Skills and Post-16 Education Bill [HL]

Lord Willetts Excerpts

Committee stage
Wednesday 21st July 2021 Lords Chamber

Moved by

[Lord Willetts]

90: After Clause 25, insert the following new Clause—
“Review of student loans
(1) The Secretary of State must review and update all the terms of—(a) student loans, and(b) graduate payments,every five years.(2) The outcome of the review under subsection (1) must be published within six months of its completion.”Member’s explanatory statement
The purpose of this amendment is to ensure that there is a regular review of the student loan system so that can any problems can be identified and changes made.

[Lord Willetts (Con) [V]]

My Lords, I wish to move Amendment 90 in my name, which proposes a new clause to provide for the review and updating of the terms of higher education loans and repayments every five years. Before I briefly turn to that, I just say to the House and to the Minister that it is much appreciated that the Government have set aside four days for consideration of this important Bill in Committee. This is the last amendment I will move, so this is the right moment to thank the Minister for her engagement with the issues. I assure her that all the amendments I have brought forward are aimed at improving the Bill and helping the Government achieve their policy objectives.

I realise that there may well be a very understandable reaction to this amendment: that higher education finance is so difficult and controversial that the last thing we need is a provision to look at it every five years. But, in reality, because the system is so important in the public finances and so politically charged, it is being changed, and it has been changed, in an ad hoc way, from time to time. In this amendment, I have tried to provide a framework so that it can be reviewed and updated systematically, looking at the system and the interactions between its parts as a whole.

This proposed new clause would also tackle a belief—I think it is misconceived, but there are people who hold it—that somehow the system cannot be changed at all. The terms on which the Student Loans Company deals with students, and then graduates, makes it clear from the beginning that regulations for the terms of repayment can be amended from time to time. Of course, there are advocates of a graduate tax. This current repayment scheme is, in many ways, rather close to a graduate tax—a 9% tax on earnings above a certain threshold but with a cap on the total amount. A graduate tax would clearly come with adjustable rates, so this establishes the reality that the terms of the scheme can be adjusted and altered, and that this should be done with a proper systematic overview from time to time.

It would also enable the system to take account of legitimate political debate about the balance between the amount we expect graduates to pay back for the cost of their education and the amount we expect taxpayers to pay by virtue of writing off unpaid student loans. There is genuine and legitimate debate about what that balance should be. Different people of different political persuasions can take different views on what the balance is, and it is also affected by things such as the performance of graduate earnings. I do not think it is now breaking any confidences to say that, when we set the graduate repayment threshold of £21,000, when we brought in the £9,000 fees, it was based on a rather different forecast of graduate earnings than actually happened. So as earnings overall grew by less, the repayment threshold ended up being higher in real terms than had been envisaged. Those are the types of economic scenarios which Ministers rightly should be able to consider, and they should be able to change the system in the light of them.

In the last few years, we have had a range of ad hoc changes, of which the most significant—and, I have to say, I think the most egregious—was the one in 2017, with a very big increase in the graduate repayment threshold and, therefore, a sudden and large increase in the cost to taxpayers from loans that were being written off. It was introduced with no consultation and no wider consideration for the system as a whole. In fact, I have to say that it was a case study in the perils of policy-making by conference speech crisis, which is not a good way to decide how our higher education should be funded.

I very much hope that this approach—which provides that there should be an overall review every five years in which, clearly, the terms of the loan scheme can be looked at in the light of economic and political considerations—provides some kind of framework. The Augar review—a serious piece of work, a lot of which I agree with—is one example of how that could be done, and the Minister might cite it. But circumstances change; debates change. Rather than having a one-off specific exercise like that, I think that, every five years, being able to look at what has happened to the so-called RAB charge, loan repayments and graduate earnings, and adjusting the system in the light of public spending pressures and other issues, makes sense, and it does not stop people doing anything else.

There will be some people in this House who believe that the whole system should be swept away. That is their view, and nothing in this provision changes their capacity to do that if they bring in primary legislation. Equally, Ministers may still want to make changes, from time to time. But this just provides, rather as in the historic social security system, for a systematic overview every five years, with the opportunity to look at all the evidence and decide in a structured way how the system could be recalibrated. I think it legitimises the absolute necessity of keeping the scheme adjusted, and provides a framework for doing so, and I hope it will improve the quality of our ability to scrutinise and improve our higher education financing system as it goes forward. That is why I propose this new clause.

--- Later in debate ---

[The Parliamentary Under-Secretary of State, Department for Education and Department for International Trade (Baroness Berridge) (Con)]

My Lords, I am grateful for the amendment tabled by my noble friend Lord Willetts, and for his thanks. It is a pleasure to engage with noble Lords. This is my first piece of legislation in your Lordships’ House, and I hope that this is the shape of things to come in terms of the tone and the reaction to this legislation.

With £19.1 billion paid out in student loans in the financial year 2020-21, and further increases forecast for future years, it is essential that the Government keep careful control of the student finance system. It is also important that they retain the ability to review and make changes to the student finance system as and when needed, without the potential delays, or the focus on process, that a requirement for a review every five years could impose. I appreciate my noble friend’s comments, but inadvertently, a process may, as the noble Baroness, Lady Sherlock, outlined, become constraining, even if it was introduced with the best of intentions.

We must ensure that the system can remain responsive to the needs of the labour market and the wider economy, and thus continue to deliver good value for students and the taxpayer. We agree that, as the noble Baroness said, there is a need for transparency. A wide range of data on student loans and repayments are regularly produced and made publicly available, which enables the Government, and other interested parties, to monitor the student loans system. These include regular publications from the Student Loans Company and the Higher Education Statistics Agency.

As the noble Baroness, Lady Sherlock, outlined, the Government have updated the student loan offer in recent years, with the introduction of several new loan products, including loans to support postgraduate and doctoral study, and we will continue to make changes as and when necessary. Through the Bill, the Government are also introducing a lifelong loan entitlement that will open up new routes for people to retrain and upskill flexibly throughout their lives.

In relation to some of the questions raised by the noble Baroness, Lady Bennett, the fees cap of £9,250 is frozen for this year and the next academic year. She talked about the burden, and the responsibility, obviously, is to repay a loan, but 30 years is at the moment akin to many of the mortgage products available on the commercial market.

As the noble Lord, Lord Willetts, correctly predicted, I shall take this opportunity to remind noble Lords of the recommendations regarding higher education, including on student loans and graduate repayments, that were made by the independent panel appointed to provide input to the review of post-18 education and funding. The Government are carefully considering these recommendations before setting out a response to the review, along with the comprehensive spending review.

In conclusion, while I am sorry to disappoint my noble friend for the second time in recent days, I hope that my remarks have reassured him, as I know this has been an issue of concern to him for many years. I hope that he will feel comfortable in withdrawing his amendment.

[Lord Willetts (Con) [V]]

I am grateful to the Minister for her courtesy, as always. I do not think my score on the amendments that I have tabled to the Bill has been very high—and I will, of course, withdraw this amendment. However, I hope that it will be possible to come back and consider this matter further.

I shall comment briefly on what has been said. The noble Baroness, Lady Bennett, came to this from her own perspective, which was interesting. I much appreciated the fact that she too made the case for some kind of structure involving a review every five years. I can assure the noble Baroness, Lady Sherlock, and the Minister, that there is nothing in the amendment that would stop specific changes at specific times. We have had a lot of those, and that may well carry on.

What I am trying to provide for is something more systematic every few years. I am trying to avoid the need for something like Augar—the setting up of a special inquiry—when it should just be natural that every five years we look at what has happened to graduate earnings, at how much of the graduate loan book is likely to be repaid, and at the terms of maintenance support, and we decide whether there should be any changes in the light of changing circumstances—or, indeed, changing political priorities. Providing that kind of health check on the system as a whole every five years would not deprive Ministers of power; it would actually provide an opportunity for a sensible wider public debate on a subject that is often seen as obscure and difficult but should not be because it is of such public interest.

As I said, I will not press the amendment to a vote today, but I hope that perhaps, over the summer, it might be possible to meet the Minister and consider with her not only this but some other amendments that I have tabled, in case we can find a way forward that takes account of the legitimate concerns that she has expressed. I also hope that she recognises that my amendments are aimed at improving the system in line with the Government’s own policy objectives.

[The Deputy Chairman of Committees (Lord Duncan of Springbank)]

Does the Minister wish to respond?