Higher Education Policy

Andrew Smith Excerpts

Wednesday 27th April 2011 Commons Chamber

[Mr Willetts]

My hon. Friend is absolutely right. We look forward to the report that Ian Diamond is preparing on precisely how we can improve efficiency in our universities.

[Mr Andrew Smith (Oxford East) (Lab)]

Will the Minister give way?

[Mr Willetts]

No, I am going to make some progress because Members in all parts of the House wish to speak and I have a lot more ground to cover.

We have not only taken on Lord Browne’s proposals in the report commissioned by the previous Government as their way of reforming the finances of our education system, but tried to improve on those proposals. The crucial way in which we have done that is by improving the repayment terms for graduates. A very important feature of the new system is that instead of the repayment threshold of £15,000 that was left to us by the previous Government, we propose a threshold of £21,000. The only way in which people pay for higher education is as graduates repaying their loans, so the level of threshold and the amount of the repayment that they make is crucial. Under our scheme, a care worker graduating in 2016 with a £20,000 starting salary would repay nothing. Under Labour’s £15,000 repayment threshold, that care worker would have been repaying £37.50 a month. Under our scheme, an accountant graduating in 2016 with a £25,000 starting salary would repay £30 a month. If the repayment threshold had remained at £15,000, that accountant would have been repaying £75 a month.

The crucial figure that matters for young people thinking about the cost of their higher education is how much they will have to repay. Under our scheme, their monthly repayments will be significantly lower. That is why the Secretary of State and I are confident that these reforms are the right way forward and are genuinely progressive. We are discharging our obligation to future generations in exactly the way the shadow Secretary of State set out at the beginning of his speech. That is the crucial challenge and we believe that our reforms rise to it.

That is not just my view or that of the Secretary of State, but the view of bodies that have scrutinised our financing proposals. The Institute for Fiscal Studies said that

“the Government’s proposals are more progressive than the current system or that proposed by Lord Browne.”

The OECD endorsed the coalition’s policy:

“The increase in the tuition fee ceiling is reasonable and should pave the way for higher participation in tertiary education”.

--- Later in debate ---

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

I welcome the fact that the Minister admitted that these proposals have been driven by the need to cut the public sector deficit, rather than by any wider educational considerations. Borrowing to give grants to universities counts as public borrowing, whereas borrowing to make loans to students does not, because that is offset, at least in part, by an income stream. This is an accountancy smoke and mirrors exercise, on which the Minister has based one of the most seismic changes in educational funding imaginable. At the end of the day, if the figures are wrong, it will still be the taxpayer who foots the bill. If the loan obligation is higher than expected, that will present problems. If the income, in return, is lower than expected, that will present additional problems. On the basis of the evidence that we have seen so far, that is the situation that is emerging.

[Mr Andrew Smith]

Was my hon. Friend struck, as I was, by the failure of the Minister, who declined to take my interventions on the point, to address the issue put to him by our right hon. Friend the Member for Southampton, Itchen (Mr Denham)—that at the Public Accounts Committee, his own permanent secretary had said that at the current level of fees, universities faced a cash funding gap, which could be plugged only by cutting the teaching grant further or by cutting numbers? Is not that the mess they have left us in?