Student Maintenance Grants

Geoffrey Robinson Excerpts

Tuesday 19th January 2016 Commons Chamber

[Mr Marsden]

I entirely agree with my right hon. Friend, who was a distinguished Schools Minister. His points are absolutely valid, and I shall deal with them in more detail in due course. These measures are not simply incidental tinkering with existing financial regulations.

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

Can my hon. Friend confirm that 45% of the student loan book, amounting to some £5 billion, is suspected to be delinquent in some way or other? These measures would add a further £1.6 billion to that amount. Are not the Government building up a huge unfunded liability in their national accounts?

[Mr Marsden]

I am grateful to my hon. Friend, who has great experience in these matters. The Institute for Fiscal Studies and other organisations have commented on that matter.

--- Later in debate ---

[Joseph Johnson]

We are making a record amount of financial support available to those students—more than has been provided by any previous Government. That will enable them to travel further away from home than they have in the past.

Let me turn to the significant savings achieved by these changes. The switch from maintenance grants to loans will, in a steady state, save around £2.5 billion per year from the fiscal deficit—not the £1.5 billion mentioned. We acknowledge that a proportion of the loans will not be repaid. This is a conscious decision to invest in the skills base of our country, and protect those who go on to lower-paying graduate jobs. We forecast that the long-term annual economic savings will be around £800 million per year.

[Mr Geoffrey Robinson]

The Minister said earlier that this is a deficit-reducing policy and we take that, and of course I entirely agree with all the points that have been made on the grounds of social mobility and denial of educational opportunity that this policy implies, but is not the point the Minister really has to answer that 45% of his loan books at the moment have been declared delinquent for one reason or another? How much of this so-called saving does he think he is going to get back? Is he not really just pretending he is making this saving, while in fact building up unfunded liabilities?

[Joseph Johnson]

There is an immediate grant saving of £2.5 billion, which comes directly off the budget deficit. As I just mentioned, there is of course the prospect down the line of some loans not being repaid, as a result of a conscious decision by the Government to invest in the skills base of the country and to allow people to pursue incomes that do not enable them to pay off the full value of the loan. The economic value of the savings, as I just said, is £800 million a year in a steady state.

I challenge the Opposition to explain how they would fund their alternatives. I note that the Labour party has in the past year put forward competing higher education funding policies, although they share one significant feature: their huge cost to the taxpayer. Labour’s leader, the right hon. Member for Islington North (Jeremy Corbyn), said in July that fees should be removed completely, with grants retained in full. The policy was costed by Labour itself at £10 billion. Such policies move us backward. They are unsustainable and, at a conservative estimate, would add more than £40 billion to the deficit over a five-year Parliament. We should be clear about what the results would be: more reckless borrowing, more taxes on hard-working people, and the reintroduction, inevitably, of student number controls. We have lifted student number controls and we will not allow the Labour party to reimpose a cap on young people’s aspirations.

I will deal with the risks associated with this policy as set out in the equality analysis, but let me first quickly respond to the false accusation that we refused to publish the assessment until prompted to do so by the National Union of Students. That is simply not true. Every year, when the Education (Student Support) Regulations 2011 are amended, an equality analysis covering the changes is published on gov.uk. This is standard practice. On 14 September, in a written response to a parliamentary question asked by my hon. Friend the Member for Totnes (Dr Wollaston), I said:

“The Government expects to lay amendments to the Education (Student Support) Regulations 2011 later this year and publish an Equality Analysis when the Regulations are laid. The Equality Analysis will include an assessment of potential impacts of the changes.”

Only on 22 September 2015, more than a week after that answer was given, did the NUS give notice that it would seek legally to challenge our policy. There has been no evasiveness in the presentation of the policy or its potential impacts.

I will deal now with some of the issues identified in the equality analysis and how they will be mitigated. Let it be remembered that similar issues were identified as a result of the 2012 reforms, but did not crystallise. Indeed, we now have a world-class higher education system, with record numbers of disadvantaged students in higher education, the highest rates of BME participation in higher education and more women in higher education than ever before. Our impact assessment explains that the risks will be mitigated by at least three factors, including the 10.3% increase in the maximum loan for living costs, the repayment protection for low-earning students and the high average returns on higher education.

More funding is also being provided through access agreements: in 2016-17, £745 million is expected to be spent by universities through access agreements, up from £404 million in 2009-10. That is money that makes a real difference to disadvantaged students, and we will of course monitor the progress of the policy through the data available from the Higher Education Statistics Authority and the Student Loans Company.

--- Later in debate ---

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

This is a very timely debate. I am pleased that the Opposition will divide the House on an important issue.

I was struck by two remarkable statements by Conservative Members. The first was made by the Minister, who said that the policy was an important deficit-reduction exercise or measure. The other was made by the hon. Member for Bexhill and Battle (Huw Merriman), who said that all the students he knows are very comfortable with the present level of borrowing with which they will leave university. I do not know where he meets such students, but I have not met anybody who feels anything other than that they are, at the moment, at the utter limit of what is bearable.

The Government want to promote a shareholding democracy, to increase social mobility and all the other things they praise, but they do not realise that no one—ordinary people graduating in the normal course of events from the bulk of our universities—will ever be able to afford a mortgage in the foreseeable future when carrying £53,000 of debt. The Minister has done nothing to contradict the figures produced by the Institute for Fiscal Studies, which has the unhappy knack of being right about such things.

We would like to hear the Government’s argument, because it seems to me to be a very strange sort of accounting. A student loan book of £5 billion is currently sitting on the balance sheet. We know that 45% of it should be written off, although it will not of course be written off. We know that loans are defective for one reason or another—the interest is not paid, or there is no likelihood of the interest being repaid, let alone the capital—but no action is taken to write them off. Similarly, the loan book will now be increased by £2 billion a year. I think the Minister said £2.5 billion, but the figure I have is nearer £2 billion. We will increase the loan book by that amount and we will effectively write off 45%, because we know that that will not be repaid, but this is somehow still a great deficit-reduction exercise. It is nothing more than a great exercise in voodoo accounting, probably promoted by the Treasury for some reason or other. The Department just seems to accept it, and the Minister for Universities and Science accepts it when he knows full well that there is no real case for it.

I endorse everything that has been said by my hon. Friends. This measure is bad for social mobility, bad for access and bad for fairness. It will leave students with an enormous burden of debt—£53,000. How can anybody think that that is a sensible proposition to put to youngsters today? We need not do it and the Government will not get the money back anyway. It beggars belief. I urge the Government to think again and am very pleased that we will divide the House on this matter.