Commons urgent question on Higher Education Funding - Oct 11

(Urgent Question): To ask the Secretary of State for Education if she will make a statement on higher education funding.

On 9 October, I made a written ministerial statement to the House setting out changes to the repayment threshold for student loans from April 2018 and confirming the maximum tuition fees for the 2018-19 academic year. The Government’s reforms to higher education funding since 2012 have delivered a 25% increase in university funding per student per degree. University funding per student is today at the highest level it has been at any time in the past 30 years.

As the House is aware, the Government have decided to maintain tuition fees at their current level for the 2018-19 academic year. This means that the maximum level of tuition fees will be £9,250 for the next academic year, 2018-19, which is about £300 less than if the maximum fee had been uprated in line with inflation.

We will also increase the repayment threshold for student loans from its current level of £21,000 to £25,000 for the 2018-19 financial year. Thereafter, we will adjust it annually in line with average earnings. This change applies to those who have taken out or will take out loans for full-time and part-time undergraduate courses in the post-2012 system. It also applies to those who have taken out or will take out an advanced learner loan for a further education course. Increasing the repayment threshold will put more money in the pockets of graduates by lowering their monthly repayments. They will benefit by up to £360 in the 2018-19 financial year. The overall lifetime benefit is greatest for graduates on middle incomes; low earners of course continue to be exempt from repayments.

We have world-class universities, accessed by a record number of young people from disadvantaged backgrounds, and a progressive funding system. We are building on those strengths through our planned reforms, including reforming technical education to provide new routes to skilled employment and strengthening how we hold universities to account for the teaching and outcomes they deliver through the teaching excellence framework.

The changes we are making are considered proposals that reinforce the principles of our student loan system and ensure that costs continue to be split fairly between graduates and the taxpayer. However, we recognise that there is more to do. We have further work under way to offer more choice to students and ensure they get value for money. We want more competition and innovation, including through many two-year courses. As the Prime Minister made clear last week, we will continue to keep the system under careful review to ensure it remains fair and effective. The Government will set out further steps on higher education student financing in due course.

Let me welcome Members back from conference season. We sang “The Red Flag”, the Conservatives waved the white flag. I told our conference that the Government should get on with sorting out student finance. Then the Prime Minister told her conference that they would. I suppose I am cheaper than Lynton Crosby, but the Government’s announcement begs just a few questions: what, who, when, why, how and how much? Apart from that, it is completely clear. What are the details of the review of higher education that the Prime Minister promised? Who will sit on it? When will it start and finish? Who decided that policy, how and when? Is it true that the Minister was unaware until the Prime Minister announced it? Surely he cannot be the least favoured Minister in the Johnson household.

Can the Minister tell us how much these policy changes will cost? How much more will taxpayers contribute and how much interest receivable is lost? Will the reduced income be replaced by additional funding? Can the Government explain why they have changed their mind since we last asked for these measures to be taken and they refused? Are they still considering capping interest rates below the 6% some graduates are being charged? What is their policy on grants? “Senior sources” have briefed that the Education Secretary wants them back. Will the Minister now match our commitment to restore maintenance support? 

Just what is the Government’s policy on tuition fees? They boast about freezing fees for one year, but we all know that that is simply because they do not have a majority in this House for any rise, so what will they do after that? Will they finally accept that this House voted against their most recent rise, and revoke that too?

The Prime Minister said that the Government have listened and learned. Will they listen to this House, and when will they learn that actions mean more than words?

I will answer some of the hon. Lady’s questions—in fact, all the questions. The normal, cross-Government processes were followed in the run-up to the announcements. The Department for Education worked closely with the Prime Minister’s team to develop those announcements. We are delighted to be able to announce the changes that she set out. I have set out in the ministerial statement that I published on Monday the full details that the hon. Lady has just asked for. However, to recap, the threshold will rise to £25,000 from £21,000. That will put a further £360 in the pockets of graduates. We have taken stock of the views of parents, students and Parliament itself in coming to our decision to freeze tuition fees for the coming academic year. Therefore, we are listening and, where appropriate, we are taking action to ensure that our student finance system is getting the balance of interests right between those of students and those of the general taxpayer. 

That is the core principle of our student finance system, which must achieve three goals. First, it must support access for the most disadvantaged, and it is achieving that with great success. If you are from a disadvantaged background, you are more than 50% more likely to go to a highly selective university than when the Labour party left office. You are more than 43% more likely to go to university overall. Students are less likely to drop out, whether they are from BME, disadvantaged, mature or part-time backgrounds, than they were when the Labour party left office. This system is delivering participation and access in a way that alternative student finance systems never have. 

Secondly, the system is working for universities. Our universities are 25% better funded per student and per degree than they were under the old student finance system, before the 2011 reforms. That is of fundamental importance. Does the Labour party really want our universities not to have the resources they need to do excellent teaching and to deliver great research? That is what it is proposing. It is proposing a return to the system that we saw in the run-up to the Dearing report in 1998, a system that saw a real-terms decline in university funding of almost 50%. Those are the changes that the Labour party will deliver if it has a chance to get into office.

Thirdly, our system is fair to the taxpayer. We keep the balance of funding under careful review. As the Prime Minister made clear in her party conference speech and in announcements in Manchester last week, we will announce further steps in that regard in due course.

I strongly welcome the measures that my hon. Friend has set out because we have to be fair to students and fair to the taxpayer, too. In the review, will he look at the high interest rate and at lowering the interest rate for students? On a wider issue, the Government announced a big boost to degree apprenticeships. Does he agree that we should be incentivising and putting all financial incentives into degree apprenticeships because the students earn while they learn, there is no debt, they get a job at the end and it helps to meet our country’s skills deficit?

We continue to keep all aspects of our student funding system under careful review to ensure that it remains fair and effective and that we are getting the balance right between the interests of individual students, who go on to have far higher lifetime earnings, and the interests of general taxpayers, whose voices must also be heard in this debate. The interest rate that my right hon. Friend mentioned will be among the things that we will continue to keep under careful watch in the weeks and months to come. Degree apprenticeships are a very promising way of combining the best of higher education and further education. We want them to develop and grow and we want more providers in the system to offer them. They have huge potential.

Raising the repayment threshold is a positive step and I am delighted that the UK Government are following the Scottish Government’s lead on that matter, but we have to be clear: it is not the panacea that this Government would have us believe. Average student debt on graduation is now more than £50,000, so the announcement needs to be part of a wider reform of student support and funding, which must include bursaries, grants and the abolition of tuition fees—indeed, everything we are doing in Scotland, which is ensuring that our students have the lowest student debt and the best level of support in the UK. We also have more students from deprived backgrounds accessing HE than ever before. 

What further steps will this Government take both to increase student support and to reduce student debt? Will the Minister now commit to reducing or better still abolishing fees and reinstating the maintenance grant for those in most need as part of a realistic student support package? Will he guarantee that he will look at reducing the interest on student loans in England, which is keeping young people locked into long-term debt?

No, I certainly will not commit to abolishing tuition fees. They are a strong policy success in many ways and an unsung one. They have enabled us to allow more people from disadvantaged backgrounds to go to university than at any point before. They have enabled us to lift student number controls. That is a critical argument for holding on to a system that shares the cost of funding fairly between the individual student, who goes on to have far higher lifetime earnings, and the general taxpayer.

We keep the system under careful review. As the Prime Minister set out in Manchester, we will make further announcements in due course about the rest of the student funding system.

I congratulate the Minister on the steps he has taken to try to get the balance right and welcome what he said about keeping this rather startling interest rate under review. I urge him to continue to resist the inevitable populist pressures to sweep away the whole system, which play very well to today’s students, but would create great problems. In hindsight, I was lucky enough to have people in low-paid jobs paying taxes to maintain me to meet my living costs when I was studying and being trained to be a reasonably successful barrister when I emerged from the university. Therefore, will he resist claims that taxpayers at all levels of income should pay for the costs, which would never be repaid by some of the students, who will go on to achieve very considerable incomes?

I can certainly assure my right hon. and learned Friend that we will continue to bear in mind carefully the taxpayer interest. It is critical to remember that the Labour party’s proposals, were they to be funded out of income taxation in that way, would add about 2.5p to the basic rate of income tax, so it is vital that we bear taxpayers’ interests in mind and we will continue to do so. He mentioned the interest rate, which we of course keep under careful review. It is worth remembering that this is a heavily subsidised loan product overall. The Government write off about 30% to 40% of the student loan book. That is a deliberate investment in the skills base of this country, not a symptom of a broken student finance system. The interest rate cannot be looked at in isolation.

Surely the Minister needs to go back to the Dearing principles? Dearing believed that the expansion of higher education should be based on the student who benefits paying the community through the taxpayer, society and the employer. Can we go back to those principles? I am worried that the Minister and the Prime Minister have already made up their minds about the review they are suggesting. The fact of the matter is that we cannot have a higher education system that is created entirely on a pile of student debt. It is time, cross-party, to have a radical alternative to what we have at the moment.

The Labour party helped to introduce the system we have today and this Government have been building on it since 2010. It is extraordinarily successful at enabling more people from disadvantaged backgrounds to get a chance to benefit from higher education. I am startled that the Labour party wants to roll back all that progress. Why would they want to reverse the changes that have enabled more than 50% more students from disadvantaged backgrounds to get to higher education? That is what the hon. Gentleman’s proposals would end up achieving.

I congratulate the shadow Secretary of State on continuing the fine tradition of women carrying on with speeches in the face of adversity. As someone who represents a university, was it not the case, when we made the decision in 2010 to put up fees, that it was a very simple calculation that if fees were not raised, we would have had to cut the number of young people able to go to university, because otherwise the public purse would not have been able to afford the system we have now? Universities are now well financed: we are not having the debate about university financing that we are having about other areas of public spending.

My right hon. Friend is absolutely right. It was the increase in tuition fees that enabled us to take the limit off student numbers and release student number controls. That change is what has driven the sharp increase in participation in higher education by people from lower socioeconomic deciles. It has driven a huge expansion of people from disadvantaged backgrounds getting a chance to go through university and higher education. The Labour party’s policies would reverse all that progress.

It is right that the Government have frozen tuition fees, but I wonder whether I could nudge the Minister to go a bit further and get rid of this unsustainable fees system altogether. When is he going to guarantee that universities and their funding will not be adversely affected in any way by the changes the Government are proposing?

Universities are well funded. As I said in my opening remarks, funding per student per degree is up by 25% since the reforms the Government introduced in the previous Parliament. We are confident, having assessed the financial position of our institutions, that they can sustain a freeze in the level of fees for this coming financial year and that is the policy the Government set out.

Value for money is key and far too many degrees are unnecessarily long. What efforts are being made to offer shorter, more intensive degrees to reduce the final tuition fee bill?

There are excellent examples of two-year programmes across our higher education system, such as those offered by the University of Buckingham. It is not alone—there are others. We want many more providers, including high-tariff, highly selective institutions, to start to offer two-year programmes. They have huge potential to access students who have been hard to reach by the higher education system. We will come forward with proposals very shortly to enable the rapid expansion of two-year degrees throughout our system.

The Minister’s replies this afternoon reveal the utter shambles at the heart of the Government’s higher education policy. We told them not to lift the cap on tuition fees. They did not listen and now they have had to U-turn. We told them not to freeze the repayment threshold. They did not listen and now they have had to U-turn. We now find that the Prime Minister has announced a review of student finance and higher education funding with absolutely no idea who is going to lead it, what the scope will be, or what the desired outcome will be. They are making it up as they go along. 

I urge the Minister, given that he has not listened to advice in the past year or two, to look at the biggest issue facing students as part of the review, which is not so much the tuition fee system itself, but student finance and the money in their pockets when they are at university, so that, finally, we can have a higher education student finance system that means that, wherever they are from and whatever their background, they have the money they need to succeed throughout the lifetime of their course and beyond.

We look carefully at the student finance system all the time. It is constantly under review and we have taken account of the views of colleagues in Parliament, parents and students in coming to the conclusion that we wanted to make the changes we announced last week in Manchester, so it would be unfair to say we are not listening and not responding appropriately. We always keep the system under review to ensure it remains fair and effective, and balances the interests of students and taxpayers appropriately. We will continue to do so in the weeks ahead.

I very much welcome the increase in the threshold, but in all this focus on finance is there a danger that we forget the whole purpose of going to university, which is to obtain a high-quality education? Will my hon. Friend assure me that whatever reforms he undertakes will not undermine the ability of universities to provide the highest-quality education possible, but that, on the contrary, they will drive them on to deliver even higher standards?

My hon. Friend is absolutely right. The more interesting part of this debate is about ensuring universities deliver value for money, great teaching and fantastic research with the resources the Government make available to them. In the autumn statement, we increased research spending in our system by the largest amount in 40 years. We should celebrate that fact. We have increased per student per degree funding by 25% since 2010-11. We should be celebrating that fact, because it is enabling our universities to do the great job we need them to do. Through the teaching excellence framework, we are holding them to account more tightly than ever before for that value for money we need them to deliver.

It is true that universities are better funded, but the Campaign for Science and Engineering, as well as universities, tell me that the definition of which subjects receive the top-up payment from the Government are out of date and too narrow. To ensure that we maintain funding, especially in science, technology, engineering and maths subjects, can the Minister confirm that the list will be looked at again as part of the review to help universities to fill the skills gap that his own Department is trying fill?

I thank the hon. Lady for her suggestion. We continue to keep that aspect of the system under watch. Clearly, it is important that courses that are more expensive to deliver receive an appropriate level of support from the Government. Obviously funds are not unlimited and we have to be careful in terms of promising further resources to all subjects, but we keep it under review.

The right hon. Member for Twickenham (Sir Vince Cable) described the current regime as having all the advantages of a graduate tax with none of the disadvantages. Is that not still the case, and would we not want to avoid the ridiculous situation at the University of St Andrews, where Scottish student numbers are capped at 20%?

My right hon. Friend puts it very well. Our system has enabled us to release student number controls, an option that has not been available to the Scottish Government precisely because they have not got the balance right between the individual student and the general taxpayer. I entirely agree with him.

May I urge the Minister to remember that most students become taxpayers, so it is completely pointless to try to set up a false divide between students and taxpayers? May I also urge him to look at the interest rate repayment? The retail prices index, which is used for student loans, is an outdated measure. It is not the Government’s measure of choice and it makes our students’ debts even more extortionate. We should be looking at the consumer prices index, not the RPI.

As I said to my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), we keep interest rates under view, along with other aspects of the system. RPI has historically been the measure of inflation for the student finance system and in some ways is more appropriate than CPI, as it takes account of, among other things, mortgage interest payments and council tax, which are typical expenses for graduates not included in the calculation of CPI.

It is exciting that record funding is now going into higher education, and it is absolutely right, of course, as the Minister said, that we get value for money from our universities. Does he share my concern, therefore, that the number of senior university figures being paid each year salaries in excess of that of the Prime Minister seems to be spiralling out of control?

My hon. Friend is right that there are examples of institutions where senior levels of pay have accelerated very rapidly. It is a matter of concern and great public interest. The new regulator, the Office for Students, will take steps to ensure much greater transparency and accountability in how pay is set, particularly the very high salaries we have seen in parts of the sector.

The Minister will be aware that students are leaving university with debts on average of over £50,000. How on earth can this burden be a sensible way to equip the next generation to meet the challenges they and society will face?

I say to the hon. Lady what I should also have said to my right hon. Friend the Member for New Forest West (Sir Desmond Swayne): this should best be seen as a graduate contribution, rather than a debt pile. Graduates do not have to repay until they are earning over £25,000, which is a world away from the world of commercial debts, and their debts are written off after 30 years. No commercial loan offers such terms. This is a time-limited and income-linked graduate contribution. We should start to move away from this conception of it as a debt and loan.

I am grateful to my hon. Friend for reminding the House that we now have record numbers of disadvantaged pupils going to university.

It’s not true.

Is it not unacceptable that the shadow Education Secretary went on Question Time the other night and claimed the opposite?

I agree with my hon. Friend, and I find it alarming that the hon. Member for Blackpool South (Gordon Marsden) is chuntering away saying, “It’s not true”. It is true. The proportion of people from disadvantage backgrounds now going to university has increased. It is undeniably true. It is in the statistics from the Higher Education Statistics Agency and the Office for Fair Access. The number is 43% higher than it was in 2009-10. A young person is 52% more likely to go to a highly selective university than they were in 2009-10. It is extraordinary that he wants to deny it.

I was happy to indulge the Minister and to listen to his mellifluous tones, but as he will quickly discover as part of his apprenticeship in this place, the Minister is not responsible for the observations on “Question Time” or elsewhere of the shadow Secretary of State on this or any other matter.

The Minister talks about the expansion in student numbers. How often does he have conversations with the local government and housing Ministers about the impact on housing pressures in cities such as Bristol and on council finances, given that students do not pay council tax and developers do not pay the community infrastructure levy? Although those students are welcome, it does come at a cost.

The hon. Lady makes an important point. Our university students bring enormous economic benefits to cities up and down the country, which is why our universities are such important economic actors across the country. Clearly, local authorities have an important role to play in managing the pressures that students bodies can sometimes put on the provision of public services, and I work closely with colleagues in the Department for Communities and Local Government to keep abreast of the pressures she mentioned, but there is no doubt that our towns and cities are immeasurably the better for having universities within them. They are anchor institutions that are steadfast and have longevity in a way that many other economic entities do not, and we should wholeheartedly welcome their presence.

Building on the point from my hon. Friend the Member for Kettering (Mr Hollobone), will the Minister explore making university finances much more transparent to ensure not only value for money for students but that the money is spent effectively and efficiently to enhance our fantastic institutions?

Yes, we feel it is important that there be greater transparency in the sources and uses of university income. In the regulatory framework consultation in the coming weeks, we expect to see the Office for Students making great progress in this area, so that we can boost student confidence that their tuition fee income will be spent clearly, well and for the purposes they want.

The Minister has said a few times now that he wishes to keep the system fair and effective. I remind him and the Government that further education is also a part of higher education and that, while additional sums have been going into HE, FE has been cut and restricted remorselessly. Would he say that what the Government do with FE is equally fair and effective? I can tell him it is not.

Of course, there is excellent higher education being delivered in our further education system, and the teaching excellence framework results in June highlighted the excellence in HE found in FE providers. On the hon. Gentleman’s question about funding, the Government made available an additional £500 million to support the evolution and development of T-levels, a transformational qualification that will help us achieve parity of esteem for technical and further education in our system.

I apologise for being late, Mr Speaker. 

The Minister has said two or three times now that student debt should not be considered real debt because it will be written off in 25 to 30 years. Will he or his colleagues in the Treasury publish their forecast of the cost to the public purse in 25 to 30 years of the loans written off as a result of students not meeting their repayments in their entirety? Given that he is raising the threshold for repayments, and so potentially increasing the level of debt, presumably that figure will grow, so he is actually stacking up a future burden for a future Chancellor.

As the hon. Gentleman probably knows, we regularly publish assessments of the amount the Government write off at the end of a 30-year period to reflect the fact that they want to make higher education free at the point of access to students. It is called the resource and accounting budgetary charge. Prior to the changes we announced at the party conference, the proportion of the loan book to be written off over that period was approximately 30%, but it will have risen as a result of the changes announced, and we will make the new amount public in due course.

I sympathise with the Labour Front-Bench team’s position on this matter. Basing higher education funding on billions of pounds of student debt that might never be repaid is neither morally right nor operationally pragmatic, so I urge the Minister to commit to a wide-ranging review of higher education funding that encompasses not only tuition fees but maintenance grants and the sustainability of funding for higher education students. 

If I may be so bold, Mr Speaker, I also urge the Labour Front-Bench team to enter into a discussion on this matter with their colleagues in Wales. The only Administration now committed to raising tuition fees is the Labour Welsh Government—

Order. I am inordinately grateful to the hon. Gentleman, but it is procedurally improper for him to veer off the centre of the fairway, which he previously inhabited. Questions must be to the Government about the policy of the Government, not general exhortations to other Opposition parties, but I am sure if he wants to have a cup of tea in the Tea Room with the Labour Front-Bench spokesperson, there might be such an opportunity.

I am grateful to the hon. Gentleman for making that point. It is true, of course, that the Labour Government in Wales have recently increased fees beyond the fee cap in England.