Higher Education: Loans

Baroness Garden of Frognal Excerpts

Wednesday 5th April 2017 Lords Chamber

This is not good enough. This is why my Motion calls on Her Majesty’s Government to report annually to Parliament on the impact on the economy of the increasing quantum of graduate debt and asks them to provide estimates of payback rates and an estimate of the annual cost to the Exchequer of the present system. It is not a lot to ask, and it is a no-brainer if the Government want to convince us that they are on the right track. I beg to move.

[Baroness Garden of Frognal (LD)]

My Lords, we on these Benches support the case put so eloquently by the noble Lord, Lord Stevenson, and we much regret that he is stepping down from his Front-Bench role. We seem to have had to work together a lot in recent days, and it has always been a great pleasure to do so.

This increase in tuition fees is a significant further step towards full marketisation of the UK higher education sector, which threatens the accessibility and reputation of this vital sector. Allowing some universities with higher teaching ratings to charge higher fees means that students will increasingly have to weigh the opportunity presented by a particular course against the fee being charged. In fact, such a step could simply encourage the development of a two-tier university system whereby richer students go to higher-rated universities while the most disadvantaged students go to the lower-rated universities or not at all.

We on these Benches totally reject the idea of linking fees to teaching excellence framework gradings, as the noble Lord, Lord Stevenson, set out. They are an untried and untested form of assessment which should not be used to determine fees. There appears to be no correlation between increased fees and improved teaching quality. The National Union of Students points out that:

“Since tuition fees were trebled in 2012, there is no evidence to suggest that there was a consequential improvement in teaching quality. There has been no change in student satisfaction with the teaching on their course, while institutions have instead been shown to spend additional income from the fees rise on increased marketing materials, rather than on efforts to improve course quality”.


Doubtless some universities have used the fees to improve quality, but there is no guarantee that that is what the fees are there to do.

We have argued for many years that there is a serious lack of attention to teaching quality in universities. The emphasis has been heavily weighted to research for prestige, funding and career promotions, and we welcome the aims in the Higher Education and Research Bill to redress the balance, but we do not believe the way to solve this is through linking teaching quality to fees.

These changes come on top of other deeply damaging changes to student finance. First, there was the abolition of maintenance grants for lower-income students, which makes these regulations all the more damaging. Getting rid of grants while increasing the cost of university education may put lower-income students off attending higher-performing universities. Secondly, the retrospective change in loan conditions to freeze the repayment threshold for tuition fees at £21,000 breaks the deal done with students by the coalition and changes the terms for many students, meaning paying back from a lower starting point.

These measures will in no way encourage diversity or open access to mature or part-time students, nor encourage lifelong learning. We acknowledge the welcome increase to £833 million for the Director of Fair Access to improve student success for the more disadvantaged, but that is not going to solve the problem. Social mobility is simply not good enough. These measures will do nothing to improve opportunities for those from disadvantaged backgrounds. We join in the regrets.

[Lord Willetts (Con)]

My Lords, I declare my interests as a visiting professor at King’s College London, an adviser to 2U and an honorary fellow of Nuffield College, Oxford. I am discovering that this debate is a kind of valedictory for the noble Lord, Lord Stevenson. I would like to say how much I have enjoyed his interventions from the Front Bench during the debates we have both participated in. I am sure he will continue to contribute to this House; we need his contributions, and I have greatly appreciated what he has done.

It is rather peculiar that on this valedictory we are having a debate about these measures, when of course the truth is that the structure of higher education finance we are considering is one that all three parties have introduced during their times in government. If there is any example of a shared consensus on how to finance higher education, it is the Blair/coalition Government proposals for fees and loans. It is now a stable system, and one that all three parties have contributed to and should support.

It is of course not a system of up-front payment; that is its crucial feature. It is a graduate repayment scheme. When graduates repay, at a rate of 9% on earnings above £21,000, it is nothing like having a commercial debt. If a child of mine left university with £25,000 on their credit card or an overdraft of £50,000, I would be extremely worried as a parent. However, knowing that during their working lives they were going to pay back 9% of their earnings above £21,000, and that they would do so only if they were earning more, and if for whatever reason they were earning less they would not have to—in other words, they would be paying through PAYE—would not cause me concern.

Far more importantly, it does not concern students, which is why we have seen steady increases in the numbers of young people going to university as the successive changes have been brought about. Those changes have led to a growth in the number of places, particularly at universities that students have been choosing. We have indeed begun to see growth and shrinkage between different universities, reflecting student choice. We have seen more undergraduates getting their first choice of university. We have seen more places at university in total; indeed, these reforms made it possible to remove the cap on student numbers.

The increase in the number of university places has been particularly beneficial to students from lower-income backgrounds—the marginal students who are not otherwise getting in. Indeed, we have seen a surge in the number of people going to university from low-income backgrounds. At the beginning of this process, nearly 10 years ago when the Blair changes were first brought in and my party opposed them—with exactly the argument that we have been hearing again today: that they would put off low-income students—10% of students from the poorest backgrounds were going to university. After 10 years of these changes, 20% of students from the poorest backgrounds are going to university. That is not good enough—it is still way behind the 60% of young people from the most affluent backgrounds going to university—nevertheless, it is a doubling. We are on a journey in which we are gradually improving social mobility, with more young people from low-income backgrounds having this opportunity.

So the evidence is that they are not, to quote the noble Lord, Lord Stevenson, “debt-averse”, for the reason that it is not debt. I love the noble Lord’s example of his time at university. When he left, I suspect—because we are roughly contemporary—that he was facing an income tax rate of 35%. Now graduates face an income tax rate of 29% above a very high threshold. If he was not income tax-averse to going to university, why should they be income tax-averse now if they are facing a 29% rate of PAYE above a high threshold?

I will not detain the House for much longer, but it is possible, if you get into the figures, to take a flow of payments and convert it into a stock. You can create extraordinary figures for liabilities or assets if you take what is essentially a flow of payments and convert it into a stock.

For example, graduates, during their working lives, are very likely to pay at least £500,000 in income tax. As, by and large, people who go to university earn a bit more, they leave university with the prospect of £500,000 of income tax debt, at least, around their necks. Should we be anxious about that? No. In their working lives, if they earn a decent income, of course we will expect them to make a contribution to the Exchequer through income tax. Just as you can apparently create enormous figures for debt by aggregating lots of years of income tax, if we think of the amount that we as a nation will spend on the National Health Service over the next 20 or 30 years, we can also construct an enormous figure by taking £100 billion a year or whatever and multiplying it by 20 or 30. So graduates have an enormous pile of income tax debt—£500,000 at least—in order to pay for trillions of pounds of National Health Service spending. That is because government is a going concern. Neither of those figures should be of concern to us, because we can manage them through the annual flows of income and expenditure.

I should like to draw these brief remarks to a close, however, by welcoming a point in the Motion of the noble Lord, Lord Stevenson, because it is the only way I should conclude a short speech when we are apparently saying farewell to his Front-Bench service. I agree that we need from time to time to look at how the system is working. We do not need to change the structure—we do not need another big review; another Dearing or Brown—but of course there is a social choice in this system. The social choice is the balance between private repayment by graduates, and the public—the generality of taxpayers—taking the burden of writing off repayments that will not be made by graduates who, for example, do not earn enough to reach the threshold. That is a public-private balance which, in a way, reflects that of public and private benefit from higher education.

It is legitimate from time to time to have a debate about what is the right balance between graduate repayment through PAYE and the likely level at which, eventually, graduates’ loans will be written off because they cannot afford to repay them. Incidentally, that would be impossible if we fixed the term in the way the party opposite want, but I think that every five years—once during the lifetime of a Parliament—such a structured review would be worth while.

I end by welcoming that aspect of the noble Lord’s proposal. This need not be done every year: the information is available. Once again, I thank him personally for the lively and well-informed contributions he has made to our debates on higher education and other matters in the recent past.