing proposals. Dearing said clearly that we should fund universities on the basis that those who benefit from university education and the university sector itself should pay for it. That includes society, through taxation, because, as I have explained, society benefits from higher education. Individuals, who will have a better life, higher-paid employment and more opportunities, should pay towards their higher education.

The White Paper is weak on the issue of employers, and I hope that the Minister will carefully consider our proposals for a levy on employers of more than a certain size. We propose that, if they do not devote a certain percentage of their turnover to research and development, they should be asked to pay into a levy that will flow into universities. The Government should take that, or a similar idea, seriously.

Those of us in this lower House of Parliament know that, at present, between 15 and 20 per cent. of our constituents, or at least the constituents of those present here, will benefit or will have benefited from higher education. About 80 per cent. of people in my constituency receive no benefit from higher education. Many of them leave school at 16. The state will have invested £45,000 in their education between the ages of three and 16, but they will get nothing more. However, those who stay on get a minimum of £25,000 between the ages of 16 and 21.

Photo of Mr David Rendel Mr David Rendel Liberal Democrat, Newbury

I am grateful. Does not the hon. Gentleman recognise that all those people will go to doctors for medical services, and that their children will have teachers at school? Those teachers and doctors will all have had a higher education, without which they could not do those jobs and give that help.

Photo of Barry Sheerman Barry Sheerman Chair, Education & Skills Committee, Chair, Education & Skills Committee

I recognise that familiar argument, but we are talking about a £25,000 extra investment in people who stay on for higher education. Some people leave school at 16 or 18, without a university education, and start their own business. Some of our greatest entrepreneurs do not have a higher education. If such people go into a bank and say that they want to start a small factory or an ICT company and therefore need to employ people, the bank manager will not say, "We are going to give you an interest-free loan."

Many people in our country do not benefit from higher education, but they pay tax and, quite fairly, they think that they can look at those who do benefit from higher education and say that Dearing was right. It is important to get the balance right between those who pay contributions and those who receive the benefits.

As we said in our report, the Government have invested enormously in higher education, but it is not enough if we are to have the highest-quality, internationally competitive research throughout the country, not just at a handful of universities in London and the south-east, and if we are to have well-paid university teachers. They have not had a real-terms pay increase for 25 years, which I know because I was a university teacher 25 years ago. There is an increasing shortage of young teachers who go to university and stay there, especially in specialist subjects. It is almost a mystery how we get them to do that on current salaries, and it is almost impossible to get people for certain subjects.

I constantly hear the refrain, "Don't wanna pay," which is almost like a teenage stamping of the feet, or Dario Fo's "Can't Pay? Won't Pay!" As the debate develops over the months and years before the next general election, I hope that the people who say, "We don't want to pay," will advance proposals that recognise the fact that, if they want a high-quality higher education, people have to pay. The Government cannot keep ratcheting up income tax, even for those earning more than £100,000, and I am dubious about how much money that would provide. If the extra money is not going to come from the taxpayer, where else will it come from in a society that believes in equity between people who receive benefits and those who pay for them? I hope that the debate can be a little more sophisticated.

The hon. Member for Northavon made a very good introduction. It is valuable that he has been corresponding with 1,000 of his constituents by e-mail, but they must start to think through what they want for our country in the long term and who should pay for that privilege and investment, so that we can get the balance right over the coming years.

Photo of James Purnell James Purnell Labour, Stalybridge and Hyde 2:38 pm, 16th July 2003

I congratulate Mr. Webb on securing this debate. He is one of those Members who give the Liberal Democrats a good name, if that is possible. He is extremely serious about social security issues, on which I have had many dealings with him. However, perhaps he knows in his heart of hearts that the picture that he paints of what the Government are doing may not be as multi-dimensional as it might be.

As politicians, either in opposition or in government, we must balance opposition against opportunism, although I am not making that accusation about the hon. Gentleman. The Conservative party has put forward a policy pretending that we should not set the target at 50 per cent., but I think that it knows in its heart of hearts that that is not what the country needs. I have great respect for Mr. Boswell, but he must sometimes find it difficult to defend such things, given his one-nation credentials.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions)

On the assumption that our respect is mutual, may I ask the hon. Gentleman to enlighten us as to the objective basis on which the 50 per cent. target was selected?

Photo of James Purnell James Purnell Labour, Stalybridge and Hyde

I am grateful to the hon. Gentleman for introducing my first question: is the 50 per cent. target arbitrary? In some respects, of course, it is. Why 50 per cent? Why not 51, 49 or 52.356 per cent? The point is that the 50 per cent. target makes clear the direction in which we want the system to head, and those who argue against such a target need to say what direction they want the system to take.

There are already pressures in the system. Improving A-level results mean that more people will want to go to university. Demographic pressures will bring tens of thousands, or perhaps even 100,000, extra students into the system over the next few years. Therefore, the figure is naturally rising towards 50 per cent., even before we take into account the relevant arguments, which are powerful.

The first argument is that more than 60 per cent. of people in the relevant age bracket go to university in countries with economies similar to ours, such as Australia and the Scandinavian countries. Indeed, the figure in most Scandinavian countries is already 70 per cent. Are we saying that the figure in this country will, uniquely, remain stuck at 42 per cent? Are the Conservatives saying that they will bring back a cap, as Mr. Portillo did when he was Chief Secretary to the Treasury? At that time, people were told, "You may have worked hard at school and sweated to get the right A-level results, but we're not going to let you go to university, even though your results would have got you in five or 10 years ago."

The second argument relates to access. At the moment, about 80 per cent. of children from the professional classes go to university, compared with 15 per cent. from the non-professional, manual classes. What are those who are against the 50 per cent. target saying about people from the manual classes? Are they saying that such people are genetically too stupid to go to university? Are they saying that they are doomed to stay in low-class, low-skill occupations? Are they saying that that is a fair reflection of their skills and talents? Those figures brutally show the discrimination that confronts people in our education system. It is often said that fewer than 1,000 people from social classes D and E get three good A-levels each year. We must address that problem, and I believe that the Government are doing so. However, that will not be enough, and we must make a radical effort to increase access so that more people can go to university.

Photo of Ms Lorna Fitzsimons Ms Lorna Fitzsimons Labour, Rochdale

Does my hon. Friend think that his argument is strengthened by the fact that we never changed the 80:20 participation ratio even in the heyday of full grants? Even after the grant was introduced, it seemed that there was a 20 per cent. ceiling, and we did not budge it. That shows that individual finances are not the real issue behind access to higher education.

Photo of James Purnell James Purnell Labour, Stalybridge and Hyde

I absolutely agree. The only reason one could give for not heading in the direction of a 50 per cent. target is that one believed in a 30:30 world. In such a world, middle class people would go to university, graduate and get the good jobs. There would then be some administrative jobs in the middle. Finally, there would be the low-paid section at the bottom, where people would be trapped, never having the opportunity to go to university and, therefore, to get a highly paid job. This may not be true of the hon. Member for Daventry, but people who denigrate media studies courses or those of our universities that used to be polytechnics are appealing to a deeply patronising and conservative tendency, which still exists in parts of our society. I think, however, that they may be slightly embarrassed about that in their heart of hearts.

I am speaking in the debate because my constituents in Hyde would benefit hugely from the proposed policy. At the moment, we broadly achieve the national average for GCSE results, but the proportion of those who go to university is only half the national average. The policy will increase that proportion and allow constituents from families that often earn less than £15,000 or £20,000 to go to university. It will do that because it will make education free at the point of use. The policy will get rid of upfront tuition fees, bring back grants for the very poorest and give them more money in their student loan to pay their maintenance costs. It will make students much less dependent on credit card debt, which has much higher interest rates. The policy will start to allow people in my constituency to have the same aspirations to go to university as people in more middle class constituencies, particularly in the south, and that is why I defend it.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

Does the hon. Gentleman share the view that the distinction between the £1,100 top-up fee, which is fully rebated for the poor, and the £1,900, which is not rebated at all, is a concern for his constituents? Would he like to see that £1,900 rebated for the poor?

Photo of James Purnell James Purnell Labour, Stalybridge and Hyde

As the consultation on the White Paper goes forward, we need to think about grants, where the £15,000 kicks in, and getting the right balance between having the right incentives in the system for people to choose which university to go to and making the way in which money is repaid as progressive as possible.

The 50 per cent. target is a crucial signal of the direction in which the Government are heading. It is arbitrary, but, if anything, too low. It is the right aspiration for 2010, but, given the demographic pressures, the improvement in A-levels and the fact that Scandinavian countries, Canada and Australia are already way above the 50 per cent. level, we should go higher than 50 per cent. in time. Anyone who pretends that we do not need to be heading in that direction is doing the country a disservice.

Increasing participation is the first spending pressure. The second is quality. I do not think that anyone pretends that that is not an issue. As the Chairman of the Select Committee made clear, the pay going to teachers and academics is a scandal that has gone unchecked for too long. We are starting to do something about it, but much more must be done.

It is still far too difficult for people to fund graduate courses. Anyone who fails to get a very good first still finds it extremely difficult to stay on at university and do a graduate course. Again, the Government are doing something about that, but we need more funding to address the issue. The Government have increased research funding in a number of areas, but, as Universities UK has made clear, there is still a lot further to go.

The twin spending pressures cannot be avoided. We must increase the proportion of people going to university and consider the spending pressures in terms of quality because, without world-class universities, in 10 or 20 years' time, we will be suffering in relation not just to the accumulation of knowledge but to the development of our economy. It is widely agreed across the House that universities are one of the key engines of economic growth in the 21st century.

We must ask ourselves how we will pay for that spending. Broadly, there are three alternatives. We can pay through general taxation. I agree with that, and we do that. The vast majority of university education is paid for through universal taxation. Such taxation is progressive and reflects the fact that there are great benefits to society. People use doctors and benefit from those who work in research and from general economic growth. Everyone benefits from our universities.

Is it right, however, to fund the whole of the increase needed to meet the spending pressures through general taxation? Even if we were to follow the Liberal Democrat proposal of increasing taxes on people earning more than £100,000, where would we want to spend that money? Would we want to spend it on people going to university, given that such people will, by and large, benefit from going to university, earn more and have their horizons expanded, or on genuinely universal services, such as sure start, nurseries, child tax credits, child benefit, schools and transport?

Even if we could raise all the money by a tax on people earning more than £100,000, which, along with the Chairman of the Select Committee, I very much doubt, higher education would not be the right place to spend it. It would not be fair. It is fair to ask people such as me who went to university to pay back a proportion of that cost. Everyone in their heart of hearts basically agrees with that.

The second alternative is to have a graduate tax.

Photo of Mr David Rendel Mr David Rendel Liberal Democrat, Newbury

The argument about whether the money would be spent on higher education if it were raised is interesting. However the money is raised, if the Government spend it on some other service rather than increasing the amount spent on higher education, and decide to go ahead with top-up fees, I presume that they will then reduce the amount of taxation that is otherwise spent on universities and put it into all those other valuable and noble causes to which the hon. Gentleman referred, thus leaving the universities with no more funding than they had to start with.

Photo of James Purnell James Purnell Labour, Stalybridge and Hyde

That is a straightforwardly mistaken argument. People in universities are arguing for tuition fees precisely because they believe that they will have more control over the money. The money is much more likely to go to areas other than universities if it is taken in general taxation. University funding under the Conservatives saw a decline in per-student funds pretty much throughout the 18 years that they were in government. The hon. Gentleman would find exactly that if he ever became a higher education Minister.

Photo of Mr David Rendel Mr David Rendel Liberal Democrat, Newbury

If the hon. Gentleman examines history, he will see that precisely what I just described happened when this Government—his party's Government—introduced tuition fees. Universities received the same money as before because, although they received tuition fee money, taxation money was reduced in line with it.

Photo of James Purnell James Purnell Labour, Stalybridge and Hyde

Again, that is straightforwardly wrong. We are increasing the money going to higher education by, I believe, 9 per cent. in real terms. It is, in fact, increasing for the first time in 25 years.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions)

I align myself with the comment made by Mr. Rendel. The then Secretary of State for Education and Employment, now the Secretary of State for the Home Department, promised that the money raised by the initial tuition fees, which, incidentally, were against Labour pledges, was additional money made available to the universities and was directed towards solving their financial problems, so why did the unit of funding not increase for six years, and why are they now in as bad a financial position, if not worse, than they were in 1997?

Photo of James Purnell James Purnell Labour, Stalybridge and Hyde

The hon. Gentleman knows very well that the unit of funding is now increasing. It did not increase in the first term because participation was rising and money was going into research funding. It is incontrovertible that the amount of money going into universities is increasing in real terms, and people in the university sector want the money raised in that way rather than through general taxation because they believe that they are more likely to see it than if there are arguments over the split between universities, health, primary schools and the NHS. They know that, under this Government, unlike under the Conservative Government, they can be confident about receiving general increases in money. However, they know that that will not be enough, so they believe that some tuition fee system will be the best way of ensuring that that money will be additional.

Could we raise the money through a graduate tax? Again, we could. I am completely agnostic about whether we should have a graduate tax or a tuition fee system. The greatest problem with a graduate tax is that it would have to be levied on everyone by adding it to the basic rate of tax. People would therefore pay it from an income of some £6,500 to £7,000—the hon. Member for Northavon is an expert on these issues, and he may correct me if I am wrong—which is about half the level at which the tax is currently paid. It is clearly much more regressive compared with the Government's proposal. The fairer way of raising money, other than through the basic rate of tax, is through repayments, which are income contingent but kick in at a higher level. If the graduate tax were added to the top rate of tax, the increase would not be 2p or 3p in the pound on the top rate of tax for people who had gone to university, but presumably 6p, 7p, 8p, 9p or 10p. If the idea of an income-contingent debt is a disincentive to going to university, the idea of paying 5p or more extra for going to university as part of the graduate tax if one is a top-rate taxpayer would be a clear disincentive.

An income-contingent loan is a fair way of raising money. If people could persuade me that it was fair to raise it through a graduate tax, I would be open to it, but the facts do not support that. People have advanced this great idea that debt will hang over people for the rest of their lives, but it should be made clear to them that the debt is income contingent. The hon. Member for Northavon talked about the possibility of Rolls-Royce reducing its prices. If loans used for selling cars were income contingent, and people knew that they would not have to pay the money back if they earned less than £15,000 a year, an awful lot of people earning less than that would be popping down to Rolls-Royce and buying Silver Shadows.

The hon. Gentleman also mentioned women. I greatly admire the way in which he consults his constituents, and I may steal the idea—plagiarism being the sincerest form of flattery. The biggest issues that face women in my constituency are the lack of universal child care and nursery education. If extra money were made available from general taxation, that is where I would invest it.

I recently met people from Hyde Clarendon, and university students have raised the issue with me. They are extremely intelligent and perceptive people, and they understand the details. If it were explained to students that the debt is income contingent and the small proportion of the total cost involved were made clear, we would be able to move forward with a policy that, in my view, is clearly in the national interest. It will be fair in terms of access, and it will plug the quality gap emerging in our universities.

Photo of Mr David Rendel Mr David Rendel Liberal Democrat, Newbury 2:55 pm, 16th July 2003

I congratulate my hon. Friend Mr. Webb on bringing this subject to our attention. As he said, it is the third time in the past few weeks that we have had the chance to debate it. For my party, however, the more often we can do so the better. I am delighted to have the chance to put our views to the House and to the public. I am delighted also to have the chance to talk about the policies of the Government and the Conservative party; it is easy to spot holes in the policies of both.

The Chairman of the Select Committee said that he believed that most people did not benefit from higher education. That is an extraordinary thing to say.

Photo of Mr David Rendel Mr David Rendel Liberal Democrat, Newbury

The hon. Gentleman has clarified what he meant.

The example of David Beckham has been introduced before when talking about the money earned by people who have not had a higher education. His earnings are partly due to the fact that he played as England's captain in the last World cup. However, he was able to play only because someone had mended his metatarsal bone a few weeks earlier. To some extent, his earnings are now dependent on the fact that somebody was around who could do that.

The fact is that everyone who earns that sort of money will, in one way or another, be dependent on those who have had a higher education. Such an education can give people the chance to work for entrepreneurs who have not had a higher education, to provide services for their firms or in one way or another to add to the wealth of the nation and therefore the wealth of those entrepreneurs that the hon. Gentleman mentioned.

The logic of the hon. Gentleman's position—that one should pay for whatever part of one's education others do not have—inevitably means that everyone should pay for education beyond the compulsory age of 16. If people have to pay for their higher education simply because not everyone gets it, they should pay also for education between the ages of 16 and 18. So far as I know, that has not yet become Labour party policy. I would be interested in whether the Minister has anything to say about that. Perhaps he will surprise us all by changing policy on post-compulsory education.

Photo of Barry Sheerman Barry Sheerman Chair, Education & Skills Committee, Chair, Education & Skills Committee

I know that the hon. Gentleman had a rather exclusive education, and that he is therefore a little removed from the world, but I was saying that individuals should make a contribution. I did not say that people should pay in full for their post-16 or post-18 education. I called for them to make a contribution for their higher education.

Photo of Mr David Rendel Mr David Rendel Liberal Democrat, Newbury

It is interesting that those who have had post-compulsory education but not higher education will not have to pay under the hon. Gentleman's theory, but that those who have higher education will. I do not see the logic of that argument. Those who have education post-compulsory school age should either pay for it all or make a contribution to it all, or make no contribution to either. The idea that people should have to make a contribution for higher education but not for post-compulsory education has no logic.

My hon. Friend the Member for Northavon made a powerful case, and he spoke of the representations that he has received from his constituents. In particular, he is right about the special effect that top-up fees will have on women. He seems to think that no one has been talking about it, but I assure him that when I go to universities and talk to groups of lecturers and students, I invariably make the point that the policy will have a major differential effect on women. He will not be surprised to hear that the response to such remarks is immediate, especially from the women. All heartily agree that the policy is particularly unfair to them.

There is an overwhelming view among students, young people, parents and university teachers that top-up fees and tuition fees have no part to play, because they are no answer to the problems that face the higher education system. However, in relation to my hon. Friend's speech, I should say that the Government are right about the need to widen participation, especially among those from the traditionally under-represented groups. The White Paper admits that the social class gap among those entering higher education is unacceptably wide and has widened. That analysis is confirmed by the MORI/Unite student living report produced earlier this year, which states that the proportion of students from social classes C2, D and E has dropped in the past three years from 20 to 17 per cent. Under Labour, the ratio of ABC1 students to C2DE students has increased from four to one to five to one.

Top-up fees, which would cause debts to soar to more than £20,000 on graduation, would make the situation much worse. We cannot have both a serious policy of widening participation to include students from non-traditional backgrounds and charges for tuition that place serious financial and psychological obstacles in the path of participation. The two policies are mutually exclusive, and the proposals in the White Paper, far from removing the contradiction, merely reinforce it.

Photo of Ms Lorna Fitzsimons Ms Lorna Fitzsimons Labour, Rochdale

I wish to ask the hon. Gentleman two things. First, does he agree with the direction of travel towards a target of 50 per cent. of people accessing higher education, and secondly, given the thesis that he is advancing, why does he think that when there was no charge for higher education and full grants were available, only 20 per cent. from the lower socio-economic classes went into higher education?

Photo of Mr David Rendel Mr David Rendel Liberal Democrat, Newbury

I am sure that there are many reasons why the participation rate was not higher, not least the failures of our education system further down the tree. It is a question of how many people progress to the right level in schools. The fact is that tuition fees have made the situation worse and top-up fees are likely to make it even worse. To answer the hon. Lady's question about the target, we should be aiming to make it possible for all young people who have the ability to make good use of a university education to have the opportunity to do so. The question should be not whether we can set a rigid target of 50 per cent. or any other figure, but how many people we can enable to reach a stage at which their education and their ability are such that they can make good use of a university education.

Photo of Ms Lorna Fitzsimons Ms Lorna Fitzsimons Labour, Rochdale

I asked whether the hon. Gentleman was in favour of the direction of travel in increasing participation towards the examples that my hon. Friend James Purnell gave from Scandinavia, Australia and Canada.

Photo of Mr David Rendel Mr David Rendel Liberal Democrat, Newbury

I am sorry if I did not make myself clear. I thought that I had said that one of the few points on which I agree with the Government is the need to increase the rate of participation. The direction is right, but the Government are going about getting there in an odd way.

I want to concentrate on two areas in which top-up fees might have an impact. The first is university funding, which I mentioned a few moments ago. It seems that all parties now agree that universities need more money—they have been seriously underfunded. The last Conservative Administration presided over a 40 per cent. real-terms drop in funding per student, and during Labour's first term in office there was a further cut of 7 per cent. in funding per student from the taxpayer. Britain now spends less as a proportion of gross domestic product on higher education than it did in 1989, when there were half as many students as there are now. That is a telling statistic.

The introduction of tuition fees did not result in any extra money for higher education. That was confirmed by Professor Sir Howard Newby, chief executive of the Higher Education Funding Council for England, who told a meeting of the Public Accounts Committee on 28 January 2002, at which I was present:

"The grant to institutions was reduced by exactly the amount that was coming through in tuition fees, so essentially there has been a displacement effect."

Photo of James Purnell James Purnell Labour, Stalybridge and Hyde

Does the hon. Gentleman recognise that higher education funding is now growing at 9 per cent. a year in real terms?

Photo of Mr David Rendel Mr David Rendel Liberal Democrat, Newbury

I certainly pay tribute to the fact that the Government have in the past year or two begun to increase the amount of money going into higher education in real terms. That is good and has had welcome effects, but it has taken an awfully long time. Moreover, owing to the reductions in past, the level is still not back where it was when the Government took office, let alone the position that held when the Conservative Government came to office in 1979, since when there has been a 40 per cent. drop in funding per student in real terms.

Why should the outcome for top-up fees be any different? There really is no logical reason to suppose that it will be. All that will happen if top-up fees are introduced is that the balance between the public and the private parts of the funds that go to universities will change. There is no reason to suppose that the overall amount will be any different from what it otherwise would have been if all the funding came from the public sector and general taxation.

The Government have denied that: the Minister told us recently that the income from top-up fees

"will be additional money going into universities."—[Hansard, 23 June 2003; Vol. 407, c. 766.]

However, he has so far not been able to explain what provisions the legislation will include to ensure that, so I hope that he will do so today. Perhaps that is not surprising, since I cannot see any provisions that could possibly do so. If there were such provisions, they would in any case not be consistent with sound financial management, since surely Government must first decide how to split up the cake of our national wealth and then decide where the money for education is to come from.

To decide first how to get the money and then to leave to chance how much for higher education the universities decide to raise from our national wealth would a mad way of proceeding, and I do not believe that even this Government are capable of that. The important point about the impact of top-up fees on university funding, therefore, is that they will have no effect on the total funding.

I should like to concentrate on the effect that top-up fees could have on the credibility of the Conservative party. Mr. Boswell is an honest chap, and if it were not for the special parliamentary meaning of the term, I would perhaps dare to call him a friend. However, on tuition fees he seems to have difficulties with his own hon. Friends. The new Conservative policy to scrap tuition fees has been much trumpeted; however, the message does not yet seem to have got across to the Conservative members of the Select Committee, not one of whom backed my hon. Friend Paul Holmes when he produced a minority report last week to outline his opposition to tuition and top-up fees.

Although I hardly dare to think that I could be so honoured, perhaps hon. Members noticed my speech when there was an opportunity to debate the Conservative proposals on 25 June. On that occasion I referred to research by Professor Nicholas Barr of the London school of economics that shows that the Conservative proposals would not only end the proposed expansion, but cut participation from the current rate of 43 per cent. to as low as 36 per cent. by 2010. Since then, Libby Ashton of the Higher Education Policy Institute has shown that up to 250,000 young people who would otherwise be well qualified to take up a university place would be denied one under the Tory proposals. Moreover, those people would be disproportionately drawn from the least well-off families. The Institute for Fiscal Studies found:

"The Conservative proposals would benefit the richest households more than the Government proposals while the poorest households would be worse off."

It is therefore no wonder that Professor Barr concludes:

"The Tory proposals are . . . offensive to anyone who cares about fairness."

Photo of Barry Sheerman Barry Sheerman Chair, Education & Skills Committee, Chair, Education & Skills Committee

What did Professor Barr say about the Liberal Democrats' proposals? The hon. Gentleman will find his comments in the same document.

Photo of Mr David Rendel Mr David Rendel Liberal Democrat, Newbury

Professor Barr has certainly never been in favour of funding higher education out of general taxation, for reasons over which I have had many arguments with him; however, I am referring to what he said about the Conservative proposals. I do not pretend that we are fully in line with each other and never have done—we have argued long and hard about the issue.

The Liberal Democrats, it has to be said, and this is really the difference—

Photo of Frank Cook Frank Cook Labour, Stockton North

Order. I must bring it to the attention of the hon. Gentleman that he has made many interventions already in the debate. I do not wish to inhibit the flow of the debate, but he is rapidly approaching 15 minutes in making his own contribution, in addition to the numerous interventions that he has already made. I therefore ask him to bring his comments to a close fairly quickly.

Photo of Mr David Rendel Mr David Rendel Liberal Democrat, Newbury

Thank you, Mr. Deputy Speaker. I shall certainly try to do that.

The main difference between the Liberal Democrats and the Conservatives with regard to abolishing tuition fees and top-up fees is that the Liberal Democrats oppose fees, because we believe that they are an obstacle to wider participation, whereas the Tories want to scrap fees at the cost of participation.

The Government have earned some respect for their commitment to a fairer higher education system, in which more people have an opportunity to take part and from which more people will benefit. I hope that they will take account of the arguments advanced by many on the front line in our universities, in Parliament and on the Government Benches to show that the noble objective of increasing participation can be achieved only if they reverse their policy on tuition and top-up fees.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions) 3:10 pm, 16th July 2003

I congratulate Mr. Webb on initiating the debate and also on the measured terms in which he put his case. That set the tone. This will not be the last debate on the subject, and I hope that any subsequent debates will be conducted with the same understanding of the complexity of the issues.

I listened carefully to what the hon. Gentleman said, and I am sure that his remarks will repay further study—I welcomed his technique of going out and asking his electorate for views on the matter. I also noted two particular points. He is right to emphasise the differential impact on the position of women. I would say that, because I have three graduate daughters and am sensitive to the issue. I was also interested in the nuancing of what he said about the vocational experience arising from higher education. We all understand that point.

I listened to the views of Mr. Rendel and have debated with him previously on a rather wider compass than we have today. We have differences of view and opinions as to solutions, but I note his conversion to looking towards people's career development. That will be a welcome additional theme.

I do not want to overlook the contribution made by Mr. Sheerman. He has presided over a useful Select Committee report, which will repay not merely partial quotation this afternoon, but deeper study over the recess. I intend to go through it carefully then. The report has properly brought together a number of issues.

I am also grateful to James Purnell for his contribution. From time to time, he makes an excellent job of defending the indefensible aspects of Government policies: someone has to do it, and I cannot think of anyone who could do it much better.

I am disappointed that Mrs. Fitzsimons has absented herself after making several interesting interventions, not least because we have "form" on the matter when I was the Under-Secretary of State, Department for Education and she was the president of the National Union of Students. I will not say that our positions have been reversed, but I would have enjoyed probing her on her current stance on these matters.

I am conscious of the time, Mr. Deputy Speaker, but none the less will remind hon. Members, before the record is distorted, that the Conservative party—I include myself in this because I was in the Conservative Government of that time—comes to this debate with clean hands. I shall take up the point made by the hon. Member for Stalybridge and Hyde on the issue of participation as opposed to access, about which there is systemic confusion.

Photo of James Purnell James Purnell Labour, Stalybridge and Hyde

If the hon. Gentleman's party were to come to power and cut 250,000 students from the total roll, does he not think that both participation and access would decrease?

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions)

The hon. Gentleman has leapt to a conclusion with which I do not necessarily agree. Our proposals would make it possible to provide an adequate offer—with the option of progression to higher education—for anyone qualified to do it.

I wanted to put it on the record that a Conservative Government took us from an elite to a mass system of higher education, with participation of young people rising from 8 to 33 per cent. or more. That is a major and historic achievement, which we have no wish to reverse. We did that without imposing tuition fees. The student loans that we introduced and that enabled us to fulfil that policy at considerable speed in the early 1990s were of a magnitude lower than the loan requirements implied by the present Government's policies.

Finally, it is often overlooked that, although there were difficulties with the structure of mortgage-type loans, they did not kick in until 85 per cent. of average earnings was attained. On that basis, a starting figure for the repayment of loans would be a salary of more than £20,000, which is more or less in line with the Select Committee's thinking.

Even in this short compass I would wish to concede that two issues are of continuing concern. First, we all believe that there has been too little participation from the lower three socio-economic classes. In some respects, it has gone back from my days in university. Hon. Members may be interested to know that the first piece of work that I commissioned from officials when I became Minister was an analysis of the situation as it then applied. The lack of participation of those groups is a great loss to universities, which miss able students, and to those individuals who do not take part.The answer, in our view, is to concentrate on the schools. We should get people prepared for university and ensure that they have adequate prior attainments, as that has a big influence on drop-out rates, rather than carry out social engineering at the university level.

Secondly, there is undoubtedly pressure on university funding. In exchanges with the hon. Member for Newbury, we noted the fact that, despite tuition fees, things have not improved and the money, as the Treasury would say, has been taken into account in the overall financial settlement.

The Minister has said that only one fourteenth of the total funding package is provided by student contributions at the moment. It is clear from the Select Committee report—for example, when it talks about higher top-up fees—that the introduction of tuition fees creates instability. There is always pressure to drift upwards to totally unacceptable levels. The figure of £5,000 has already been mentioned.

I should just make three or four specific points on current developments in relation to Government policy. The first is one on which we all agree. I have written to all the vice-chancellors about our proposals. There has been a range of replies, not all of which, I hasten to say, said that our suggestions were anathema. They all agree that they do not like the Office for Fair Access. Its job is one that they think they can properly do themselves.

Secondly, the Minister announced today in a written statement the figures for the new grant. It is lower than the grant that applied until 1997 under the previous Government. The upper income threshold for the full amount will be £15,200. It is estimated that only 30 per cent. will receive the full grant and a further 10 per cent. a partial grant. Given that there is a huge participation in fees relief for 58 per cent., the Government are beginning to shade down the coverage of people who receive support. The position under top-up fees is quite unclear.

I close on our strategic response to the Government's proposals. We object to them for two reasons beyond those that have already been discussed. First, they are unsustainable. Often, policies, including some of our own in government, require so much amelioration and tailoring that they yield little revenue. The Prime Minister appeared to say last week that only £500 million was coming in from the fees package. He was a little more modest than the Secretary of State, who suggested that it might be £700 million. It is still a very small amount, even if it is new money, which we doubt.

It is clear from the Select Committee report that the cost of the fees subsidy is already more than £800 million. A recent written answer suggested that it might be £1 billion. That is solved by cutting the Treasury interest rate. Once we move to top-up fees, the figures become much larger. I cannot see a Chancellor of the Exchequer in the future wanting to draw the cheque for that. There will be some reneging on undertakings if those loans are allowed to escalate.

There is also the issue of indefensibility. In relation to that, I would single out students with incomes just above the qualifying thresholds who, with their families, will be under severe pressures. Those with lower income levels are also, in one way or another, deterred from the process. It is wrong to say that students do not make a contribution. They suffer the opportunity cost of not earning, and they have additional maintenance expenditure through university participation. As the hon. Member for Newbury said, there is also the question of where the fees process will stop. If Governments think that they can charge students, why should they think that they cannot charge people at school?

Photo of Alan Johnson Alan Johnson Minister of State (Education and Skills) (Lifelong Learning, Further and Higher Education) 3:21 pm, 16th July 2003

I congratulate Mr. Webb. As others have said, he approached the debate in a constructive and rather novel way by describing his survey of 1,000 constituents. He said that I might be getting a bit tired of debating this issue, but we cannot have too many debates on it. In this particular forum, I should like to leave aside yah-boo party politics and deal with the issue in the way that the hon. Gentleman has.

The hon. Gentleman has raised a number of points that I will consider further, but I also have some immediate responses that will allow him to send a copy of the Hansard of this debate to the 1,000 constituents to whom he referred—if he can afford it. His constituents made an important contribution; their prejudices about the Office for Fair Access shocked me nearly as much as their prejudices about students on media studies courses. My hon. Friend James Purnell made the point that we want to link university education to industry, and ensure that graduates who come out of our universities make an important economic contribution in today's world. I make no comment on any subjects that might have been studied for 200 or 300 years, but media studies courses make, and will continue to make, an important contribution to today's economy. It is saloon-bar, red-neck language—not that I would accuse the good citizens of Northavon of that—to suggest that, because media studies has become an important topic, it is irrelevant. It is not irrelevant. The higher education sector needs to get that message across.

I have listened carefully to the points that have been made. I remain convinced that the Government's strategy is the only coherent one for the future of higher education. I want to explain why I believe that a variable fee, which is the prime topic of today's debate, is the right approach. I want to deal with the effects and the perceived effects of our proposals, and finally I shall put the proposals in context of the Government's wider agenda. As usual, there will not be enough time to cover all the points raised.

As the hon. Member for Northavon will accept, he has a problem not just with top-up fees, but with fees in the first place. The starting point for any such debate has to be the Dearing report. I am perfectly willing to listen to the views of the 1,000 good citizens of Northavon, but let us not forget what Dearing said. His was a cross-party report, which was supported across party boundaries. It was a national committee of inquiry that produced the most radical and thorough analysis of higher education since the Robbins report in 1963. The Dearing committee was unequivocal in its view, and Dearing himself put it well in a recent speech. Higher education is different from post-16 education where, although too many youngsters are leaving school at 16, they have a right to stay on. Dearing said that, given that higher education is a major benefit that is not available as of right to all our citizens, it is equitable that those who are qualified and choose to take it should put something back in the pot when they become earners. If it is unfair to ask graduates to pay more of the cost, why is it fair to ask non-graduate taxpayers to do so? That is at the heart of this debate.

The hon. Member for Northavon spoke about the effect on women. That is an important issue, and perhaps we have not paid enough attention to it—I shall certainly do so in future. However, the big success story is the number of women going into higher education. They were in the minority in higher education—34 per cent.—as recently as 1996, but now account for 55 per cent. of those going into higher education, so the introduction of tuition fees did not affect that at all.

The basis of the hon. Gentleman's argument was the time taken to pay back the loan. A recent Institute for Fiscal Studies report said that that would take an average of 10 years under the Government's proposals. We have not analysed those figures carefully but, for women, 13 years—a difference of three years—sounds about right.

Mr. Boswell said how important the issue of loans is for women, and how onerous the loan might be to them. I am the secretary of his fan club, and all other hon. Members here probably feel the same. However, I remind him that, although it is true that under the loan system of the previous Government—£1 billion of which still has to be paid back—there was a threshold of £20,000, once that threshold was passed by one penny, the debt would be paid back in five or seven years irrespective of whether a person had taken time out for maternity leave or had left the job market. That is a much more onerous burden, and those debts are being paid at this moment. That issue should be the subject of a debate.

The point was raised in debate in the House that we are not talking about debt in itself but about the level of debt, because by and large, under various systems, students have incurred debt. The introduction of tuition fees has not affected the number of women going to university. I repeat that our proposal is that we remove upfront tuition fees and take a purist steering, as it were. No one—not students or parents—pays anything except graduates once they are earning £15,000 a year, and then they pay on an equitable and attractive basis.

This is not credit card debt. There is no real rate of interest building up, and the loan does not have to be repaid in a short period. It is not as though the scheme takes no account of people's earnings—that would be credit card debt. It is 9 per cent. applied to the difference between the threshold and earnings. Someone on £18,500 a year would pay back £5.50 a week.

I am perfectly willing to engage in debate on the time that paying back the loan will take, but we should ask whether the scheme is an attractive proposition if we accept that graduates should make a contribution, and accept all the points that my hon. Friend the Member for Stalybridge and Hyde made so powerfully. We must decide whether, considering all the other options, Dearing was right. We are talking about making a contribution, not paying the total amount.

By the end of the current spending review, we will be putting £10 billion of public money into higher education, and that is—as it should be—a real increase of 6 per cent. a year in the next three years. That means that £400 for every taxpayer in the country will go into higher education. If graduates are to make a contribution, is our system the right way to provide for that?

On variability, recent research suggests that there is a 44 per cent. difference in the average returns for graduates at the two ends of the graduate pay scale. Fortuitously, I have the figures for women who study law and architecture, although I did not know that that would be a major feature of the survey that the hon. Member for Northavon conducted. Between 1993 and 1999, the returns for women graduates in law and architecture were more than 40 per cent., while those for arts degrees were below 20 per cent., so there is a big difference. That is a factor if, in trying to bring more money into the system, we ask students to pay the same amount and make exactly the same contribution.

It is unreasonable to insist that students with such different earnings prospects pay the same flat-rate fee. In a speech in February, Lord Dearing said that, with the introduction of the price competition that comes with the discretion of institutions to set fees ranging from nothing to £3,000 in what is otherwise a growth desert in the market for three-year degree students, strong competition will lead to a differentiation in fees. People will not go to the upper end of £3,000.

Photo of Frank Cook Frank Cook Labour, Stockton North

Order. For the next 30 minutes at least, we must focus our attention on community transport.