Brexit Readiness: Operation Yellowhammer
Adrian Bailey Excerpts(5 years, 1 month ago)
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Michael Gove
That is a very good point. We published a no-deal tariff schedule in March, and it is going to be updated. It is important to recognise that there was specific protection in that no-deal tariff schedule for agrifood, as a vulnerable sector that requires that additional protection.
One thing I would say, and this question gives me the opportunity to do so, is that there are sometimes those who actively embrace no deal and think it would be the best of all possible worlds. I think that is absolutely not the case; it is far better that we have a deal. There are others who say that, in no deal, there will be consequences that are almost biblical in their horror. The truth is that no deal will generate challenges, particularly for the agrifood sector. That is why the Government are taking steps to mitigate them, and those steps are along the lines that I have outlined today. However, there is much more that DEFRA is doing, which the Secretary of State in that Department, and other Secretaries of State, will have the opportunity to acquaint the House and the public with in the days and weeks to come.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
Earlier, the Minister said the Government were talking with the industry concerning the effects of EU tariffs on petrol exports. What he did not say is that the UK is proposing to have a zero tariff on petrol imports. That could result in the closure of two oil refineries, the loss of £50 million a year to the industry, the loss of 2,000 jobs and a potential loss of fuel availability. Will he be more specific and say what the Government will do about that?
Michael Gove
The hon. Gentleman makes an important point. Where we look at tariff schedules, there are things that we have to balance. One is appropriate protection for sectors, and that is why the agrifood sector, because of the vulnerabilities and the level of the EU’s common external tariff, is one sector that we have sought particularly to protect. However, we also need to have regard to the interests of the consumer and of industry overall. We need to make sure that we keep access to fuel at a level and a price that ensure that our economy continues to motor ahead.
Oral Answers to Questions
Adrian Bailey Excerpts(5 years, 2 months ago)
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The Prime Minister
As my right hon. Friend knows full well, there have been demands for the Prorogation of Parliament ahead of a Queen’s Speech from the hon. Member for Walsall South (Valerie Vaz) and from across the House. This Session has lasted longer than any in the last 400 years, and there will be ample opportunity to debate the Brexit deal in this House after 17 October if this Government are allowed to get on and deliver a deal.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
The Prime Minister
There is a great deal of preparatory work going on—particularly in the west midlands, which the hon. Gentleman represents—to make sure that automotive supply chains are indeed ready for a no-deal scenario, but we do not want a no-deal scenario. And the way to avoid it is not to vote for the absurd surrender Bill that is before the House today and to let the Government get on and negotiate a deal, because that is what we want to do.
Oral Answers to Questions
Adrian Bailey Excerpts(5 years, 8 months ago)
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Alistair Burt
The UK made clear some time ago that we would oppose matters under item 7 of the Human Rights Council’s determination, and we expect to do that. On Gaza, the international commission was unable to investigate non-state actors, but there is no doubt that the situation was serious, as Israeli authorities have also determined. The UK will maintain its position in relation to that.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
In the case of a no-deal Brexit, the Secretary of State has given some limited assurances to NGOs accessing funds from the EU’s humanitarian fund that the Government will underwrite them in future. Are they prepared to do the same for NGOs that access funds for broader humanitarian work?
Penny Mordaunt
I thank the hon. Gentleman for raising that important point. Yes, we are looking at widening that support. Our NGOs, whether they are humanitarian or work in other areas, are world class and we want them to continue to work in those settings, so we have issued those guarantees. However, I say to the hon. Gentleman that if he ever gets the opportunity, he knows what he can do to avoid a no-deal scenario.
Leaving the EU
Adrian Bailey Excerpts(5 years, 9 months ago)
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Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
So far, the Prime Minister’s Brexit policy has involved transport arrangements with no ships, a facilitation arrangement in Northern Ireland with no facilitators and a backstop arrangement that does not actually stop anything. On top of that, we have been promised meaningful votes that disappear like mirages as we get near them. When will the Prime Minister get real and recognise that only a customs union with the EU will sort the Northern Ireland border issue, protect our manufacturing and command a majority of the House?
The Prime Minister
It is not the case that the only resolution of the issue of the border between Northern Ireland and Ireland is a customs union with the European Union.
Oral Answers to Questions
Adrian Bailey Excerpts(5 years, 10 months ago)
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Alistair Burt
I am grateful to my hon. Friend for mentioning that programme. In fact, my hon. Friend the Minister for Africa visited the programme recently and was able to see its valuable work on both AIDS and Ebola. That sort of ministerial commitment demonstrates our support on the ground, which will continue and intensify.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
The Secretary of State for International Development (Penny Mordaunt)
UK aid provided 2 million people in Afghanistan with life-saving support last year, including members of the Hazara community. The provision of humanitarian assistance is based on need and is delivered across the country, and it includes food, shelter and clean water. Humanitarian partners have been assisting displaced people in central Afghanistan, but they have not requested new funding.
Mr Bailey
On 4 December, the Minister for Asia and the Pacific said that British embassy staff had met Afghan Government representatives from the affected area to discuss the situation. Can the Secretary of State update us on the progress made on the humanitarian front and on any developments since that meeting?
Penny Mordaunt
Obviously I do not know the precise meeting to which the hon. Gentleman refers, because of course we frequently meet regional representatives, as well as meeting representatives based in Kabul. We are assisting people, particularly in that region, because of the territorial changes and the new pressures. At the moment there has not been a further call on us to provide any further assistance in that respect, although in other areas of Afghanistan we have leaned in because of the drought.
EU Exit Negotiations
Adrian Bailey Excerpts(6 years ago)
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The Prime Minister
We are very clear that we will be an independent coastal state. There have been attempts to link fisheries and access to fishing waters to the trade aspect of the negotiation. We have been very clear that we will not accept that. We will be an independent coastal state so that it is the United Kingdom that determines access to UK waters.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
Uncertainty about our future trading relationships with the EU is undermining British business and having a chilling effect on our economic growth. There is absolutely nothing in this so-called deal that dispels or resolves those issues. Will the Prime Minister recognise that, instead of negotiating with the economic kamikaze tendency in her own party, she needs to reach out to this side of the House and build a consensus, or take the issue again to the public?
The Prime Minister
The decision taken yesterday gives that certainty to business, which is why business has been welcoming the deal. Richard Walker of Iceland says:
“it delivers a clear path ahead that business so desperately needs”.
As I mentioned earlier, the FSB says it
“brings with it some certainty that our small businesses have craved.”
There are other quotes from business welcoming the fact that we have recognised the needs of manufacturing industry in putting forward our proposals for the future relationship.
Oral Answers to Questions
Adrian Bailey Excerpts(6 years, 11 months ago)
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The Prime Minister
I am very happy to commit to supporting our farmers. Markets for British food are growing around the world and we want them to grow even further. Leaving the EU means that we will have an opportunity to design a new approach to agricultural policy—one that supports our farmers to grow more, to sell more and to export more of their world-class products. We will ensure that we have an agricultural policy that actually meets the needs of the United Kingdom.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
The Prime Minister
If the hon. Gentleman had listened to the answer I gave to my hon. Friend the Member for Lichfield (Michael Fabricant), he would have heard how we are supporting the automotive industry—crucially, supporting the future of the automotive industry. We recognise its importance for the west midlands and its importance for the United Kingdom. That is why we are very clear in our industrial strategy that it is one of those sectors that we will be supporting so that we can support these jobs and its prosperity for the future.
UK's Nuclear Deterrent
Adrian Bailey Excerpts(8 years, 4 months ago)
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Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
I rise to support the motion. The Prime Minister said earlier that the first duty of a Government is to protect their citizens. I would add that the first duty of an Opposition, if they hope to become a Government, is to convince the electorate and the public at large that they will, and above all that they can, do the same. The Opposition cannot be ambiguous on that commitment. I fully understand those in our party who feel that their ethical values and the values of the Labour party are incompatible with that stance, but the public—the electorate—do not feel that our values and ethics are an adequate defence in the face of military aggression from countries that might threaten us.
I am old enough to remember campaigning in the days when Labour’s policy was unilateralism. I remember the cruel caricature of Labour’s defence policy, which was somebody standing with their hands up, labelled “Labour’s defence policy.” Regrettably, it resonated with many of Labour’s traditional voters. The feeling that, above all, people are entitled to security transcends voting behaviour, social class and income. It goes right across the piece, and Labour paid a very high price for failing to recognise that in the 1980s.
My hon. Friend the Member for Ilford South (Mike Gapes) talked about how we succeeded in changing Labour’s former policy. Change it we did, and since then, whatever disagreements the electorate have had with Labour, they have not been about defence. We have won three general elections with a multilateral defence policy. In fact, multilateral defence and an independent nuclear deterrent have been our policy for the last six general elections and were a manifesto commitment in the last general election. That is backed by trade unions, which recognise that any removal of Trident would have a huge impact on levels of employment and skills, which are absolutely essential to people’s welfare.
Mr Bailey
I am sorry, I will not give way, because too many others want to speak.
Above all, the policy is backed by the public. For that policy to be overturned, four thresholds have to be met. The first is that there must be a huge improvement in international relations. That has quite clearly not happened—things have deteriorated. Russia’s lowering of the threshold for the use of nuclear weapons, its activities in Ukraine, the situation in North Korea and the ability of terrorists to take over a country and possibly acquire nuclear technology mean that the world is much more dangerous.
The second threshold is that there must a compelling change of technology that would render nuclear submarines irrelevant. That has not happened. The third is a financial capacity that renders us unable to build them. That has not happened. The last is overwhelming evidence of public support shifting against the deterrent. That clearly has not happened.
Tunisia, and European Council
Adrian Bailey Excerpts(9 years, 4 months ago)
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Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
I thank the Prime Minister for his statement on Tunisia, and for the measures he has taken so far and the measures he is proposing.
Three generations of one family from Tipton and Wednesbury have been killed in this atrocity. The impact on their relatives and the local community has been absolutely devastating, and, unfortunately, I am sure that that will be reflected in other families and other communities throughout the country. Will the Prime Minister assure me that he will take up the suggestion made by the Leader of the Opposition, and set up a dedicated taskforce to support not just the family liaison officers, who are doing great work, but local authorities and other public agencies, so that those families are given the specialist support that they will need now and for a long time in the future?
The Prime Minister
The case to which the hon. Gentleman has referred is absolutely heartbreaking. All of us have read about it in the newspapers, and we all know how the family and community will be affected, as he said, for many years to come.
As for helping the families, I think that the first thing to do is ensure that each of them has a family liaison officer from one of the police forces. Those liaison officers are now being put in place. They are experts—they are extremely good at the work that they do—and they should be the point of contact that ensures that families are given all the information, help, advice and support that they need.
The next step, as the right hon. and learned Member for Camberwell and Peckham (Ms Harman) said, is to think about how we are going to mark and commemorate what has happened. That should be done in consultation with the families, so we should not rush that decision, but I think it is right that this Friday we have a national minute’s silence.
Higher Education Funding
Adrian Bailey Excerpts(9 years, 10 months ago)
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Mr Speaker
I call the Chair of the Business, Innovation and Skills Committee, Mr Adrian Bailey, although I think that he is speaking in a personal capacity.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
I beg to move,
That this House notes the Third Report from the Business, Innovation and Skills Committee, Student Loans, HC 558, and the Government response, HC 777; and calls on the Government to outline proposals that will sustain funding for the sector while addressing the projected deficit in public funding.
I thank the Backbench Business Committee for agreeing to hold this debate, which is of huge significance to universities up and down the country and, indeed, to the cohorts of students at or about to go to those universities. The debate is essentially about the Business, Innovation and Skills Committee report on student loans. I must thank my Committee colleagues because the report’s recommendations to the Government were unanimously agreed on a cross-party basis. It is fair to say that they reflect the concerns of Members from both sides of the House.
I will also draw on other reports not mentioned in the motion, including some by academic and university institutions, but particularly a report by the independent Institute for Fiscal Studies and one by the Higher Education Commission. I stress that the IFS is an independent body with expertise across both the academic and economic spheres, and that the Higher Education Commission report was co-chaired by the Conservative peer Lord Norton of Louth and Dr Ruth Thompson. Although the reports’ details may vary, their conclusions are remarkably coherent and consistent.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
My hon. Friend will know that I used to co-chair the Higher Education Commission. I have a copy of the “Too Good to Fail” report, which we produced on an all-party basis, and I thank him for mentioning it.
Mr Bailey
I understand that my hon. Friend is due to speak, so although I will draw on his report, I will not pre-empt him by discussing its conclusions.
The motion mainly deals with the policy’s public spending and budgetary aspects, but it is important to recognise that we are not just talking about money. Higher education is vital to the economy of this country and to our society. It is an £8 billion export earner and attracts students from all over the world, because British universities consistently feature at the top of the rankings of world universities. In addition, universities drive and sustain economic growth in their immediate local economies, which are often in some of the most deprived parts of the country.
For an individual going to university, such an education is a potential path to personal fulfilment, and of course an economic advantage. Various estimates of graduate earnings show a minimum of something like £150,000 earned by a graduate over their lifetime over and above what they might expect had they left school after A-levels, and many estimates show more.
The Treasury estimates added benefits from taxes earned, and further benefit to employers through productivity gains. In short, higher education in this country is a success story that needs to be sustained, and it is crucial to reinforce Britain’s position in a global economy that is becoming ever more competitive.
Paul Farrelly (Newcastle-under-Lyme) (Lab)
I congratulate my hon. Friend and the Business, Innovation and Skills Committee on its report. Clearly, the size of student loans reflects in great part the size of fees. I have read the Government’s response to the consultation in which they state that they have
“no current plans to initiate a formal review of the sustainability of the student loans system in England.”
That means that there are no formal plans for a review of fees. Does my hon. Friend think that that is right or responsible?
Mr Bailey
My hon. Friend, as ever, touches on the key issue underlined in the Committee’s report, and I will address that issue in due course.
As I was saying, higher education is a success story and vital for our economy, our society and the aspirations of millions of young people in the country. To underpin it we need a funding system that enables it to respond to the demands that will be placed on it by outside pressures, and to sustain its role as a driver of social change. The current funding system is based on recommendations in the 2010 Browne review and subsequently implemented, with some changes, in 2012. The key change was to replace direct Government funding of university teaching by a fees-based system payable by individual students on the basis of Government loans through the Student Loans Company, capped at £9,000. Those fees are to be repaid after graduation once a salary of £21,000 has been reached, over a period of 30 years.
There were short-term benefits to that model. It removed the cost of funding from public accounts, except for those costs that would have to be written off through under or non-repayment in the future—technically known as the resource accounting and budgeting, or RAB, charge. That model benefited the universities because it led to an increase in funding at least in the short term, and it benefited taxpayers because there was a drop in public subsidy per student of something like 5%. The benefit to the student is far less clear. Although the system delays payment for education until later in life and is income-contingent, the Institute for Fiscal Studies estimates that the average debt per student will be more than £44,000 for a combination of tuition fee and maintenance loans. In its report the Higher Education Commission stated that focus groups demonstrated a low level of awareness among students about that issue and its potential implications for them.
Mr Sheerman
The IFS and the commission report highlighted the fact that many students we interviewed had no idea that the debt would be that much. They will possibly never be eligible to get a mortgage later on, which I find absolutely stunning, astounding and disgraceful.
Mr Brian Binley (Northampton South) (Con)
Will the hon. Gentleman give way?
Mr Binley
Many of us feel that the contributions being demanded are often too great, but I would not want to overstate that to the point at which we begin to believe that no student will ever be able to buy their own house. That is more than a slight exaggeration and it needs to be corrected.
Mr Bailey
I thank the hon. Gentleman for his observation. When I speak to sixth formers and potential undergraduates I always make the point that, compared with the cumulative spend in their lifetimes on cars that depreciate immediately, investing in their education is a very good investment. But it will have consequences for patterns of consumer expenditure, the full implications of which we do not yet know.
Mr Sheerman
I am sure that my hon. Friend would not wish to mislead the House and I know that he is replying to an intervention, but the IFS study says that middle earners—the public administrators, the health and education workers—will be particularly affected. That is 40% of graduates, so we are not talking about a small number who may never be able to get a loan for a house.
Mr Bailey
I understand the point that my hon. Friend makes and I could talk about it at some length, but I recognise that other people wish to speak in the debate so I will not pursue it any further.
It is now clear that the level of debt repayments is predicted to be much lower than when the scheme was initiated. In the early days, the Committee questioned the Minister on that point, and the estimate was a level of default of between 28% and 30%. It is now acknowledged by the Government that the rate is 45%, and that may rise. In crude terms, for every £100 the Government lend, they get only £55 back. That has huge implications for the Government’s long-term budgeting.
The principal reason for the projected increase in non-repayment is the fact that graduate income has not grown as anticipated by the Office for Budget Responsibility. That will keep an increasing number of graduates below the repayment threshold, and even if they reach the threshold they will repay at the lower rate, commensurate with their lower income. That will mean that they will be unlikely to pay off the debt within 30 years.
The IFS has estimated that 73% of graduates will not repay in full. We can add to that the difficulties that the Student Loans Company has had in securing repayments, particularly from former students living abroad, so there is a basic problem and other administrative problems.
The Select Committee has made recommendations on the latter. If we look at the implications for annual budgetary expenditure, we find that £7.4 billion in loans was given to undergraduates in 2012-13. In 2015-16, that figure is estimated to be £12.6 billion. If we estimate that nearly half of the loans will not be paid back, it is clear that that has enormous implications for future budgetary planning. If that were not a big enough problem in itself, the Chancellor added to it in his 2013 pre-Budget report by announcing the lifting of the cap on student numbers to allow the additional recruitment of 30,000 students. He tacitly admitted that there was a funding problem when he said that that would be funded by the sale of the student loan book. The Committee subsequently questioned Ministers and others on that. We expressed considerable concern that such ongoing expenditure should be financed in this way, and we were very doubtful about the Government’s potential to balance their books by doing so.
Mr John Denham (Southampton, Itchen) (Lab)
Does the Chair of the Select Committee accept that, when I was in charge of the Department for Innovation, Universities and Skills, we put considerable effort into trying to sell the previous loan book? We concluded that the inevitable uncertainties—future inflation rates, earnings rates and so on—made it quite impossible to get good value for money from the student loan book. Is that not a second reason why it was quite irresponsible of the Chancellor to suggest that this was an easy way of funding the long-term expansion of higher education?
Mr Bailey
I agree with my right hon. Friend. Indeed, the report’s recommendations underline that point. It is significant in another way, too: it was a tacit recognition by the Chancellor that if he were to expand the number of places, extra money would have to come from somewhere, and that that was not being provided for in the then current Budget projections. It is still unclear exactly how the escalating cost—it could well rise to considerably more than 30,000 students if the cap were removed completely—will be dealt with by the Government.
Mr David Willetts (Havant) (Con)
The hon. Gentleman talks about costs, budgets and public spending. In the interests of having a clear debate, will he confirm that the resource accounting and budgeting charge is not an item of public expending, as it appears in the national budget or the national accounts?
Mr Bailey
I understand the question, because I have heard the former Minister’s, shall we say, robust prosecution of this particular argument before. May I make an admission? I am not an accountant. All I do is go by what the authoritative bodies say. If the right hon. Gentleman wishes to argue with them that is fine, but I think most people would say it is a matter of common sense that if we lend so much money and get only so much back, sooner or later that particular default rate will have to be incorporated in national accounts and people will have to pay for it.
Mr Denham
May I add to my hon. Friend’s point? The Office for Budget Responsibility’s fiscal responsibility report makes it clear that there are three sets of national accounts: whole Government accounts, national accounts and resource accounts. The comments made by the right hon. Member for Havant (Mr Willetts) apply to only one of the three ways of looking at the national books. My hon. Friend is absolutely right. If we borrow £10 billion a year and write off £5 billion a year, that is bound to show up somewhere as a cost to the taxpayer—that is common sense.
Mr Bailey
I welcome the interventions of two former Ministers, which have shone an economic light on some of the most obscure elements of our education accounting.
To return to my point on the student loan book, the fact that the sale has now been abandoned underlines what my right hon. Friend said about the non-viability of this course of action in funding future financial higher education commitments.
In short, we have an education funding model that is producing an ever-increasing call on the nation’s finances, and actually further commitments are being added. The House of Commons Library paper projects that by the mid-2030s the addition to the national debt incurred as a result of this policy will be equivalent to 8%—about £350 billion to £360 billion at current prices. That is a huge sum of money that will have enormous implications for future Governments—and universities and students—in terms of financial planning.
The Minister for Universities, Science and Cities (Greg Clark)
I am sorry to pre-empt my response to the debate, but at the beginning of his contribution the hon. Gentleman mentioned the important benefit—he referred to it as unambiguous—to the Exchequer. Has he made an estimate of that benefit to set against the costs he is referring to?
Mr Bailey
I believe that these estimates are projected in the figures from the Institute for Fiscal Studies, and certainly there is the netting off if you like, of these figures. There will be benefits. I said in my opening comments that there would be benefits. However, to have this level of future debt without any policy recognition that it will have to be funded in the future accounts is complacent and, in my view, a dereliction of duty. I shall return to that in one moment.
It was because of the figures that the Committee recommended an urgent review of the sustainability of the system, and obviously the sort of figures the Minister mentioned would be incorporated in such a review. If the model does stack up, I do not see why the Government should have any problem undertaking that review to demonstrate it. In their reply to the Committee’s recommendation, the Government quoted, of course, Andreas Schleicher from the OECD—I believe this featured in exchanges earlier today:
“The Government has no current plans to initiate a formal review of the sustainability of the student loans system in England. Indeed the OECD’s Director for Education and Skills, Andreas Schleicher, considers that we are the first European country to have established a sustainable higher education system.”
However, the Government response did not mention, as the Minister’s earlier response did not, that Andreas Schleicher’s comments were about the pre-2012 funding model, not the current one.
Greg Clark
I was aware of this matter, and I was surprised to hear that with uncharacteristic discourtesy—it is not his normal demeanour—the shadow Business Secretary accused me of having misled the House in referring to this endorsement from the OECD. It is important to clarify to the House that I met the author of the report, Mr Schleicher, on the day he published it. I know that overseas visitors often do not get the chance to meet members of the Opposition Front-Bench team, but I had the great privilege of meeting him, and there was never the slightest doubt about what he meant. In fact, he wrote to me this week, on 6 January, having read the report from the shadow Business Secretary. He wrote: “I had made it very clear that the rise to £9,000 fees had not changed the overall assessment by the OECD.” In fact, it is in the opposite direction: “The UK higher education system is excellent for individuals and for the Government. England has got it right on paying for higher education. Among all available approaches, the UK offers still the most scalable and sustainable approach to university finance.” I hope that when he responds, the Minister, on behalf of the shadow Business Secretary, will apologise to me for his accusation.
Paul Farrelly
Let me come to the Select Committee’s aid. Does my hon. Friend recognise that it is not only his Committee that has found the system to be unsustainable, but the former adviser to the right hon. Member for Havant (Mr Willetts) when he was a Minister, Nick Hillman, who said that the Government had got their maths wrong? He is now the director of the Higher Education Policy Institute and he said in March last year:
“The government has got it wrong and therefore there is a big funding gap and something has to be done about it.”
Mr Bailey
I agree. What I find odd is that Ministers will pray in aid a body such as the OECD, but refuse to recognise the overwhelming consensus of opinion of experts across the academic and economic sphere in this country that the system is unsustainable.
So far, the Government’s approach has basically been to say that the figures on which the estimates are based are essentially projected hypothetical figures, which could be altered if macro-economic conditions change. I certainly accept that that is absolutely true in broad terms. One point quoted more often than others is that if graduate incomes increase, it will substantially alter the projected potential deficits and increase in RAB charges.
The trouble is that it is possible to look at a whole range of economic variables, many of which might work in the other direction. Let me cite a couple of examples off the top of my head, but there are many others. First, if the cap in student numbers is removed and we have a larger number of graduates coming on the market as a result, that could further depress the starting salaries for graduates to a lower level than before. That could also have a significant impact on future RAB charges. If the Government had to borrow money at a higher rate than applies at the moment in order to re-lend, that, too, could considerably alter RAB charges.
Mr Speaker
Order. I am listening intently and with great interest to the hon. Gentleman’s opening speech. I hope he will not take it amiss if I express the hope that the four or five sets of papers arrayed in front of him do not constitute individual chapters in the development of his speech. Although we are not hugely pressed for time, there are several other hon. Members who wish to contribute. The hon. Gentleman, being a considerate and sensitive fellow, will wish to tailor his remarks accordingly.
Mr Bailey
Thank you, Mr Speaker. I reassure you that, given the expertise of some Government Members, and one in particular, the papers in front of me are there to provide a factual basis on which I can respond to them. I am coming on to conclude my particular comments.
The broad point is that where it is possible to look at future macro-economic variables that will benefit the RAB charge, it is equally possible to look at a whole range of them that do not or even work in the opposite direction. What I find particularly worrying is that so far, on the basis of available evidence, it is the authoritative research organisations that have predicted an increase in the RAB charge and they have proved to be correct, while the Government sources, which have been very complacent on this issue, have not been proved correct.
I have spoken about the range of the research done on this issue. In summing up, as a Committee, we did not put any specific proposals before the Government. What we wanted was a review. I recognise that a number of organisations and individuals have looked at this in some detail. They include, of course, the Higher Education Commission, and I am sure that my hon. Friend the Member for Huddersfield (Mr Sheerman) will talk about some of its recommendations. They also include my right hon. Friend the Member for Southampton, Itchen (Mr Denham), who I know has done considerable research and will want to talk about his suggestion, and, of course, the shadow Minister, my right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne).
I think it important for us to begin by recognising that there is a problem, but the Government do not appear to recognise that. It is not possible to solve a problem without starting from the basis that there is one, and it seems to me that the Government are sticking their head in the sand. All those other organisations and individuals are putting considerable effort and research into finding a solution, but from the Government we have had no response, just the complacent argument that there is no problem so no problem needs to be fixed. I believe, my colleagues on the Committee believe, and an increasing body in the academic and economic world believes that there is a problem, that there needs to be a review, and that we need to look at these issues. There is no easy answer, no silver bullet, but universities and future cohorts of students can reasonably expect to have some sort of answers to these questions.
Mr Willetts
The only country that has a system like ours is Australia. The last time I was in Australia, comparing notes and discussing our two systems, when I asked the leading Australian expert what the Australian equivalent of the RAB charge was, he said, “I think when we launched the scheme five years ago, we did an estimate of write-offs, and come to think of it, we probably ought to have another look at it now.” The idea that every six months a new figure was churned out essentially based on what has happened to earnings in the previous six months compared with the OBR forecast in 2011 would have been regarded as absurd. I would happily have a much more credible set of assessments of write-offs, which would have to allow for the fact that this must be a flexible system.
Returning to the shadow Minister’s intervention, I accept that all of us in all parts of the House should openly recognise that the scheme will not remain unchanged until 2046. We do not sit around with our income tax system, saying, “Well, of course Geoffrey Howe decided income tax rates and thresholds in 1980, and now that 35 years have elapsed we can decide on a new set.” That is not how policy is conducted in this country. One of the reasons why I am unhappy with this focus on a particular way of calculating the RAB charge is that it brings with it a set of assumptions which, unlike any other area of public policy, have been determined until 2046, so the only thing to do if someone wanted to change it is to tear the whole system up and start again.
I completely accept that there will be a necessity—I am interested in this and I am doing something on it at present—for us to discuss the right balance of public and private benefit from higher education and the balance of public and private contribution to the costs of higher education. The graduate repayments must clearly reflect the private benefit from higher education, but nobody should be preoccupied with a set of calculations that are possible only because of some highly precise assumptions that bear no relationship to the real world of higher education over the next 30 years.
Mr Bailey
I have been listening to the right hon. Gentleman with great interest. It seems to me that part of the case for a review is that, when the scheme was introduced, the Government based it on certain assumptions about RAB charges that have subsequently proved to be incredibly inaccurate. That may at some time in the future result in a need at least to amend policy. Given that the scheme has been in effect since 2012 and these inaccuracies have been exposed, is not this the most appropriate time to review it to see what changes should be made?
Mr Willetts
On inaccuracies, the RAB charge is largely determined by external factors. The 2.2% cost of borrowing is determined by Treasury assumption. The repayment threshold in 2016 relative to earnings is entirely determined by OBR forecasts. We did not go round trying to reach an alternative wages forecast; we just took the OBR forecast, which was the only sensible way to proceed. Then the British jobs market performed differently from what everyone expected in 2010, with good news on employment and less good news on increases in the real value of wages.
There was an error. The error that was made, which emerges from increased research on what has happened to graduates, is that it looks as though graduate earnings do not bounce around as much as was expected. That is another factor, although not a significant one in how the RAB charge is forecast. The forecast is inevitably shaped by the kind of assumptions that I described earlier.
I have spoken for 20 minutes and I do not want to go on any longer. I have touched on my concern about the way this debate is going wrong. It is going wrong by treating the assumptions necessary to make any kind of RAB charge calculations as somehow fixing the design of the system for the next 30 years, when that is absolutely not the purpose of the specification of those assumptions to make the calculation.
Mr Bailey
I would like to endorse the comments about the quality of today’s debate. It demonstrates the depth of expertise in the House on this issue. It is appropriate to pay tribute to the right hon. Member for Havant (Mr Willetts). We have had robust exchanges in the Select Committee in the past, but there has never been any doubt about his commitment to higher education and the expertise he brought to the issues it faces. Similarly, I thank my colleague on the Select Committee, the hon. Member for Northampton South (Mr Binley), who is a great believer in Select Committees and in going where the evidence leads. He has been prepared to back me even when, politically, it has been inconvenient for him to do so.
To summarise, the arguments for the review have been made largely, but not entirely, by Opposition Members, but, strangely and perversely, the arguments made by the former Minister and the current Minister in defence of the existing system underlined and reinforced the case for having a review. The right hon. Member for Havant seemed to argue that the current RAB charge calculations are essentially an accountancy issue. If that is the case, why not have a review to demonstrate it to everybody so that all those institutions that are criticising it can get some reassurance from the Government? The Minister’s and the OECD’s argument about the benefits of graduate education and investment in the industry are a given. I understand that. The problem is whether in the future the country finds the level of projected debt that will have to be funded politically acceptable in view of the benefits accruing from it. There is a big debate to be had here, and this review could kick-start it.
Whatever current and past Ministers have said in defence of the existing system does not take away from the opportunity that a review could create to refine and improve the system and address any issues.
Question put and agreed to.
Resolved,
That this House notes the Third Report from the Business, Innovation and Skills Committee, Student Loans, HC 558, and the Government response, HC 777; and calls on the Government to outline proposals that will sustain funding for the sector while addressing the projected deficit in public funding.