Vince Cable
Main Page: Vince Cable (Liberal Democrat - Twickenham)
The Secretary of State for Business, Innovation and Skills (Vince Cable)
I beg to move,
That, for the purpose of section 24 of the Higher Education Act 2004, the higher amount should be increased to £9,000, and to £4,500 in the cases described in regulation 5 of the draft regulations in Command Paper Cm 7986, and that the increase should take effect from 1 September 2012.
Mr Deputy Speaker
With this we shall discuss the following motion on education:
That the draft Higher Education (Basic Amount) (England) Regulations 2010, which were laid before this House on 29 November, be approved.
Vince Cable
The terms of the statutory instrument are narrow, but I think you ruled yesterday evening, Mr Speaker, that you would like us to entertain debate on the wider issues involved, because they arouse very strong feelings inside and outside the House. The instrument represents a central part of a policy that is designed to maintain high-quality universities in the long term, that tackles the fiscal deficit and that provides a more progressive system of graduate contributions based on people’s ability to pay.
I shall briefly go over the sequence of events that has led to this debate. I became Secretary of State in May, when the Browne report was being conducted. It had been commissioned by the previous Labour Government last November. They had asked the former chief executive of BP to conduct a report in order to prepare the way for an increase in tuition fees following the earlier introduction of fees, and then top-up fees, by the last Government.
Vince Cable
I will take interventions later. You have asked, Mr Speaker, that both Front Benchers should keep their introductions brief. [Interruption.] As hon. Members know, I am very happy to take interventions, but I will take them when I have developed an argument. [Interruption.]
Mr Speaker
Order. The Secretary of State should resume his seat for a moment, and I apologise for having to interrupt him.
There are strong opinions on this matter, and passions are aroused. That is understood and accepted. What is not accepted by any democrat is that the Secretary of State should not receive a fair hearing. The right hon. Gentleman will be heard, and if Members are making a noise and then expecting to be called, I fear that is a triumph of optimism over reality.
Vince Cable
When I became Secretary of State, I invited Lord Browne to make two adaptations to the terms of reference that he had undertaken under the previous Government. The first thing that I asked him to do was to see how we could make the existing system of graduate payments more progressive and more related to future graduates’ ability to pay. He undertook to do that, and we have done further work to develop the progressivity of the system. As a result, the Institute for Fiscal Studies was able to conclude that the package that we have produced is more progressive than the existing system and more progressive than the Browne report. Concretely, what that means is that just a little under 25% of all future graduates will pay less than they do under the current system that we inherited from the Labour Government.
Vince Cable
I will give way in a moment.
The second request that I made of Lord Browne was to ask him to look thoroughly at the alternatives, and particularly at the alternative of a graduate tax. Like many people coming fresh to the issue, I thought that the graduate tax was a potentially good and interesting idea, and I wanted it to be properly explored. He reached the same conclusion that the Dearing report reached under the Labour Government and the same conclusion that the shadow Chancellor reached when he had responsibility for this policy. The conclusion was that the pure graduate tax has many disadvantages: it undermines the independence of universities and, most seriously, it is, in the words of Lord Browne, simply unworkable. I am surprised, therefore, that the Leader of the Labour party, after all this experience and independent analysis, has chosen to drive his party down the cul-de-sac of this policy.
Vince Cable
I will take the hon. Gentleman’s intervention after reading to him a comment from someone whom I would have thought would have been one of his political allies. The education editor of the New Statesman—that publication is normally favourably disposed to the Labour party—commented on Labour’s current position:
“Labour has been seduced into sentimental, sloppy thinking that defends the interests of the affluent, not the poor… To describe students as facing a lifelong “burden” of “crippling” debt is simply bizarre, particularly for a Labour leader who wants to replace the debt with a graduate tax that the rich would avoid”.
Mr Thomas
On sloppy thinking, crucial to the Government’s case has been their advocacy of the national scholarship fund, but since the weekend when he announced further details, have the Secretary of State’s plans not been unravelling rather fast? Vice-chancellors are criticising it left, right and centre, and yesterday, the Institute for Fiscal Studies told us that it provides a financial incentive for universities to turn away students from poorer backgrounds. How is he going to fix it?
Vince Cable
The consultation on the national scholarship scheme is still open to representations from the hon. Gentleman, vice-chancellors and others in order to achieve an objective that I hope he shares, which is to ensure that people from disadvantaged backgrounds achieve access to higher education. That is something the Labour Government failed miserably to do in relation to the Russell group universities. As it happens, the IFS looked at one of a series of options, but did not take account of the fact that, under our proposed scheme, those universities that wish to progress beyond the £6,000 cap will be obliged to introduce the scholarship scheme without the detrimental effects he described.
Mr Straw
I am grateful to the Secretary of State, but he knows that the central issue is the fact that the teaching grant is to be cut by 80%, the burden of which is to be transferred to students. That is justified by the Government’s assessment of the scale of the deficit. Yesterday, in evidence to the Treasury Select Committee, the Chancellor of the Exchequer admitted that he is anticipating tens of billions of pounds of receipts from privatisations not included in the comprehensive spending review. What estimate does the Secretary of State put on those receipts, and to what extent have they been taken into account in his calculations of the scale of the deficit and the cut to the grant?
Vince Cable
I am glad of that intervention from the right hon. Gentleman, who, given his history in the previous Cabinet, is—I think—a co-author of the package of measures we inherited, and which lacked progressivity. His intervention is helpful in directing us to the heart of the debate, which is the question of how we fund universities and where the money comes from. That is exactly what I now wish to deal with.
Vince Cable
For the funding of universities, Lord Browne recommended—in a report that the then Labour Government endorsed, I think, in their manifesto—that there should be no cap on university fees and a specific proposal for a clawback mechanism that gave universities an incentive to introduce fees of up to a level of £15,000 a year. That was the report given to the Government. We have rejected those recommendations and proposed instead that we proceed as the statutory instrument describes. That involves the introduction of a fee cap of £6,000, rising to £9,000 in exceptional circumstances.
I will now explain the basic economics of that problem in the light of the intervention from the right hon. Member for Blackburn (Mr Straw).
Mr Brian H. Donohoe (Central Ayrshire) (Lab)
Will the Secretary of State give way?
Vince Cable
No, I will not. I will give way later, when I have finished my point.
The right hon. Member for Southampton, Itchen (Mr Denham), who is the Opposition spokesman on this matter, rather helpfully sent a circular letter to MPs yesterday in which he sketched out the basic economic framework within which these decisions have been made. He said that
“MPs have been asked to vote on increasing the fee cap to £9000”—
he did not mention the £6,000, but never mind—
“because the Government is choosing to make a disproportionate cut to the university teaching budget…in a spending review with an average cut of 11%”.
Vince Cable
I will finish my point.
As the right hon. Gentleman knows, the Government, like the previous Government, are not making average, across-the-board cuts of 11% in every Department. We have chosen, as did the previous Government, to have some protected Departments—health, schools, pensions and aid. The logical consequence of that is much higher cuts in unprotected Departments. I am sure that he remembers the IFS analysis that told us, in the wake of the March Budget, that a Labour Government were planning to cut unprotected Departments by 25.4%.
Mr John Denham (Southampton, Itchen) (Lab)
The right hon. Gentleman has been good enough to refer to my letter. He knows full well that the IFS analysis carried out after the Budget does not stand up to scrutiny, and reflects neither the decisions taken by the Chancellor in the comprehensive spending review nor the speech made by my right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson) setting out our approach. However, will the Secretary of State help the House by identifying which other major spending programmes have been cut by 80%?
Vince Cable
The 80% fact—and it is a fact—derives from the following: most major Departments have had to take spending reductions of about 25%, as they would have done under a Labour Government. I wish to take the right hon. Gentleman and his colleagues in opposition through what that has meant for the teaching grant to universities and university funding in general.
Vince Cable
I shall develop this point and then take an intervention.
What were the options for a Department facing 25% cuts of the kind that the right hon. Member for Southampton, Itchen himself was going to introduce? Some 70% of all spending in the Department is on universities. He could—and I could—have chosen to make the cuts elsewhere, but the largest category would have been in further education. We could have made the choice to cut apprenticeships and skill-level training by a modest amount, but we need to deal with the problem we have inherited of 6 million adults in this country without the basic literacy of a 12-year-old. We could have cut that, but we chose not to. So we were left with the question of how to make cuts in the university budget of about 25%. There were various options—
Vince Cable
I will finish this section and then take an intervention.
There were various options for cutting the university budget. We could have reduced radically the number of university students by 200,000, but all the evidence suggests, as the previous Government used to argue, that increasing university participation is the best avenue to social mobility. We therefore rejected that option and did not cut large numbers of university students.
We could have made a decision radically to reduce student maintenance, which would have been easier, less visible and less provocative in the short run. We could have done that, but the effect of that would have been to reduce the support that low-income students receive when they are at university now. We rejected that option. We could have taken what I would call the Scottish option. We could have cut funding to universities without giving them the means to raise additional income through a graduate contribution. The certain consequence of that would have been that in five to 10 years, the great English universities—Manchester, Birmingham, Bristol and the rest—would still be great, world-class universities, whereas universities such as Glasgow, which I used to teach at, and Edinburgh would be in a state of decline. We rejected—and rejected consciously—all those unacceptable options.
Pete Wishart (Perth and North Perthshire) (SNP)
I am very grateful to the Secretary of State. Does he even begin to understand or appreciate the potentially disastrous impact that trebling tuition fees in England will have on Scottish universities? What will he do to mitigate that?
Vince Cable
I most emphatically will not be following the advice of the Scottish nationalists in government, who are starving Scottish universities of resources and reallocating priorities to cut schools. That is what has happened in Scotland.
Mr John Baron (Basildon and Billericay) (Con)
I am sure that we can all agree that all students who would benefit from a university education should be entitled to do so, regardless of their financial situation. My concern is that by increasing the tuition cap, participation levels among lower and middle-income students will fall away. What assurance can the Government give that the situation will be monitored closely and that corrective action will be taken, should participation levels fall away?
Vince Cable
Yes, of course I can give my hon. Friend that assurance. Of course the policy will be monitored, and it will reflect the evidence that emerges. We have put in place not merely a series of measures to protect low-income graduates, which we have done through the threshold, but a series of measures designed to help children from low-income families to go to university, notably by increasing the maintenance grant from its level under the previous Government, giving access to an extra 500,000 pupils.
Andrew Selous (South West Bedfordshire) (Con)
I am extremely grateful to my right hon. Friend for giving way. I wonder whether he could say something about how he sees the future position of English students relative to Scottish and Welsh students. Should we not be looking to secure a degree of fairness between families of similar economic circumstances across the United Kingdom in years to come?
Vince Cable
I believe, as the Government as a whole believe, in devolution. We believe that the devolved Administrations in Scotland, Wales and Northern Ireland have got to make their own decision, but the inevitable consequence of the tightening of public finance—a tightening that is happening under this Government, but which would happen under any Government—was bound to be a system of graduate contributions, which is what will happen throughout the UK. However, that is for those Administrations to decide.
Rushanara Ali (Bethnal Green and Bow) (Lab)
Despite this talk of supporting people on low incomes, I find it quite hard to stomach what I am hearing, because in my constituency, for example, the vast majority of young people come from low-income backgrounds, yet they will be losing support through the education maintenance allowance, from which 88% of Bangladeshi children across England benefit. That one ethnic minority group, along with white working-class children, will be prevented from going on to higher education. Coupled with that are the cuts in the future jobs fund—£1 billion, and we are still waiting to hear—so please think again.
Mr Speaker
Order. Just before the Secretary of State replies, let me say that an enormous number of Members wish to speak in this debate. I want to accommodate as many as possible. From now on, interventions must be brief.
Vince Cable
Yes, of course I hear what the hon. Lady says about the education maintenance allowance. What I would say is that the existing system that we inherited was enormously wasteful. Large numbers of pupils received the EMA who did not need it to stay on at school. However, she is quite right to stress the fact that there are large pockets of deprivation in Britain, and her constituency in the east end of London is one of them. We understand that. The purpose of the pupil premium, which is being introduced into the school system, is precisely to address that problem of giving support to schools and pupils in areas of high deprivation.
Mr Peter Bone (Wellingborough) (Con)
Will the Secretary of State give way before moving on?
Vince Cable
I will take an intervention later, if my hon. Friend does not mind.
We have eliminated, I think, most of the other alternatives to raising funding for universities. I hope that nobody on the Opposition Benches is seriously arguing that we should drastically reduce the number of students, that we should drastically reduce maintenance or that we should simply withdraw funding from universities. The only practical alternative was to retrieve income for universities from high-earning graduates once they have left. That is the policy that we are pursuing, and today, 50 university vice-chancellors have come forward and endorsed this approach to the strengthening of university funding in the long term.
Vince Cable
Opposition Members who follow these arguments closely have often made the following argument. “We acknowledge,” they say, “that universities will continue to have high levels of income, but you’re replacing public funding with private funding, and this is”—in some sense—“ideological.” [Hon. Members: “It is!”] That is a debating point, and I am happy to take it on. At present, roughly 60% of the income of universities comes from the public sector, through different funding streams. The rest comes from private sources—something that the previous Government were trying to encourage. That will be reversed: in future, roughly 40% of university funding will come from the public sector and 60% will come from the private sector. I am keen to encourage more private funding of universities, which is why I have spoken to the director general of the CBI. He is approaching all his members to ensure that we have a significantly higher level of employer support for apprenticeships, sandwich courses and other—[Interruption.]
Mr Speaker
Order. First, there is still far too much noise in the Chamber. Secondly, when the Secretary of State has indicated that he is not giving way, Members must not continue standing. That is the situation.
Vince Cable
I hope that not too many Opposition Members would regard additional funding from employers as somehow ideologically contaminated, because we will need more resources going into universities, not less, and that is what we are doing.
Simon Hughes (Bermondsey and Old Southwark) (LD)
Under the fees scheme introduced by the Labour party, all universities ended up charging at the highest rate. One of the worries out there is that all universities might end up being allowed to charge £9,000. What assurance—what rules, what guarantees—can my right hon. Friend give that “exceptional” will mean “exceptional”, and that £6,000 will be the limit for most universities in the country?
Vince Cable
That is a highly pertinent question in the light of the experience of the last Government, who had a two-tier system. There was a migration of all universities to the top of the range. They operated, in effect, like a cartel, and that must be stopped. It must not happen again, and there are several means by which that will happen. First, any university that wants to go beyond £6,000 will have to satisfy very demanding tests of access for low-income families, including through the introduction of the scholarship scheme. Newer institutions, particularly further education colleges providing accredited courses, will drive down the cost of high quality basic teaching. If universities defy the principle of operating on a competitive cost basis, it may well be necessary to introduce additional measures to observe the principle that my hon. Friend has correctly summarised, which is that—
Mr Speaker
Order. I apologise for interrupting the Secretary of State, but I must ask him to address the House. His natural courtesy causes him to look at the Member to whom he is responding, but I want the whole House to hear what he has to say.
Vince Cable
I am simply saying that there are potentially other mechanisms by which universities that exceed the £6,000 level will not be allowed to behave in the way that they behaved under the last Government.
Vince Cable
Let me proceed. Of course increasing the graduate contribution is bound to have an effect—it is an additional cost—to graduates. I therefore want to summarise the steps we are taking to make sure that this happens in a fair and equitable way. First of all, no full-time students will pay upfront tuition fees and part-time students doing their first degree will for the first time—unlike under the last Government—have the opportunity to obtain concessional finance under the student loan scheme arrangements.
Yesterday, after discussing the issue with the Open university and others, I made a further announcement that we will increase the range of that access from students spending a third of their time in education, as originally proposed, to those spending a quarter of their time in it. That will widen enormously the number of part-time students who will have access to supporting finance in order to pursue their education.
Vince Cable
Thirdly, we will introduce a threshold for graduate repayment of a £21,000 salary—a significantly higher level than before—and it will be uprated annually in line with earnings. It is important to emphasise that point because under the Labour Government, there was a threshold of £15,000, but it was never uprated on any basis whatever. I wish to communicate what I said yesterday—that students who were pegged at that £15,000 threshold under the current arrangements established by the Labour Government, will in future have annual uprating in line with inflation. Those existing students whom the last Government did absolutely nothing to protect will have inflation-proofing in future.
Vince Cable
Furthermore, we are introducing variable interest rates so that those on high incomes pay relatively more to ensure the progressivity of the scheme, as a result of which a £30,000 salary will carry a monthly payment of approximately £68, which is far lower, incidentally, than it would be under a graduate tax system. Under that system, people would have to start paying much earlier and at much lower levels of income.
Mr Speaker
The Secretary of State is not giving way at the moment and must be allowed to continue—[Interruption.] Order. He must be allowed to continue his argument.
Vince Cable
As well as the measures we have taken to improve access for low-income families, as opposed to the separate problem of low-income graduates, we have made it clear that additional grant provision will be made, as I said in response to an earlier intervention. In addition, universities wishing to move to a higher threshold will have demanding tests applied to their offer requirements in respect of access.
It is worth recalling the situation that we have inherited. There are a lot of crocodile tears from Labour Members, so let me remind them that social mobility, judged by the number of people from disadvantaged backgrounds getting into Russell group universities, has deteriorated over the last decade. There are currently 80,000 free school meal pupils, of whom only 40 made it to Oxbridge —40 out of 80,000. That is fewer than from some of the leading independent schools. That is a shameful inheritance from people who claim to be concerned about disadvantaged backgrounds—and we intend to rectify it.
Let me conclude in this way. I do not pretend—none of us pretends—that this is an easy subject. Of course it is not. We have had to make very difficult choices. [Interruption.] Yes, we have. We could have taken easier options, but we were insistent that at the end, we would make a substantial—
Mr Donohoe
On a point of order, Mr Speaker. Did not the Secretary of State say that he was going to give way? Why is he not doing so?
Mr Speaker
I understand what the hon. Gentleman has said, but that is not a point of order; it is a point of frustration.
Vince Cable
I have given way to several of the hon. Gentleman’s colleagues and several of my own, and I now wish to summarise where we are.
As I was saying, there have been difficult choices to make. We could have made a decision drastically to cut the number of university students; we could have cut student maintenance; we could have cut the funding to universities, without replacing it. Instead, we have opted for a set of policies that provides a strong base for university funding and makes a major contribution to reducing the deficit, while introducing a significantly more progressive system of graduate payments than we inherited. I am proud to put forward that measure to this House. [Interruption.]
Mr Speaker
Order. [Interruption.] Order. [Interruption.] Order. I understand the passions, but the more noise, the greater the delay and the fewer the number of Members who will have a chance to contribute. I want Back Benchers to have the chance to contribute and I appeal to right hon. and hon. Members to help me to help them.