Draft Unified Patent Court (Immunities and Privileges) Order 2017

Lord Johnson of Marylebone Excerpts

Wednesday 29th November 2017 General Committees

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

I beg to move,

That the Committee has considered the draft Unified Patent Court (Immunities and Privileges) Order 2017.

It is a pleasure to serve under your chairmanship, Mr Bailey. The draft order, which was laid before the House on 26 June, will confer legal status on the unified patent court, as well as providing a limited set of privileges and immunities to the court, its judges and staff. These are necessary to ensure the effective and proper functioning of the court, and were agreed in the international agreement that established the court and its protocol on privileges and immunities.

Why does the unified patent court matter? The current patent system across Europe is fragmented and expensive: businesses must maintain a bundle of patent rights, each covering a single country, and must enforce each patent separately in the national courts of each country, which is costly and burdensome. The unified patent court will offer a way for innovative businesses to enforce or challenge patents in up to 26 European countries with a single court action. The ability to obtain a single judgment is significant and valuable for patent-intensive industries. Independent research shows that approximately a quarter of all patent cases heard in UK courts were litigated between the same parties in other European jurisdictions, so a single unified patent court is welcome. An important division of the court, dealing with disputes in the field of pharmaceuticals and life sciences, will be based here in the UK, cementing our global reputation as a place to resolve commercial legal disputes. British businesses will still be able to choose national patents and litigation in national courts, but will have the option to use the new court structure with all the benefits that I have described.

The draft order is part of the UK’s ratification process. It confers legal capacity on the unified patent court and gives effect to the protocol on privileges and immunities. It also provides immunity from legal process for the court, with some exceptions; for its judges, registrar and deputy registrar; and for its representatives and staff, although only in the exercise of their official functions. That immunity can be waived by the UPC.

The judges and staff of the court will be exempt from national taxation on their salaries and from national insurance once the court applies its own equivalent tax and puts in place its own social security and health system, but neither exemption will apply to court staff who are British nationals or permanent UK residents. The draft order also provides that the court is exempt from direct taxation in relation to its official activities, as is the case for other international organisations based here, such as the International Maritime Organisation.

The draft order will confer on the new court and its judges and staff only the privileges and immunities that are necessary for the organisation to conduct its official activities effectively. Those privileges and immunities are in line with those offered to officers of other international organisations of which the UK is already a member. I commend the draft order to the Committee.

--- Later in debate ---

[Joseph Johnson]

I thank the hon. Member for Birmingham, Erdington for supporting the order, and for recognising the role that the court will play in ensuring that we have a system that encourages innovation and protects companies that invest in research and development. Those companies are able to go on and commercialise the discoveries that they make without fear of their hard work and efforts leading to nothing, or being taken advantage of by competitors that have not made those investments in discovery.

I thank the hon. Member for Wallasey for asking some important questions; I will now try to respond to as many as I can. She asked principally about the impact that leaving the EU will have on the operation of the UPC, and what our relationship to the UPC will be after March 2019, when we will be in the process of leaving the EU. To be clear, the UPC itself, as she knows, is not an EU institution, but currently all participating member states are EU member states. Our position is that while the UK remains a member of the EU, we will and should complete all necessary legislation, so that we are in a position to ratify the agreement.

Whatever the UK’s future relationship with the unified patent court, we expect that, as the hon. Lady said, we will need to negotiate with our European partners, to reflect the change to the UK’s status in relation to the UPC that will take place when we leave the EU. As a Government, we believe that it would be wrong to set out any unilateral positions in advance of the negotiations that we know we are going to have to have, because our efforts will need to be focused on securing the best possible deal for the UK in our negotiations with our European partners.

[Jack Dromey]

This is an important point for the avoidance of doubt on the part of the innovators and entrepreneurs of our country. Our support for the order is given on the basis that it will be an enduring mechanism now and after we leave the European Union. Is the Minister suggesting that having given legal effect to the order, the situation might change post-Brexit? That will be a source of immense concern to innovators and entrepreneurs in our country.

[Joseph Johnson]

Through the passage of the order and completing all the necessary legislative steps in Parliament, we want to ensure that we are in a position to ratify the UPC and our membership of it, thus enabling it to come into existence. As the hon. Gentleman and Members know, under the terms of the international treaty, UK ratification is required for the UPC to come into existence, and we want the court to come into existence. We have been supporters of it from the outset, and we think it will play an important role in enabling businesses to enforce their intellectual property rights at the lowest possible cost, or certainly at a much lower cost than many companies find to be the case at the moment. We are supportive of it, and we want to continue to play a facilitating role in setting it up.

After we leave the European Union in March 2019, we understand that we will have to negotiate a new relationship with the UPC. We want to do that as seamlessly as possible so that businesses can continue to take advantage of the provisions that the UPC makes possible. Our expectation is that the long-term relationship we will have to establish after March 2019 will be subject to some negotiation. I and the Government as a whole do not want to go into the detail of exactly what that relationship will be at this point.

[Ms Angela Eagle]

We all agree that the court should be set up. Because of the delay in Germany it is unlikely to be up and running much before the middle of next year, if things go well with the constitutional court there. That leaves us less than a year to get the institution up and running before we have to have a major renegotiation of our relationship with it.

In response to one of my initial questions, the Minister said that he is not in a position to give us any particular view on that because he, his Department and the whole Government will be much too busy concentrating on the bigger Brexit things. Is he of the view that the court and, much more importantly, our participation in it can continue without the legal changes we will clearly have to negotiate to remain a member once we are outside the European Union?

[The Chair]

Order. I remind Members that the order is essentially about the privileges of the key figures of the court. While I have allowed the debate to range to other issues around it, it would be helpful if we could focus on the order and if the Minister could relate his reply to the specific issues relevant to the order and the hon. Lady’s comments.

[Joseph Johnson]

Thank you, Mr Bailey, I will try to do that. Returning to the hon. Lady’s question, the order is made under the International Organisations Act 1968. It does not relate to EU legislation, nor does it rely on the European Communities Act 1972. The order will therefore not need to be preserved by the EU (Withdrawal) Bill at exit to remain UK law, so it will continue. As the hon. Lady knows, the UPC agreement is an international treaty, not an EU treaty. It will not need to be converted into UK law by the EU (Withdrawal) Bill for it to continue to apply.

To summarise all the points on Brexit, whatever the UK’s future relationship with the UPC, we will need to negotiate with our European partners to reflect the change to the UK’s status when we leave the EU. We want the court to come into existence. That is why we are facilitating it by putting ourselves in a position where we can ratify it. We understand that there are issues in other countries whose ratification is necessary; we hope that they can be overcome so that this court can come into existence and do the job we all want it to do.

[Ms Angela Eagle]

The privileges issue is clearly important. We cannot have the court without this order, which is why we all support it, but I hope the Minister will reassure me that we can continue to use this court with all its privileges if we are out of the European Union. The House of Commons Library note on this issue includes some worrying or at least alarming views from European law experts who say that we will not be able to remain in the court appropriately after Brexit before we have changed the law—we will not be able to just carry on having the court run. That might mean that people in our country cannot have access to its benefits until the Government ensure that they have entered into new legal agreements with the other signatories. Would he confirm that that is the case and say something about whether the order ensures that we will continue to have access to the court’s benefits, which we all want, without Parliament having to come back—

--- Later in debate ---

[The Chair]

The points have been packaged up as questions. We have the drift of it, so will the Minister now respond?

[Joseph Johnson]

The hon. Lady has raised the issue of a smooth transition so that there is minimum uncertainty for business about the enforcement of intellectual property rights as we leave the EU. She is right, and the Government are in total agreement. We do not want any cliff edges. We want minimum disruption for businesses, and we want to minimise threats to stability as we develop the deep and special relationship with the rest of the EU that we have set out as our objective for the negotiation. Of course we will take into account the need to protect intellectual property rights as part of the process of considering the options for the UK’s intellectual property regime after our exit, but as I have said on a number of occasions, our future relationship with the UPC will be a matter for negotiation. It would not be appropriate for me to set out unilaterally what the UK’s position will be in advance of those negotiations.

I will try to conclude again by saying that the Government will continue to work with signatory states to bring the UPC into operation as soon as possible, making it easier for businesses all over the country—in the midlands, in Birmingham, Erdington and elsewhere—to enforce their patents across Europe. I hope the Committee will support the draft order accordingly.

Question put and agreed to.

Competitiveness Council: Pre-Council Statement

Lord Johnson of Marylebone Excerpts

Wednesday 29th November 2017 Written Statements

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

The Competitiveness Council will take place on 30 November and 1 December in Brussels.

Day one—Internal Market and Industry

The Council will aim to agree a general approach on the single digital gateway. The objective of the Single Digital Gateway proposal is to remove barriers to the single market created by lack of easy access to high quality information and Government services online.

The Commission will then present a competitiveness check-up including details of the objectives of the EU industrial strategy. This will lead into a discussion on the EU industrial strategy, where the Estonian presidency will present a report. The Council will be invited to adopt conclusions on the Commission’s communication on ‘A Renewed EU Industrial Policy Strategy’.

The Council will then discuss a number of AOB points on geo-blocking, the European defence industrial development programme, the digital single market, the Unitary Patent and Unified Patent Court, the European SME action programme, the public procurement package and the traceability system of tobacco products. In these AOB points the Council will be given information by the presidency or by a member state delegation.

The day will end with a presentation by the Bulgarian delegation on details of their upcoming presidency.

Day two—Space and Research

The Council will adopt Council conclusions on the mid-term evaluation of the Copernicus programme. This will be followed by an exchange of views on the way forward for EU space programmes.

The afternoon session will begin with a discussion on Council conclusions “From the Interim Evaluation of Horizon 2020 towards the ninth Framework Programme”. The Council will then debate the mission-orientated approach proposed for the ninth framework programme.

Under AOB, the Commission will provide information on the state of play with open science.

Day two will conclude with information from the Bulgarian delegation on their incoming presidency work programme.

[HCWS284]

Unified Patent Court (Immunities and Privileges) Order 2017

Lord Johnson of Marylebone Excerpts

Wednesday 29th November 2017 General Committees

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

I beg to move,

That the Committee has considered the draft Unified Patent Court (Immunities and Privileges) Order 2017.

It is a pleasure to serve under your chairmanship, Mr Bailey. The draft order, which was laid before the House on 26 June, will confer legal status on the unified patent court, as well as providing a limited set of privileges and immunities to the court, its judges and staff. These are necessary to ensure the effective and proper functioning of the court, and were agreed in the international agreement that established the court and its protocol on privileges and immunities.

Why does the unified patent court matter? The current patent system across Europe is fragmented and expensive: businesses must maintain a bundle of patent rights, each covering a single country, and must enforce each patent separately in the national courts of each country, which is costly and burdensome. The unified patent court will offer a way for innovative businesses to enforce or challenge patents in up to 26 European countries with a single court action. The ability to obtain a single judgment is significant and valuable for patent-intensive industries. Independent research shows that approximately a quarter of all patent cases heard in UK courts were litigated between the same parties in other European jurisdictions, so a single unified patent court is welcome. An important division of the court, dealing with disputes in the field of pharmaceuticals and life sciences, will be based here in the UK, cementing our global reputation as a place to resolve commercial legal disputes. British businesses will still be able to choose national patents and litigation in national courts, but will have the option to use the new court structure with all the benefits that I have described.

The draft order is part of the UK’s ratification process. It confers legal capacity on the unified patent court and gives effect to the protocol on privileges and immunities. It also provides immunity from legal process for the court, with some exceptions; for its judges, registrar and deputy registrar; and for its representatives and staff, although only in the exercise of their official functions. That immunity can be waived by the UPC.

The judges and staff of the court will be exempt from national taxation on their salaries and from national insurance once the court applies its own equivalent tax and puts in place its own social security and health system, but neither exemption will apply to court staff who are British nationals or permanent UK residents. The draft order also provides that the court is exempt from direct taxation in relation to its official activities, as is the case for other international organisations based here, such as the International Maritime Organisation.

The draft order will confer on the new court and its judges and staff only the privileges and immunities that are necessary for the organisation to conduct its official activities effectively. Those privileges and immunities are in line with those offered to officers of other international organisations of which the UK is already a member. I commend the draft order to the Committee.

--- Later in debate ---

[Joseph Johnson]

I thank the hon. Member for Birmingham, Erdington for supporting the order, and for recognising the role that the court will play in ensuring that we have a system that encourages innovation and protects companies that invest in research and development. Those companies are able to go on and commercialise the discoveries that they make without fear of their hard work and efforts leading to nothing, or being taken advantage of by competitors that have not made those investments in discovery.

I thank the hon. Member for Wallasey for asking some important questions; I will now try to respond to as many as I can. She asked principally about the impact that leaving the EU will have on the operation of the UPC, and what our relationship to the UPC will be after March 2019, when we will be in the process of leaving the EU. To be clear, the UPC itself, as she knows, is not an EU institution, but currently all participating member states are EU member states. Our position is that while the UK remains a member of the EU, we will and should complete all necessary legislation, so that we are in a position to ratify the agreement.

Whatever the UK’s future relationship with the unified patent court, we expect that, as the hon. Lady said, we will need to negotiate with our European partners, to reflect the change to the UK’s status in relation to the UPC that will take place when we leave the EU. As a Government, we believe that it would be wrong to set out any unilateral positions in advance of the negotiations that we know we are going to have to have, because our efforts will need to be focused on securing the best possible deal for the UK in our negotiations with our European partners.

[Jack Dromey]

This is an important point for the avoidance of doubt on the part of the innovators and entrepreneurs of our country. Our support for the order is given on the basis that it will be an enduring mechanism now and after we leave the European Union. Is the Minister suggesting that having given legal effect to the order, the situation might change post-Brexit? That will be a source of immense concern to innovators and entrepreneurs in our country.

[Joseph Johnson]

Through the passage of the order and completing all the necessary legislative steps in Parliament, we want to ensure that we are in a position to ratify the UPC and our membership of it, thus enabling it to come into existence. As the hon. Gentleman and Members know, under the terms of the international treaty, UK ratification is required for the UPC to come into existence, and we want the court to come into existence. We have been supporters of it from the outset, and we think it will play an important role in enabling businesses to enforce their intellectual property rights at the lowest possible cost, or certainly at a much lower cost than many companies find to be the case at the moment. We are supportive of it, and we want to continue to play a facilitating role in setting it up.

After we leave the European Union in March 2019, we understand that we will have to negotiate a new relationship with the UPC. We want to do that as seamlessly as possible so that businesses can continue to take advantage of the provisions that the UPC makes possible. Our expectation is that the long-term relationship we will have to establish after March 2019 will be subject to some negotiation. I and the Government as a whole do not want to go into the detail of exactly what that relationship will be at this point.

[Ms Angela Eagle]

We all agree that the court should be set up. Because of the delay in Germany it is unlikely to be up and running much before the middle of next year, if things go well with the constitutional court there. That leaves us less than a year to get the institution up and running before we have to have a major renegotiation of our relationship with it.

In response to one of my initial questions, the Minister said that he is not in a position to give us any particular view on that because he, his Department and the whole Government will be much too busy concentrating on the bigger Brexit things. Is he of the view that the court and, much more importantly, our participation in it can continue without the legal changes we will clearly have to negotiate to remain a member once we are outside the European Union?

[The Chair]

Order. I remind Members that the order is essentially about the privileges of the key figures of the court. While I have allowed the debate to range to other issues around it, it would be helpful if we could focus on the order and if the Minister could relate his reply to the specific issues relevant to the order and the hon. Lady’s comments.

[Joseph Johnson]

Thank you, Mr Bailey, I will try to do that. Returning to the hon. Lady’s question, the order is made under the International Organisations Act 1968. It does not relate to EU legislation, nor does it rely on the European Communities Act 1972. The order will therefore not need to be preserved by the EU (Withdrawal) Bill at exit to remain UK law, so it will continue. As the hon. Lady knows, the UPC agreement is an international treaty, not an EU treaty. It will not need to be converted into UK law by the EU (Withdrawal) Bill for it to continue to apply.

To summarise all the points on Brexit, whatever the UK’s future relationship with the UPC, we will need to negotiate with our European partners to reflect the change to the UK’s status when we leave the EU. We want the court to come into existence. That is why we are facilitating it by putting ourselves in a position where we can ratify it. We understand that there are issues in other countries whose ratification is necessary; we hope that they can be overcome so that this court can come into existence and do the job we all want it to do.

[Ms Angela Eagle]

The privileges issue is clearly important. We cannot have the court without this order, which is why we all support it, but I hope the Minister will reassure me that we can continue to use this court with all its privileges if we are out of the European Union. The House of Commons Library note on this issue includes some worrying or at least alarming views from European law experts who say that we will not be able to remain in the court appropriately after Brexit before we have changed the law—we will not be able to just carry on having the court run. That might mean that people in our country cannot have access to its benefits until the Government ensure that they have entered into new legal agreements with the other signatories. Would he confirm that that is the case and say something about whether the order ensures that we will continue to have access to the court’s benefits, which we all want, without Parliament having to come back—

--- Later in debate ---

[The Chair]

The points have been packaged up as questions. We have the drift of it, so will the Minister now respond?

[Joseph Johnson]

The hon. Lady has raised the issue of a smooth transition so that there is minimum uncertainty for business about the enforcement of intellectual property rights as we leave the EU. She is right, and the Government are in total agreement. We do not want any cliff edges. We want minimum disruption for businesses, and we want to minimise threats to stability as we develop the deep and special relationship with the rest of the EU that we have set out as our objective for the negotiation. Of course we will take into account the need to protect intellectual property rights as part of the process of considering the options for the UK’s intellectual property regime after our exit, but as I have said on a number of occasions, our future relationship with the UPC will be a matter for negotiation. It would not be appropriate for me to set out unilaterally what the UK’s position will be in advance of those negotiations.

I will try to conclude again by saying that the Government will continue to work with signatory states to bring the UPC into operation as soon as possible, making it easier for businesses all over the country—in the midlands, in Birmingham, Erdington and elsewhere—to enforce their patents across Europe. I hope the Committee will support the draft order accordingly.

Question put and agreed to.

University Tuition Fees

Lord Johnson of Marylebone Excerpts

Monday 27th November 2017 Westminster Hall

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

I am grateful to the petitioners for giving us the chance to have this debate as well as to the hon. Member for Hartlepool (Mike Hill) for introducing it.

Enabling people from all backgrounds to take advantage of the opportunities provided by higher education is obviously an important goal for the Government. Since reforming the student finance system in 2012, the Government have been able to lift the enforced cap on student numbers that had been in place for many years and remove the associated cap on social mobility that it represented. We have enabled record numbers of 18-year-olds, including those from disadvantaged backgrounds, to start in higher education. We have also increased the total resources available to universities by about 25% per student per degree, according to the IFS. As a result of all of that, increased numbers of students stand to benefit from increased lifetime earnings of at least £100,000 more than non-graduates after tax.

[Mr Christopher Chope in the Chair]

However, it is only fair that graduates should share some of the costs associated with their education, rather than those costs falling to the taxpayer alone. The system is designed to ensure that those who benefit contribute to the costs of higher education in proportion to the benefits that they receive from it. The motion raises the question of whether we should reduce tuition fees to £3,000. In our view that would be a big step backwards. We estimate it would cost the Government an additional £6 billion a year. The Government would have to choose whether to reduce funding to universities, reintroduce a cap on the number of students who could access higher education, or ask taxpayers, many of whom will be non-graduates, to pay that £6 billion additional cost. None of those options is palatable. We need our universities to be well funded so that they can equip our graduates with the skills and knowledge that they need to contribute to our economy.

[Carol Monaghan]

Will the Minister give way?

[Joseph Johnson]

I want to respond to the points made by the hon. Member for Poplar and Limehouse (Jim Fitzpatrick), and then I will give way to the hon. Member for Glasgow North West (Carol Monaghan). The hon. Member for Poplar and Limehouse clearly does not support the wholesale abolition of tuition fees, which I understand to be the present policy of the Labour party. However, I hope he will acknowledge that the most worrying effect of reducing fees to £3,000 would be to lower the participation of students from lower socioeconomic backgrounds. To lower spending and to control it in the context of rising demand for what would effectively be free higher education, the Treasury would push hard to introduce student number controls that we, thanks to our present student finance system, have been able to lift under our current arrangements.

[Carol Monaghan]

I thank the Minister for giving way. He mentioned who should pay the fees and shoulder the responsibility for that. If we ask taxpayers, “Do you want to fund this particular student £9,000 a year to go to university?” probably their answer would be no, but if we were to say, “Do you want to have teachers in our schools, nurses and doctors in our health service and engineers working on different projects, and your taxes will fund that,” I think the answer would be different.

[Joseph Johnson]

The Government recognise that the cost needs to be shared in proportion to the benefits that flow from higher education. There are public benefits, which the Government make a contribution to on behalf of taxpayers, and there are private benefits, which individual students should make a contribution to. We have a mixed economy for our higher education system, which makes it sustainable and fair.

[Carol Monaghan]

If the Minister is suggesting that the private benefits would be an increased salary, part of the increased salary would be an increased tax, so people would be contributing via their salary.

[Joseph Johnson]

Indeed they would, but it is also important that they make a direct contribution that relates to the benefit they have received, which has been provided for them by a public funding contribution.

[Jim Fitzpatrick]

I echo the point made by the hon. Member for Glasgow North West (Carol Monaghan). In response to the Minister’s challenge to me, he is right: I do not support full abolition, but neither do I support the £9,000 level. I think there is a balance to be struck. On his comment that the Treasury presses hard, I know it does. I have been in government; the Treasury always presses hard. The political choice that one makes, and that the Treasury and the Cabinet make, is how far it is allowed to press, and where the trade-offs are. The hon. Lady says that there should be contributions from elsewhere. The health service has suggested that we have golden handcuffs for those who want to qualify as doctors, and free them from their tuition fees to get them into the NHS and keep them there for the rest of their professional lives. Those choices and judgments have to be made.

[Joseph Johnson]

I would just note that higher education is a devolved policy responsibility in the United Kingdom. Those parts of the United Kingdom that have the present level of fees that we have in England have been able to lift student number controls. Other Administrations, which have made their own policy choices, have not been able to lift student number controls. As a result, under those Administrations we have seen far lower levels of widening participation than we currently see in England. We genuinely think that returning to a cap on student numbers would be absolutely disastrous for young people from lower income backgrounds.

[Richard Graham]

One crucial element in danger of being overlooked is that the lifting of the cap on student numbers has been extended in a particular direction, very constructively across the country. I refer to the policy on nursing degrees, and the new policy of nursing associates that complements it. Were it not for that, frankly my county of Gloucestershire, and those like it, would have a net deficit of about 350 new nurses per year. With the new policy, the University of Gloucestershire has been able to offer nursing degrees. Over time, that will result in far greater numbers of home-grown nurses than previously, and I am grateful to the Government for that.

[Joseph Johnson]

My hon. Friend is right: putting the funding of nursing places on to the sustainable basis that other students are on will enable far greater participation, and result in an uplift in the numbers of nursing students in this country.

Taxpayers already contribute around half of the costs of the higher education system. We believe that it is right that graduates should also contribute, and that that contribution should be linked to their income. As I have said, that means that those who have benefited the most from their education repay their fair share. The hon. Member for Leeds North West (Alex Sobel) gave us interesting insights from Latin America, which I know is a source of great inspiration for those in the Labour party at present. We look with interest to see what other lessons he draws from Venezuela and countries from that part of the world, as Labour develops its ever-shifting policy on higher education.

Every year, the Government consider the appropriate maximum level of tuition fees, and sets a cap. The Government consider whether the maximum tuition fee amounts should be uprated in line with inflation, to support continued investment in course delivery. We are committed to ensuring the ongoing sustainability of our world-class higher education sector. The student finance system ensures that teaching in our universities is well funded, but that individuals do not pay until they are seeing a good return on their investment. As I said, continued investment in the higher education sector has seen funding per student per degree increase by 25% since the 2012 reforms.

What is more, funding per student is today at the highest level it has been in almost 30 years. The recent decision to freeze the maximum level of tuition fees in the 2018-19 academic year takes account of the views of young people, their parents and Parliament. We have evaluated the current position of our universities, and on that basis, we have decided not to uprate tuition fees by inflation for the 2018-19 academic year. Students will therefore see maximum fees of around £300 less than if the maximum fee had been uprated with inflation.

The hon. Member for Reading East (Matt Rodda) mentioned that his constituents were struggling to repay the cost of their higher education. To help him put it in context, as a result of our decision to increase the repayment threshold to £25,000 with effect from April next year, if one of his constituents earns £30,000 per year, that constituent will be repaying about £1.20 per day. We think that is a reasonable amount for someone on that level of income to repay as a contribution towards the cost of their higher education.

[Alex Sobel]

Is it not correct that those earning far more will end up paying less because they will repay their loan much more quickly? The total amount of interest that they pay will therefore be far less than somebody on £25,000, who will take much longer to repay their loan.

[Joseph Johnson]

That is right. The amount that someone repays is linked to the amount that they earn in any one year, and the repayment will be more rapid for someone on a higher level of income.

The current student finance system removes the financial barriers for those hoping to study, and avoids students facing upfront tuition fee costs. We have maintained the universal accessibility of the system, which allows all eligible students to access the required finance, regardless of their background and financial history. Critically, monthly repayments depend on income, not on interest rates on their debt, or on the amount borrowed. From April 2018, we will increase the repayment threshold to £25,000, and adjust it annually in line with average earnings after that. That change will benefit around 600,000 borrowers, and will continue to benefit future borrowers. Many borrowers who have already graduated will see their monthly repayments reduced. That change forms part of a considered and costed proposal that reinforces the principles of our student finance system, and puts money back in the pockets of graduates.

[Richard Graham]

Those changes are important and will make a difference to a large number of people. There are, however, two matters on which my hon. Friend knows we do not entirely agree. One is the interest rate. When student loans revert to being repaid with normal interest, I do not see the argument for having them use the retail prices index as a base rather than the consumer prices index. My second point is a wider one. The universities themselves believe that they would be able to attract even more students from abroad—which would help the funding of our universities—were students to be excluded from the immigration numbers. Does he agree that that is something that we might look forward to one day?

[Joseph Johnson]

My hon. Friend raises some interesting points. A longstanding feature of the system has been that it uses RPI, as that includes costs that are relevant to the basket of goods and services that students consume, including housing costs and mortgage interest costs. That is why RPI has been embedded in the student finance system historically.

International students make a massive contribution to our higher education system, economy and society. They enrich the learning experience, and the Government welcome them warmly. We wish to see more international students come to study in the United Kingdom. Members will have seen some positive changes in the Budget, including an expansion of the tier 1 exceptional talent cap, and that route into the country. The Budget also contained measures to make it easier for students to flip into tier 2 after they have finished studying, which means that they can move into work straight after completing their studies, rather than waiting until they receive a diploma some time later. That will be particularly valuable for people doing postgraduate courses. The Government are taking steps to ensure that we have a competitive offer for international students, so that we continue to be competitive around the world in attracting international students.

The hon. Member for Glasgow North West suggested that the tighter controls on student numbers in Scotland were not restricting opportunities there. I know that she did not want to hear about the OECD’s PISA rankings, but she may be interested in taking note of what the Sutton Trust has said about student numbers in Scotland, and how, in its opinion, they have restricted the aspiration of young people in Scotland. The Sutton Trust recently stated that

“Scottish 18 year olds from the most advantaged areas are still more than four times more likely to go straight to university than those from the least advantaged areas”

in Scotland. In comparison, they are 2.4 times more likely in England. We obviously take note of the hon. Lady’s points, but she should not give the impression that social mobility in Scotland is being advanced by higher education policy there to a greater extent than by our policies in England.

[Carol Monaghan]

As I explained in my speech, much of the data on student movement is not captured by UCAS figures and is therefore not captured by the Sutton Trust’s report, so it is simply not a true reflection of the picture in Scotland.

[Joseph Johnson]

I take note of the hon. Lady’s comments. The Sutton Trust has been engaged in this area of study for many years and has had plenty of opportunity to take on board points from her party over the years, but it has evidently chosen not to do so.

The Government remain committed to widening participation in HE. England’s sustainable student finance system has enabled record numbers of disadvantaged 18-year-olds to benefit. As my hon. Friend the Member for North East Derbyshire (Lee Rowley) noted, in 2016 disadvantaged 18-year-olds in England were 43% more likely to go to university than they were in 2009, and the application rate for disadvantaged 18-year-olds increased to a record high once again in the 2017 entry cycle.

[Matt Rodda]

I am grateful for the Minister’s wide-ranging discussion of the issues. Will he meet employers from my constituency, and possibly from other high-cost areas, to address the issue that my hon. Friend the Member for Leeds North West (Alex Sobel) mentioned—namely, that graduates on middle incomes may end up paying more in tuition fee repayments over time than those on the highest salaries, and that that may have a damaging effect on local economies? I would be very grateful if we could meet the Minister and officials to discuss that matter.

[Joseph Johnson]

I am always happy to discuss these matters with colleagues. I will be keen to do so.

There is always more to do on widening participation, including on the progression of disadvantaged students to more selective institutions and ensuring that the retention, success and progress of some of those students is better. Universities have committed to spend £860 million on improving access and success for students from disadvantaged backgrounds through access agreements agreed for 2018-19 with the independent director of fair access. Through the Higher Education and Research Act 2017, the Government introduced measures to make further progress, including a statutory duty on the new regulator—the Office for Students—to have regard to equality of opportunity in connection with access to and success in higher education for students from disadvantaged and under-represented groups. We have also created a director for fair access and participation within the OFS as an executive board member.

Access and participation plans—the successor to access agreements—will ensure that any provider wanting to charge higher fees must have a plan agreed before they can do so as a condition of their registration with the Office for Students. The Act also created a transparency duty for all providers, which means that they will have to publish application, offer, acceptance, completion and attainment information, broken down by gender, ethnicity and socioeconomic background, so that all students can make an informed choice about which university they attend and so universities can see where they need to make further progress on widening access.

In his thoughtful speech, the hon. Member for Blackpool South (Gordon Marsden) rightly mentioned the numbers of part-time and mature students, as he has done on many occasions when we have discussed these matters. Studying part-time and later in life can bring enormous benefits for individuals, the economy and employers. That is why the Government are taking steps to help hard-working people who want to gain new skills and advance their careers by studying part time. The Government intend further to enhance the student finance package for part-time students by introducing part time maintenance loans in 2018-19. In the 2017 Act, we enshrined the need for the new higher education sector regulator to have regard to part-time study.

The hon. Gentleman also mentioned drop-out rates. Access to higher education is only one aspect of improving social mobility. The full benefits of gaining a degree are experienced only by those who actually complete their studies. Non-continuation rates for UK students at English institutions are lower now than they were in 2009-10 for all categories—young, mature, disadvantaged and black and minority ethnic students. Although progress has been made, the Government continue to look carefully at this area and are working with universities to focus on improving retention via the access agreement process and the teaching excellence and student outcomes framework, one of whose core metrics is non-continuation and drop-out rates, as the hon. Gentleman knows.

The Government are committed to removing access to finance as a barrier to entering higher education, which is why we continue to make more money available to students than ever before. Many hon. Members mentioned living costs. Students who started their courses this academic year—2017-18—have access to the highest ever amounts of funding to support their living costs at university. Our system deliberately targets living cost support at those from the lowest income families, who need it most. Replacing maintenance grants with loans— the theme of several Members’ remarks—enabled the Government to increase support for full-time students’ living costs by 10.3% for students on the lowest incomes in 2016-17, with a further 2.8% increase in such support for the current year.

With a view to the future, we are further strengthening our approach to widening participation by placing an overarching duty on the Office for Students to consider the promotion of equality of opportunity in relation to access and participation in all that it does. The new director for fair access and participation will have a clear role within the Office for Students to look across the student lifecycle.

The current student finance system is achieving our aims of widening participation and increasing the income that goes to the sector. As I said, funding per student, per degree is up 25% since the funding reforms at the beginning of the previous Parliament. The university system is better funded than it has been at any point over the past 30 years. The progressive nature of the system is ensuring that higher education is open to all people who have the potential to benefit from it. In all of this, the Government are ensuring that the costs of our system are split fairly between graduates and other taxpayers, with graduate contributions linked to income.

The current system has allowed the sector to grow and has made higher education accessible to a greater number of 18-year-olds from disadvantaged backgrounds than ever before. Reducing or abolishing fees would take us back to the days of underfunded universities and limited access for disadvantaged students, and would inevitably result in often hard-pressed taxpayers paying the bill for a system that would benefit the few, not the many: bad for students, bad for universities and poor value for money.

Question put and agreed to.

Resolved,

That this House has considered e-petition 182953 relating to university tuition fees.

Student Loans Company

Lord Johnson of Marylebone Excerpts

Monday 20th November 2017 Commons Chamber

[Gordon Marsden (Blackpool South) (Lab)]

(Urgent Question): To ask the Secretary of State for Education if she will make a statement on the management and operation of the Student Loans Company.

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

The Student Loans Company’s performance has improved year on year for the past six years. SLC services account for about 1.8 million applications per year. It responds to about 4.5 million phone calls from borrowers and has more than 6 million repaying or due-to-repay customers, with loans totalling over £100 billion. In addition, it has delivered a range of new products for the Government on time and successfully, including postgraduate loans and simplified advanced learner loans.

This year, the SLC has processed more than 1.4 million applications for student funding, and so far this academic year it has paid out approximately £2.5 billion in maintenance funding and £2 billion in tuition fee payments to providers. Customer satisfaction remains high, at about 85%, and, for borrowers in repayment, at about 72%. It receives complaints from just 0.1% of its 4.7 million customers. The SLC is, of course, constantly looking to learn lessons from this low level of complaints and to use these complaints to improve the quality of its services.

The Department for Education is also working closely with the SLC on a range of initiatives that will further improve the user experience for the SLC’s borrowers and in respect of staff engagement. Proposals currently being developed include greater digitisation of the student loan application and repayment processes and investment in more efficient SLC systems.

Following two independent investigations into allegations about aspects of his management and leadership, the SLC has terminated Steve Lamey’s contract as chief executive officer of the SLC. The SLC and its shareholders expect the highest standards of management and leadership and, having taken into account the findings of the investigations, have concluded that these were not being upheld by Mr Lamey during his time in his role. The SLC board acted swiftly and has appointed the current chief executive of the Education and Skills Funding Agency and of the Institute for Apprenticeships, Peter Lauener, as interim CEO, with effect from 27 November. He will remain in post at SLC until a permanent appointment is made.

Mr Lauener was formerly chief executive of the Institute for Apprenticeships and the Education and Skills Funding Agency. He has had a long and successful career in a number of senior leadership positions in the Department and its partner organisations, and I have every confidence that he will provide the drive and stability the SLC requires at this time, as we recruit a permanent chief executive.

[Gordon Marsden]

This announcement was snuck out over the November recess on the same day as the Secretary of State for International Development resigned. Since last Monday, two articles in The Times have raised severe questions about the process. Why, in the Minister’s letter to me on 17 October, sent six weeks after I wrote to him about the SLC, did he refer to the suspension of the chief executive as a neutral act that did not imply wrongdoing, when he was actually made fully aware of the allegations against Steve Lamey in June, as his written reply has told me?

Will the Minister publish the findings of the performance review of the SLC, issued two months before the suspension, in which, as The Times says, Steve Lamey was rated “outstanding”? Was the Minister aware at the time that Mr Jenkins’s report on Mr Lamey had concluded that he was

“making a real and positive difference”

to the Student Loans Company, and was a popular and effective leader who staff found supportive, before the decision was made to sack him? Will he also publish the findings of the internal investigation, in which 52 of 58 allegations against Mr Lamey were dismissed, so that all Members can understand the issues at the SLC?

Who appointed the chair and the other three board members of the SLC, and what were the criteria and processes for those appointments? Can the Minister confirm that Simon Devonshire, the board member who heard and dismissed Mr Lamey’s appeal, and David Gravells are also members of the same venture capital trust?

The lack of proper co-operation between the SLC and HMRC has led to significant overpayment of debts. Can the Minister tell us how many overpayments amounting to more than £10,000 have been made since 2015-16? I have just been told that the Government have tacitly admitted their failure in this regard by saying that from 2019 onwards, HMRC and the SLC will co-operate on these matters. However, that does not address the fact that Mr Lamey and the HMRC’s permanent secretary have blamed each other for the issue. Mr Lamey has claimed that he asked for real-time updates that HMRC would not share. Who is telling the truth?

The BBC’s “Panorama” has raised questions about private providers of courses in which students have fraudulently enrolled in order to claim loans. How much has been paid to students of private higher education providers who were subsequently determined to be ineligible in the last five full financial years, and what mechanisms are there to enable the misused taxpayer money to be reclaimed? In the light of all that, will the Government now suspend the sale of a further chunk of the student loan book?

The Minister recently admitted that changes in interest rate thresholds on student debt would cost £175 million by 2020. Can he tell us where the money will come from? Given that tens of thousands of graduates are footing the bill for SLC failures, what confidence can Parliament have in the competence of this Minister, who is the key shareholder in the Student Loans Company?

[Joseph Johnson]

I would encourage the hon. Gentleman not to denigrate the hard work of the dedicated public servants at the Student Loans Company, who are undertaking a vital task in securing the finance that young people and learners in this country need to pursue higher education and who, as I have said, are doing so in a successful way: fewer than 0.1% of the SLC’s 4.7 million customers complain each year. They are delivering an important service, and the hon. Gentleman should support them rather than running them down.

The hon. Gentleman asked about a number of matters. He asked about the investigations that led to the dismissal of Mr Lamey from his position as chief executive of the SLC. The concerns were brought to the board’s attention in May, and to the attention of the Department for Education.

[Gordon Marsden]

When did you learn about it?

[Joseph Johnson]

We learnt about it in May.

[Gordon Marsden]

But when did you learn about it?

[Joseph Johnson]

I learnt about it in May, as I have just said. The two investigations were immediately set in motion to get to the bottom of the allegations received by the SLC board. One was led by the Government Internal Audit Agency, and the other by Sir Paul Jenkins, former Treasury Solicitor and head of the Government’s legal services. They concluded that Mr Lamey had not shown the leadership which would be expected of someone in that role, and accordingly the board decided that he should no longer continue in the role. As a consequence of the SLC’s decision, the Department decided to relieve him of his responsibilities as accounting officer of the SLC.

The hon. Gentleman asked about ineligible payments, some of which were highlighted by the “Panorama” programme that was broadcast a few days ago. I am sure he will be interested to know that the level of ineligible payments made to alternative providers has been falling sharply in recent years. In fact, it has fallen by over 80% since 2012-13, from about 4% of all payments to 0.5% of all payments in 2015-16. This rate is low; of course we want to eliminate fraud wherever we can identify it, but this is a low rate of ineligible payments to these providers. Indeed, the rate is now no higher than the average across the HEFCE-funded higher education system. So if I were the hon. Gentleman, I would not use this as a means of running down the newer entrants to our higher education system—which he often does from the Dispatch Box—because it cannot be used to support that sort of attack. This reduction in the level of ineligible payments is the direct consequence of the controls that previously the Department for Business, Innovation and Skills and now the Department for Education have been putting in place to ensure that public money is not abused.

We take the issue of overpayments extremely seriously, and the hon. Gentleman mentioned some of the steps we are taking. We want close and effective co-operation between HMRC and the SLC so we avoid the risk, to the extent that we possibly can, of students overpaying when they repay. I understand that the Chancellor will be considering this issue further in the Budget later this week, so the hon. Gentleman might want to wait to see the contents of the Budget for further details. We are committed to improving the interface between HMRC and the SLC. We ensure that all borrowers, as they enter the last two years of their repayments, are given the opportunity to move directly to a direct debit system of repayment, so that they eliminate almost all the risk of overpayment.

[Robert Halfon (Harlow) (Con)]

I welcome the Minister’s efforts to reform the SLC, and he will know that our Select Committee on Education is doing a value-for-money inquiry into universities. As well as looking at the management of the SLC, will the Minister use this opportunity to look at reducing the rate of interest for students, which is much higher than in many other countries in the developed world?

[Joseph Johnson]

We keep all aspects of our student finance system under review, to ensure that it is fair and effective as a system, and that it is meeting our core objectives of removing financial barriers to access, funding our university system fairly, and sharing the costs of doing so equitably between individual students and the general taxpayer. The rate of interest is heavily subsidised. This is to be compared with unsecured personal commercial borrowings. The Bank of England benchmark reference rate for unsecured personal commercial borrowing would be well over 7%, and this is a particularly unique product, which is written off entirely after 30 years with no recourse to a borrower’s other assets, and it only enters the repayment period when people are earning more than £25,000. So it is a unique product, and it is not easy to compare any element of it with loan offerings from elsewhere in the commercial sector.

[Carol Monaghan (Glasgow North West) (SNP)]

In recent years the SLC has been plagued by mishaps, complaints of inefficient bureaucracy, and poor customer service. The latest student loan sell-off is also concerning; we saw the problems for many graduates, receiving letters telling them they must pay even though their earnings had not reached the repayment level. Can the Minister confirm that the SLC will not now, or in the foreseeable future, syphon loans off to a third party?

Devolved Administrations are shareholders in the SLC. Can the Minister outline the discussions he has had with fellow shareholders on the circumstances of the dismissal of the chief executive of that company?

Over 1,400 people are employed by the SLC in Glasgow. Can the Government confirm that any shake-up of practices will not involve a plan to move any part of the company from Glasgow and that all employees will have an opportunity to be consulted in any future discussions?

At a time when graduates are paying up to 6.1% in loan interest, student debt in England is nearly treble what it is in Scotland, so does the Minister not think that, while the SLC could use a radical-shake up and reform, his policies could, too? The Budget is just around the corner, so while the Minister works to clear up the managerial problems, why does he not clear up the mess of his policy and stop saddling English students with the millstone of debt around their necks?

[Joseph Johnson]

I am not sure that we need lessons from Scotland on our higher education policies. Over successive Administrations in this country, those policies have resulted in levels of access for people from disadvantaged backgrounds that should frankly be the envy of Scottish National party Members rather than a source of criticism. The hon. Lady asked about the work that SLC staff do from its location in Glasgow, and of course that is valued. We support everything they are doing to ensure that the SLC continues to perform at the level that we all want it to, as an important agency of the Department for Education. As I have said, it is now in its sixth consecutive year of improvement in all its operational metrics, and we want that to continue. I am sure that Glasgow will play its part in that.

[John Howell (Henley) (Con)]

Would the Minister like to explain what role the Office for Students will play in this, and how it will help?

[Joseph Johnson]

The new Office for Students comes into existence progressively from 1 January 2018, with its full operational existence commencing in April 2018. The Student Loans Company has its own statutory existence, independent of the Office for Students, and it will continue to carry out its vital function of ensuring that the loans we make available to remove barriers to access to higher education continue to be made available seamlessly to the students who are in need of them.

[Several hon. Members rose—]

[Dr Roberta Blackman-Woods (City of Durham) (Lab)]

Thank you, Mr Speaker. I hope the Minister appreciates that the problems at the SLC go beyond the actions, or lack of them, of the previous chief executive. The Jenkins report pointed to “bad behaviour” among the whole of the executive leadership team. Will the Minister tell us what that bad behaviour is, how long he has known about it and what action is being taken to stop it?

[Joseph Johnson]

The SLC board has taken prompt action to address the shortcomings in the leadership of the company that were identified in the two investigations that I have mentioned: the Government Internal Audit Agency report and the report by Sir Paul Jenkins. I have every confidence that the new chief executive we have put in place, Peter Lauener, who has worked successfully across a range of Department for Education partner organisations including the Institute for Apprenticeships, will do the job that we need him to do.

[Jeremy Quin (Horsham) (Con)]

Picking up on the Minister’s reply about the Office for Students, what role does he see it playing in driving value for money across further education for our students?

[Joseph Johnson]

Of course value for money is a critical part of our reforms, as it has been since the Green Paper, the White Paper and the Higher Education and Research Act 2017. We want the SLC to hold universities to account for the tuition fee income that they receive from the SLC, and to ensure that students are made aware of where the best teaching is available across the system and where really good outcomes are emanating from specific higher education institutions. We want that to be made clearer to students so that they can make informed choices about where to study, and so that universities can be held to account for the use of public resources.

[Bambos Charalambous (Enfield, Southgate) (Lab)]

An external audit of the SLC placed it at the bottom of all organisations in 35 out of the 36 criteria against which it was assessed. Can the Minister tell us what those criteria were?

[Joseph Johnson]

I cannot tell the hon. Gentleman the precise criteria against which the SLC was assessed. I can tell him that the organisation is steadily improving from when the coalition Government inherited it in 2010. As I have said, it is in its sixth consecutive year of performance improvement, and that is something that we should be celebrating. No one is denying that all organisations have room for improvement, and we want to work with the company to ensure that steps are taken in particular to improve the interface between itself and HMRC.

[Michelle Donelan (Chippenham) (Con)]

Does the Minister agree that it is imperative not only that university students get value for money but that they are able to see where their money goes, and that both of those elements will be promoted by the Office for Students, which will be launched on 1 January?

[Joseph Johnson]

I am happy to confirm that. Indeed, we are consulting on the new regulatory framework that the Office for Students will use as its operating manual. Among the things that we are consulting on is how we can clarify to students how institutions use their tuition fee income so that they—and the Government—can be confident that that income is supporting the core activities that we intend it to be used for: teaching, producing world-class research, and helping students to go on to get great outcomes in the world of work.

[Mr David Lammy (Tottenham) (Lab)]

I have huge sympathy for Mr Lamey—not least because he has such a fantastic surname—but I also have sympathy for the Minister, because I have been in his shoes. Given the failure of the SLC to which colleagues have alluded, it is important that the House understands how often over the past year the Minister met Mr Lamey, the chairman and the senior management team. In the spirit of probity, will the Minister put before the House a list of those meetings so that the proper inquiries can be made?

[Joseph Johnson]

I would of course be happy to do that, but I remind the right hon. Gentleman that the SLC is in many ways a successful organisation, so we should not denigrate it. Opposition Members are doing a massive disservice to public servants who are working hard in Darlington and in Glasgow to ensure that students are getting access to the finance they need to undertake higher education. It is an achievement for an organisation to have 4.7 million customers but to receive complaints from less than 0.1% of them each year, so we should not endlessly run the SLC down. Of course it has room to improve, and the Government are committed to helping it do so.

[Bob Stewart (Beckenham) (Con)]

What does my hon. Friend consider to be the most significant change brought about by the Higher Education and Research Act 2017?

[Mr Speaker]

Order. That question is not altogether adjacent to the matter of the management and operation of the Student Loans Company. If I am being very polite to the hon. Gentleman, which I invariably am, I will say that his inquiry is at best tangential. It has at best a nodding acquaintance with the SLC, but no better than that. However, the Minister is a versatile and dextrous fellow, and I feel sure that he will be able to handle the matter eloquently and pithily.

[Joseph Johnson]

Thank you, Mr Speaker.

Students receive their funding indirectly from the Student Loans Company, and universities receive their funding directly from it, so it is vital that there is a strong relationship and that students feel that they are getting value for money from the funding that the SLC provides. The spirit of the Higher Education and Research Act 2017 is to promote value for money in our system, and to ensure that universities are delivering great teaching, great research and great outcomes for students.

[Mr Speaker]

The Minister is not known as a considerable boffin for nothing.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

The Minister mentioned denigration, but no Opposition Member would denigrate the Student Loans Company. In fact, the SLC has offered a good service to many students and parents. If we compare it with our commercial banking sector, in which so many people should have gone to prison, the SLC has done very well indeed. Is there some secret agenda here? This Government are about to sell off £4 billion of student loans, and who is leading that consortium? It is British banks led by Barclays.

[Joseph Johnson]

I thank the hon. Gentleman for acknowledging the good work that the SLC does—it is important that we all recognise that. The sale of the student loan book is a policy that the previous Labour Government made possible following the passage of the Sale of Student Loans Act 2008, so there is considerable cross-party recognition of the importance of ensuring the sustainability of our public finances. The sale of the student loan book, which was made possible by the previous Labour Government, is something that this Government are quite prepared to continue.

[Wendy Morton (Aldridge-Brownhills) (Con)]

When we talk about student loans and access to university, we often quite rightly talk about disadvantaged students. Does my hon. Friend recognise that the current system has created opportunities for such students?

[Joseph Johnson]

My hon. Friend is right that the income-contingent student loan repayment system has made a huge expansion of access to higher education possible. I have referred to this statistic several times while speaking at the Dispatch Box: young people from disadvantaged backgrounds are 43% more likely to go to university or other higher education today than they were in 2009-10, which is a direct result of successive Governments deciding to share the cost of higher education equitably between students and the general taxpayer.

[Diana Johnson (Kingston upon Hull North) (Lab)]

Will the Minister have another go at the question put to him by the right hon. Member for Harlow (Robert Halfon), the Chair of the Education Committee, as to exactly why our students have to pay such a high rate of interest compared with those in other countries?

[Joseph Johnson]

Many hon. Members are under the impression that all students in the repayment period are paying a 6% interest rate, which is of course wrong. Only between 2% and 5% of students in that period are paying rates of about 6.1%. Most students in the repayment period are paying somewhere between RPI and RPI plus 3. That takes us from RPI, which is roughly 3%, all the way to around 6.1%. Students are paying a spectrum of interest rates, and only those earning more than £42,000 in the repayment period will be paying the high rate of interest that has caught the imagination. From the statistics I have, that represents between 2% and 5% of students.

[Michael Fabricant (Lichfield) (Con)]

Notwithstanding my hon. Friend’s previous answer, is it not the case that far fewer people from deprived backgrounds now go to university? At least that is what I have heard from the Labour party—or has it got that wrong?

[Joseph Johnson]

Yes, I am afraid the Labour party has got that wrong. As I have just said, the rate at which students from the most disadvantaged backgrounds are going to university has jumped sharply over the past six or seven years. They are now 43% more likely to go into higher education than they were in 2009-10.

[Christine Jardine (Edinburgh West) (LD)]

As the mother of a daughter with a student loan, I was appalled by a BBC report of evidence that education agents are recruiting bogus students to private colleges to defraud the taxpayer of thousands of pounds in student loans. What are the Department, the Quality Assurance Agency for Higher Education and the Student Loans Company doing to detect and prevent bogus students? For instance, will the Government legislate to ban essay mills?

[Joseph Johnson]

The Department takes allegations of fraud and malpractice extremely seriously, and we are grateful to “Panorama” for bringing to our attention the fraud allegations it aired in relation to student loans at three private providers. Fraud devalues the work of honest providers and students. Working with stakeholders, including the City of London police, we will take robust action where abuses of the system are evident.

To put this in context, it is vital we remember that the number of ineligible payments to such providers is very low. It is about 0.5% of all payments, and that has come down sharply from 4% in 2012-13. The rate is no higher than the rate of ineligible payments across the rest of the Higher Education Funding Council-funded, or publicly funded, world of higher education.

[Kevin Foster (Torbay) (Con)]

The Minister will agree that one of the key ways of judging the success of the student loan finance system is the number of people from disadvantaged backgrounds who are going to university. What role does he see for access agreements in particular alongside the support provided by the SLC?

[Joseph Johnson]

Access agreements play a vital role. The funding now flowing through access agreements to support widening participation has doubled over recent years and now stands at well over £800 million a year. Access agreements are driving progress in widening participation, and the rate at which people from the most disadvantaged 20% of households are accessing higher education has jumped, with the figure now standing at more than 20% of that particular group.

[Wes Streeting (Ilford North) (Lab)]

Given that Mr Lamey has criticised the lack of support from the Department for Education, and given that this House has had to rely on various media reports that paint a picture of a Student Loans Company plagued by bullying, low morale and high sickness rates, is it not in the public interest that the Jenkins report is put into the public domain, not least so that Committees of this House can properly scrutinise the performance of the Student Loans Company and the support provided by the Department for Education?

[Joseph Johnson]

This is an employment matter between Mr Lamey and the SLC. The Department for Education has taken quick action in response to the two reports by the GIAA and Sir Paul Jenkins. It suspended Mr Lamey from his role as accounting officer and took quick steps to put in place new management, in the form of Peter Lauener, to take the SLC forward in the coming months and years.

[Tom Pursglove (Corby) (Con)]

I declare my interest, in so far as I am currently repaying a student loan. What involvement does my hon. Friend see for Ministers or the new Office for Students in the appointment of a new permanent chief executive?

[Joseph Johnson]

I think we can all agree that my hon. Friend is a good advertisement for the student loans system—he is a good outcome from his particular institution. The OFS will not have a direct role in the appointment of the new SLC chief executive. That will be a matter for its board, and of course it is a ministerial appointment as well.

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

The incompetence of the Student Loans Company is seen in things ranging from its scaremongering fake debt collection letters, to the predicament of my constituent Sibhoz Hallet of Acton, who is perversely barred from working any overtime as her debt would double—that is not an anomaly, but the norm. Is it not apparent that by exposing the SLC as a mess, with 50% of calls mishandled at peak times, Steve Lamey was dismissed for telling the truth?

[Joseph Johnson]

Mr Lamey did not live up to the standards the SLC board felt were required for his role, so it took action to dismiss him, and the Department for Education followed on by removing his function as accounting officer. We want the SLC to continue to be a high-performing organisation, and we should remember that overall it is a successful organisation, with just 0.1% of its customers complaining every year. Many private sector organisations would envy such a record.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

In his initial response, the Minister referred to last week’s “Panorama” revelations. Is he aware of any Welsh higher education institutions that have been caught up in fraudulent activity, and what discussions has he had with the Welsh Government?

[Joseph Johnson]

I am personally not aware of any such allegations, but they would be a matter for the Higher Education Funding Council for Wales and the Welsh regulatory authorities. If the hon. Gentleman is aware of any, he should not lose any time in relaying his concerns to the appropriate bodies.

[Margaret Greenwood (Wirral West) (Lab)]

This chaos at the SLC adds insult to injury for those who are paying off these huge debts following graduation. A constituent who came to see me last Friday showed me his SLC statement. He is a paramedic who is doing an important, highly-skilled job in our emergency services. He completed his training with more than £28,000 of debt. He has paid off £1,084 since April 2016, but the SLC has applied £878.10 interest during that period. He said to me, “It’s no wonder graduates are tempted to leave the country.” What would the Minister say to him?

[Joseph Johnson]

We want the student repayment experience to be as simple, smooth and effective as possible, and it is striking that the level of complaints is as low as it is. Of course there will be complaints, such as that made to the hon. Lady by her constituent, and she is right to raise it. We want to learn from all student experience, and the SLC does learn from the relatively few complaints it gets—it is important to do so.

[Alex Sobel (Leeds North West) (Lab/Co-op)]

I have been in contact with Leeds University union about many cases, particularly those involving overpayment. One student was given incorrect information and made a repayment, but now cannot get a further loan, having been told by the SLC that he had made a voluntary repayment. Another student was given four years’ loan but was subsequently told that he did not meet the residency requirement, so the full amount has now been demanded, even though the SLC admits that that was its mistake. How will the Minister ensure that students are treated fairly when the SLC makes a mistake and students are already deeply in debt?

[Joseph Johnson]

Of course we want all students in repayment to be treated fairly by the SLC and we take the issue of overpayments particularly seriously. As I said in response to the hon. Member for Blackpool South (Gordon Marsden), we can expect to hear more on the theme of overpayments and the interaction between the SLC and Her Majesty’s Revenue and Customs in a couple of days’ time at the Budget.

[Clive Efford (Eltham) (Lab)]

The Minister seems complacent about the extent of fraud. He can report to us only the amount of fraud that is known about but, by their very nature, the people who carry out fraud are devious. Did the “Panorama” programme suggest to him an area of fraudulent activity of which he was not aware before? What action did he take in response to what was exposed by that programme?

[Joseph Johnson]

The hon. Gentleman is of course right that the nature of fraud is such that we only really have a sighting shot at understanding its extent in any system. We have to look at comparable levels of ineligible payments across different types of provider. As I said, we do not see more fraud in the so-called alternative providers than we see in the HEFCE-funded public part of the higher education system.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

Last Thursday, senior NHS leaders told me about the growing desperation to grow our own senior NHS professionals. Such people will have to pay all the money back because their earnings will be above the threshold, so will the Minister look again at the interest rate they will have to pay and the fact that they will start to accumulate interest before they even graduate?

[Joseph Johnson]

The student loan product is heavily subsidised overall. Around 45% of loans are consciously written off by the Government as a deliberate investment in the country’s skills base. We do not want any financial barriers to access, so we make the money available on very favourable terms. The interest rate is a means of ensuring that graduates who go on to have higher than average lifetime earnings make a contribution towards the overall cost and sustainability of higher education, ensuring that it continues to drive access and widen participation systematically across the piece.

[Mr Dennis Skinner (Bolsover) (Lab)]

Is the Minister aware that this is not subsidised enough? There is only one solution and it stares us in the face every time he opens his mouth: let us have free education like we used to have, from the cradle to the grave.

[Joseph Johnson]

The thing is that our system of student finance has enabled far, far more people to go to university than the kind of system that the hon. Gentleman advocates. In the 1950s and 1960s, when others in this House were thinking about whether to go to university, a far smaller proportion of each cohort of 18 to 19-year-olds was given the chance to do so. Now almost 46% of 18 and 19-year-olds get a chance to go to university, and that is a world away from the situation when we had an entirely state-funded higher education system, which meant that it was really just the preserve of a narrow elite.

Contingency Liability: Mercator Ocean

Lord Johnson of Marylebone Excerpts

Thursday 16th November 2017 Written Statements

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

Today I will lay before Parliament a departmental minute describing the purchase of a shareholding in Mercator Ocean and the resulting contingent liability.

Copernicus is the EU earth observation programme that monitors the global health of the planet. Mercator Ocean is the “co-ordinating entity” for the Copernicus marine services which provides free and open access to constantly updated information about the global ocean and the seas of the European region. Mercator Ocean is currently owned by five French public institutions with an interest/obligation to deliver research aligned to operational oceanography. It is broadening its ownership structure to be more in line with other delegated authorities.

The Secretary of State, acting through the Met Office, intends on 29 November 2017 to buy a 5% (€100k) share of Mercator Ocean, alongside equivalent organisations from Norway, Germany, Italy, Portugal and Spain.

The organisation is a “société civile” (a not-for-profit organisation) under French law, meaning it has unlimited liability, and its shareholders are exposed to liability risk in proportion to their shareholding. A remote contingent liability will therefore exist as long as the Secretary of State retains a shareholding in Mercator Ocean.

The organisation protects its shareholders through contractual mechanisms and through insurance. Also any residual claim would first be met from the assets of the company. Any contingent liability is considered to be extremely remote. In addition any contingent liability will cease to exist should the Met Office dispose of the shares, which it is able to do so at cost at any point within the first three years of ownership, and with six months’ notice after this point.

Regrettably, on this occasion pressing commercial requirements to procure the shares have meant that it has not been possible to provide the full 14 sitting days prior to taking on the contingent liabilities.

[HCWS255]

Oral Answers to Questions

Lord Johnson of Marylebone Excerpts

Tuesday 7th November 2017 Commons Chamber

[Ian Murray (Edinburgh South) (Lab)]

3. What steps he has taken to ensure that the UK participates in the Horizon 2020 programme for the duration of that programme.

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

The Government have acted quickly to underwrite Horizon 2020 funding that is competitively bid for by UK participants. As we set out in our future partnership paper, “Collaboration on Science and Innovation”, we will seek an agreement on science and innovation that protects us now and in the future, and continues to ensure we deliver these great partnerships.

[Ian Murray]

Edinburgh is blessed with three world-class universities, Napier, Heriot-Watt and Edinburgh, which punch significantly above their weight in being able to gain EU funding for research and development. Will the Minister come to the Dispatch Box to reassure those universities that they will still be able to access research and development funding at European Union level when we leave the EU?

[Joseph Johnson]

As I said, we are working towards an agreement that will ensure our continued success in European science and research collaborations. Scottish institutions do indeed do exceptionally well. They punch well above their weight in winning about 11% of the share of UK participation in Horizon 2020, which is well above their GDP and population share. We want that to continue.

[Stephen Gethins (North East Fife) (SNP)]

18. The Minister is right to highlight that Scottish universities are world-beating. In my constituency, the University of St Andrews receives £38 million of research funding that relies on our partnerships with the European Union and European institutions. What reassurances can he provide about plans post-2020, so that those partnerships will be able to continue?

[Joseph Johnson]

As I just said, we are working hard to ensure an agreement with the rest of the European Union to ensure we can continue to collaborate closely in important areas of research and innovation. I repeat, Scottish institutions do well in terms of their share of overall UK participation in Horizon 2020. We want that kind of success to continue in the years ahead. Very impactful research is done in Scotland on a collaborative basis across the continent. We have every intention of that continuing in the years ahead.

[Rachel Maclean (Redditch) (Con)]

4. What steps he is taking to support science and innovation in Worcestershire.

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

We have committed to the single largest increase in science and innovation funding for nearly 40 years, adding an additional £4.7 billion to our science spending. This helps to drive growth across the country, and I am pleased that a consortia led by Worcestershire local enterprise partnership will be undertaking a science and innovation audit on the theme of cyber-resilience. This will identify local research and innovation strengths to drive economic growth.

[Rachel Maclean]

Following the commitment in the industrial strategy Green Paper to build new institutes of technology, will the Minister, if his diary permits, meet me in Redditch to review what an excellent location it would make for one of the first institutes of technology? It has fantastic transport links and access to business, and would provide a great opportunity for young people.

[Joseph Johnson]

My hon. Friend is a strong champion for her constituency, and I am pleased to say that we have recently issued a statement confirming our intention to establish high quality and prestigious institutions that specialise in delivering the higher level technical skills that employers need across all regions of England. We will be launching a call for proposals before the end of the year and would welcome applications from Redditch and other places across the country.

[Carol Monaghan (Glasgow North West) (SNP)]

5. What recent assessment he has made of the effect of the UK leaving the EU on the Scottish research sector.

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

As I have said, Scottish institutions are performing well in terms of their participation levels in Horizon 2020, and we want that to continue in the years ahead. The Government are working hard to ensure the success of our institutions and to get an agreement that enables us to continue to collaborate in the years ahead.

[Carol Monaghan]

Of course we also want our institutions to continue to do well, but our research sector is facing a significant loss of funding owing to Brexit, which will of course impact on innovation. What direct communication have the Government had with Scottish universities about the funding threat posed by Brexit?

[Joseph Johnson]

The Department for Business, Energy and Industrial Strategy and the Department for Education are in constant contact with all the devolved Administrations at various levels on a wide range of issues, including EU exit. BEIS participates in various forums, including the UK research funders group, and officials have recently participated in working groups with the Scottish Government, Universities Scotland, Heriot-Watt University and Edinburgh University.

[John Mc Nally (Falkirk) (SNP)]

7. What steps he is taking to support the development of carbon capture and storage technology.

--- Later in debate ---

[Wendy Morton (Aldridge-Brownhills) (Con)]

T2. Businesses in my constituency and across the west midlands need the investment and the skills to continue to thrive and flourish. Will the Minister update me on the work the Government are doing in that regard?

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

We are investing in a world-class technical education system, growing apprenticeships and introducing T-levels from 2020 for 16 to 19-year-olds, backed by a further £500 million per year. We are also investing £170 million to create institutes of technology across all regions and £80 million for specialist national colleges to deliver higher-level technical education.

Government Asset Sale

Lord Johnson of Marylebone Excerpts

Tuesday 31st October 2017 Written Statements

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

Today, I can confirm that the Government are resuming the process required to sell part of the “plan 1” (i.e. pre-2012) English student loan book as previously announced to the House on 6 February 2017. The sale covers loans issued by English local authorities only under the previous (pre-2012) system, specifically those which entered repayment between 2002 and 2006, with a total face value of around £3.7 billion. This is the first sale of the Income Contingent Repayment (ICR) loan book and it is proceeding on the basis that there is a reasonable prospect of achieving value for money. It will only complete subject to market conditions and a final value for money assessment.

As the Government have previously made clear, the position of all graduates, including those whose loans are part of a sale, will not change as a result of the sale. A sale will not alter the mechanisms and terms of repayment and sold loans will continue to be serviced by Her Majesty’s Revenue and Customs (HMRC) and the Student Loans Company (SLC) on the same basis as equivalent unsold loans. These protections mean that purchasers will have no right to change any of the current loan arrangements or to directly contact borrowers. Government have no plans to change, or to consider changing, the terms of pre-2012 loans.

The sale terms are expected to include a number of warranties and indemnities for sale arrangers and investors, which give rise to contingent liabilities for Government. In this case, although there is specific statutory authority for the liability under the Sale of Student Loans Act 2008, in line with HM Treasury rules I believe it is appropriate to notify Parliament before incurring these liabilities. As a matter of record I have placed a Departmental Minute in the Libraries of both Houses describing the contingent liabilities that the Department for Education will hold on behalf of Government as a result of this first sale of the pre-2012 English student loan book. The maximum contingent liability against the Department for Education is unquantifiable and is expected to be in place for as long as there are outstanding securities.

The House will also be informed if and when a sale is completed.

[HCWS205]

Higher Education Funding

Lord Johnson of Marylebone Excerpts

Wednesday 11th October 2017 Commons Chamber

[Angela Rayner (Ashton-under-Lyne) (Lab)]

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

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

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.

[Angela Rayner]

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?

[Joseph Johnson]

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 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. Someone from a disadvantaged background is more than 50% more likely to go to a highly selective university than when the Labour party left office, and 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.

[Robert Halfon (Harlow) (Con)]

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 such apprenticeships help to meet our country’s skills deficit?

[Joseph Johnson]

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.

[Carol Monaghan (Glasgow North West) (SNP)]

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?

[Joseph Johnson]

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.

[Mr Kenneth Clarke (Rushcliffe) (Con)]

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 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, although others will go on to achieve very considerable incomes?

[Joseph Johnson]

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, 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.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

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 think about a radical alternative to what we have at the moment.

[Joseph Johnson]

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 into higher education? That is what the hon. Gentleman’s proposals would end up achieving.

[Nicky Morgan (Loughborough) (Con)]

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.

[Joseph Johnson]

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.

[Dr Roberta Blackman-Woods (City of Durham) (Lab)]

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?

[Joseph Johnson]

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.

[Justin Tomlinson (North Swindon) (Con)]

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?

[Joseph Johnson]

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.

[Wes Streeting (Ilford North) (Lab)]

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 students are from and whatever their background, they have the money they need to succeed throughout the lifetime of their course and beyond.

[Joseph Johnson]

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.

[James Cartlidge (South Suffolk) (Con)]

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 universities on to deliver even higher standards?

[Joseph Johnson]

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 the value for money we need them to deliver.

[Layla Moran (Oxford West and Abingdon) (LD)]

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?

--- Later in debate ---

[Joseph Johnson]

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 appropriate 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.

[Sir Desmond Swayne (New Forest West) (Con)]

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%?

[Joseph Johnson]

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.

[Liz McInnes (Heywood and Middleton) (Lab)]

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.

[Joseph Johnson]

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.

[Mr Philip Hollobone (Kettering) (Con)]

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 salaries in excess of that of the Prime Minister seems to be spiralling out of control?

[Joseph Johnson]

My hon. Friend is right that there are examples of institutions where senior pay has 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.

[Margaret Greenwood (Wirral West) (Lab)]

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?

--- Later in debate ---

[Joseph Johnson]

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.

[Alex Burghart (Brentwood and Ongar) (Con)]

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

[Alex Burghart]

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

[Joseph Johnson]

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 the hon. Gentleman wants to deny it.

[Mr Speaker]

Order. 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.

[Kerry McCarthy (Bristol East) (Lab)]

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.

[Joseph Johnson]

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.

[Michelle Donelan (Chippenham) (Con)]

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?

[Joseph Johnson]

Yes, we feel it is important that there is greater transparency in the sources and uses of university income. In the regulatory framework consultation in the coming weeks, we expect the Office for Students to make 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.

[Stephen Lloyd (Eastbourne) (LD)]

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.

[Joseph Johnson]

Of course, excellent higher education is 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 to achieve parity of esteem for technical and further education in our system.

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

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 burden for a future Chancellor.

[Joseph Johnson]

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.

[Ben Lake (Ceredigion) (PC)]

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—

[Mr Speaker]

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.

[Joseph Johnson]

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.

Bill Presented

Nuclear Safeguards Bill

Presentation and First Reading (Standing Order No. 57)

Secretary Greg Clark, supported by the Prime Minister, the Chancellor of the Exchequer, Secretary David Gauke, Secretary Boris Johnson, Secretary Liam Fox and Secretary David Davis, presented a Bill to make provision about nuclear safeguards; and for connected purposes.

Bill read the First time; to be read a Second time tomorrow, and to be printed (Bill 109) with explanatory notes (Bill 109-EN).

University Vice-Chancellors: Pay

Lord Johnson of Marylebone Excerpts

Wednesday 11th October 2017 Commons Chamber

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

I congratulate my hon. Friend the Member for South West Wiltshire (Dr Murrison) on securing this important debate on university vice-chancellors’ pay. I am grateful for the opportunity to set out how the Government have prioritised value for money in the higher education sector, and to touch on our plans to address the issue of senior staff pay.

With students and taxpayers heavily invested in our world-class higher education system, the Government are determined that value for money should be a key priority. To that end, the Higher Education and Research Act 2017 introduced reforms to increase competition between providers and to promote greater choice for students.

The Act introduced a new regulator for the higher education sector, the Office for Students. Once it comes into being next year, the OfS will develop a new risk-based approach to regulation. For the first time, all registered higher education providers in England will be part of the same system. This new regulatory framework will promote diversity and innovation in the higher education sector in the interests of students. It will drive up quality and standards, incentivise better teaching and learning, and inspire the growth of sector-relevant skills to increase employability.

Under the Act, one of the duties of the OfS is to have regard to the need to promote value for money in the provision of higher education by English providers. It will ensure more transparency for students so that they can have greater confidence that their money is being well spent.

We introduced the Teaching Excellence Framework with the intention of raising the standard of teaching in higher education and giving students clear information about where they are likely to receive good teaching and to get great outcomes from their time at university. Almost 300 providers took part in the first trial year of the TEF, including all but two English universities and more than 100 colleges and private providers. Excluding those with provisional ratings, roughly 75% of entrants received either a gold or silver award.

We are making it a priority for students to know their rights and to have fair contracts that enable them to take action if the reality of their experience does not match what was advertised. With a view to ensuring students obtain value for money, the OfS will use its powers, including setting a regulatory condition for providers to create an environment in which providers fully meet their obligations to students as consumers, and students will be able to build an understanding of their corresponding rights.

If a student is not satisfied with their course or provider, they may wish to switch to a different one. That has been difficult for many students up until now. The Act places a duty on the OfS to monitor and report on arrangements for students to transfer, and empowers the OfS to facilitate, encourage and promote such arrangements.

The Department for Education will shortly be launching a consultation on behalf of the OfS. That will include a proposed condition of registration requiring providers to publish information on their student transfer arrangements.

Many universities are large and complex organisations. Highly skilled and talented individuals are needed to run these organisations effectively. In some cases, universities may be competing internationally to secure the right managerial expertise. Higher education providers are rightly private, autonomous and independent institutions—they are not in the public sector and they are not really in the quasi-public sector—and they are solely responsible for setting the salaries of their staff. Nevertheless, these providers also have a public service mission, as my hon. Friend mentioned. With public funding providing the sector’s most significant single source of income, there is a legitimate public interest in promoting the efficiency of providers. This must include senior staff pay.

There is a risk that increasing salaries diverts money away from a provider’s core mission of teaching and research. Exceptional pay can only be justified by exceptional performance. The Government have consistently used their annual grant letter to HEFCE to call on universities and their remuneration committees to exercise restraint on senior staff pay. In my most recent letter, I made it clear that efficiency must include demonstrating restraint in setting senior pay. The Department’s consultation will contain proposals reflecting my requests that the OfS introduces a new condition of registration requiring the governing bodies of providers with access to student support to publish the number of staff paid more than £100,000 a year. For staff paid more than £150,000, providers will be required to publish their justification for these salaries. In the event that a provider fails to meet the requirements of this condition of registration, the OfS will be able to use its powers, which include monetary penalties, to take action.

The OfS will also issue guidance to help providers to meet the requirements of the condition of registration, and use its power to investigate the governance of an institution through assessments of management effectiveness, economy and efficiency where there are substantiated concerns.

[Robert Halfon]

I thank my hon. Friend for his work on this. Will the consultation also look at potential gender-related pay disparities?

[Joseph Johnson]

I am grateful to my right hon. Friend for mentioning that because we do indeed plan to ensure that such issues are considered by the OfS.

Arrangements will also be made to compile and publish data on the levels of HE senior staff remuneration beyond what is required by the registration condition, with a particular focus on protected characteristics such as gender and ethnicity. Further to this, I have called on the sector to work through the Committee of University Chairs to develop and introduce its own remuneration code. Such a code should encourage greater independence of remuneration committees, the publication of the pay ratio of top to median staff pay and explanations of top pay increases that are greater than increases in average pay in an institution as a whole. I am pleased that the CUC has confirmed that it plans to take forward the development of this code.

I am confident that these actions, in addition to our wider reforms to the higher education sector as a whole, will deliver much greater transparency and accountability, as well as improved value for money for taxpayers and for students. We have legislated to facilitate greater competition within the sector and choice for students. We have successfully promoted measures such as the TEF to help to students to make better informed decisions that affect their futures and enhance teaching quality, and we have acted to address escalating senior staff pay.

Let me be absolutely clear, for the avoidance of all doubt, that I want to see the relentless upwards ratchet in senior staff pay come to a halt, and I am confident that the measures the Government have put forward through the OfS will achieve that. I hope that my hon. Friend the Member for South West Wiltshire is reassured by the Government’s strong action and, once again, I congratulate him on securing this important debate.

Question put and agreed to.