Review of Post-18 Education and Funding

Lord Hunt of Kings Heath Excerpts

Tuesday 20th February 2018 Lords Chamber

[Lord Hunt of Kings Heath (Lab)]

My Lords, I thank the Minister for repeating the Statement and I remind the House of my wife’s role as a consultant to the Education and Training Foundation. I should like first to ask the Minister about the status of the advisory panel. Can he assure me that it is going to be allowed to work without ministerial interference and direction? I would not ask him this except for the statements made by the Secretary of State at the weekend which seemed to set out most of the conclusions he expects the advisory panel to reach. On that, I should raise one particular issue that has struck me, which is that of charging lower fees for degree subjects with lower salary outcomes and the suggestion that it would mean that the fees for, say, arts courses would be lower than those for science and engineering courses. I cannot think of a more stupid outcome than that. In particular for poorer students, it would act as a huge disincentive to take up the very subjects that this country excels at. I hope that the Minister will tell me that that was just a whim of the Secretary of State and that the advisory panel will be given a clear indication that it is to come to its own conclusions on the issues it has been set.

I turn to the terms of reference. The Statement rather glosses over the important point in the terms of reference that the review cannot make recommendations on tax and must follow the Government’s fiscal policies. Does that mean that the review cannot address anything that would increase spending—and, if that is the case, does it mean that it cannot consider recommending the restoration of maintenance grants, reducing the current interest rates or increasing the teaching grant?

The Minister has made much of the T qualifications and the extension of education, but I remind him that his party’s manifesto promised a review of tertiary education across the board. Despite that, hundreds of thousands of 16 to 18 year-olds studying in FE colleges do not form part of the review. Perhaps he could say why that is.

In closing, the noble Lord set out the core principles under which the advisory panel and Ministers will work and said in particular that the review would look at value for money for graduates and taxpayers. On that, will the review look at the current rate of interest being charged? It is three percentage points above RPI, which all observers believe is unjustified and based on a discredited level of inflation. I remind the noble Lord of the Treasury Select Committee report published this month which states:

“The Committee sees no justification for using RPI to calculate student loan interest rates. RPI is no longer a National Statistic and has been widely discredited. In its Autumn Budget the Government acknowledged that the use of RPI was unfair for business rates, and the Committee is unconvinced by the case put forward for its use”,


by the then Minister. The committee goes on:

“The Government should abandon the use of RPI in favour of CPI to calculate student loan interest rates”.


I notice that the review is not looking at value for money for students. I would say to the noble Lord that what I find difficult about the RPI rate is that it is applied to students’ loans from the moment they reach university. That really needs to be looked at.

On the question of student loans in particular, will the noble Lord remind the House what percentage of graduates are expected to repay their loans in full and what percentage of the loan is likely to be repaid? Will he also say what the Department for Education wrote off in respect of student loans in the last financial year, and for how much below its value has the loan book been sold so far? Will he also say what sum it is now estimated will have to be finally written off at the end of the 30-year term? Will he also confirm that, due to the quirks of accountancy rules, the annual write-offs are missing from the deficit figures, but that while the value of the loan book is not netted off against the national debt, any cash for which it is sold is netted off? In fact, does he agree with the Treasury Select Committee, which described student loan accounting as being a “fiscal illusion”? Up to £7 billion of annual debt write-offs has simply gone missing, allowing the Government to artificially reduce the deficit by saddling young people with the debt. I very much hope that the advisory panel will be able to look at that.

Oh so wearyingly we hear more about a market in higher education—despite the fact that the Government have said that we have the most outstanding higher education system in the world. I shall make one further comment in relation to the report of the Treasury Select Committee. It notes:

“Without adequate information, an efficiently functioning market will struggle to develop. Prospective students face the unenviable task of determining whether to participate in higher education based on increasing quantities of university marketing material coupled with a lack of proven, reliable metrics for judging the quality of courses”.


If the Government are determined to go down the market route, they will have to ensure, first, that prospective students have information that they can use effectively. Secondly, they must ensure that the education sector does not repeat the problem of the health sector, which is to introduce a quasi market and then attempt to micromanage it through the regulator. My great fear about the Office for Students is that, while ostensibly it is there to encourage a market, in reality it is there to micromanage the sector. The outcome of that will be an unholy muddle and a higher education sector that is less than it ought to be.