Higher and Further Education

George Freeman Excerpts

Tuesday 11th September 2012 Commons Chamber

[Mr Willetts]

We are talking about future graduate debt, and the House is noticing that the hon. Lady is wriggling on the issue. We are saying that the extra funding helps to pay out cash for students at university through higher bursaries that are paid for out of revenues from higher fees. Students will have observed the failure of the Labour party to commit to maintaining that money.

Let us look at the next item that will supposedly meet those losses. We have established that the cost is not £1.1 billion but £2 billion, and that £330 million of that already comes from a set of measures that students will dislike. The shadow Secretary of State went on:

“£300 million comes from cancelling the Government’s planned cut to the corporation tax on the banks”.

That is the next extraordinary device that he thinks will help him save that money. Let us be clear: this Government have introduced a bank levy to raise at least £2.5 billion a year. That was set out by the Chancellor in the 2012 Budget, to take account of the benefit to the banking system from additional reductions in corporation tax on banks. In other words, we are already raising this money; we are already collecting extra money from the banks through the banking levy which is to offset the effect of lower corporation tax. There is no reduction in the taxation on banks that the Labour party could use to pay for this policy; the banking levy is extracting that funding.

If any Member of this House were remorseless in ensuring that every pound of revenue was extracted from our banks to contribute to education and other purposes, it would be my right hon. Friend the Secretary of State. We are already extracting a large amount of money from the banks, and it is evidence of the bankruptcy of the Labour party’s thinking that when faced with any problem or public expenditure challenge it keeps claiming that it can meet the cost by taxing the banks. The evidence shows that the funding is simply not available to pay for it.

Reversing the VAT increase—£13.5 billion—is supposed to be met by taxing the banks. The Opposition have called for more capital spending—£5.9 billion—which will supposedly be met by taxing the banks. Reversing the child benefit savings of £2.5 billion will apparently be met by taxing the banks. Reversing tax credit savings—£5.5 billion—will be met by taxing the banks. They want more regional growth funding, and now we learn their plans for universities as well. There is simply no way in which taxing the banks will solve the gaping black hole in the Opposition’s financial proposals, and we will not let them get away with it.

[George Freeman (Mid Norfolk) (Con)]

Will the Minister give way?

[Mr Willetts]

Let me continue to make progress.

The final item, and the biggest on the shadow Secretary of State’s list, is in some ways the most curious. Some £500 million is to come from the top 10% of graduates. I quote the shadow Secretary of State, who wishes to ask

“graduates earning over £65,000 in each year of their working life—to pay more through a combination of a higher interest rate…and to continue to pay for an additional two years.”

That is £65,000 in each year of their working life. The shadow Secretary of State is possibly the only person in the Chamber who could have imagined earning £60,000 a year in each year of his working life. The idea that a levy on people earning £60,000 in each year of their working life could raise £500 million is absolutely incomprehensible. Does the Labour party perhaps mean that when someone’s earnings eventually reach £65,000, they will be charged a higher rate or be charged retrospectively? Again, however, there is no way in which such a measure could raise anything like £500 million, not least because in a free and voluntary system in which we have—quite correctly—protected the right of people to make early repayments of their loan, people whose earnings are heading that way will simply repay their loans. The idea that they will find themselves trapped in penal repayment terms when they are earning over £65,000 a year is complete fantasy. There is no £500 million.

I am, incidentally, offering the hon. Member for Birmingham, Ladywood a free briefing on her policy, and I hope she appreciates how helpful it is. I am trying to explain it to her. In addition, if she were to move to anything like the commercial terms envisaged by the Opposition, consumer credit legislation would come into force and she would find a whole host of new regulatory requirements placed on her scheme that it would not be able to meet because of the design of the scheme that we inherited from the previous Government. It would simply become unworkable. There is no £500 million to finance the Opposition’s proposal, and they have no way of financing fees of £6,000.

[Mr Willetts]

It has come to a pretty pass when a loyal Opposition Back Bencher has to help those on the Front Bench by diverting attention from his party’s own policies, but that is what it has come to. The fact is that there is a black hole in the Opposition’s accounts, and we need to know whether they will cut £2 billion from resources that are now going to our universities. How are they are going to provide an extra £2 billion that is financed properly and honestly, and not by the slick accounting tricks used in the only attempt that they have so far made to explain their policy?

[George Freeman]

The Minister is famously well read, and I wonder whether he saw the comments made by Lord Mandelson in his paperback autobiography. He said that when he launched the Browne review in November 2009, he

“assumed, as the Treasury did, that the outcome would have to include a significant increase in tuition fees. I felt that they would certainly have to double.”

Is not the truth that dare not speak its name on the Opposition Front Bench that the Labour party would have doubled fees had it stayed in power?

[Mr Willetts]

I do recall that vivid and frank admission from the former Secretary of State.

The final irony of the Labour party’s proposals is that it is not at all clear what purpose they achieve. Let us be clear: there is nothing in those proposals for students who are currently at university; there are only risks. There are risks of having less money to pay for the student’s higher education, and, as we have seen, of less money for their bursaries. There seems to be no proposal to change the repayment terms of the scheme—9% on earnings above £21,000—and there is no reduction in the monthly repayments that graduates pay. There is, therefore, nothing in those proposals for people in their 20s or 30s; it will simply mean that they end their repayment period a bit earlier than they would otherwise have done. There is absolutely nothing for recent graduates.

Therefore, there is nothing for students, nothing for recent graduates because monthly repayments are not reduced, and there is no help for the poorest graduates, the one third who are better off under our scheme because we fully accept that they will not be able to repay the full amount under the current scheme. The Opposition managed to spend £2 billion that they do not have, with no help for students, no help for recent graduates, and no help for the poorest graduates. That is an extraordinary achievement.

I do not know which bit of the policy-making process produced this proposal, but the Opposition really need to do better. Just possibly, the Leader of the Opposition recognises that problem. In September last year he was asked on the “Andrew Marr show” about his policy, and about the status of the commitment to £6,000 and whether it was a policy that the Labour party would take into the next election. He said:

“The status is that it’s something that we would do now, that it’s something we’re committed to. But the manifesto’s three and a half years away. We'll announce the manifesto”.

It does not even look as if the Leader of the Opposition believes that that policy will ever make it into the Labour manifesto, and after what we have understood about it in today’s debate, I am not at all surprised.