Funding Higher Education

Sam Gyimah Excerpts

Wednesday 28th February 2018 Westminster Hall

[Mr Streeter]

I must confess I do not know the details of the current dispute. I am not a huge supporter of strikes, but I agree that it would be better to have the dispute resolved as quickly as possible. All people are entitled and should aspire to a proper and decent pension settlement.

Moving on to my three points, you will be pleased to hear that the first two are very brief, Mr Hosie. I have some ideas for the Government to grapple with, although I am sure they have thought about these things in advance. One possibility to soften the blow for students could be to make the monthly repayments tax deductible, which would basically reduce the true impact of the repayments and seems both reasonable and fair. Secondly, the current interest rate of 6.1% seems almost punitive when we have interest rates so much lower. I do not think that that was ever the intention when we started off on this journey. We should consider reducing the interest rates to the amount that Her Majesty’s Revenue and Customs pays us when it has our money for any length of time. The interest calculation for overpaid tax is a lot less than 6%. If it is fair for that purpose, it would be fair for students. Again, it would encourage people to embrace the student loan system if the rate of interest was significantly lower.

Thirdly, and in a little more detail, for the first time in my life I wonder whether it is time to consider a graduate contribution system in place of the current tuition fees and student loans: in other words, what some people would call a graduate tax. We have all been involved in debates over the years in which we have said that that is an absolutely disastrous idea but, for the reasons that I am about to give, I think it should be reconsidered.

A graduate contribution tax is essentially a system sub in which the student becomes obligated to an income-related additional tax on graduating in return for Government subsidisation of higher education, resulting in low or no tuition fees to the student. The Government would in effect pay all or most of the fees directly to the university, and the student would pay a contribution over and above ordinary levels of tax for a limited period of time once they start work. That removes the burden of individual borrower accounts or balances owed. The exact percentage of earnings that graduates would be required to pay back would be up for discussion, but one option is to have a banded system in which the percentage paid back is determined by income and increases across income bands. What is the point? Two things. First, a system based on the ability to pay rather than the amount of money the student has borrowed to get through university is more reasonable and fair than the current system.

[The Minister for Universities, Science, Research and Innovation (Mr Sam Gyimah)]

I thank the hon. Gentleman for giving way and register the fact that I have arrived at the debate. The point about a system based on the ability to pay is important. In a sense, the current system is a hybrid between a loan and a graduate contribution system. People pay 9% of their income, so those who earn a lot more pay a lot more of the loan back, and people who earn a lot less pay less back. There is already a significant taxpayer subsidy up to about 45%. I want to put on the record that the current system is a hybrid between the graduate contribution system that he is outlining and a loan system.

[Mr Streeter]

The Minister is absolutely right to make that point.

The second reason why I think a fresh look might be helpful is that, under a graduate contribution scheme, students would not leave university with the worries associated with personally owing so many thousands of pounds. There would be no massive debt figure around their neck. I know the Minister was snowed in this morning, so I am not sure whether he heard me say that I am coming to the view that young people having a personal debt of £40,000 or £50,000 around their neck as they enter the workplace is becoming a massive problem that we need to think about. I hope the review will look at that.

I believe that the vast majority of graduates would be happy to pay a fair income-contingent contribution in return for the direct payment of fees by the Government, thus breaking the perceived link between the cost of tuition and repayments from students. Such a change would hopefully serve to alleviate some of the mental health worries faced by students and graduates who, on finishing university, receive the infamous letter outlining how many tens of thousands of pounds they now owe: “Congratulations on graduating. Now we want the money back.” Paying a regular, reasonable graduate contribution through tax gives far less reason to worry than the contents of those letters sent to graduates. A graduate contribution system would also provide the Treasury and higher education institutions with a long-term guaranteed stream of money as graduates pay regular instalments of additional tax in line with their incomes over a certain number of working years.

The Minister might like to reflect on this next point. It would be possible also to tailor the contribution system to change the rate of tax on degrees that the Government are keen to encourage, perhaps in science, technology, engineering and maths subjects, and nursing, as an inducement for students to pursue those degree courses and consequent careers. I can see that the Minister is not leaping to his feet to agree with me. He will no doubt deal with that point when he winds up the debate later.

Obviously, training and recruiting sufficient nurses to meet the growing needs of our NHS is becoming a huge priority for our country. The Royal College of Nursing, which I had a meeting with recently in my constituency, informs me that applications to nursing courses have fallen by 33% since tuition fees for undergraduate nursing were introduced. The Government wisely said that they would review the impact on nurse training and recruitment once the new system had been in place for a year or two. We are now approaching that moment in time. I hope the review currently being undertaken by the Government will reflect on that and make recommendations. We cannot have a system that starves our NHS of sufficient nurses for the future, because that would be short-sighted.

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[Paul Blomfield]

I have visited the university that my hon. Friend represents. It does particularly innovative and good work in supporting small businesses and is a leader in the sector. He makes an important point. At a time when one of the issues we face as a country is the imbalance in the economy between London and the south-east and the rest of the country, universities offer a unique asset in ensuring that economic growth is distributed across the country. They are the one asset that we have in every part of the UK, in its regions and nations. The role that they play in driving economic growth is hugely important. My hon. Friend makes that point very well.

I have three additional points. First, will the Minister answer the question—which the Education Secretary was unable to in the statement the other day—relating to widening participation and fair access funds? There is a concern that one of the ways in which the sector will be squeezed in order to hit ambitions on fees is by reducing the amount of money allocated to widening participation and fair access. Investment in that area was one of the few good things that came out of the 2012 reforms, so I would be grateful if he could give a reassurance on that.

[Mr Gyimah]

I would like to give the hon. Gentleman that reassurance now. He is absolutely right: the widening participation funds—£1,000 out of every £9,000 paid by students in fees—go towards access. We will not be doing anything to diminish that access project. Although many people talk about the fact that we have global, world-class institutions, one of the successes of our higher education system is actually the number of disadvantaged people who are going to university as a result of those funds being available. There is a challenge in making sure that they are successful at university and get well-paid jobs. We will not be doing anything to diminish that.[Official Report, 21 March 2018, Vol. 638, c. 2MC.]

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[Mr Gyimah]

To be absolutely clear, university education in England is not based on the ability to pay. On the contrary, no one has failed to get a university place in England because they cannot pay. Payment is only significant after the graduate earns more than £21,000—it will be earnings of more than £25,000 from 1 April. It is important to get the facts right.

[Carol Monaghan]

We also have to look at the retention rates for young people from disadvantaged backgrounds who do not have full support.

Ultimately, this debate should be about who benefits. We educate children in schools not simply for their own economic benefit, but for the benefit of society. We have got to ask whether the young people embarking on tertiary education courses will contribute economically and societally to our nations, or whether we are simply providing them with a service, for which they must pay. As legislators, we must be clear about that. Post-Brexit, the UK’s economic success will rely on a well-educated population. We have skills shortages in science, technology, engineering, healthcare, education and digital. Graduates are needed now to ensure that the UK remains competitive outside the EU.

The hon. Member for Sheffield Central (Paul Blomfield) mentioned the variance in fees. I have difficulties with that. If as has been rumoured we lower the fees for less expensive courses, how will we encourage our young people to study the more expensive science, technology, engineering and maths subjects, graduates of which are so desperately needed? EngineeringUK estimates that we have an annual shortfall of 20,000 engineering graduates alone. The hon. Member for South West Devon mentioned the impact of removing the nursing bursary. Again, who benefits? We should encourage young people to study those courses, not put additional barriers in their way.

Fees are not the only difficulty for English students. The interest on student loans has risen sharply—it is currently 6.1% for some students. Maintenance grants have been scrapped, and it is rumoured that student debt on completion has reached £50,000. Many young graduates will be left saddled with debt throughout most of their working lives.

The hon. Member for South West Devon mentioned students staying at home for their university experience, and was concerned about the impact on the whole package experienced by students at university. In Scotland and Ireland there is a cultural predisposition to stay at home. It is not necessarily financially driven—my son is staying at home during university—so there may be other factors at play. His education is not impacted. Students have opportunities for other life experiences, such as summer placements, industrial placements and travelling abroad. The hon. Member for Northampton South (Andrew Lewer) mentioned Erasmus, which is a rich experience for students even if they stay at home during university. I push the Minister to make a commitment on Erasmus, because university students and many people across the sector want that commitment as part of the Brexit process.

We are often told that our free tuition policy in Scotland prevents Scottish students from accessing available places, but since 2007, the number of Scottish-domiciled full-time degree entrants has risen by 12%. Since 2013, the total number of funded places available at Scottish universities, including additional places to widen access for students from Scotland’s most deprived communities, has also increased. The hon. Member for Sheffield Central mentioned the metrics used in the teaching excellence framework, and graduate success as an indication of our universities’ quality. Graduate salaries are a lot lower in many geographical areas in the UK, so students graduating in parts of England and Scotland will automatically have a lower salary than those in south-east England. That is a flaw in that metric.

We often talk about the number of young people going to higher education as a measure of economic success. I could not count the number of times I hear people talking about encouraging people to do high-quality apprenticeships, yet that seems to be forgotten when we talk about higher education. I would like there to be parity among apprenticeships, further education colleges and quality employment. In fact, we should look at positive destinations, not just the number of young people going to university. For many young people, a high-quality apprenticeship—degree level or otherwise—allows them to make excellent progress in the workplace without necessarily saddling themselves with debt.

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[Gordon Marsden (Blackpool South) (Lab)]

It is a great pleasure to serve under your chairmanship, Mr Hosie. I congratulate the hon. Member for South West Devon (Mr Streeter) on securing the debate. He spoke thoughtfully. We are both of the Kinnock generation, so I understand some of his points. He talked about his experiences in schools and people going to university. We must recognise the heart of the debate is not just the people who speak about what they might be deterred from, but the people who keep silent. The people who keep silent, whether they are older or younger learners, are being put off by the current financial structure that the Government have put in place.

The hon. Gentleman made a number of interesting suggestions about graduate tax and cutting the interest rates from 6.1%. There is consensus on that across the piece. We would have more sympathy with the Government if they had not been so intensely relaxed, and indeed complacent, when the interest rates were introduced. It was very clear that the previous Universities Minister—no doubt because he was a keen remainer—did not take into account in any shape or form the implications of Brexit in that respect. Two months before the referendum, inflation stood at 0.4%, but it is now 3.1% and rising. That is one of the reasons why the interest rate is 6.1%.

I welcome the thoughtful comments made by the hon. Member for Northampton South (Andrew Lewer). He made very sensible points about governance in higher education. He rightly touched on the impact on post-1992 universities if fee aversion hits the disadvantaged students they cater for, and talked about his experiences with the two universities he is associated with—the University of Northampton and the University of Derby. I support all that, but I remind him and the House that fee aversion is an issue not simply for students but for the taxpayer. My hon. Friend the Member for Manchester Central (Lucy Powell) made exactly that point in response to last week’s statement. The Government have tried to make a virtue out of necessity by saying, “Oh, you don’t really need to repay all this money,” but we are irresponsibly laying burdens on future generations and on the tax system now. The Government should not be complacent about that in any way.

[Mr Gyimah]

I look forward to hearing the hon. Gentleman outline the Labour party’s policy. His concern is burden on the taxpayer, but there would be an even bigger burden on the taxpayer if higher education were made free—that is my understanding of the Labour party’s policy—unless places were rationed.

[Gordon Marsden]

There were several completely unproven assertions in what the Minister just said. He would do better to stick to this debate, which is about his policies rather than—

[Mr Gyimah]

rose—

[Gordon Marsden]

No, I am not going to take another intervention. The Minister will have plenty of time to say what he wants to say.

My hon. Friend the Member for Sheffield Central (Paul Blomfield) rightly talked about the sustainability of the sector and some of the key issues in terms of Brexit. My hon. Friend the Member for Coventry South (Mr Cunningham), who is no longer in the Chamber, absolutely rightly drew us back to further education and nursing bursaries, and the hon. Member for Glasgow North West (Carol Monaghan) spoke about issues post-Brexit.

The point is very straightforward: since coming to office in 2010, Conservative-led Governments have repeatedly raised tuition fees. They trebled fees to £9,000 and subsequently increased them to £9,250. That agenda has hit students—particularly those from disadvantaged backgrounds—harder and harder since 2012. The cutting, one by one, of all the concessions that David Willetts introduced to temper the impact has been just as damaging. Those concessions were dismantled deliberately. The National Union of Students lists them in its briefing for the debate: the Government abolished maintenance grants, NHS bursaries, the disabled students allowance and the education maintenance allowance, and ended Aimhigher.

The Minister has inherited that. He is not responsible for it, but he would be wise to show due humility about its incremental impact on the people concerned. If he reads the “Fairer Fees” report published by the Sutton Trust late last year, he will see, as Members have already said, that the average debt for students in England is higher than the European average and twice the US average. As a result, the Government have racked up an unenviable record of nudging people away from, rather than towards, aspiration in higher education and chipping off many of the rungs of the ladder of social mobility that were designed to protect them.

The July report by London Economics for the University and College Union suggested that thousands of graduates would suffer a mid-life tax crisis, analysis undertaken last year by the Institute for Fiscal Studies shows the level of debt, and only this week the Sutton Trust gave us figures that show disadvantaged students across the UK are more than three times more likely to live at home while attending university. The hon. Member for Glasgow North West made that point, too.

The Prime Minister finally admitted last week, after months of us, the Sutton Trust and an impressive range of stakeholders all saying the same, that the current funding system leaves the most disadvantaged students with the highest debt, yet behind the warm words and soft soap that were ladled out by the Prime Minister in Derby and by her Education Secretary in the Commons, it seems that no new money is available and there is the potential for HE funding cuts. In her speech, the Prime Minister tried to talk the talk on social mobility and aspiration, but she did little to walk the walk and address either the FE sector, in which 10% of HE is delivered, or the problems with 16-to-18 provision that many colleges are suffering, including the one in which she chose to make her speech. It will take more than a brush-by in Derby one afternoon in February to remedy those issues.

The terms of reference published by the Department state that the review cannot make recommendations on tax policy and must make recommendations in keeping with the Government’s fiscal policies. Will the Minister confirm that that means there will be no new money for the policies in the review? Does it mean that savings will have to be found elsewhere in the FE budget if changes are to be made? My hon. Friend the Member for Sheffield Central challenged him and, to give him credit, he made a commitment that access and widening participation funding will not be diminished as a result of the review. I warn him that the Treasury has a long reach and he will need a stout shield to resist it in this area and others.

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[The Minister for Universities, Science, Research and Innovation (Mr Sam Gyimah)]

It is a pleasure to serve under your chairmanship, Mr Hosie. I congratulate my hon. Friend the Member for South West Devon (Mr Streeter) on securing the debate, which has been wide-ranging and stimulating in a number of ways. Higher education is a complicated policy area, and since I have been appointed to this position I have been inundated with ideas about things to do. In the debate, hon. Members have made contributions where they have not just come up with ideas but thought of knock-on consequences of some policy suggestions. I welcome that.

There were many questions about the Government’s HE review and what it seeks to do, but before I get to that I will deal with some of the myths around the current system, because it is worth clarifying that. The system does not stop disadvantaged people applying to university. Their parents’ income and their income is not a barrier to getting into university at all. In fact, they can get into university and get on, and they have to pay back only once they have completed their studies and have a job paying—from 1 April—£25,000.

Another myth is that disadvantaged people in particular do really badly. That is not true. The system is very progressive in its repayments structure. I have been going around the country, speaking directly to students, and I went to Queen Mary in London, where 42% of students are the first in their family to go to university. That is a direct result of the policies the Government have pursued. I am not saying that everything is perfect and that there are not reforms to pursue, but it is worth recognising the success we have had.

No matter how we cut it, in every league table in the world our universities come second only to those of the United States. We have four in the top 10 and 16 of the top 100 in the world, and that is because we have put them on a sustainable financial footing. Those who have read the terms of reference will know that the review must have regard to the sustainability of the university sector. An important point was made that universities are not just about the education that the individual gets; in many of our towns, universities are huge employers and a source of spreading wealth and growth. For that reason alone, ensuring the sustainability of the sector is particularly important.

This year, we will probably hit the target of one in two 18 to 30-year-olds having a university education. Such an education is not just about what is studied; it has become a rite of passage for many young people. It is the first time they move away from home. They have freedoms, and they become an adult at university. We think that is a positive thing. That aspiration was set by Tony Blair, a Labour Prime Minister, so to hear Labour Members criticising us for hitting a target set by a Labour Prime Minister is a bit rich.

[Hon. Members]

Who is criticising?

[Mr Gyimah]

Well, the suggestion from the Opposition spokesperson, the hon. Member for Blackpool South (Gordon Marsden), was that somehow we have pursued policies that are damaging higher education and the aspiration and prospects of our young people as far as the university sector is concerned. On the contrary, we have pursued policies that have put no cap on aspiration.

[Gordon Marsden]

rose—

[Mr Gyimah]

I will take the hon. Gentleman’s intervention in a second.

I will end this myth-busting section by focusing on Scotland, where controls on student numbers continue to restrict the aspiration of young people. The Sutton Trust recently stated that Scottish 18-year-olds from the most advantaged areas are still more than four times more likely to go straight to university than those from the least advantaged areas, compared with 2.4 times in England. Audit Scotland has stated:

“It has become more difficult in recent years for Scottish students to gain a place at a Scottish university as applications have increased more than the number of offers made by universities.”

That is not an example I want to copy here in England.

[Carol Monaghan]

Of course, as I said, the distinction between FE and HE in Scotland is far more fluid, and UCAS admits that a third of young people studying degree-level courses are doing so in further education colleges, which is not captured by Sutton Trust figures or UCAS figures. Scotland is doing extremely well in this area.

[Mr Gyimah]

Audit Scotland clearly does not share the hon. Lady’s view.

[Gordon Marsden]

The Minister speaks about rites of passage. Those are fine words, but fine words butter no parsnips. The truth of the matter is, he should be focusing on not just the number of people from disadvantaged backgrounds getting to university but what stops them staying there. He should also focus on the groups who never even think about getting there because of what his predecessors’ tuition fees policies have done, particularly for mature and part-time students.

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[Mr Gyimah]

In the spirit of compromise, I agree that, yes, access should be not just about getting to university but succeeding when there and getting a well-paid job afterwards. If people do not get to university in the first place, the idea of succeeding when there and getting a well-paid job is purely academic, not to put too fine a point on it. There is clearly work to be done, but where we are now shows significant progress from where we were in 2010.

The review seeks to look at the whole higher education sector for post-18 education, including choice and competition in the market, how the funding system works and how HE and FE can be joined up, and the overlaps. That is particularly important. However, we are not waiting for the review; a significant number of reforms are under way, building on our successes.

We are in the process of implementing the Higher Education and Research Act 2017, and the new Office for Students, at whose launch I will speak later today, will be a strong voice for students and ensure minimum standards. The OFS director for fair access and participation will further drive social mobility. The teaching excellence and student outcomes framework will drive quality teaching—that is particularly important—and the reforms will facilitate further diversity, with new providers and shorter degrees delivered at lower cost. In fact, today my right hon. Friend the Secretary of State is publishing the first statement of Government priorities and guidance for the OFS. The Government are also publishing the results of recent consultations on the new regulatory approach, and the OFS is publishing the regulatory framework. That marks a key milestone in delivering our higher education reforms in that area. The review will build on all of that.

There are questions about the teaching grant, which will be looked at in the review, and whether new money will go in. As always, it is important to look at things within the constraints of the Government’s overall fiscal framework, and that will be considered alongside budget lines in wider education and our public spending.

There are issues around changing the system completely and whether we look at some kind of graduate contribution or graduate tax system. Obviously, those are all welcome suggestions. I would say they have been looked at by successive Governments over the years, but fresh thinking is welcome, and I welcome the fresh thinking that my hon. Friend the Member for South West Devon brought to the debate.

We have a higher education system that is the envy of the world, and many international students are queuing to come and study here, but the Government recognise that to deliver for students more needs to be done. My right hon. Friend the Secretary of State has said that the variability in fees that we expected has not materialised, and it is important to look at all the different ways in which universities operate. There were 534,000 students who accepted a place at university last year. They clearly do not all have the same desires, the same aspirations and the same needs, yet our university system gives all of them pretty much the same offer.

[Stewart Hosie (in the Chair)]

Order.

Motion lapsed (Standing Order No.10(6)).