Local Government Finance (England)
Debate between Paul Farrelly and Greg Clark(8 years, 8 months ago)
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Greg Clark
Indeed, and I pay tribute to my hon. Friend for the work that he does as MP for the Isle of Wight in bringing together all its leaders and councillors, regardless of party political affiliation, to promote its best interests. I look forward to visiting the island in his company to meet the councillors and officers.
Paul Farrelly (Newcastle-under-Lyme) (Lab)
My county of Staffordshire makes the transitional grant list at No. 18, with just £5.6 million. Next door to me, deprived Stoke-on-Trent gets nothing, against £24.1 million for Surrey. Why, in this battle of the S’s, does the south, as ever, win out?
Greg Clark
It is very straightforward. The amount of transitional relief is in proportion to the reduction in revenue support grant, and so Staffordshire had less than Surrey. That is purely mathematical. I should have thought that the addition of nearly £3 million to the council’s budget would have been welcomed by council tax payers. In fact, I know that it has been.
Higher Education Funding
Debate between Paul Farrelly and Greg Clark(9 years, 9 months ago)
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The Minister for Universities, Science and Cities (Greg Clark)
We have heard many good words to inspire us in what has been, as many Members have said, an excellent debate. The fact that three of the Members who have spoken will be leaving the House at the election invites us to pay tribute to the contribution they have made over the years. It could be, of course, that more than three may find themselves leaving the House, but three, at any rate, are planning to leave.
I am grateful to the Backbench Business Committee for granting us the opportunity to have this debate, and to the Select Committee, several of whose members have spoken. They have done a valuable job and I echo the tribute paid by my predecessor, my right hon. Friend the Member for Havant (Mr Willetts). They have an important job to do in scrutinising the implementation of the reforms to student finance. As the Chair will know, the Government have rightly adopted many of its specific recommendations, for example on continuously improving the forecasting methodology and on targets for the Student Loans Company. In a different context, I told the Committee that my experience in this House has always been to listen very carefully to the advice of Select Committees. I will always do so.
As the new system is gradually exposed to the clear light of how it works in practice and not in prospect, it is becoming increasingly plain that it is a very considerable achievement and a source of confidence in our future excellence and prosperity. My right hon. Friend the Member for Havant has reason to be very proud of his achievement in carrying through the reforms.
Greg Clark
I want to make some progress. I have the least time of all, which is appropriate in a Backbench Business debate. However, if I have some time later, I will of course take an intervention.
Since the Committee took its evidence, which the Chair will acknowledge was about a year ago, the evidence in favour of the positive effects of the reforms has been mounting. We have discussed whether to undertake a review. I encourage the successor Select Committee in the next Parliament to undertake a stocktake of the system in practice. I suspect that it will draw the same conclusion as I have.
In the words of the OECD, which is widely regarded as the leading authority in the world on comparing education systems, the UK is one of the few countries that has figured out a sustainable approach to higher education finance and the investments pay-off for individuals and taxpayers:
“among all available approaches”—
the OECD includes 34 countries—
“the UK offers still the most…sustainable approach to university finance.”
In responding to the debate, I want to summarise how the advantages are clear for students, the taxpayer and universities.
The system is good for students, because it has allowed more of them than ever before to fulfil their dream of a place at university. Many Members have acknowledged the importance of achieving what has previously been beyond the reach of many of our fellow citizens. This autumn, for the first time in the history of this country, half a million applicants were placed in higher education. The head of UCAS put it this way just last month. It is, she said,
“a stunning account of social change, with the most disadvantaged young people over 10 per cent more likely to enter higher education than last year and a third more likely than just five years ago – 40 per cent more likely for higher tariff institutions.”
Despite predictions to the contrary, students have seen that going to university is an exceptional investment. Graduates earn on average £9,000 more than non-graduates. In the past year, the graduate premium for young graduates—those under 30—has risen to £6,000. Graduates are half as likely to be unemployed as non-graduates and two-thirds are in highly skilled jobs, a proportion that has been rising substantially as we recover from recession. Students know that they will pay nothing up front and that they will pay back only if and when they can afford to do so. It is important to be clear to the House that for a graduate earning £30,000, a high salary compared with the population as a whole, for the benefit of a three year degree they will repay £2.22 a day. That is an eminently reasonable reflection of the value they obtain from that degree. It is no wonder that students are responding with such alacrity—more than ever before.
Let me say why the system is good for taxpayers, as the OECD director said. The reforms have made it possible—without them it would not have been possible—to abolish the cap on student numbers. That is overwhelmingly in our national interests, as I think most Members would acknowledge. The earning power of graduates means that it is not just the graduates themselves who gain—the Exchequer gains hundreds of thousands of pounds over a graduate’s lifetime of employment. That is many times more than even the most conservative estimate of the so-called RAB charge. Andreas Schleicher of the OECD said that what one loses through non-payments is small versus the tax revenue uplift from more students earning more in work and that this premium is expanding.
It is important to emphasise—it has not been clear in some of the contributions—that this subsidy is nothing like a commercial loan, in which any debt that is written off is somehow a mistaken lending decision. It is not like that. It is a reflection of a set of deliberate policy choices to write off, for example, outstanding debt after 30 years, and to repay at 9% above earnings of £21,000. It is highly progressive, according to the Institute for Fiscal Studies: the lowest earning 10% get a 93% subsidy and the highest earning 10% get a 1% subsidy. For the record, I am perfectly content with all the policy choices that produce the published RAB charge.
Greg Clark
I have been very clear on this. I am not persuaded that there is any reason to increase the ceiling. I think the ceiling at £9,000 is reflective of the costs of providing a good education to people.
Greg Clark
Let me make a bit of progress, but I will come back to the hon. Gentleman.
As my right hon. Friend the Member for Havant said, the published RAB charge, as it is known, is notional and, in fact, ultra-conservative. I mentioned—to the mystification to the OECD, I might add—that it takes no account of the dependable tax revenue uplift that the Treasury takes. It also assumes, as my right hon. Friend said, that the Government’s cost of borrowing is 2.2% a year in real terms. In practice, it has been closer to 0% in real terms. The student loans system is therefore a good deal for students and a good deal for taxpayers.
Paul Farrelly
The Minister speaks of confidence in the system. Does he share the widespread concern across the country that other Government changes are making it more difficult for students to cast their verdicts on the fees and funding system they have inherited? The changes to electoral registration rules mean that universities cannot register their students en bloc. For example, at Keele university in Newcastle-under-Lyme just 144 students registered last month, and we have lost nearly 2,600. Is he concerned about the likely effect on student participation and their ability to give a verdict on the system in which he is so confident?
Greg Clark
Every Member takes great pains to encourage young people to register to vote. Through the online registration system, it is easier than ever, and I think that everyone in the House, over the next few months, will encourage people in schools and universities to register. The hon. Gentleman mentioned the university of Keele, but he has to accept that without the reforms that my right hon. Friend the Member for Havant introduced, there would be fewer students going to Keele university in the future than is now possible. That would be bad for the university, which I had the privilege to visit just before Christmas, and bad for the hon. Gentleman’s constituents, who benefit substantially from the presence of that fine university.
The system is excellent for universities too. It is an extraordinary achievement, at a time of financial stringency, that, according to the Institute for Fiscal Studies, the resources available to universities for teaching have on average increased significantly. It estimates an increase from £22,000 under the previous system to about £28,000 per student under the current system. The Institute for Public Policy Research, which tends towards the left in its assessments, said that the main strengths of the current system are that it has increased the resource flowing into higher education, which has enabled institutions to maintain or enhance their level of provision. This led the OECD to conclude that the UK is probably the only country in Europe, and one of the few in the world, to be able to support and sustain a big increase in participation and yet raise unit costs. No wonder that recruitment increased last year for all university types with higher tariff providers to record levels.
Our system of university finance offers extraordinary opportunities to students, universities and the taxpayer, which is why it is mystifying that the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) called for a review. It was not clear to me in his response whether that was the Opposition’s new policy. They have had four and half years to come up with a policy, but now it seems to be a review. Just a few weeks ago, he was speculating vaguely, just as the success was being recognised, about turning turtle on it. It is completely unclear what his policy is. Is it a review or a change? He has previously said that fees would be reduced by £3,000, but that would blow a £3 billion black hole in the public finances and force universities to go cap in hand to the Treasury every year just to maintain their funding. It would decimate that stunning social progress I referred to earlier, since it would obliterate the funds from the access agreements, which will be worth £718 million next year—I was surprised that the right hon. Member for Southampton, Itchen (Mr Denham) did not think they were worth having—and impose pressure to cut student numbers. The IPPR said that the pressure to cut student numbers would crowd out students from disadvantaged backgrounds.