Student Loans Agreement

Daniel Zeichner Excerpts

Monday 18th July 2016 Westminster Hall

[Daniel Zeichner (Cambridge) (Lab)]

I thank the Petitions Committee and my hon. Friend the Member for Warrington North (Helen Jones) for scheduling this important debate. It is a pleasure to serve under your chairmanship once again, Mr Pritchard. I am glad to have the opportunity to speak about an issue that will affect many young people in university cities such as my constituency of Cambridge, where more than 700 petitioned me on this issue.

As my hon. Friend the Member for Warrington North said, the issue is not new. In fact, I raised it at Prime Minister’s Question Time in December last year, which seems a lifetime ago. At the time—it is extraordinary—the right hon. Member for Witney (Mr Cameron) was otherwise engaged touring Europe and negotiating his deal; it seems such a long time ago. In his absence, the then Chancellor answered. I had asked:

“When the Chancellor tripled student tuition fees, he set the repayment threshold at £21,000. He has now frozen the threshold, and the Institute for Fiscal Studies tells us that many students will bear many extra thousands of pounds in repayments. Given that he has broken his promise, will he send students an apology or just the bill?”—[Official Report, 9 December 2015; Vol. 603, c. 989.]

Unsurprisingly, he did not apologise, and students, I fear, are now left with the bill. What he is left with is rather less clear, but he has obviously got more time on his hands.

Changing the threshold at which student loans are to be repaid, as other Members have pointed out, really does not do politics any good. As all of us here know, one of the major challenges facing us is to slowly rebuild, piece by piece, the trust that has been lost in politics. We need to repair the connection between voter and elected representative, and moving the goalposts really does not help. It is clear that current and prospective students are angry, and I cannot blame them. They are being pulled out of the European Union when the majority of them wanted to remain. They are now being denied opportunities and experiences across the continent that just a month ago seemed boundless. Back in 2010 they were misled and tuition fees tripled under the Liberal Democrats and Conservatives. In many university cities like mine, they are being locked out of the housing market, and in many cases locked out of the rental market, with the cost of living constantly rising. The Government have gambled their future away on an exceptionally bad hand. To top it all, young people are being shafted by the Government on student loan agreements. How can we expect them to put any trust in us when this is how they are treated?

As other Members have pointed out, the Government are keen to remind us that there was a consultation, and when 84% responses came back saying, “Don’t do it,” it was ignored. Of 489 responses, 410 were explicitly against keeping the threshold of £21,000 the same for all post-2012 borrowers until April 2021. As others have said, the Government—and local councils, too—lose all authority if they consult the public having already made up their mind what they are going to do. The consultation seems as if it was a charade. In fact, it was a sham, which is a shame, because the respondents’ points were worth listening to. Their main arguments, some of which have been rehearsed, were against freezing the repayment threshold for five years for all existing and new loans. They argued that the policy represents a retrospective change to borrowers’ terms and conditions which, as others have said, would not be allowed to commercial lenders, and that leads to a further loss of trust.

Such loss of trust occurs on a number of levels. The policy goes back on the original deal made between the Government and each student, saddling them with more debt than they signed up for and undermining the fundamental fairness that a contract should entail. It completely disregards the views of those consulting on the policy, including student unions and higher education providers—perhaps they are a part of the group of experts the world no longer believes in. Those most directly affected are the ones who know what the policy will do. It was snuck in through the back door. It was omitted from the now ex-Chancellor’s spending review speech, and it was introduced furtively and somewhat undemocratically through secondary legislation.

The effects are severe, as we have heard. The Department for Business, Innovation and Skills said in its post-consultation report:

“In 2020-21 borrowers will be paying £6 per week, or £306 in the year, more than they will be in 2016-17.”

The Institute for Fiscal Studies has found that freezing the repayment threshold has a proportionately larger impact on repayments by graduates with lower lifetime earnings. It also estimates that a five-year threshold freeze would increase average repayments by almost £4,000, and that it expects middle-income earners to be hardest hit by the threshold freeze. The Government’s own equality analysis agreed. It concluded that the largest increase in lifetime repayments in absolute terms is among middle earners, and the largest increase as a proportion of earnings is among lower earners. The analysis also concluded that the average increase in repayments would be greater for women than for men.

A constituent wrote to me:

“It breaks my heart to see my family saddled with huge debts that will certainly affect their life chances.”

It is imperative that we do not underestimate the impact that an unexpected loss of several thousand extra pounds could have on middle and lower earners struggling to get by. We must look at the changes in a wider context. They come alongside the scrapping of student grants and their replacement with loans, a policy change that the IFS estimates will most affect graduates from lower-income families who go on to become higher earners. Just as we have seen with the Government’s damaging pay to stay housing proposals, the policy effectively penalises social mobility and aspiration. It creates extra barriers for successful graduates from low-income backgrounds, but has little impact on students from the richest households.

I was fascinated to discover that the new Prime Minister said in 1997—we have all said things in the past—that she had a real concern that

“to abolish the maintenance grant and replace it with loans will, far from widening access, narrow it.”—[Official Report, 4 November 1997; Vol. 300, c. 155.]

I wonder whether she will, some years later, revisit her predecessor’s schemes.

Freezing the student repayment threshold also comes alongside changes to tuition fees expected in the Higher Education and Research Bill, which I am sure we will discuss in the days ahead. The Bill will allow some universities to charge tuition fees that rise in line with inflation, creating a greater hierarchy of education, with some simply costing more. As the University and College Union points out, further increasing the cost of higher education to the individual is hardly conducive to widening participation.

The UCU also identifies further potential retrospective changes: many students could begin their courses without knowing the full cost of their study, which could change if the institutional rating changes. All that comes at a time of great instability in the sector. The Universities Minister recently said:

“This Government have done more than any other to put the financing of higher education on to a secure and sustainable footing.”—[Official Report, 27 June 2016; Vol. 612, c. 125.]

Others may see it slightly differently, especially as that was said a few days after the EU referendum, the shockwaves of which are resonating around our universities and research sector. It may be one of the most destabilising events that our higher education sector has experienced in many, many years.

The Government’s original justification for implementing a repayment threshold freeze was that it was necessary to contribute towards debt reduction and to balance the books. As others have said, the rule book seems to have changed. The budget surplus target has been abandoned. Higher education policy has been carved away from one Department and bolted on to another. The Prime Minister said:

“When it comes to opportunity, we won’t entrench the advantages of the fortunate few. We will do everything we can to help anybody, whatever your background, to go as far as your talents will take you.”

Hear, hear to that; let us hold her to that.

Change is afoot, so I hope the Minister can confirm that students will no longer be treated in such a shabby way, but will be treated better. We are already standing amid the broken pieces of the big society and the wreckage of BIS and our place in Europe. Please do not add to that wreckage. Do not break your promises to all those students who trusted you to keep them.

[Mark Pritchard (in the Chair)]

I shall call the Front-Bench spokesmen and women in a moment. We have a little time today. Typically, Front-Bench spokespersons speak for 10 minutes. However, we have a little extra time if required.