Student Loans Agreement

Wes Streeting Excerpts

Monday 18th July 2016 Westminster Hall

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[Joseph Johnson]

Graduates from our universities do spectacularly well on the whole in moving into graduate employment. Obviously, we want variability across the system to even out and we want to ensure less patchiness in the system, but graduates do go into graduate employment on the whole.

The funding system put into place is also progressive. Interest rates after graduation increase with income, so that high earners repay more. For those earning £21,000 or less, the interest rate is set at RPI flat: the loan balance does not increase in real terms. For borrowers who earn more than that, the interest rate increases to a maximum of RPI plus 3%. It is only fair that borrowers who have benefited most from their education should repay the most back into the system.

Student loans are very different from a mortgage or credit card debt. Repayments are determined by income, not the amount borrowed. Borrowers are protected. If at any point their income drops, so do their repayments. Borrowers will repay only if they earn above the threshold and the loans are cancelled after 30 years, so many borrowers, as I said, will not repay the full amount. That is part of the taxpayers’ investment in our country’s skills base.

I recognise hon. Members’ concerns that students may not be fully aware of the terms and conditions of their loans at the time of application. The Student Loans Company does, however, provide students with a clear statement of the terms before the student completes their application for a loan. On page 3 of “Student loans—a guide to terms and conditions”, it states clearly—this is not hidden in some small footprint—that

“The regulations may change from time to time and this means the terms of your loan may also change. This guide will be updated to reflect any changes and it’s your responsibility to ensure you have the most up-to-date version.”

Furthermore, it is worth noting that the threshold freeze did not actually change the terms and conditions; it merely left them unchanged.

That information includes the way that interest will be applied and the repayment terms that will apply. Students are asked explicitly to confirm that they understand the information before they are granted the loan. All the information that the SLC provides to students is reviewed regularly to ensure that it is both accurate and accessible.

[Wes Streeting]

I have lost count of the number of times that iTunes has changed its terms and conditions, and I check the box and agree every time—more fool me, some might say. However, when the substance of the repayment conditions is written up in large print to entice students in but is open to change through the small print, surely that is not right. Even if the Government and the Student Loans Company took even greater steps to tell potential students that the terms and conditions could change, that is hardly a reassuring message to send to them, is it?

[Joseph Johnson]

There are always ways in which the Government can try to make things more explicit, but we cannot deny that on page 3 of the guide to terms and conditions students were clearly informed of the possibility that terms might change. In the event, they did not change—they were left unchanged, as I said.

Let me turn to the benefits of the freeze to the system and all the other reasons we felt it important to do what we did. A sustainable student finance system enabled us to abolish student number controls, lifting the cap on aspiration and enabling more people to receive the benefits of a university education. That is essential if we are to maintain our place as a country with a modern, highly skilled economy. Freezing the threshold means that we expect to recover £3.2 billion more of the loan outlay from existing borrowers. From future borrowers, we expect an additional £1 billion of repayments per £15 billion of loan outlay.

We send proportionately fewer people to university to study at undergraduate level than our main competitors. Between now and 2022, more than half of job vacancies will be in occupations most likely to employ graduates. If we are to continue to grow our economy, we must equip our young people with the skills and qualifications they need to fill those roles. England is not unique in grappling with those problems, but we are one of the few countries to have found a sustainable solution. That has been recognised internationally; the OECD has praised the student loan system in England as that of

“one of the few countries to have figured out a sustainable approach to higher education finance”.

I recognise the strength of feeling there is on the issue, but the Government must balance the interests of students, who benefit from higher education, with those of general taxpayers. We have taken difficult decisions, but in the process we have underpinned the financial sustainability of our student funding system in a manner that means we can lift student number controls and enable proportionately more young people than ever before to benefit from university.