Savings (Government Contributions) Bill

Lucy Frazer Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 17th October 2016 Commons Chamber

[Lucy Frazer (South East Cambridgeshire) (Con)]

The hon. Lady helpfully outlined the circumstances in which the lifetime ISA kicks in. Does she welcome that ISA to enable young people to save, given that half of present ISA holders are over 55?

[Rebecca Long Bailey]

I welcome the Government’s sentiment of encouraging people to save. If I may make a little progress, the hon. and learned Lady will get a fuller response in due course.

The Opposition have serious concerns about both policies under the Bill and a number of questions, with which I hope the Minister can assist. The Labour party warmly supports the Government’s principal aim of encouraging saving. Many working people in Britain are not saving enough or not saving at all, and that is storing up a multitude of problems not just for their personal finances, but for the public purse. The helpful House of Commons Library briefing states that 28% of people say that they have no savings at all and that 38% would struggle to pay an emergency expense of more than £500. In addition, the Joseph Rowntree Foundation surveys on poverty and social exclusion consistently find that between a quarter and a third of households say that they are unable to make regular savings. In the most recent survey, which was conducted in 2012, 32% of households gave that answer.

It is therefore right for the Government to examine methods and structures that will encourage saving, but I am sure that the Minister agrees that they must also address the root causes of this low saving trend. Will she examine carefully the reasons why many people do not save at all? Is it because they are splashing out on fancy cars and extravagant purchases, or is it because wages are too low and the cost of living is too high to get through the month for some people, never mind whether they have a bit of spare cash at the end of the month to put into a savings plan?

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[Lucy Frazer]

The hon. Lady refers to the impact assessment. After the sentence she referred to, it says:

“These estimates were informed by information from similar savings schemes and government savings pilots.”

[Rebecca Long Bailey]

I thank the hon. and learned Lady for reading from the impact assessment, but I was asking whether specific groups are more likely to save than others, and I do not think the assessment provides that information.

Most importantly, however, how will the scheme help the remaining 3 million people who simply cannot afford to participate in it? I can sum up my concerns about this element of the Bill by reiterating comments made by our former shadow Work and Pensions Secretary, who stated that the scheme was

“like stealing someone’s car and then offering them a lift to the bus stop.”

Charter for Budget Responsibility

Lucy Frazer Excerpts

Wednesday 20th July 2016 Commons Chamber

[John McDonnell]

Saying that the fiscal charter is a technical matter is a good point, but it is the foundation upon which these poor—to say the least—decisions are being made, and a lack of investment is the result.

Following the vote to leave the EU, despite the threat of a punishment Budget we have seen an entirely predictable U-turn. No punishment Budget is scheduled and we have been told by both the old and new Chancellors that one will not happen and that, on the contrary, we must be realistic and accept that the deficit will not be gone by 2020, as predicted by the charter. From the responses at Prime Minister’s questions, it seems as though the surplus target for 2019-20 has now been dropped or has at least slipped to some unknown date in the future. Let us be clear: the Conservatives claimed that their approach would eliminate the deficit in five years, but it will not have happened after 10 years. Three targets set—every target missed. The 2015 charter appears to be dead in the water.

[Lucy Frazer (South East Cambridgeshire) (Con)]

The hon. Gentleman is being generous with his time. Does he agree that it is appropriate to have a fiscal charter as a matter of principle? Strong economies, such as those of Germany, Austria and Switzerland, all have such a rule.

[John McDonnell]

Of course. That is why we support a fiscal charter approach and have produced a realistic one—fiscal charters must be realistic. If the Government set targets and then miss the three that they set themselves, that undermines the credibility of the Government’s economic policy making.

The only hope of rescuing the existing charter is by activating its knockout clause, which the Chancellor referred to in an earlier speech. To remind hon. Members, if growth has been below 1%, is below 1% or is forecast by the OBR to be below 1% on a rolling four-quarter by four-quarter basis, the charter’s targets can be suspended. The problem is that the OBR recently announced that it will not release new projections until later this year, so we remain in the dark about whether the charter targets are still in operation. In the absence of evidence to the contrary, we can only assume that the charter still holds. That means Departments and other public agencies are operating under the old rules; they are still implementing planned spending cuts and still holding back investment decisions. It is essential for the wellbeing of this country that the House repeals the updated charter, because as it stands the charter still requires achieving a surplus, which we all know is impossible to achieve, as I believe the Prime Minister admitted today.

--- Later in debate ---

[John McDonnell]

I will have to watch my language, Madam Deputy Speaker. Let me say to the hon. Gentleman that when someone is going to crack a joke in this place—I know this because I have failed so often—it is best that they get the script right. As for Labour Members, the message has come across in every debate we have had, consistently since September, including today, that this is about the difference between having a fiscal charter that allows us to invest and one that does not. It is as simple as that. I respect his views and I have listened to his contributions in the past, but on this issue I believe that even those on his own side are beginning to move.

Britain is on hold until the Chancellor makes his plans, because, unfortunately, as I said, this is not the only consequence of the lack of planning. I say to Conservative Members that it is important now that we recognise the decisions that have to be made as soon as possible, particularly on the surplus rule. We already know about the black hole in March’s Budget brought about by the Government’s U-turn on personal independence payments, but following the leave vote, the former Chancellor also announced plans to reduce corporation tax to below 15%. That is a significant fiscal announcement. According to the ready reckoner of Her Majesty’s Revenue and Customs, by the time it takes full effect it could mean an enormous additional £4 billion giveaway by the Treasury. This is money that could otherwise be spent on public services. It would be useful to know today whether the successor Chancellor is planning to be similarly generous to large corporations and whether the reduction to 15% is still part of the Government’s plans.

[Lucy Frazer]

I thank the hon. Gentleman for giving way yet again. He has mentioned a couple of times that Britain is on hold, but just this week SoftBank bought ARM Holdings, a company in Cambridgeshire that spans my constituency, for £24 billion, which shows that Britain is still open for business. People still very much want to invest here, and there is nothing in the economy on hold.

[John McDonnell]

I will come on to that, but I have to say that there are some concerns about the sale of British assets, and I am simply echoing what the Prime Minister herself said only a few weeks ago.

--- Later in debate ---

[John McDonnell]

Let us be clear, because it is best not to exaggerate people’s positions. I think the response on immigration was a response to the concerns people had about the undercutting of wages, the pressure on public services and so on. That is why, on the development of the free movement of people, we have always argued—particularly from the Opposition side—that we should ensure there are sufficient controls, but also mechanisms to prevent the undermining of wages. That is why the last Labour Government—I praise them for this—set up a fund to alleviate the pressure on public services. I think a whole batch of grievances was wrapped up in the vote, and we have to learn from that.

One of the key grievances, as my hon. Friend the Member for Coventry South (Mr Cunningham) said, was the impact of austerity on people’s daily lives, which is caused by the adherence to a fiscal rule that we now know is virtually bankrupt and having counter- productive implications for our economy by holding back the investment that many people—even on the Government side—now feel is needed.

[Lucy Frazer]

Will the hon. Gentleman give way?

[John McDonnell]

Would the hon. and learned Lady allow me to finish? I have taken several interventions, and she will be able to speak. [Interruption.] Oh, go on.

[Lucy Frazer]

I am very grateful to the hon. Gentleman for giving way—he is being very generous. He said there are a number of alternatives to the position the Conservative Government put forward. He also said in answer to an earlier intervention that he accepts there should be some sort of fiscal rule. Will he tell the House when Labour would return our budget to a surplus?

[John McDonnell]

Let me outline Labour’s fiscal credibility rule, which we set out a number of months ago. We said that we would have a forward-looking target to achieve a cyclically adjusted current balance by the end of a rolling five-year forecast period. Why? Because that gives us the flexibility to adjust to shocks such as the one we have seen. Capital expenditure would be excluded from the deficit target in order that the Government can invest for higher growth. The contentious issue last September was that the then Chancellor included capital investment in the overall fiscal rule, which held back investment, and that is why we have seen the figures for Government investment falling. Debt as a proportion of potential GDP would be lower at the end of each five-year Parliament than at the start. Again, that gives an element of discipline.

However, we also make the point that when conventional monetary policy is hampered by the lower bound to interest rates, the rules will be suspended in order that fiscal policy can then work, but we have suggested that the Monetary Policy Committee should be the determinant of that. Why is that more flexible than the existing rule? It is because, as we have seen, the Office for Budget Responsibility, for example, is not going to report until the autumn, but the Monetary Policy Committee meets monthly, so that will give us more flexibility. In our credibility rule, we also said that the OBR would be responsible to Parliament, with a clear mandate to blow the whistle on any Government breaching those rules, so that gives an element of independence. It is a fiscal rule, but a credible one. If it was operating now, we would be abiding by it, and we would be investing for the future.

Let me press on to the end. We hope the Chancellor will heed those who call for a much needed and eminently affordable change in direction. It is a tragedy for this country that the Conservative party has come to notice that alternative only as a result of the leave vote. As I said, I announced on Monday that we would support a large programme of investment to help to ensure that the potential of our economy is met. We proposed a national investment bank, which would help to boost investment across the country, ensuring that no community is left behind.

In conclusion, Labour will do all it can to ensure that the price of any negative shocks from the leave vote will not be paid by working people in any part of the country. In March, we saw the fastest unravelling of a Budget almost in living history. Now, the entire fiscal approach, as underpinned by the current charter, has collapsed in almost a year. The Government’s economic credibility faces nothing less than a catastrophe unless they rise to the challenge.

We cannot wait for the OBR to report in due course that there has been a negative shock and that the targets are suspended. To be frank, the mandate as it stands is shredded and must go. There is no credible option left to the Chancellor but to undo what should never have been done, to put right his predecessor’s mistakes, to repeal the charter and to support this motion, bringing forward an alternative that provides the basis for the stabilisation of the UK economy and the provision, above all else, for long-term investment in growth.

Oral Answers to Questions

Lucy Frazer Excerpts

Tuesday 19th July 2016 Commons Chamber

[Mr Hammond]

My hon. Friend rightly points to the fundamental strengths of the UK economy. Britain is still one of the most attractive places in the world to do business, to start a business and to invest money, and it is right that we should focus on those positive aspects. But it is also right that we are conscious of the short-term turbulence that we will inevitably experience and of the need to manage that carefully over the next 18 months.

[Lucy Frazer (South East Cambridgeshire) (Con)]

I, too, welcome the Chancellor to his place. As has been mentioned, SoftBank has made a huge investment in a fantastic Cambridgeshire business. It has done that because Cambridgeshire is at the forefront of technology and innovation. The company has said, as the Chancellor has mentioned, that it is going to double the workforce. Cambridgeshire can continue to attract investment such as this only if we have the infrastructure to support it, so will he confirm that he will be committed to infrastructure investment in roads such as the A10?

[Mr Hammond]

My hon. and learned Friend is absolutely right; raising the UK’s productivity is the long-term challenge of our economy, and infrastructure investment is one of the ways we do that. I draw attention to another point: the success of Cambridge today, not only as a centre of academic excellence but as an innovation hub of global importance, has arisen because of the very foresighted decision of Cambridge City Council many years ago to allow development around the city and the creation of the Cambridge business park, which is now a world magnet for investment.

Oral Answers to Questions

Lucy Frazer Excerpts

Tuesday 19th April 2016 Commons Chamber

[Mr Speaker]

Order. Quite a lot of people whom I would have called have toddled out of the Chamber. There seems to be a bit of a lack of stamina—very unfortunate—although not from Lucy Frazer.

[Lucy Frazer (South East Cambridgeshire) (Con)]

I welcome the fairer funding consultation that has just closed. When taking into account figures for growth in pupil numbers, will the Minister consider the actual numbers for the new school year, rather than the previous one, to ensure that we have a truly fairer funding formula?

[Damian Hinds]

The national funding formula will address historical unfairness. As now, school budgets will be set on the basis of the pupil census in the October prior to the start of the funding year, giving schools the certainty they need. The Department’s consultation also proposes to include a new factor to recognise in-year growth, targeting funding to schools with significant increases in pupil numbers.

Budget Changes

Lucy Frazer Excerpts

Monday 21st March 2016 Commons Chamber

[Mr Gauke]

With the greatest of respect to the hon. Gentleman, that is a load of pompous nonsense. The Chancellor of the Exchequer will respond to the Budget debate, the first time a Chancellor has done so since the 1990s.

[Lucy Frazer (South East Cambridgeshire) (Con)]

One of the best ways to improve the life chances of those who are either able-bodied or disabled is to invest in education. Does the Minister agree that the £1.6 billion investment set out in the Budget will help the next generation to get the best start in life?

[Mr Gauke]

This was an excellent Budget for education; it was an excellent Budget for the next generation. If we are going to have the prosperity and economic security the country wants, we have to have a world class education system. That is exactly what the Government are in the process of delivering.

Oral Answers to Questions

Lucy Frazer Excerpts

Tuesday 1st March 2016 Commons Chamber

[Mr Speaker]

Order. I apologise for interrupting, but that was a very unseemly gesticulation by the hon. Member for Na h-Eileanan an Iar (Mr MacNeil). I remind him of his status in this House as the Chair of a Select Committee. He is an aspiring statesman and must conduct himself accordingly.

[Lucy Frazer (South East Cambridgeshire) (Con)]

In response to an earlier question on productivity, my right hon. Friend mentioned the drivers of growth being investment in schools and investment in science and technology. Does he, like me, welcome the Government’s commitment to train 17,500 more teachers in science, technology, engineering and maths, and does he think that there is absolutely no time to waste in recruiting those teachers?

[Mr Osborne]

My hon. and learned Friend is absolutely right. It is one of the big national challenges to get more children, particularly more girls, studying STEM subjects at school. The key to that is to get more STEM teachers. We have a series of incentives to drive that forward. Of course through our school freedoms, schools also have the tools to recruit teachers themselves.

EU Referendum: Timing

Lucy Frazer Excerpts

Tuesday 9th February 2016 Commons Chamber

[Mr Dodds]

The hon. Gentleman makes a good point. Despite the public’s ability to discern the different issues at stake in the different election questions, the media often fixate on one issue. They will undoubtedly concentrate heavily on the national question of the EU referendum while giving little coverage to the elections in the devolved regions. That is another good argument for why the two should not become enmeshed.

[Lucy Frazer (South East Cambridgeshire) (Con)]

Is the right hon. Gentleman aware that in Sweden in 1994 two months elapsed between a general election and a referendum on membership of the EU; in Denmark, two months elapsed between the general election and the referendum on the treaty of Amsterdam; in Malta, one month elapsed between two such elections; and in Switzerland, 15 referendums were held in 1992 alone? Is he suggesting that these countries have abdicated their responsibility to the general public?

[Mr Dodds]

No, not at all. That is a rather strange argument to make. In Northern Ireland and elsewhere, European elections have been held on the same day as local and Assembly elections. So that is neither here nor there. We have already made the point that people are quite capable of separating out the issues. We are talking about the impact on the functioning of the devolved Administrations and the ability of political parties to campaign and work with others, if necessary, on those issues; about the purdah issue the right hon. Member for Gordon (Alex Salmond) rightly raised; and about the media’s concentration on EU issues to the exclusion of devolved issues. This debate is about those important issues, not the question the hon. and learned Lady raised.

On 3 February, the First Ministers of Northern Ireland, Scotland and Wales, along with the Deputy First Minister of Northern Ireland, wrote jointly to the Prime Minister to set out the case against a June referendum and to argue for the debate to be free from other campaigning distractions. That needs to be taken seriously and treated with the respect it deserves. We hear a lot about the respect agenda and taking on board the views of the devolved Administrations, and that now needs to be put into practice. This is an important moment in this Parliament. Will the Government respect the devolved Administrations?

Education (Student Support) (Amendment) Regulations 2015

Lucy Frazer Excerpts

Thursday 14th January 2016 General Committees

[Mr Marsden]

Well, there might have been weeks to read it if the Government had actually made it available, but they did not.

This is the document that almost dare not speak its name, not least because the detailed evidence of impact tucked away in its pages, to which I will refer later, is belied by the bland conclusions appended to it that it will be all right on the night. What is driving panic measures such as the threshold freeze is the Government’s dawning recognition that their whole set of financial assumptions about repayment in other areas that underpinned their swingeing fees increases is producing a black hole for them and for future taxpayers.

Mr Percy, I am sure that you and those of us who have been here under all sorts of Governments will have observed the rule of thumb in this place that there are two ways for Ministers and their advisers to present and package things that they feel might be unpalatable. One is to bundle in the controversial bits with more technical or anodyne measures that might lull the reader into a false sense of security. Here is an example of such wording in the impact assessment:

“The following maximum grants and loans for living and other costs will be maintained at 2015/16 levels in 2016/17”.

Another way is to entitle the document innocuously, to increase the camouflage. Both methods have been employed on this occasion.

This is not a bit of incidental tinkering with existing financial regulations. It represents a major departure and reversal of policy, only four years after the Government hailed maintenance grants for students from disadvantaged backgrounds as an essential element in their strategy for fairness and in the acceptance of tripled tuition fees. I am afraid the measures are typical of the ideology-driven but evidence-light approach that this Government too often employ. They will affect probably 500,000 of England’s most disadvantaged students and define their futures for good or ill. Has the Minister made, or had given to him, any breakdown, geographical or otherwise, of that total figure and its impact on higher education institutions? If not, why not?

The statistics about those institutions helpfully provided to me by the House of Commons Library amount to a Domesday Book listing the numbers of students who will lose their grant under the new rules. Institutions in all parts of the country will be affected, both old universities and new ones. Further education colleges will be affected, of course, because they make an increasingly valuable contribution, 10% and more, to higher education for the group of people affected. Of course—this is not irrelevant in today’s circumstances—Scottish students who are taking courses at English universities will be affected.

There are a number of disadvantaged students studying at higher education colleges, and the Association of Colleges tells me that many of the colleges that deliver higher education are in northern towns—Blackpool and Blackburn are cited. Cornwall and the south-west also help to provide the large number of places at HE colleges. The association has said in specific response to these regulations, “We have real concerns about the proposed change as many of the students may never earn enough to pay back the money and the policy does appear to penalise poorer students. The new system therefore needs careful monitoring to ensure it is as fair as possible.”

These changes will affect significant numbers of students, from the north to the south. On the basis of the figures for 2014-15, for example, 14,728 students at Manchester Met University will be affected; 8,167 at the University of Manchester; 1,527 at my own excellent further education college, Blackpool and The Fylde College; 10,924 at Nottingham Trent University; 4,897 at Bournemouth; and 3,738 at King’s College. The other institutions that I have not had the opportunity to mention are far from incidental. The list will be a roll-call of lost opportunities if this issue is not handled carefully.

However, despite this being such a major issue, as my hon. Friend the Member for Sheffield Central has observed the Government have refused to bring the changes to the Floor of the House and prefer to try to sneak them through the delegated legislation route, whereby it can be debated and voted on by only a handful of MPs. As he said, there is cross-party support on the issue.

Importantly, the shadow Business Secretary, my hon. Friend the Member for Wallasey (Ms Eagle), in her letter to the Secretary of State explaining why there needed to be a full debate on these measures, wrote that scrapping maintenance grants for lower income students and replacing them with loans would have a regressive impact and should therefore receive further scrutiny from Members of Parliament. That was why she went on to call for a debate on these measures in Government time. She also made the practical point, which I will come on to, that the change would not improve Government finances in the long term, and she also made the link with the adverse impact of freezing student loan repayment, which I have touched on briefly.

Can the Minister explain why the Secretary of State did not deal adequately with any of those points in his reply? As my hon. Friend the Member for Sheffield Central has asked, will the Minister also explain why his Department has ignored the words of the Leader of the House in December and is prepared to break the precedent of debates in the House under these circumstances?

Turning to the impact of the regulations, of course we can only speculate on the future cohorts of people who come in, but we have some reason to make those speculations on the basis of existing experience. The National Education Opportunities Network, which is the professional organisation for widening access to education in England, and the University and College Union are currently undertaking research with more than 2,000 final-year A-level and level 3 students to look at how costs influence the HE choices they make. The interim findings from that research show that more than half the students who are deciding not to go into HE are taking that decision because of the lack of direct financial maintenance grant support that they had envisaged for the year ahead. If research suggests that a large number of students are deciding not to go to university due to that lack of support, why are the Government risking even more students dropping out by introducing the regulations?

A study by economists at the Institute of Education in 2014 showed that a £1,000 increase in grants would create a 3.95% increase in participation, and that the removal of grants would see participation levels fall. In fact, the institute said that it should also be of grave concern that more than a third of students had told a recent survey that they would not have chosen to go to university if they had not had access to maintenance grants. Does the Minister not fear a severe drop in participation levels, given that statistics indicate that the accessibility of a maintenance grant is a deciding factor for many when choosing whether to go into higher education? His equality assessment, which has been circulated, as I have said, states:

“At an aggregate level there is currently no evidence that the 2012 reforms, which saw a significant increase in HE fees and associated student debt levels has had a significant impact in deterring the participation of young students from low income backgrounds.”

That is debatable, because the safety net of maintenance grants, introduced in 2012 with that tripling of fees, is now being removed.

My hon. Friend the shadow Secretary of State wrote in her letter praying against the regulations:

“Labour are concerned that this change won’t improve Government finances in the long-term.”

Hon. Members might say, “You would say that, wouldn’t you?” but perhaps more cogent is the view of the Institute for Fiscal Studies:

“The replacement of maintenance grants by loans from 2016–17 will raise debt for the poorest students, but do little to improve government finances in the long run.”

The IFS states that in the short term, Government borrowing will drop

“by around £2 billion per year. This is because current spending on grants counts towards current borrowing, while current spending on loans does not.

In the long run, savings will be much less than this. The amount of money lent to students will rise by about £2.3 billion for each cohort, but only around a quarter of these additional loans will be repaid. The net effect is to reduce government borrowing by around £270 million per cohort in the long run in 2016 money—a 3% decline in the government’s estimated contribution to higher education.

About two-thirds of those eligible for the full maintenance grant will repay no more as a result of this reform because they will end up with the additional debt being written off.”

There is the rub. Will the Minister tell us what conversations he has had with his colleagues in the Treasury about the accuracy of those predictions, and why his Department is embarking on a leap in the dark that will, as the IFS makes clear, diminish the contribution to higher education and do little to address the black hole?

The IFS states:

“Students from households with pre-tax incomes of up to £25,000 (those currently eligible for a full maintenance grant) will have a little more “cash in pocket” whilst at university. But they will also graduate with around £12,500 more debt, on average, from a three-year course. This means that students from the poorest backgrounds are now likely to leave university owing substantially more to the government than their better-off peers.”

It also states:

“The poorest 40% of students going to university in England will now graduate with debts of up to £53,000 from a three-year course, rather than up to £40,500. This will result from the replacement of maintenance grants”.

The removal of those grants threatens access to higher education and, importantly, follows on from the removal of the national scholarship programme, which was designed to help students from low-income households. The programme has been scrapped, just as the Government are doing to maintenance grants.

In 2012, when the Government tripled tuition fees, they tried to sweeten the pill by talking up the centrality of the maintenance grant to ensuring that the most disadvantaged could still access higher education.

“The increase in maintenance grant for students from household with the lowest incomes, the National Scholarship Programme, and additional fair access requirements on institutions wanting to charge over £6,000 in graduate contributions should ensure that the reforms do not affect individuals from lower socio-economic backgrounds disproportionately.”

That is what the Conservative-led Government said in 2011-12 through the Minister’s predecessor, but the regulations will disadvantage the same groups of students the Government promised to protect two years ago. In June 2011, the Minister’s predecessor, David Willetts, pledged in Parliament:

“We want students from a wide range of backgrounds to benefit from the reforms. We are increasing maintenance grants and loans for nearly all students”.—[Official Report, 28 June 2011; Vol. 530, c. 770.]

He had previously defended the measure as a quid pro quo for the trebling of tuition fees, saying:

“Our proposals are progressive, because they help to encourage people from poorer backgrounds to go to university, because of the higher education maintenance grant, and because of the higher repayment threshold. That crucial commitment to taking progressive measures is one of the reasons we commend these proposals to the House.”—[Official Report, 3 November 2010; Vol. 517, c. 940.]

Does the Minister accept that the Government have now broken both those promises? His colleague, who is now Lord Willetts, must be revolving in his ermine at the way his promises have been so lightly regarded by the Government.

[Lucy Frazer (South East Cambridgeshire) (Con)]

Does the hon. Gentleman accept that there is a bit of a non sequitur in what he says? On one hand he says that the debt will be increased, but on the other he says that it will be written off. If both propositions are true, there should be no detrimental effect on the students involved.

[Mr Marsden]

The hon. Lady needs to look more carefully at the differential impacts. The point that I, and I am sure my hon. Friends, would make about this is that debt aversion depends on where someone is coming from. It is perfectly possible to have a situation with those common factors. It is not, however, at all clear from any of the evidence that has been put forward that that would not be a significant disincentive.

I was talking about the things that were said previously: those words will do little to enhance the Government’s alleged commitment to increasing social mobility. The Government and their predecessors set great store by the principle of “nudge”—actions that persuade people to change their behaviour for the better. I remind the Minister that is possible to nudge people away from desirable outcomes such as getting higher education, rather than towards them. The question that the Minister and his colleagues must answer is what attention they have devoted in the regulations, which are highly specific, to preventing that.

A new BIS study included in the impact statement by the Government says that more than half the applicants said they felt put off by the cost of university. Also, for poorer applicants, tuition fee loans and the income-contingent repayment threshold were more important in persuading them to apply, despite the costs. However, the Government seriously underestimate the effect that the grant and the cost of universities have on student decisions. That is backed up by what the Sutton Trust has said:

“Shifting grants to loans may move them off the balance sheet, but it could also put off many low and middle income students and tip the balance against their going to university. Since grants were reintroduced, there have been significant improvements”—

and we welcome that—

“in participation from full time less advantaged students, and this will be put at risk by today’s Budget plans.

The reality is that the Government has miscalculated the levels of repayments it will get from its student loans under the new fees system. Rather than penalising poorer students, it should have a fundamental review of the repayments system. We need long term solutions not a short term fix.”

Research from the NUS that was published yesterday by Populus shows that parents are concerned that the Government’s plans to scrap the maintenance grant will discourage their children from applying to university. Two fifths of those with a combined income of £25,000 or less believe that their children would be discouraged from applying to university if grants were replaced by loans. More than half the parents believed that the plan to scrap grants undermined the Government’s objective of increasing access to university for poorer students.

I want to deal with some other surveys that have been conducted. The changes may well pile even more pressure on to students to alter their work-study balance while pursuing a degree. According to the 2015 Endsleigh survey, produced by a company that has specialised in the area for many years, already 77% of students must work to help fund their studies, using time that could be spent on academic work. That already high number looks set to increase further with the removal of maintenance grants.

The Government claim that they want to strengthen our skills base and that they have given more support for postgraduates. The initial steps that were announced on that are welcome; but there is a risk that they will be undercut because of the debt aversion of the group of students who will lose their grants. The NUS found that after a student finished their undergraduate degree, access to a maintenance grant could also influence their post-study choices.

I want to turn my attention to the specifics of the equality impact assessment that BIS produced for the regulations. It concedes, for example, that black and minority ethnic students, in particular, will be disproportionately worse off than others following the removal of maintenance grants:

“We believe that the proposed changes will disproportionately affect people from ethnic minority backgrounds. This is based on evidence of debt aversion in this group and the increased likelihood for these students to receive the full maintenance grant. We have assessed that there is a small risk to the participation of students”—

given participation rates—

“both from high and low socio-economic backgrounds”.

Additionally, there is risk to the outcomes of these students if they choose not to take out the additional loan available.”

However, a recent BIS study also stated that non-white applicants were likely to cite the importance of maintenance grants in overcoming their concerns about costs. Thus the removal of the maintenance grant will seriously discourage BME students from attending HE institutions.

There is potentially bad news for older learners as well. The equality analysis states:

“Mature students will be disproportionately impacted by the policy proposals to remove the full maintenance grant and replace with additional loan as well as the freezing of targeted grants. The proportion of students aged 21 and over that claim maintenance grant support is significantly higher than their representation in the population of all student support claimants. The available evidence points to the cost sensitivity and debt averseness of this group. The policy change presents a risk for the participation of older students in higher education.”

The assessment has worrying words for disabled students as well:

“As for all students from low income backgrounds we expect the risk to participation of low income disabled students…to continue to be mitigated by the high average returns to HE investment and the repayment protection for low earning graduates.”

That, of course, assumes that current ratios quoted in that respect will remain the same with the massive expansion of the cohort entering full-time work in the next 10 to 15 years. There is no evidence whatever on that.

However, the Government have conceded in the assessment that disabled people will also be disproportionately affected by the decision not to protect the real value of disabled students’ allowances. The assessment says:

“Students from low income backgrounds will be able to access DSA at same level in cash terms but may be disproportionately affected by the freezing (real terms reduction)”—

a term the Government were reluctant to use at the beginning of the equality impact assessment—

“of DSAs and dependants grants.”

For all of the groups that I have cited so far, I and the rest of the Committee want to know what the Government propose to do to mitigate those disproportionate impacts, which their own equality impact assessment so candidly concedes will be the case.

In addition, there is the separate worrying implication that a significant number of would-be students may be discriminated against under these regulations because of their religious beliefs. The impact assessment states:

“There is evidence to suggest that there are groups of Muslim students whose religion prohibits them from taking out an interest bearing loan. This means that this group of students will no longer have access to funding for living costs as non-repayable finance is no longer available. This could lead to a decline in the participation of some Muslim students.”

The complacency about the failure to have available a sharia-compliant alternative to grants that will be withdrawn borders on discrimination. Does the Minister agree that the regulations as they stand will restrict Muslim students from accessing valuable finance, while the removal of grants threatens to weaken further their ability and capacity to carry through their higher education studies?

The Government claim that they are making an alternative to traditional loans available that is sharia-compliant, but it is not there yet, is it, Minister? Yet the Government have known about the issue since April 2014. Will the Minister guarantee that the change will not be implemented until there are firm regulations in law for an alternative finance proposal that will be acceptable to people of the Muslim faith?

--- Later in debate ---

[Mr Marsden]

It is always dangerous to draw general a conclusion from ad hominem examples. I and other Members of this House can quote lots of examples. I can quote examples from my casework of people who have come to me at a later age who have been deterred. The onus is on the Government when making these changes to demonstrate that they will work, not by making ad hominem arguments—however much I applaud the hon. Gentleman for doing what he did to get to where he is today—but by looking at the broad statistics and the analysis that has been put forward today.

[Lucy Frazer]

Will the hon. Gentleman give way?

[Mr Marsden]

I will not take another intervention from the hon. Lady. She has had one. [Interruption.] I did answer the first. The hon. Lady will have an opportunity to speak later if she wishes to.

The equality analysis makes reference to the damaging effect that the proposed regulations will have on female students. As my colleague, the shadow Equalities Minister, said to me, the changes will have an unfair impact on women—especially mothers. When the Government increased fees, the number of mature students fell, so I think we can expect exactly the same effect with these loans. The impact assessment also states that female students will be particularly affected by the freeze to childcare grants, parents’ learning allowances and ESAs, given their significant over-representation in these populations. What action does the Minister plan to take to protect female students from the cumulative negative impact that the change could have on their ability to pursue higher education?

Those details from the Government’s own impact assessment should surely give them pause for thought, given that they threaten to affect the most debt-averse groups. Worryingly, it appears that the Government are yet to produce an up-to-date estimate of the impact that the shift from grants to loans will have on the resource accounting and budgeting charge, which calculates the cost to the Government of the higher education funding system, based on—this is relevant to the issues that other Members raised—how much students are expected ultimately to repay of their loans.

In November, my hon. Friend the Member for Ashfield (Gloria De Piero), asked about that issue in a written question. She received the following bland reply:

“This estimate will be updated in Summer 2016, alongside publication of the Department for Business, Innovation and Skills accounts.”

Given, as I have already emphasised, the IFS’s scepticism about the savings that the changes will make, will the Minister tell us why his Department did not obtain an up-to-date estimate before proposing the changes? Is that not a dereliction of duty on a key question, both for sound government finance and for cost-benefit analysis? Summer 2016 will be way too late, as by that time the new regulations could have deprived 500,000 or so young people of their grants and set a potentially perilous alternative in motion. This Government proposal was not in the Conservative party manifesto. For all those reasons, I and my colleagues will vote that the proposal has not been adequately considered.

--- Later in debate ---

[Alison Thewliss]

I absolutely agree. Debt and disadvantage are being compounded by the actions of this Government.

[Lucy Frazer]

I should have declared an interest in that my husband works in the sector. Opposition Members are saying that the measures will disadvantage people and put them off studying as a result. Of course we must encourage all people, particularly the disadvantaged, to go into higher education, but the figures show that disadvantaged people have not been put off going to university by the fees. State school applications have increased from 88% to 89%, and applications from lower socioeconomic groups have increased from 30.6% to 32.6% in recent years, showing that people have not been put off.

[Alison Thewliss]

We cannot tell exactly what will happen as a result of these further changes and what impact they will have. I speak from my own experience: I graduated from university in 2004, and only since taking this job have I been able to make any impact on paying back the loan that I took out then. That loan was relatively small compared with the loans that we are discussing. How long will people be saddled with debt, and what impact will it have on their life chances and their ability to make progress in their lives? It is an absolutely appalling circumstance, and it is creating an even more indebted generation than the one before it. It is ridiculous. The impact in Scotland will be greater, because we have four-year degrees rather than three-year degrees as in England.

I will quote from the figures sent to me by the NUS in Scotland, which notes that in the academic year 2013-14, a total of £1.59 billion was awarded to applicants in all cohorts. In 2014-15, for post-2012 students, a provisional total of £1.5 billion was awarded. Assuming that that averages out over the three years, it implies an annual reduction of £500 million, contributing to a £50 million reduction in the cash DEL—departmental expenditure limit—available to Scotland per year. For comparison, Student Awards Agency for Scotland figures for 2014 show that the social grant and bursary awards made to Scotland for Scottish-domiciled students totalled £63.6 million. That is a significant impact.

On the impact on Scotland since the introduction of tuition fees in England, when direct cash DEL teaching grants provided by the Higher Education Funding Council in England to English universities were cut by more than £3 billion, assuming a straight consequential, the result is a £300 million reduction in cash DEL available to Scotland. The spending review proposes a further £120 million reduction in the teaching grant by 2019-20, which will result in a consequential to Scotland on top of the impact of these measures, including for nursing students.

The impact on us in Scotland is unfair. Decisions here by a Government we did not vote for and who have one MP in Scotland are resulting in decisions that John Swinney will have to make in our budget, which is decreasing. We have no impact on those decisions, and our Government cannot change them. The decisions taken by this Conservative Government and the previous coalition Government have had the effect of skewing the Scottish budget in further education. The departmental expenditure limit, which includes the teaching and research budget and the grant and bursary budget, has been reduced, and the annually managed expenditure budget, which goes on loans, has increased. We do not want an increase in loans; we want the DEL, but we cannot have that, because decisions here have reduced it. Those decisions affect the Scottish budget, and we must find the money that we want to spend on grants and bursaries from somewhere else within it. That is unfair. We want to support our students. Our students in Scotland deserve support, particularly where, due to demographic differences, they have not yet had the chance to go to university because they are put off by loans.

The point made by a Labour Member about minorities is true as well. It will particularly affect constituencies such as mine in Glasgow, Central, which is probably one of the most ethnically diverse constituencies in Scotland and contains Strathclyde University and Glasgow Caledonian University, as well as bounding on Glasgow University. All those universities could be affected by that decision.

Oral Answers to Questions

Lucy Frazer Excerpts

Tuesday 1st December 2015 Commons Chamber

[Mr Osborne]

The national living wage is coming in next April, so of course we will comply with it.

[Lucy Frazer (South East Cambridgeshire) (Con)]

T9. I welcome the Chancellor’s spending review last week, boosting the science budget and supporting silicon fen. Does he agree that the only way to continue to attract international investment to the region is good infrastructure, and now is the time to upgrade the A10 from Cambridge to Ely?

[Mr Osborne]

We have put a huge amount of investment into Cambridge, including of course the renovation of the famous Cavendish Laboratory, and I congratulate my hon. Friend on the strong start she has made in recent months in championing her constituency. That has been continued today with a big bid for the A10, which I will take a close look at.

Spending Review and Autumn Statement

Lucy Frazer Excerpts

Wednesday 25th November 2015 Commons Chamber

[Mr Osborne]

It is generally accepted across this House that mental health services in the NHS have not always had the support they need over many decades and that we have not always had equality of treatment in the NHS. We have now made that change in the constitution of the NHS. Today I have announced £600 million extra funding for mental health, on top of what was announced at the March Budget. That will help with access to talking therapies and to perinatal mental health services. I would have thought and hoped that the hon. Lady welcomed that.

[Lucy Frazer (South East Cambridgeshire) (Con)]

I commend the Chancellor’s commitment to the fairer funding formula. How precisely will it help students in Cambridgeshire, who historically have received about £2,000 less per pupil than those in some other areas of the country?

[Mr Osborne]

The current funding for schools is arbitrary and unfair. Children in different areas but with exactly the same circumstances can receive many thousands of pounds in funding at their schools, depending on where in the country they live. Cambridgeshire is one of the areas that has been underfunded historically. The new national funding formula will help address that unfairness. My hon. Friend has been championing that cause, and my right hon. Friend the Education Secretary will set out how the formula is going to work.