Student Loans Agreement

Mark Pritchard Excerpts

Monday 18th July 2016 Westminster Hall

[Mark Pritchard (in the Chair)]

Given the temperature today, if Members wish to remove their jackets please feel free to do so.

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[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.

[Wes Streeting (Ilford North) (Lab)]

rose—

[Mark Pritchard (in the Chair)]

Sorry, Mr Streeting. Next time—seniority.

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[Wes Streeting (Ilford North) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Pritchard, and to follow my hon. Friend the Member for Sheffield Central (Paul Blomfield), who gave an excellent speech, save for the reference to used-car salesmen. I have to declare an interest: my dad is a used-car salesman and he would never find himself in front of trading standards in the way described. We have heard some excellent speeches, particularly from my hon. Friend the Member for Warrington North (Helen Jones) and from one of the Liberal Democrat Members, the hon. Member for Southport (John Pugh). He honoured his pledge, for which he deserves credit.

I also want to focus my speech on the issue of trust. I confess to having something of an axe to grind. I have been a consistent opponent of the tuition fees system introduced by the Labour Government in 1998, the system that was introduced by the Labour Government in the Higher Education Act 2004 and the coalition reforms in 2010 and 2011. It is true that, in all those cases, I did not think that the right direction—an equitable or sustainable direction—for the funding of higher education had been set out, but I do not want to rehearse those arguments. This afternoon, the debate is more about the promises that were made and the trust that students and their parents, teachers and advisers can have in the Government and in the system overall.

In 2011, I was asked by Martin Lewis—who I am delighted to see in the Public Gallery—the founder of moneysavingexpert.com and a trusted consumer champion—

[Mark Pritchard (in the Chair)]

Order. Forgive me but I have to do this. It is not appropriate, or allowed under the rules, to refer to people in the Public Gallery, however well meaning the reference. I feel uncomfortable saying that, but I have to obey the rules and I know that the hon. Gentleman would want me to highlight them.

[Wes Streeting]

I am grateful to you, Mr Pritchard. That shows that, even after a year in this place we new Members are still learning.

Martin Lewis was asked by the Minister at the time—now Lord Willetts—to lead an independent taskforce on student finance information. Martin asked me to work with him as his deputy in that endeavour—partly because I had recently finished my term as president of the National Union of Students—to reinforce the fact that, although we were opponents for different reasons and to varying degrees of the reforms that had been put through, we had a shared belief that whatever the merits of the coalition Government’s higher education funding reforms it would be an absolute catastrophe if students were deterred, or their parents or advisers dissuaded them, from going into higher education not because of the substance of the package but because of a misunderstanding of it. We were not going out there to sell the reforms on the basis of their politics or their merits; we were simply going out there to argue the facts and to ensure that people could take an informed view.

I do not regret taking that position, because it is crucial that people who are making decisions about their future, particularly those from disadvantaged backgrounds who sometimes do not have access to the information, advice and guidance that people from wealthier or privately educated backgrounds have, are able to make those decisions based on the facts. We toured schools and speaker events and produced a range of materials. We did our best to empower advisers to give young people making decisions about their future the tools they needed, and we did it in good faith. I have to ask the Minister: how on earth does he think it could be justifiable for people who have signed up to a higher education student finance package to see the terms and conditions changed, either during their course or after they have graduated? That is not only unfair; it entirely undermines confidence in the Government, as teachers, grandparents, parents and students are out there looking at the information and making decisions.

Last week, I was at Caterham High School in my constituency talking to sixth-formers, and among the questions I was asked were: will the student finance system change for me? Will the repayment conditions change? Will the level of grants or loans change? I am afraid to say that I had to give the honest answer, which is, “I don’t know and I can’t give you that guarantee because of the way in which the Government are behaving”.

For the integrity of the system and for people, particularly those from disadvantaged backgrounds, to be able to make informed choices, the Government have to provide certainty and assurance that the system will not change further down the track. Other Members have rightly pointed out that, if the Government were a private company, we would be absolutely appalled if they were behaving in this way.

The Government may argue that under the small print of legislation it is entirely possible and permissible for Ministers to change the terms and conditions for existing students and graduates, but if a company behaved in such a way, the Financial Conduct Authority would not just be looking at the small print of the terms and conditions; it would also be looking at the marketing material, the sales material and the pitch made by every higher education institution, by the Government, by third-party advisers and by the Independent Taskforce on Student Finance Information. If the FCA came in front of my Committee, it would find it hard to justify a ruling, on the basis of the information and the marketing material that have been distributed, that it was ethically right for a lender to behave in the way the Government are proposing to behave. On that basis, the Government have to think again.

As my hon. Friend the Member for Sheffield Central rightly argued, a change in Government and personnel provides an opportunity to look at the issue with a fresh pair of eyes. The Prime Minister would be congratulated by all parts of the House if she came forward and argued that trust and faith, not just in the student finance system, but in politics itself, were more important than any money saved through the initiative the Government propose. The Government could look to save money in the system through more equitable ways that would lead to higher-earning graduates paying more over the course of their careers than those on middle or lower incomes. I suspect that that is a debate for the passage of the Higher Education and Research Bill.

The Government need to think again on the merits of the arguments that were put forward. They also need to reflect that this issue is of interest not just to students, but to their parents, grandparents, teachers and advisers. Given the damage done under successive Governments to trust in politics—not only on other issues, but on this issue of student finance in particular—I urge the Minister to give this a serious rethink and come forward with alternative proposals that do not lead to Governments changing the terms and conditions for existing students and graduates. If he is not prepared to do that voluntarily, I suspect I will not be the only Member tabling amendments to the Higher Education and Research Bill, so that we can continue this debate and, I hope, gain support from all parts of the House for the Government to act in a different way.

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[Daniel Zeichner (Cambridge) (Lab)]

I thank the Petitions Committee and my hon. Friend the Member for Warrington North (Helen Jones) for scheduling this important debate. It is a pleasure to serve under your chairmanship once again, Mr Pritchard. I am glad to have the opportunity to speak about an issue that will affect many young people in university cities such as my constituency of Cambridge, where more than 700 petitioned me on this issue.

As my hon. Friend the Member for Warrington North said, the issue is not new. In fact, I raised it at Prime Minister’s Question Time in December last year, which seems a lifetime ago. At the time—it is extraordinary—the right hon. Member for Witney (Mr Cameron) was otherwise engaged touring Europe and negotiating his deal; it seems such a long time ago. In his absence, the then Chancellor answered. I had asked:

“When the Chancellor tripled student tuition fees, he set the repayment threshold at £21,000. He has now frozen the threshold, and the Institute for Fiscal Studies tells us that many students will bear many extra thousands of pounds in repayments. Given that he has broken his promise, will he send students an apology or just the bill?”—[Official Report, 9 December 2015; Vol. 603, c. 989.]

Unsurprisingly, he did not apologise, and students, I fear, are now left with the bill. What he is left with is rather less clear, but he has obviously got more time on his hands.

Changing the threshold at which student loans are to be repaid, as other Members have pointed out, really does not do politics any good. As all of us here know, one of the major challenges facing us is to slowly rebuild, piece by piece, the trust that has been lost in politics. We need to repair the connection between voter and elected representative, and moving the goalposts really does not help. It is clear that current and prospective students are angry, and I cannot blame them. They are being pulled out of the European Union when the majority of them wanted to remain. They are now being denied opportunities and experiences across the continent that just a month ago seemed boundless. Back in 2010 they were misled and tuition fees tripled under the Liberal Democrats and Conservatives. In many university cities like mine, they are being locked out of the housing market, and in many cases locked out of the rental market, with the cost of living constantly rising. The Government have gambled their future away on an exceptionally bad hand. To top it all, young people are being shafted by the Government on student loan agreements. How can we expect them to put any trust in us when this is how they are treated?

As other Members have pointed out, the Government are keen to remind us that there was a consultation, and when 84% responses came back saying, “Don’t do it,” it was ignored. Of 489 responses, 410 were explicitly against keeping the threshold of £21,000 the same for all post-2012 borrowers until April 2021. As others have said, the Government—and local councils, too—lose all authority if they consult the public having already made up their mind what they are going to do. The consultation seems as if it was a charade. In fact, it was a sham, which is a shame, because the respondents’ points were worth listening to. Their main arguments, some of which have been rehearsed, were against freezing the repayment threshold for five years for all existing and new loans. They argued that the policy represents a retrospective change to borrowers’ terms and conditions which, as others have said, would not be allowed to commercial lenders, and that leads to a further loss of trust.

Such loss of trust occurs on a number of levels. The policy goes back on the original deal made between the Government and each student, saddling them with more debt than they signed up for and undermining the fundamental fairness that a contract should entail. It completely disregards the views of those consulting on the policy, including student unions and higher education providers—perhaps they are a part of the group of experts the world no longer believes in. Those most directly affected are the ones who know what the policy will do. It was snuck in through the back door. It was omitted from the now ex-Chancellor’s spending review speech, and it was introduced furtively and somewhat undemocratically through secondary legislation.

The effects are severe, as we have heard. The Department for Business, Innovation and Skills said in its post-consultation report:

“In 2020-21 borrowers will be paying £6 per week, or £306 in the year, more than they will be in 2016-17.”

The Institute for Fiscal Studies has found that freezing the repayment threshold has a proportionately larger impact on repayments by graduates with lower lifetime earnings. It also estimates that a five-year threshold freeze would increase average repayments by almost £4,000, and that it expects middle-income earners to be hardest hit by the threshold freeze. The Government’s own equality analysis agreed. It concluded that the largest increase in lifetime repayments in absolute terms is among middle earners, and the largest increase as a proportion of earnings is among lower earners. The analysis also concluded that the average increase in repayments would be greater for women than for men.

A constituent wrote to me:

“It breaks my heart to see my family saddled with huge debts that will certainly affect their life chances.”

It is imperative that we do not underestimate the impact that an unexpected loss of several thousand extra pounds could have on middle and lower earners struggling to get by. We must look at the changes in a wider context. They come alongside the scrapping of student grants and their replacement with loans, a policy change that the IFS estimates will most affect graduates from lower-income families who go on to become higher earners. Just as we have seen with the Government’s damaging pay to stay housing proposals, the policy effectively penalises social mobility and aspiration. It creates extra barriers for successful graduates from low-income backgrounds, but has little impact on students from the richest households.

I was fascinated to discover that the new Prime Minister said in 1997—we have all said things in the past—that she had a real concern that

“to abolish the maintenance grant and replace it with loans will, far from widening access, narrow it.”—[Official Report, 4 November 1997; Vol. 300, c. 155.]

I wonder whether she will, some years later, revisit her predecessor’s schemes.

Freezing the student repayment threshold also comes alongside changes to tuition fees expected in the Higher Education and Research Bill, which I am sure we will discuss in the days ahead. The Bill will allow some universities to charge tuition fees that rise in line with inflation, creating a greater hierarchy of education, with some simply costing more. As the University and College Union points out, further increasing the cost of higher education to the individual is hardly conducive to widening participation.

The UCU also identifies further potential retrospective changes: many students could begin their courses without knowing the full cost of their study, which could change if the institutional rating changes. All that comes at a time of great instability in the sector. The Universities Minister recently said:

“This Government have done more than any other to put the financing of higher education on to a secure and sustainable footing.”—[Official Report, 27 June 2016; Vol. 612, c. 125.]

Others may see it slightly differently, especially as that was said a few days after the EU referendum, the shockwaves of which are resonating around our universities and research sector. It may be one of the most destabilising events that our higher education sector has experienced in many, many years.

The Government’s original justification for implementing a repayment threshold freeze was that it was necessary to contribute towards debt reduction and to balance the books. As others have said, the rule book seems to have changed. The budget surplus target has been abandoned. Higher education policy has been carved away from one Department and bolted on to another. The Prime Minister said:

“When it comes to opportunity, we won’t entrench the advantages of the fortunate few. We will do everything we can to help anybody, whatever your background, to go as far as your talents will take you.”

Hear, hear to that; let us hold her to that.

Change is afoot, so I hope the Minister can confirm that students will no longer be treated in such a shabby way, but will be treated better. We are already standing amid the broken pieces of the big society and the wreckage of BIS and our place in Europe. Please do not add to that wreckage. Do not break your promises to all those students who trusted you to keep them.

[Mark Pritchard (in the Chair)]

I shall call the Front-Bench spokesmen and women in a moment. We have a little time today. Typically, Front-Bench spokespersons speak for 10 minutes. However, we have a little extra time if required.

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[Angela Rayner (Ashton-under-Lyne) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Pritchard. I welcome the Minister to his place. This is the first time I have debated with him. I thank my hon. Friend the Member for Warrington North (Helen Jones) for securing this debate. She is absolutely right to say that students have once again been let down by this Government.

This has been an excellent discussion. I want to reiterate the points made by my hon. Friends the Members for Sheffield Central (Paul Blomfield) and for Ilford North (Wes Streeting), who outlined the issue of trust. They demonstrated how unfair this retrospective change is and spoke about its long-term impact on trust in the Government. Before the general election, my hon. Friend the Member for Sheffield Central asked about this specific issue. Despite there being no indication before the votes were cast in the general election, no indication in the House and no indication in the Conservative party manifesto, the change has happened. That is outrageous, as he pointed out. I agree with him that a retrospective change will destroy any faith that students have in the political system. I urge the Minister to think about that carefully.

My hon. Friend the Member for Cambridge (Daniel Zeichner) asked the Prime Minister a question, and demanded an apology, and not just a bill, on behalf of many thousands of his constituents. Unfortunately, the cost of this disastrous Government has fallen upon our students and the next generation.

The issue of trust goes to the heart of the debate. As my hon. Friends have exposed, time and again the Government have offered grand rhetoric on improving access to higher education and social mobility, but time and again they have failed to deliver. Indeed, they have made matters worse, especially if we take into account the Higher Education and Research Bill, which is having its Second Reading tomorrow, and its potential to increase tuition fees.

I associate myself with the words of the hon. Member for Southport (John Pugh). I commend him for his commitment to education, both inside the House in his work as a Member of Parliament and before coming to this place as a teacher and school leader. He clearly demonstrates a huge amount of knowledge and has great respect in the field.

Every time the Government legislate on higher education, we know that it will mean cuts to the services that mature students and those from low-income backgrounds need and an increased debt burden on our students and that it will make it more difficult for those from low-income backgrounds to attend the top universities. That takes place in the context of spending on adult skills falling in real terms by 41% in the previous Parliament, and funding for post-16 education falling by nearly 16%, the deepest cuts that post-16 education has ever seen.

As my hon. Friend the Member for Heywood and Middleton (Liz McInnes) pointed out, in higher education, the Government, not content with tripling tuition fees, scrapped maintenance grants for the poorest students, meaning that they will graduate with more and more debt. That change, justified as a means to cut the national debt, will fail even the test that the Government have set themselves—the Institute for Fiscal Studies has shown that, for each cohort of graduates, the measure will save the Government only 3% of their contribution to students’ higher education.

Who will pay the price for the Government’s penny pinching from the HE budget? As my hon. Friend said, it will be those students who come from poor backgrounds who go on to earn high salaries. Having needed maintenance loans to get through university, they will face a far higher debt burden than their well-off peers, and will spend more and longer paying off the debt that the Government have lumbered them with. She is right to say that the changes are unacceptable, unjust and underhanded, and that the Conservatives have maxed out the nation’s credit card and it is our children who will be footing the bill.

That is the substance of the issue before us today: the Government’s decision to freeze the repayment threshold on student loans. The decision announced in last year’s autumn statement to freeze the threshold retrospectively is only the latest in a long line of attacks on access to education and social mobility. My hon. Friend the Member for Blackpool South (Mr Marsden) was right when he said that the change amounts to “mis-selling” of loans to students since 2012. He was right to say that it

“will be a disincentive to future loan applicants, in further education as well as higher education”.

Students will now feel that they are writing a blank cheque to the Government, whom they have no reason at all to trust. Will the Minister at least have the decency to tell us why any student should ever trust his Government again? I cannot put it any better than my hon. Friend the Member for Nottingham South (Lilian Greenwood), who described the change as dangerous, unfair and outrageous.

The Government, when they trebled the cost of tuition for students, said that students had at least been given a more generous income allowance before having to start paying back their loans. However, even that small consolation will now cease to be true. The IFS has shown that, after five years of the freeze, the repayment threshold will, in real terms, be the same as it was before fees were trebled. The Government promised investment and gave nothing but more debt. Again, it will be middle earners and those from disadvantaged backgrounds who will suffer the most.

The IFS has shown that the average student, as many Members have pointed out, will lose £6,000 as a result of the change. That is outrageous and indefensible. Hard-working students and socially mobile graduates from low-income backgrounds, the very people we should be giving every encouragement and opportunity to pursue higher education, are the very people the Government seem most determined to put off.

The Government’s own consultation said that women, black and minority ethnic students, those with disabilities, and mature students will be disproportionately affected by the change. As my hon. Friend the Member for Walsall South (Valerie Vaz) outlined today and in her Adjournment debate last month, many groups who have historically not had access to higher education are set to face a £6,000 disincentive. When the Government talk about widening access to education, they must tell us who exactly they are trying to help.

As my hon. Friend the Member for Warrington North pointed out, no private company would get away with retrospectively changing the terms of a deal, as the Government have done. Perhaps the Minister can at least tell us their justification for doing so. Given that it will be several years before the Exchequer makes any substantial gains from the policy, can the Minister tell us how much money it will be likely to save in future? That is based on the fact that, for the first several years under the changed scheme, there will be little difference between £21,000 as it was in 2012 and what it was in real terms.

Why are the Government pursuing a policy that will heavily penalise those who come from disadvantaged backgrounds, go to university and then become high earners? Given that the Government’s own consultation document has shown that it will be women, BME students and those with disabilities who will lose the most as a result of the policy, why have the Government still failed to publish an equality impact assessment? When can we expect them to do so?

The overall changes to how higher education is financed are basically worse for those who are from low-income backgrounds, because they need the maintenance loans alongside the tuition loans. Increasing their debt burden means that they will spend more and longer paying off their loans. Those from affluent backgrounds, who do not take out the maintenance and tuition loans, will not have that issue. Why, at a time when those from disadvantaged backgrounds are attending top universities in smaller and smaller numbers, are the Government pursuing a policy that will do little more than create a worrying disincentive for those from disadvantaged backgrounds who want to pursue higher education? The changes to the fee repayment threshold will act as a disincentive to many, as will the increase in the student debt burden, especially when taken alongside the change from maintenance grants to loans.

Was the reason the Government did not announce the policy in the spending review that they knew at the time that it would be universally condemned? I agree with the Minister’s recent comments that there has been a “worrying lack of progress” on widening participation in higher education. I share his conviction to “redouble our efforts” to boost social mobility. So can he please explain how breaking the trust of students and increasing their debt burden will achieve those laudable goals? It is clear from the debate today that the measure will have the opposite effect. Given the new Prime Minister’s words last week—about equality and bridging the gap—will the Minister reconsider that position today?

[Mark Pritchard (in the Chair)]

Before I call the Minister, as colleagues will know, changes made in this Parliament to the Standing Orders allow the mover of a motion to speak for two or three minutes after the Minister has sat down. Helen Jones, would you like to do that?

[Helen Jones]

indicated assent.

[Mark Pritchard (in the Chair)]

You would. I call the Minister.