Student Loans Agreement

John Pugh Excerpts

Monday 18th July 2016 Westminster Hall

[John Pugh (Southport) (LD)]

I thank the hon. Member for Warrington North (Helen Jones) for moving the motion, although she could have been slightly more charitable towards the Liberal Democrats. This is a subject on which any Liberal Democrat speaks with some trepidation these days, but I voted against the coalition line on increasing student fees. [Hon. Members: “Hear, hear.”] Before that, in 2004, I voted against top-up fees, which Labour promised not to introduce—I do not think the hon. Lady did the same—so the record is mixed, but I can give some testimony on the awful torment the issue has created for the Liberal Democrats. I was party to several very difficult discussions within the party about how we should proceed. In the days of the coalition, those who wanted to increase fees used to put very heavy emphasis on the guarantee that the thresholds would move with inflation and that the £21,000 was a starter, rather than the final word. I suppose it could be argued that that was then and this is now. There are also arguments for keeping the situation as it stands and not making the changes that the current Conservative Government wish to make.

I shall rehearse some of the basic arguments. Every time I voted against either top-up fees or the coalition policy on tuition fees, I predicted, quite wrongly, that those changes would be dreadful for access to university. I have to accept that, empirically, that did not happen, but I was right about one thing: those changes added to student indebtedness every single time. If the Government make the changes they want to make, they will be adding to that indebtedness to the tune of at least £3,000. That is one argument for not making any changes, because young people are certainly indebted enough.

A second argument, which might seem slightly trivial, is that the Government held a consultation on the proposals. Consultations are supposed to be about finding out whether something is a good idea. There were, I think, 489 responses, and 42 organisations responded. Of those who responded, only 5% were in favour, with 84% against. The others were clearly somewhere in between or had mixed feelings. If we have a consultation, then quite clearly there is a purpose behind it. I think the purpose is to find out whether people think something is a good idea, and quite clearly they did not think this was a good idea. The Government then either ignore consultations or pay some heed to them. I think they should pay some heed to them.

There is a second, possibly stronger argument for the Government’s point of view—this refers back to the trauma my party went through over tuition fees. A lot of the debate at that time was not about whether it was a good political thing to do, because we could see the inherent dangers in it—in fact, people underestimated them. Part of the argument, particularly in relation to the Department for Business, Innovation and Skills, was that the change was absolutely crucial in order to manage the nation’s finances, as part of the austerity programme, which was the emergency brake we needed to apply to an economy going downhill fast.

People argued that at the time, but if we look at the statistics and the impact of that particular fiscal change, we can see that it was not half as big or portentous, and the impact of not making it would not have been anything like what we were told at that time, either by the Treasury or by the Secretary of State at the time, Vince Cable. When I look back at that particular decision, I see one that produced very little gain for the public finances, but an awful lot of pain—political pain for my party in particular and, more importantly, pain for all the students who were affected by it.

That is a pretty solid argument. I am sure that the Minister, who is a literate and intelligent man, can work it all out for himself, but if he looks at the political impact of making the change versus the fiscal gain, I think he will see that it was basically not an objective worth pursuing, because part of the rationale for the Government doing so was not that they wished to be faithless towards students, but that the country’s circumstances demanded it.

Going on to the country’s circumstances, however, if it is the case that, as the former Chancellor told us several times, the country’s finances are on an upward trend and that we are in a more buoyant position—I think the former Prime Minister said the other day that the economy had been left in a very strong position—why do we need to do worse things now than we had to do in 2010? I just do not follow the logic of that argument, unless we wish to redistribute income in favour of one group rather than another, and that logic has not been spelled out. The argument is “needs must”, but if needs must, why did we agree to one thing in 2010 and then, when the economy is allegedly improving, do something worse later on? That is the second argument disposed of.

The third argument, which I think the hon. Member for Warrington North mentioned, is this business of, “It’s a retrospective change”. Of course, Martin Lewis and people like that are saying, “This is a form of mis-selling.” If a private enterprise had done this, we would regard it as mis-selling and we would all be lobbying for the Government to address the issue. Commercial lenders would simply not be allowed to behave like this.

The Government, and previous Governments, have made a slight case for retrospection. I am aware that, in Treasury circles, retrospective measures have been taken, particularly on tax avoidance and the like—whereby people who set up tax avoidance schemes have subsequently found that they have been outlawed—but on the grounds that the schemes were of such a nature that those involved might reasonably have expected that. The Treasury has taken the view that says: “It looked a rather devious scheme at the time and if it looked devious at the time, then you should have thought it was devious and tried avoiding it, and if you get clobbered later on, well so be it.”

What argument could legitimately be put to students? The only coherent argument that could be put is that they ought to be aware that Governments are intrinsically faithless, but that is not really an acceptable defence a Government could pursue for long. We have a big political problem in this country and it was underlined during the Brexit debate. We have a big political divide in the country and a big problem with establishing that there is genuine inter-generational fairness. As the hon. Lady said, we are looking at millennials ending up in worse financial circumstances over time than their parents and previous generations.

What the Government are doing—and a Universities Minister should be bothered about this—is teaching students a hard and very unwelcome lesson, which is: “Don’t trust Governments. Any contract with a Government isn’t worth the paper it’s written on.” That is an extremely negative message, which the new Prime Minister and the new Government certainly ought not to be too quick to promote it. They should genuinely and urgently reconsider what they are doing, because, as the hon. Lady said, it will not make a huge difference one way or another now, but it will make a big difference in the message that it sends out to future generations.

[Mark Pritchard (in the Chair)]

I call Paul Blomfield to speak.