Wednesday 21st July 2021
(3 years, 5 months ago)
Lords ChamberSkills and Post-16 Education Act 2022 View all Skills and Post-16 Education Act 2022 Debates Read Hansard Text Amendment Paper: HL Bill 5-IV(Rev) Fourth marshalled list for Committee - (19 Jul 2021)
Baroness Sherlock (Lab) [V]
My Lords, I thank the noble Lord, Lord Willetts, for introducing his amendment, and the noble Baroness, Lady Bennett, for her reflections—and for her courteous but quite unnecessary apology. The current arrangements for student loans are now quite complicated. A recent House of Commons Library brief gave a lovely timeline of all the changes from 1990, when the first loans were introduced for student support—then at just £420 a year. It then tracked the developments, as loans gradually replaced grants for maintenance, and there was a shift from mortgage-style loans to income-contingent repayment schemes. Then loans for fees started, and some maintenance grants came back.
The big shift came in 2012, when fees trebled and the current system was in put in place. The effect of this pattern showed up when I was chatting recently to a member of our small opposition staff team. She had compared notes with a couple of colleagues in the office, and realised that although the three of them had graduated not so many years apart, each had a different package of debt and repayments.
Part of the reason for the complexity is that the system has so many moving parts. A Government wanting to save money have a range of ways to do it. They can change the size of the original debt, as they did dramatically in 2012. They can change the repayment threshold, as they did in 2016, when they decided to stop tracking earnings and freeze the threshold until 2021—although that went down so badly that they changed it again, not just unfreezing the threshold but raising it to £25,000 from 2018. They can change the contribution period; indeed, Augar recommends raising it to 40 years. They can change the contribution rate. That is still 9% for undergraduate degrees, but loans for master’s programmes were introduced in 2016, and for PhDs in 2018. That rate could now go up to 15% of earnings above the threshold for postgrads. Or they could change the interest rates. Indeed, they are spoilt for choice here: they could change the rate while studying or the rate when repaying, or they could change one or both of the lower and upper thresholds. Each of those changes or combinations would have a different distributional effect.
I take it from his introduction that the noble Lord, Lord Willetts, wants a periodic systematic review, and he made his case for that. But does his amendment mean that changes could be made only then? I suspect that the answer to that might affect the Government’s interest in the idea.
One benefit of the systematic approach would be the opportunity to ensure that factual information about the impact of changes to the system was gathered and disseminated. Does the Minister agree that work is needed to ensure that the student loans system is widely understood? After all, if Governments are to make changes to student finance, it is vital that it is not done by sleight of hand, or by banking on the HE version of a fiscal drag. It is crucial that the differential impact on people with different likely lifetime earnings is made crystal clear. After all, if the state is advancing £17 billion a year to higher education students in England and the value of outstanding loans is some £160 billion this year, the least the Government owe the country is transparency, and a good public debate. Does the Minister agree?
The Parliamentary Under-Secretary of State, Department for Education and Department for International Trade (Baroness Berridge) (Con)
My Lords, I am grateful for the amendment tabled by my noble friend Lord Willetts, and for his thanks. It is a pleasure to engage with noble Lords. This is my first piece of legislation in your Lordships’ House, and I hope that this is the shape of things to come in terms of the tone and the reaction to this legislation.
With £19.1 billion paid out in student loans in the financial year 2020-21, and further increases forecast for future years, it is essential that the Government keep careful control of the student finance system. It is also important that they retain the ability to review and make changes to the student finance system as and when needed, without the potential delays, or the focus on process, that a requirement for a review every five years could impose. I appreciate my noble friend’s comments, but inadvertently, a process may, as the noble Baroness, Lady Sherlock, outlined, become constraining, even if it was introduced with the best of intentions.
We must ensure that the system can remain responsive to the needs of the labour market and the wider economy, and thus continue to deliver good value for students and the taxpayer. We agree that, as the noble Baroness said, there is a need for transparency. A wide range of data on student loans and repayments are regularly produced and made publicly available, which enables the Government, and other interested parties, to monitor the student loans system. These include regular publications from the Student Loans Company and the Higher Education Statistics Agency.
As the noble Baroness, Lady Sherlock, outlined, the Government have updated the student loan offer in recent years, with the introduction of several new loan products, including loans to support postgraduate and doctoral study, and we will continue to make changes as and when necessary. Through the Bill, the Government are also introducing a lifelong loan entitlement that will open up new routes for people to retrain and upskill flexibly throughout their lives.
In relation to some of the questions raised by the noble Baroness, Lady Bennett, the fees cap of £9,250 is frozen for this year and the next academic year. She talked about the burden, and the responsibility, obviously, is to repay a loan, but 30 years is at the moment akin to many of the mortgage products available on the commercial market.
As the noble Lord, Lord Willetts, correctly predicted, I shall take this opportunity to remind noble Lords of the recommendations regarding higher education, including on student loans and graduate repayments, that were made by the independent panel appointed to provide input to the review of post-18 education and funding. The Government are carefully considering these recommendations before setting out a response to the review, along with the comprehensive spending review.
In conclusion, while I am sorry to disappoint my noble friend for the second time in recent days, I hope that my remarks have reassured him, as I know this has been an issue of concern to him for many years. I hope that he will feel comfortable in withdrawing his amendment.
Lord Willetts (Con) [V]
I am grateful to the Minister for her courtesy, as always. I do not think my score on the amendments that I have tabled to the Bill has been very high—and I will, of course, withdraw this amendment. However, I hope that it will be possible to come back and consider this matter further.
I shall comment briefly on what has been said. The noble Baroness, Lady Bennett, came to this from her own perspective, which was interesting. I much appreciated the fact that she too made the case for some kind of structure involving a review every five years. I can assure the noble Baroness, Lady Sherlock, and the Minister, that there is nothing in the amendment that would stop specific changes at specific times. We have had a lot of those, and that may well carry on.
What I am trying to provide for is something more systematic every few years. I am trying to avoid the need for something like Augar—the setting up of a special inquiry—when it should just be natural that every five years we look at what has happened to graduate earnings, at how much of the graduate loan book is likely to be repaid, and at the terms of maintenance support, and we decide whether there should be any changes in the light of changing circumstances—or, indeed, changing political priorities. Providing that kind of health check on the system as a whole every five years would not deprive Ministers of power; it would actually provide an opportunity for a sensible wider public debate on a subject that is often seen as obscure and difficult but should not be because it is of such public interest.
As I said, I will not press the amendment to a vote today, but I hope that perhaps, over the summer, it might be possible to meet the Minister and consider with her not only this but some other amendments that I have tabled, in case we can find a way forward that takes account of the legitimate concerns that she has expressed. I also hope that she recognises that my amendments are aimed at improving the system in line with the Government’s own policy objectives.
The Deputy Chairman of Committees (Lord Duncan of Springbank)
Does the Minister wish to respond?
Baroness Berridge (Con)
Just to say that I would be delighted to meet my noble friend at a convenient point.
Baroness Berridge (Con)
My Lords, I am grateful for this opportunity to further discuss our vision for lifelong learning. As part of the lifetime skills guarantee, and as I hope noble Lords are now aware, the lifelong loan entitlement will be introduced from 2025. It will provide individuals with a loan entitlement to the equivalent of four years of post-18 education, to use over their lifetime. It will be available for modules and full courses of study at higher technical and degree levels, at levels 4 to 6, regardless of whether they are provided in colleges or universities. I hope that the noble Baroness, Lady Janke, is reassured that this plan will provide flexibility. I say to the noble Lord, Lord Addington, that it will enable people to update and change their skill base across their lifetime.
While the sentiment of the amendment to develop lifelong learning is admirable and one the Government share, unfortunately the personal skills account policy would create significant fiscal and logistical challenges—so at this point I would advise the noble Lord, Lord Addington, not to place any bets on its acceptance. The amendment could disrupt our established loan support system to accommodate an additional system of grants. This would substantially increase the costs to the taxpayer, both in the cost of such grants themselves and in their administration.
The amendment suggests that a new body would be created to administer these learning accounts for every adult resident in England. This process would have to happen seven years before an individual could first make use of any funds at 25, and integration of these new accounts with the Student Loans Company’s existing operations would have significant costs and operational impacts. Moreover, there is an opportunity cost to the Government in depositing thousands of pounds into these accounts, only for them potentially to be left idle and waiting for an unknown point of use. This poses a strong contrast to our current loan support, which is available at the point of study.
To answer one of the questions raised by the noble Baroness, Lady Bennett, we are all contributing to further and higher education, as what is called the RAB rate is currently 53p in the pound. That is what the Government end up paying for under the current student loan system that is not repaid by the student.
Finally, these significant changes to the basis of our student finance offer would risk delaying the rollout of the lifelong loan entitlement beyond 2025. I know that many noble Lords have sought to bring that date even earlier. As noble Lords will be aware, the introduction of the lifelong loan entitlement was a key recommendation from the Independent Panel Report to the Review of Post-18 Education and Funding, led by Sir Philip Augar. It was also endorsed by the Economic Affairs Committee of your Lordships' House. We want to ensure that the lifelong loan entitlement provides value for money to students, the education sector and the taxpayer. I am afraid this amendment is at odds with these aims. As such, I hope that the noble Lord, Lord Storey—sorry, I meant the noble Lord, Lord Addington—will feel able to withdraw this amendment.
Lord Addington (LD)
My Lords, I should now mention my noble friend Lady Garden, so that all three of us who have covered the Front Bench can be in on this one.
I am not surprised that the Government are not going down there. If I had any money on the Government accepting this, it would have been only on very long odds. However, we are getting a little clearer on what lifelong learning will mean under the Bill and under the current Government. We might want to dig further into the difference in approach here at a later stage of the Bill, but it is certainly something that we must look at all the options for. If the noble Baroness, Lady Wilcox, looks in our manifesto, she will see that the costings are there. I am sure that is a bit of light reading that she will embrace massively over the holiday.
Having been given that bit of assurance and saying that we will probably come back to this, I beg leave to withdraw the amendment.
Baroness Berridge
Member’s explanatory statement
This is consequential on the Minister’s second amendment at page 18, line 17.
Baroness Berridge (Con)
My Lords, I beg to move Government Amendment 91A and speak to Amendments 91B, 91C, 99C and 99D in my name. These are primarily aimed at amending Clause 15, which in turn amends the definition of “higher education course” in the Higher Education and Research Act 2017, to make express provision for the regulation of modules and to make clear what a module of a higher education course is as distinct from a full course.
The current student finance system does not offer funding for modules, nor is there any fee maximum for such modules or a specific corresponding regulatory system. The lifelong loan entitlement will transform student finance by supporting more flexible and modular provision. This legislative change is needed to ensure that we can deliver modular provision. Taken with the amendments that we have previously laid, this clause makes specific provision for modules in Part 1 of HERA 2017, which relates to the regulatory regime under the Office for Students. The amendments also relieve higher education providers, the OfS and the designated quality body of certain additional burdens which would otherwise arise from the addition of the concept of modules under HERA. These relate to certain requirements to provide or publish information—for example, under Sections 9, 11 and 65 of that Act. We want to reduce bureaucratic burden on providers, and these changes will ensure that the introduction of funding for modules through the LLE will not add to this.
Clause 26 sets out the territorial extent of the provisions in the Bill. This is a standard clause for all legislation. In essence, and with minor technical exceptions, the LLE provisions extend to England and Wales but apply in relation to England, because we are making amendments to the English student finance system. Overall, these changes will help to pave the way for more flexible study and for greater parity between further and higher education. As noble Lords will be aware, we will be consulting on the detail and scope of the lifelong loan entitlement this year. Our commitment to supporting students through the LLE is a key consideration in the public consultation which we will launch in due course. This will include seeking views on specifics of our regulatory system.
Lord Johnson of Marylebone (Con) [V]
My Lords, I speak to Amendment 92 in my name and draw attention to my interests in the register, as chair of TES, the education software and information group, and of Access Creative College, an independent provider of training for the digital and creative industries.
Amendment 92 is a probing amendment, to test the Government’s ambitions for the lifelong loan entitlement and to probe their assumptions about what provision is worthy of funding under it. We do not yet have critical details on the LLE, for which the Bill provides the legislative underpinning. That will emerge only following the consultations that the Minister has just mentioned, and then in secondary legislation due in 2024, ahead of the LLE’s actual introduction in 2025. In theory, the combination of the LLE and the introduction of the system of modular funding that the Minister has just mentioned, for sub-degree chunks of study, will make it easier for adults and young people to access learning in a more flexible way, to space out their studies and to earn while they learn if they wish.
Since 2012-13, English HE students have been eligible for loans only if they are studying at an intensity of 25% or more of a full-time equivalent course and are following a full course for a specified qualification, hence students studying individual modules or shorter courses of less intensity have not been eligible for loans. This has been an important factor in the decline of part-time adult learners. The LLE will, in theory, help to address this problem—therefore so far, so good, and I very much welcome it.
However, there is real complexity involved in the introduction of the lifelong loan entitlement, and a danger that theory and practice might diverge in crucial ways in certain respects. One of the main sources of danger is that the Treasury, partly out of its desire for quick savings from higher education in the spending review, may water down the promised skills revolution by insisting on retaining the so-called equivalent or lower qualification rule. Indeed, I expect that the Treasury will put up a valiant attempt to keep the ELQ rule whatever the consultations on the LLE say when they are eventually produced.
The traditional rationale for the ELQ restriction is that funding available for student support is finite and that it is necessary to put in place limits to ensure that all eligible students who wish to enter HE for the first time can do so. Accordingly, the ELQ rule prevents those studying a second HE course, at an equivalent or lower level, from receiving tuition fee loans or maintenance support for the course. For example, if you study classics for an undergraduate degree in your 20s at UCL, you could not then reskill in your 30s by undertaking a diploma in graphic design at UAL.
Restrictions apply even to those who previously followed privately funded courses which they self-financed. These ELQ restrictions seem complex and very unusual, when you look across the global HE landscape. For example, they do not exist in Canada, Australia, or New Zealand, whose HE systems are quite similar to England’s. The obvious trouble is that the ELQ rule not only constrains student choice about how best to retrain if they already have a qualification but treats tertiary education—post-18 education—as a one-off event, rather than as part of a process of lifelong learning in a world in which people can expect to have multiple careers over their working lives. Keeping it will therefore make a nonsense of the entire lifelong loan entitlement.
My contention is that any savings which the Exchequer might make on the subsidy in the loan book from retaining it are outweighed by the broader economic costs incurred by making it so difficult for students to change subject and retrain for new careers. We need a serious economic impact analysis of the ELQ rule before we can consider the secondary legislation on the LLE. Indeed, since it was introduced in 2008, various Governments have already effectively acknowledged the flaws with the ELQ by peppering it with ever more complicated exceptions, such as those applying for medicine, dentistry, and initial teacher training. Part-time ELQ exemptions have been made for engineering, computer science and technology, extended to STEM courses in 2016-17. In 2018 further exceptions were made for nursing, midwifery, allied health professions, and so on.
ELQ restrictions were possibly appropriate for a restricted grant-based HE system, but, under the current loans-based system, they are anachronistic and antithetical to the broader objectives of the Government’s skills reforms. That is why the 2019 Augar report rightly recommended that the ELQ rules be scrapped entirely for those taking out loans for levels 4, 5 and 6—yet nothing has happened since.
Baroness Berridge (Con)
My Lords, I am grateful to all noble Lords. I am feeling sympathy for my noble friend Lady Stedman-Scott as I will deal first with the questions asked by the noble Baroness, Lady Sherlock, on the Government’s amendments.
First, we need the flexibility outlined by the noble Baroness in relation to modules to ensure one of the purposes, which is that a module can be transferred from institution to institution. The noble Baroness used the analogy of Russian dolls; I tend to use the analogy of carriages on a train. A course may be three carriages, but you can pick up one of those carriages and do that course as a module. Obviously, we need to define what a module is; that will be part of the consultation. A fee cap will also attach to that module, to answer the noble Baroness’s question, and you can do that carriage without signing up to do all three carriages at the same time.
The consultation will inform the questions she asked about whether or how you prevent people doing carriage number one of the six different trains. The consultation will inform the decisions that need to be made and, as noble Lords are aware, there will be amendments on Report, which will further amend HERA to attach a fee cap limit to that module, as it is currently attached to an academic year.
The noble Baroness, Lady Sherlock, raised questions on the regulatory regime of the Office for Students. We will be working closely with the Office for Students on the interconnection with the student outcomes quality framework of starts, continuity and completion and how that will work when we have modular provision. We are aware of the two cogs that will need to work closely together, but there will still be year-long funding. The HE finance system that at the moment funds straightforward three-year degrees will need to be changed. The Office for Students takes a risk-based approach to its regulatory activity. We are going to work with it to make sure that the expectations on providers are clear. It already regulates the fee limit condition and is required to do so in a proportionate way.
On comments made by the noble Baroness, Lady Sherlock, and other noble Lords, I have specifically been asking questions of officials, because I did not have the pleasure of working on HERA or any of the other legislation, and I respect that noble Lords are often experts on the legislative process and bring their scrutiny to bear. But I believe we are legislating in a similar way to how we did with HERA, in that much of the primary legislation is a framework that gives broad powers to the Secretary of State, and then there are approximately 300 pages of statutory instruments on higher education finance, at the moment, which your Lordships’ House will have the opportunity to scrutinise. I sometimes feel a little constrained, because there is a limit to what can be in primary legislation.
In relation to noble Lords’ amendments, I assure the noble Lord, Lord Addington, that of course we are listening, and assure my noble friend Lord Johnson that I will make sure that the Treasury has listened to many of his comments, which I think is where he addressed them.
On the amendments tabled by my noble friend Lord Johnson and the noble Lord, Lord Watson, as I mentioned, we intend to consult on the detail and scope of the LLE, including on aspects such as eligibility—I was asked whether we would get it all at once or whether there would be a transition, and that will be in the consultation—and whether restrictions on previous study should be amended to facilitate retraining and stimulate high-quality provision. The final policy design will be informed by consultation and engagement, which is a crucial aspect of ensuring that the transformation of the student finance system is done in a way that takes into account the needs of providers, learners and stakeholders and, as my noble friend Lord Johnson said, enables that process of learning over a lifetime.
As such, it is very important that this legislation does not pre-empt or prescribe any further decisions based on its outcome. Introducing the proposed changes in primary legislation is likely to prejudice the consultation, which is important to ensure that we listen to providers and all affected by it. I also highlight the purpose of the existing equivalent or lower qualification and previous study rules. We are building the LLE on to a system designed to support students pursuing either further or higher education but, at the same time, to share the cost to the taxpayer fairly. We want to ensure that the lifetime loan entitlement provides value for money to students.
Furthermore, regarding the aspects in the amendment on the mode of study, institution of study and both modular and full course pathways, I confirm that the LLE is intended to support greater flexibility in all those areas. As I set out initially, it will be available for modules at levels 4 to 6, regardless of whether they are provided in colleges or universities. Although I respect that my noble friend Lord Johnson is probing and obviously making comments to the Treasury in his amendment, I cannot help but ask what the effect would be of having these amendments in the Bill. At the moment, if the ELQ is prohibited in the manner proposed by the amendment, we would not, in consultation or further regulations, be able to stop somebody doing the same level 4 course four times, for instance. We do not want to rule out the option of having statutory instruments that allow us to do that.
My noble friend asked questions about the creative industries, of which he is a great advocate. All these flexibilities are aimed at opening up opportunities in growing sectors of the economy. We have talked about LSIPs and the Skills and Productivity Board, but I think I am correct in noting that his examples were related to HE creative industry courses. Our hope and expectation are that this will open up many courses in these sectors within FE, as well as HE, institutions.
We are Chancellor in agreement with Amendments 99 and 99B, from the noble Lord, Lord Addington, and the right reverend Prelate the Bishop of Durham. We recognise that many or a disproportionate number of those students are within the FE sector. We want this to be flexible and expect that students who might particularly benefit are those with special educational needs and disabilities, or SLDD, as it was more accurately put by the right reverend Prelate.
I reassure noble Lords that our commitment to supporting FE students through the LLE is a key consideration, but we have yet to determine what form that support will take. I confirm to the right reverend Prelate that the SEND review includes further education; and to the noble Lord, Lord Watson—and the noble Lord, Lord Addington, who has raised this away from the Chamber—that there are certain grants for SEND students in HE at the moment. What happens to those in relation to the LLE is also part of the consultation. I hope that noble Lords, in particular the noble Lord, Lord Addington, will tell us what they believe to be the best of both worlds, both in your Lordships’ House and through the consultation—and of course I would be delighted to meet with him and the right reverend Prelate on the issue of special educational needs and disabilities.
On Amendment 94, tabled by the noble Lord, Lord Watson, our vision is for a four-year entitlement, as recommended in Augar. Beyond the significant and obvious potential for additional costs, I also highlight to noble Lords that six years of entitlement would enable students to complete one degree, then turn straight around and do another undergraduate three-year degree. As such, a six-year entitlement might inadvertently further embed full-time study for level 6 degrees as the default option, when it is not necessarily best for some students. We are trying to open up the provision to be more flexible.
It is worth noting that the current HE system, as my noble friend Lord Johnson outlined, funds courses that are part-time, with a minimum intensity of 25%. That part-time study may take place over several calendar years. Under the LLE, we would not wish to remove this flexibility. As such, part-time study would also be able to exceed four calendar years.
Amendments 96 and 99A on maintenance were tabled by the noble Lord, Lord Watson, and my noble friend Lord Flight respectively. We agree wholeheartedly with the importance of ensuring that students are supported to succeed in their studies. It is part of our ambition to help students have the opportunity to choose the best course or modules to suit their needs, rather than the most advantageous funding system. The Bill already provides the necessary powers for maintenance support to be introduced as part of the LLE, if the decision is taken that it should be, following the consultation I have outlined. The consultation will inform the way maintenance loans and other forms of living costs support—which the noble Lord, Lord Aberdare, was right to highlight—can be made available to students.
Amendment 97 is in the name of the noble Lord, Lord Watson, and was supported in her speech by the noble Baroness, Lady Bennett. I am grateful for the opportunity to discuss sharia-compliant student finance. Clause 14 already encompasses the possibility of sharia-compliant student finance under the LLE. This is encompassed by the term “alternative payments”, taken from the Secretary of State’s existing powers to make regulations introduced by Section 86 of HERA. As such, Amendment 97 would not give the Secretary of State any additional powers. Alongside our other priorities, we are carefully considering an alternative student finance product, compatible with Islamic finance principles, and have decided to align a decision on implementation with the outcome of the post-18 review of education and funding. We will provide an update on ASF when we conclude that review.
The Bill makes explicit provision for the funding of modules of courses, as well explained by the noble Baroness, Lady Sherlock, and will help create a more flexible system across both higher and further education. However, it does not set out changes to the rules of eligibility, maintenance support or other points of detail, which I argue are more appropriately a matter for regulations. As I have said, much more work is going to be done through the consultation. I will happily report back to noble Lords once the consultation is launched, and again once it has concluded and we have formulated our response.
In recognition of your Lordships’ contributions during this debate, and particularly the comments of the noble Baroness, Lady Sherlock, I beg leave to withdraw the amendments in my name. We will review and table them again on Report, alongside the other amendments we are already planning to table. I hope noble Lords will feel comfortable not moving their amendments when they are called.
Lord Watson of Invergowrie (Lab)
I am perplexed because, in her response, the Minister said that she expected the announcement made yesterday by the Office for Students on funding for the arts and creative subjects would open up many more such courses. The report that I have received is that high-cost subsidy funding is to be cut by half, with effect from September this year. How on earth could that open up more courses? Universities are saying that they may even have to close down courses. Defunding cannot produce more courses, or have I misunderstood the noble Baroness?
Baroness Berridge (Con)
To clarify, the point that I was raising was in relation to FE courses. My noble friend Lord Johnson referred to existing courses in HE in terms of the creative industries. What we are hoping is, through this measure, to see a parity of esteem with FE. Obviously, FE delivers an enormous number of courses at the moment, but we would see an expansion of that provision in that sector as well. I just wanted to highlight that FE is also a main player in that sector. I was not referencing yesterday’s announcement. I am sorry for any confusion.