Education: Treating Students Fairly (Economic Affairs Committee Report)

Lord Burns Excerpts

Wednesday 16th January 2019 Lords Chamber

[Lord Burns (CB)]

My Lords, I join others in thanking the noble Lord, Lord Forsyth, for his skilled chairmanship of the Economic Affairs Committee, in particular through this fascinating inquiry.

Many of us will make points about improvements that could be made, but we should at the same time recognise the welcome aspects of the system that has evolved over the last 20 years and not lose sight of them. One aspect is that we have increasing numbers of young people in higher education, including students from less well-off backgrounds. We should also recognise the system of income-contingent loan repayments, combined with the write-off after 30 years; although it produces some anomalies, as mentioned by the noble Lord, Lord Forsyth, it is still the case that, over an important range of earnings, those who earn the most quite rightly pay the most.

Another feature of the new system is that the cap on the number of students able to attend particular courses in particular universities has been lifted; that is another important step forward and something I would not like to lose. We have also seen that, with greater certainty in future incomes, universities have been able to borrow and invest in their critical infrastructure; this is another important aspect, compared to the uncertainties that existed in previous systems.

However, we are here today to emphasise some of the weaknesses of the system and what might be done about them. Without doubt, the biggest of these—as mentioned by the noble Lord, Lord Forsyth, and concentrated on in the report—has been the concentration on three-year undergraduate degree courses and the extent to which they have coincided with a decline in other types of qualification, including those which are cheaper, shorter and more tailored to the skill shortages of today. We have also seen a sharp fall in the number of part-time and mature students gaining degrees, which is a great sadness. As the noble Lord, Lord Forsyth, mentioned, although there is some progressivity in the student fees arrangements, there are also some anomalies. The decision to turn maintenance grants into loans has left those from less well-off backgrounds with a higher level of debt, and the very high interest rates charged on outstanding loans fall more lightly on those with higher incomes, who pay off their loan more quickly. That is a considerable anomaly.

Basically, the attempt to introduce competition and market incentives into this sector, while having some good results, has produced a number of unintended consequences. The fee cap has meant that almost all courses are priced at the maximum; competition has been almost entirely in terms of numbers of students rather than price or the quality of teaching; there is concern about too little attention being given to entry qualifications; and of course there is the point that has been mentioned about the considerable inflation in the class of degrees awarded. All these are things that we should be looking for ways to correct.

At the centre of many people’s concerns is the feeling that for many students the returns from studying for a degree might not be what they had hoped, while at the same time the non-degree part of higher education is being financially starved. The committee’s report presents a set of proposals. We have already heard about a number of them today and I shall mention two or three. First, if we are to increase the attractiveness of alternatives to the standard three-year degree, we have to incentivise both the institutions offering them and the potential students. As the noble Lord, Lord Sharkey, outlined, the proposals that we have presented are to provide more funding for other post-school options; to have a single system of funding, including loan funding and maintenance support for all full and part-time courses; and to have a single regulator.

My second point is that there is clearly a case for ironing out some of the problems with the funding system that are causing the most unhappiness for students. We spent a long time having meetings with students and talking about their experience. Without a doubt, the two issues that came up time and again were the level of interest rates on student loans and the need for those to be as recognisable as other interest rates, and switching maintenance loans back to maintenance grants so that poorer students did not end up with the largest debt.

My third point is that we should make a change in the transparency of what is happening with the loans that will not be repaid, and how this appears to both government and students. The noble Lord, Lord Forsyth, explained about the ONS decision to change the arrangements for how the write-off fees are recorded in the national accounts, and that change should lead to a more transparent treatment of loans in the public accounts. The expected write-off of student loans will now appear sooner, and we believe that over time this is going to lead to better decision-making in how resources are allocated.

However, I would personally like to see an attempt to apply a similar treatment to the amounts that are owed to students. Students who are likely to be on lower incomes after graduation now have a much more informed view of the income-contingent loans system than they did at the outset but they are still saddled for years with the existence of a large and growing outstanding debt, even if it is to be written off after 30 years. There is no doubt that this is extremely disheartening for many. Just as we want the Government to recognise the likelihood of debt write-off on an ongoing basis rather than waiting for 30 years, my own suggestion is that we should be looking for an arrangement that writes off part of this debt for the student on an ongoing basis as it becomes clear that it is not going to be repaid. That is not straightforward but I am sure there are ways that it could be done. It would make the whole process more transparent from the point of view of the student and the Government, and it would considerably reduce the levels of anxiety among many students.