Higher Education Policy

Sam Gyimah Excerpts

Wednesday 27th April 2011 Commons Chamber

[Mr Denham]

We have made it quite clear in every debate since the Browne report was published that it would be unrealistic to say that higher education budgets would be untouched by the deficit reduction that we would have had to introduce. However, we have also pointed that if, for the sake of argument, the reduction in higher education spending had been in the order of 10% to 20%, as faced by most public services, we would certainly not have been talking about tuition fees above about £3,800—and certainly not the £9,000 that this Government are implementing.

Since Parliament voted to treble tuition fees in December, Ministers have ensured through their actions that record numbers of disappointed students will be turned away from university this year, with perhaps 150,000 applicants missing out on places. More of the students across England who are studying hard for their A-levels today will be rejected than ever before, because tens of thousands are rushing to avoid the trebling of fees, and because Ministers have already cut 20,000 places for 2012 from the number that Labour had planned for 2010—and that is before any more cuts that may be in the pipeline.

On 3 November, the Minister for Universities and Science told the House:

“We… are… proposing a basic threshold of £6,000 a year, and in exceptional circumstances there would be an absolute limit of £9,000.”—[Official Report, 3 November 2010; Vol. 517, c. 924.]

That was the solemn promise on the basis of which the House was asked to treble fees. The Minister did not say, “Most universities will charge £9,000 or as near as makes no difference”; he said that £9,000 would apply “in exceptional circumstances”, and that is not going to happen. Of the universities that have made declarations, 71% have declared fees of £9,000 and 85% have declared fees of £8,000 or more.

The Minister continues to live in a world of his own. In March he was saying of arts and humanities degrees:

“Most institutions should only need to charge £6,000—or perhaps a bit more once inflation has been accounted for.”

So where are those £6,000 arts and humanities degrees in the most sought-after universities? Where, for that matter, are the £6,000 arts and humanities degrees in less sought-after universities? The truth is that the Minister and the Secretary of State have lost control of the system through their own incompetence. They have created a system in which there is every incentive for universities to charge high fees and virtually no incentive for them to charge low fees, and it is young people who will pay the price. Some will be put off university altogether, while those who go to university will face 30 years of debt repayments, with middle-income graduates paying more money and a larger proportion of their incomes than the wealthiest. They will still be paying off their student debt when their own children have started university.

The Minister is now trying to say that what matters is the average once the reduced fees for some students have been taken into account. How disingenuous can you get? When the Minister promised fees of £9,000 “in exceptional circumstances”, I do not believe that a single Member of the House thought, “Oh—that means that most universities will charge most students £9,000, or as near as makes no difference.” That is not what Members thought; they thought that he meant “in exceptional circumstances”. I do not think they thought that middle-class, middle-income students would have no choice but to pay close to £9,000 a year no matter which university they chose to go to. The Minister’s failure to admit that he got it wrong does him no credit.

[Mr Sam Gyimah (East Surrey) (Con)]

Given that universities that charge £9,000 will have to satisfy fairly stringent access requirements, will they not be helping the very students whom the right hon. Gentleman says we should be helping?

[Mr Denham]

That argument is worthy of further examination, and I assure the hon. Gentleman that I will be dealing with it in due course, at—I hope—not too much length. It gets worse.

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[Mr Denham]

My hon. Friend has underlined a point that I have already made. Individual institutions have had to make their own choices, but this was a system in which almost every incentive for the vast majority of institutions was to raise fees, and there were almost no incentives to lower them. Given the number of professors of game theory in the universities of England, one would have thought that Ministers could have got a few together and asked them, “What will you do, in practice, if we introduce a system like this?” Every single one of them would have replied, “We will make the fees as high as we possibly can.” The Minister and the Secretary of State are just about the only people with any connection to higher education who are surprised by what has happened.

Of course, Ministers have consistently claimed that fees above £6,000 will be allowed only if tough access agreements are in place. When Cambridge university announced it wanted a fee of £9,000 per year, the Deputy Prime Minister—the man who promised no fee increases—exploded, stating:

“They can say what they like. They can’t charge £9,000 unless they’re given permission to do so. And they’re only going to be given permission to do so if they can prove that they can dramatically increase the number of people from poorer and disadvantaged backgrounds who presently aren’t going to Oxford and Cambridge.”

That sounded pretty clear, but what has Cambridge actually proposed? Its current access target under the current fees policy is to reach 60% to 63% of state school students—not, we should note, poorer or disadvantaged state school students, just any state school students including those from selective schools. What has it proposed in the new access agreement? It has proposed that the target should be not 60% to 63% of state school students, but 61% to 63% of state school students. As the Financial Times put it:

“Cambridge basically reckons it can triple student fees and placate the Government by adjusting the bottom of its target range for state school pupils by one percentage point.”

Does anybody in this House believe that Cambridge will not be allowed to charge £9,000?

The Secretary of State’s guidance to the Office for Fair Access did not request that OFFA take into account past performance on benchmarks or widening participation, nor could it legally have done so. It will be many years, at best, before OFFA can possibly judge whether the new access agreements have been complied with and made any difference to access. Will the Minister for Universities and Science tell the House today how long he expects it to be before OFFA could feasibly sanction any university for failure to comply?

It is obvious that these bungling Ministers thought OFFA had powers it simply did not have. When The Times asked Sir Martin Harris, the director of OFFA, whether Ministers had been aware of his limited powers when plans to treble the cap on fees were approved by Parliament, he replied:

“I think that the powers of OFFA became clearer as this debate went on.”

That is a tremendously polite way of saying, “They didn’t understand what they were talking about,” and he went on to say, for the avoidance of doubt:

“It is very important that everybody understands that OFFA is not a fee regulator.”

Tory peers made sure of that in 2004. In another place, they passed amendments that ensured that Labour’s fees legislation could not allow the very interference that the Tory-led Government are now threatening.

Of course, in theory OFFA can reject an access scheme, but only a stupid and incompetent vice-chancellor would run that risk. Universities just need a rational plan for school outreach work, and bursaries or fee waivers for some students; if they get that right, OFFA’s powers to limit fees to £6,000 collapse, and the university is free to charge up to £9,000. That is the second reason why £9,000 is becoming the norm, not the exception.

The cynical talk of tough access agreements is raising false hopes among students, and now the finances are unravelling. The permanent secretary at the Department for Business, Innovation and Skills recently appeared in front of the Public Accounts Committee, and he was asked by my hon. Friend the Member for Walthamstow (Stella Creasy) about the consequences of fees higher than an average of £7,500. She asked:

“You have a gap, haven’t you, that you are going to have to plug”?

The permanent secretary replied: “Yes.”

The Secretary of State has already made it absolutely clear how he will respond. He told the Higher Education Funding Council for England conference:

“Government essentially has two ways of dealing financially with collective over-pricing: either cutting the teaching grant or student numbers.”

So there will be more cuts in teaching grant, or even more cuts in student numbers beyond the cut of 20,000 from the total Labour planned for September 2010 and the number he will allow in 2012-13.

Frankly, the Government are all over the place on this. On the one hand the permanent secretary says there is a problem, and the Secretary of State says he may cut student numbers or the teaching grant. On the other, he says there is not a black hole. The House of Commons Library has published estimates of the financial shortfall at average fee levels above £7,500. Ministers say they do not recognise the Library figures, so will the Minister guarantee to the House today that the average fee will be no more than the £7,500 first promised? If he cannot guarantee that, will he tell the House what the black hole will be, and how he is going to balance the budget?

That is not the only question about finances, because the whole fiasco has been driven by the Secretary of State’s claim that he needed to sacrifice higher education to cut the budget deficit. There are increasing concerns that the policy will not save any public money. The cut in teaching grant has to be set against the massive increase in the level of student debt that has to be written off because of loans that will never be repaid. London Economics, million+ and the Higher Education Policy Institute are among the organisations that have pointed out that quite small changes in assumptions about future graduate earnings or the rate of non-repayment would wipe out any savings. Yesterday, the director of the Office for Budget Responsibility wrote to me confirming that the OBR will re-examine the Government’s assumptions once all the universities have set their fees.

As it has become increasingly clear that fees approaching £9,000 will be the norm, Ministers have constantly threatened to enact new laws to stop them. In their guidance to the Office for Fair Access, these Ministers said that

“if the sector as a whole appeared to be clustering their charges at the upper end of what is legally possible, and thereby increasing the pressure on public funds, we will have to reconsider what powers are available, including changes to legislation, to ensure there is differentiation in charges.”

They have talked of cutting all university places by 5% to 10% and then auctioning them off to the lowest bidder, including foreign-owned private universities. They have also talked of strengthening OFFA’s legal powers, but part of this disgraceful situation is that they make threats but they will not publish any details.

So I ask the Secretary of State and the Minister for Universities and Science whether, having said that they are prepared to legislate to stop universities charging high fees, they will stop hiding behind weasel words and tell us what they actually propose to do. Will there be an auction of student places? Is OFFA going to be given powers to set fees or impose quotas for students from different backgrounds? There are people on both sides of the House who would like to have the answer to that question. Does the Minister have any idea how he would get such a policy through the House of Lords, given that the Lords insisted on explicitly limiting OFFA’s powers in 2004? It really is not good enough for the Secretary of State and his Minister to keep making it up as they go along.

The Minister said that he would double the level of student loans available for study at private universities and he has made it clear that he wants more competition from private universities, but he has not set out how they will be regulated, how quality will be maintained or how the problem of fraud, which is being investigated by congressional committees in the USA, will be avoided—this involves the same companies he wants to expand their activities here. Once again, veiled threats are being made in panic as Ministers lose control of the system, but we are being given no details, no substance and no openness. It is not good enough to keep this House, future students and universities in the dark about what they plan to do.

Let me turn now to another aspect of Government policy that is becoming clear. The Secretary of State and his Minister plan to force tens of thousands of students from squeezed-middle homes to pay a levy to cut the fees of other students, often those from similar backgrounds. In a typical access scheme—hon. Members can go on websites to look at these—a student with two working parents both on £24,000 a year will pay a full £27,000 a year in fees, but that will include a £3,000 levy to cut the fees of the student from next door with one working parent on £24,000 a year. So two graduates with the same degree from the same university starting the same job will start their working life with as much as a £9,000 difference in their level of debt. How many of our constituents will think that having two hard-working parents should be a disadvantage that stays with someone for 30 years?

[Mr Gyimah]

Will the right hon. Gentleman briefly explain to us how his proposal of a graduate tax can address the challenges in higher education that he has so eloquently highlighted?

[Mr Denham]

I am flattered by the hon. Gentleman’s remarks. No system of student payment for the cost of higher education makes easy the problem of an 80% cut in teaching grant. The fundamental problem we face is that the Government have decided to make most students pay the entire cost of their higher education. The great advantage in a system of repayment of moving towards a graduate tax is that it is fairer; it ensures that what people pay is better related to what they are able to earn as a graduate. But nobody should be under any illusions: the fundamental problem we are dealing with is not the choice between a graduate tax and a fees system; it is the choice between slashing higher education teaching grant by 80% and not doing so.

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[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

First, I declare my interest as a part-time lecturer at Queen Mary, university of London. I therefore take a keen interest in universities and know slightly more about their workings than some Government Members who have contributed.

I am privileged to represent Stoke-on-Trent Central, in which Staffordshire university sits and many students from Keele university reside. In the university libraries of those great universities sits a book by Tony Travers and Andrew Adonis called “Failure in British Government: The Politics of the Poll Tax”. That wonderful text tells one how not to make Government policy from beginning to end. I am going to write to Andrew Adonis and Tony Travers to suggest a second volume on the introduction of the tuition fee fiasco that we see before us.

[Mr Gyimah]

When the hon. Gentleman speaks to Andrew Adonis, he should also discuss the graduate tax with him, which he looked at in detail and dismissed when Labour was in government, and which is now Labour policy.