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Higher Education and Student Finance

Volume 516: debated on Tuesday 12 October 2010

Order. There is a great deal of interest in the Secretary of State’s statement, and I appeal to Members leaving the Chamber to do so quickly and quietly, because I want to hear the Secretary of State—[Interruption.] I am always grateful to you, Mr Pound, for your attempted assistance.

With permission, Mr Speaker, I would like to make a statement on the future funding of higher education and student finance, in the light of the report published today by Lord Browne’s independent inquiry.

Lord Browne was asked to undertake his review in November last year. The review was set up by the Labour Government on a cross-party basis, and that is how we wish to proceed. I and the Minister for Universities and Science, the right hon. Member for Havant (Mr Willetts), thank Lord Browne and his review panel. The Government endorse the main thrust of the report, but we are open to suggestions from inside and outside the House over the next few weeks before making specific recommendations to Parliament, with a view to implementing the changes for students entering higher education in autumn 2012. More detail will be contained in next week’s spending review on the funding implications, but as a strategic direction the Government believe that the report is on the right lines.

Browne acknowledges that

“the current funding and finance systems for higher education are unsustainable and need urgent reform”.

The issue is how, and it has to be framed in terms of how the higher education sector contributes to the deficit reduction programme. There is also, I think, consensus that there should be no up-front tuition fees for students, which would seriously deter students from low and middle-income families, and this Government strongly oppose up-front tuition fees. Indeed, we share Lord Browne’s conclusion that we should extend exemption from up-front tuition fees to part-time students—currently 40% of the student population—who have been unfairly discriminated against hitherto.

The question, then, is how much the graduate contributions for tuition should be. We are considering a level of £7,000. Many universities and colleges may well decide to charge less, because there is clearly scope for greater efficiency and innovation in how universities operate—two-year ordinary degrees are one approach. Exceptionally, Lord Browne suggests that there should be circumstances under which universities can price their courses above this point, but he suggests that this would be conditional on demonstrating that funds would be invested in securing a good social mix with fair access for students from less-privileged backgrounds, and in raising the quality of teaching and learning. We will consider this proposal carefully.

We believe it essential that if the graduate contribution is to rise, it should be linked to graduates’ ability to pay. On average, graduates earn comfortably more than £100,000 over their lifetimes compared with non-graduates, but not all graduates benefit in this way. Some choose socially useful but modestly paid or unpaid work, which may include time spent bringing up a family. At present, the graduate contribution acts too much like a poll tax, and is not fair.

I therefore asked Lord Browne specifically to look at progressive solutions to the problem, and he has come up with persuasive proposals to deal with it. He suggests a £21,000 graduate income threshold before any payment is made—as against £15,000 at present—and that it be linked to average earnings. He also suggests that a real rate of interest should be paid, but only over that threshold. The effect is striking: 30% of graduates would pay less from their lifetime earnings than they do under the existing system. The top third of graduate earners would pay more than twice as much as the lowest third. That is fair and progressive. The Government broadly endorse that approach, and we will examine the details of implementation. The principle of needs-blind admission to universities must remain central.

The cost of university education to individuals and the state reflects living costs as well as tuition costs. The Browne report makes some constructive suggestions. We will make detailed proposals that will not only make it attractive for students from families of modest means to go to university, but be fair and affordable, including by exempting the poorest students from graduate contributions for some or all of their studies.

Lord Browne considers alternatives, including a graduate tax, which I believe the new leader of the Labour party favours. [Interruption.] I have consistently argued for a progressive contribution, which we are now delivering. Some key features of a progressive graduate contribution would incorporate the best features of a graduate tax. It would be collected through the pay packet at a rate of 9p in the pound above the £21,000 threshold and, combined with a real interest rate, as Browne recommends, it would be progressive and related to ability to pay. However, Browne identifies serious problems with what he calls a “pure” graduate tax. He concludes that the proposal is simply unworkable.

If there are any lingering doubts among those on the Opposition Benches, I strongly recommend that they read the open letter from the new shadow Chancellor to the new Labour leader three weeks ago, which reads:

“Oh, and for goodness’ sake, don’t pursue a graduate tax. We should be proud of our brave and correct decision to introduce tuition fees. Students don’t pay them, graduates do, when they’re earning more than £15,000 a year, at very low rates, stopped from their pay just like”—[Interruption.]

Order. I apologise for interrupting the Secretary of State, but I want to hear every word of his statement, and every Member should want to do the same.

I do believe, moreover, that we need to look beyond the graduate population. Some 55% of young people do not go to university. We must not perpetuate the idea, encouraged by the pursuit of a misguided 50% participation target, that the only valued option for an 18-year-old is a three-year academic course at university. Vocational training, including apprenticeships, can be just as valuable as a degree, if not more so.

Finally, there is a challenge to us all to promote a long-term sustainable future for higher education. This has been a difficult issue for all parties in the House. Those on the Opposition Benches have ranged between early advocates of a graduate contribution, such as the right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) and the new shadow Chancellor, through to those implacably opposed to change and to the current Labour leadership, who have apparently embraced a graduate tax. The Conservatives initially campaigned against graduate contributions, but reversed their position. My own party consistently opposed graduate contributions, but in the current economic climate we accept that the policy is simply no longer feasible. That is why I intend, on behalf of the coalition, to put specific proposals to the House to implement radical and progressive reforms of higher education along the lines of the Browne report.

May I thank the Business Secretary for his statement and for giving me advance notice of it? Is it not the truth that the coalition has decided to put the responsibility for reducing the deficit on to the personal bank accounts of this country’s most ambitious and able young people, saddling them with debts that many will never pay off, when the Government should be opening doors for them to make the most of their ability?

Labour Members believe that higher education is important not just for individual graduates but for growth, prosperity, job creation and our ability to succeed in a competitive world. That is why, a few years ago, we took the tough decision to introduce fees, and it is why we invited Lord Browne to undertake his inquiry. We should thank him for his work. I welcome the raising of the threshold, the equitable treatment of part-time students and the emphasis on better guidance in schools and improved information on quality. Those were issues on which we asked Lord Browne to advise, to build on work that we had already begun. The £350 increase in the maintenance grant will of course be offset by the abolition of the £329 bursary for poorest students. In the spirit of cross-party co-operation, will the Business Secretary promise today to make available to the House and the wider public the economic models used by Lord Browne?

It is clear that Lord Browne’s report has been crucially shaped by the assumptions that he has had to make about coalition policy. Will the Secretary of State confirm that Lord Browne’s report assumes that the teaching grant for higher education will be cut by 80%? That would effectively end the public funding of most courses, and place the responsibility for paying for higher education on to students alone. Will he also confirm that some universities could lose more than 90% of their public funding? Is not the row within the coalition conveniently obscuring the biggest cuts to a publicly funded university system that we have ever seen? Tough decisions have to be made to cut the deficit, but even in its plans for reckless, deep and rapid cuts the coalition is planning cuts of only 25%, so why is it singling out higher education for such a massive and disproportionate cut? Our competitors around the world are investing in higher education because universities are a key driver of growth and new jobs. Why is the coalition turning its back on growth?

The Business Secretary says that some universities might charge less than £7,000. Does he accept that an average fee of £6,000 would cut university funding by £300 million? He says that he is considering a £7,000 basic fee. On 28 April this year, the leader of the Liberal Democrats—now the Deputy Prime Minister—said:

“If fees rise to £7,000 a year…within five years some students will be leaving university up to £44,000 in debt. That would be a disaster. If we have learnt one thing from the economic crisis, it is that you can’t build a future on debt.”

So what exactly is the difference—[Interruption.] That was the Deputy Prime Minister’s conclusion. What exactly is the difference between the £7,000 a year fees that he believed would be a disaster and the £7,000 a year fees that his Business Secretary now proposes? Promises were made by the Business Secretary and the Deputy Prime Minister at the last election that should not be lightly thrown away. The trust of politicians is a matter not just for the Liberal Democrats but of the integrity of this House as a whole.

Is it not true that Lord Browne’s report makes proposals that would leave many graduates paying off their debts when their own children start university? Is it not true that, while the average graduate today pays off their loan in 11 years, under these proposals the majority of students would not throw off the burden of debt for 30 years? Is it not true that the middle-income graduates—the teachers, police officers, engineers and middle managers, who are often the same people losing their child benefit—will pay more than their fair share? They will pay longer and pay more interest than the higher earners, who can pay off their loans more quickly. Is it not true that women will be in debt longer than men and pay more interest on their loans?

Will the Business Secretary be more explicit? Does he support the ending of the fee cap? A student taking a course costing £12,000 per annum will leave with a total debt, including maintenance, of £47,250, compared with the £32,000 debt that the Business Secretary says is the basic one. Can we not all recognise that, in the real world, too many able students will turn their backs on the university and the course best suited to them and be forced to shop around for the cheapest option? Will the Secretary of State accept that the Browne proposals on access to the most selective universities lack any teeth or any strength?

The Secretary of State once advocated a graduate tax because he believed that it could produce a manifestly fair and progressive system, with those who can most afford it making the greater contribution. Now, he has been told that he does not support a graduate tax. Given the promises he and his colleagues made at the election, does he not agree that we all have the right to demand that any proposals meet the same tests of fairness that he used to support?

May I welcome the right hon. Gentleman to his new post? He was a much respected Minister in the previous Parliament and was regarded as a man of considerable integrity, mainly because of his resigning from the Blair Government over the Iraq war. Whatever our differences, he will be respected for that decision.

I should be interested to find any quotation marks indicating that I have ever advocated a pure graduate tax. In the South Bank university speech, I advocated a progressive graduate contribution. That is what this statement is all about.

The thrust of the right hon. Gentleman’s comments related to deficit reduction—a problem on an enormous scale that we inherited from him and his colleagues. May I remind him that according to the analysis conducted by the Institute for Fiscal Studies, my Department—the one that he shadows—was, under a Labour Government, confronting cuts of 20% to 25%. About 70% of that budget is for higher education. He and his colleagues have already said that they do not accept the cuts in regional development agencies and they do not accept cuts in science. They were therefore planning to make massive cuts in the university teaching budget. It is just sheer hypocrisy to stand up here and tell us—[Interruption.]

Order. I apologise for interrupting the Secretary of State. I know that feelings are running high on this subject—[Interruption.] Order. The more noise there is, however, the slower progress will be. Very large numbers of Members wish to participate. I want to help the House, but the House has to be prepared to help itself.

I repeat that Labour Members, who landed the country in this enormous deficit problem, have to begin to spell out what it is that they would cut. It would include universities; let us be under absolutely no doubt about that.

The right hon. Gentleman had the extraordinary nerve to talk about building a future on debt. I and many Members will recall my warning the former Prime Minister five, six or seven years ago about the dangerous escalation of private debt in this country, which has led to British households having more debt in relation to their income than those in any other country in the world. This is what we inherited. He and his colleagues introduced a system of tuition fee funding that is built on debt. They introduced a system of repayment over 25 years; we are extending that, potentially, to 30 years. What is the fundamental objection in terms of personal debt? The right hon. Gentleman has given no convincing explanation of what alternative he is recommending.

I think we need to get to the bottom of this. The right hon. Gentleman did get around to talking abut the graduate tax. Is that now the policy of the Labour Opposition, or is it not? We know that the shadow Chancellor is opposed to it, and that his leader is in favour of it. The right hon. Gentleman is sitting uncomfortably in the middle. What is his position?

The right hon. Gentleman says that the policy recommended by the Browne report, which we have endorsed in outline, is hard on middle earners. Let us confront that proposition. We inherited a system that effectively amounted to a poll tax. That was the way in which the student tuition fee system operated. We required Browne to produce proposals for a progressive formulation. Such a progressive contribution would not have come about if this Government had not intervened and asked Browne to produce proposals. That is the commitment that we have made to middle earners, many of whom will not have to pay the full rate of tax.

Let me read the right hon. Gentleman a comment made by the independent Institute for Fiscal Studies. Opposition Members frequently quote its views, as they did in the aftermath of the Budget earlier this year. The IFS said that

“those in the bottom 30% of lifetime earnings would actually pay back less than under the current system”—

that is, the system that the right hon. Gentleman operated. Only the highest-earning 30% of graduates would pay back the full amount of their loans. That is the progressive system with which we are identified, and with which the previous Government had no intention of proceeding.

Finally, let me confront the pledge, the promise, that my colleagues and I—[Interruption.] Yes, I am confronting that issue: the issue of the pledge that my colleagues and I undertook to implement. In the current circumstances, we cannot implement it. I fully accept—[Interruption.]

Order. The Secretary of State must be heard. Members have challenged him. He is dealing with the point according to his own lights, and the House must hear him.

As I was saying, I fully accept that, but let me explain. I believe that Members in all parts of the House will share this experience. Like many of them, I was the first person in my family to stay at school beyond the age of 15. I went to university free of charge, with no fees or maintenance costs to pay. They were paid for me by the state.

Like many Members, I wanted to ensure that my children’s and my grandchildren’s generations enjoyed that free system of university education. In an ideal world, that is what we would do, but we are not in an ideal world. We are in a world in which we have inherited a massive financial mess. We have come to terms with reality, and it is time that the right hon. Gentleman and his friends did the same.

Order. First, I remind right hon. and hon. Members that questions must be about the policy of the Government: what it is, or what it should be. Secondly, in view of the very large number of Members seeking to catch my eye, I underline the importance of each Member’s asking a single short supplementary question—and, of course, I remind the Secretary of State of the merits of pithy replies.

I welcome the Secretary of State’s statement and commend the Browne report, which is a really constructive piece of work.

We need world-class teaching in our universities and we need world-class research in our universities, so reform must come, and we accept what the Secretary of State has said. Does he agree that the quality of student experience of teaching, tutorials and careers advice needs to be improved, and that we also need more innovative part-time courses?

I very much agree; indeed, one of the incentives provided by this new system will be encouraging part-time courses, and therefore part-time learners, who have been discriminated against in the past. It will also bring pressure to bear on universities to improve their teaching performance, which is highly variable. In the university system, promotion tends to be earned through research rather than teaching quality. Universities will now have to attract students, so they will have to provide quality teaching throughout the system. That is one of the big advantages of the reforms we are undertaking.

The leader of the Liberal Democrats said on 28 April that increasing student fees to £7,000 would be “a disaster”. If it was a disaster on 28 April why is it not a disaster now?

I have already explained the necessity, for economic reasons, of pressing ahead with these reforms. They have great advantages in themselves, but they also help us to address the massive deficit left by the previous Government, in which the right hon. Gentleman served throughout.

It was a great hero, I believe, of the right hon. Gentleman who said:

“When the facts change, I change my mind.”

When the facts change, does not the new Leader of the Opposition bury his head in the sand?

I apologise to the hon. Gentleman for having to deal with this matter in this way, but questions must be about the policy of the Government and, unfortunately, that one was not.

Does the right hon. Gentleman accept that if higher fees to attend the best universities deter poor students from going to them, the most able students will not go to the best universities and Britain will be the poorer for it?

Yes, the hon. Gentleman is right. There is a real issue here, and it relates to the Browne review’s proposals for variable fees, which I made very clear we are still considering. Let me set out the argument. On the one hand we have world-class universities—four of the 10 leading universities in the world are in this country and we want to keep it that way—and they are making a very strong case for variable fees. On the other hand, however, if that were to be accepted large numbers of people from modest backgrounds would be deterred by highly priced courses at universities such as Oxford and Cambridge, and we see the psychological impact of that—it is very real. We need to weigh up those two factors. That is why, although I have come to the House with the firm proposal of our support for the £7,000 limit, we want to consider further how we might balance those two issues in relation to variability of fees.

In welcoming the broad thrust of this report, may I say to my right hon. Friend that his two priorities for such public money as is available should be the protection of excellence and of the position of less well-off people who want to do courses?

Indeed. Those two considerations are at the heart of the Browne report, and that is one of the reasons we have gone along with the thrust of its recommendations. There are proposals that we still have to make—and which, of course, will depend on the spending review—in relation to the maintenance package of grants and loans, which will, of course, affect the least-advantaged people in society. I cannot give details on that today, but that central point is clearly uppermost in our policy.

Conspicuously absent from the Secretary of State’s statement was any projection of the amount of increased funding for universities that would accrue from these measures. Are they designed to provide extra funding for the universities, which we need for an advanced industrial economy, or are they designed just to finance cuts in public expenditure?

I am not going to announce a week ahead of the spending review the details of what it will entail, which is why I could not answer the specific questions the right hon. Member for Southampton, Itchen (Mr Denham) asked about percentages. Of course, as a result of the very difficult cuts we are going to have to make, there will be a replacement of Government funding for teaching with graduate contributions. That is very clear, and it was at the heart of the Browne report as well as of Government policy, but the upshot will be that there will be adequate funding for universities as a whole so that they are in a position to maintain their current standards of excellence. As the hon. Gentleman implies, they are world class and we must keep them that way.

As my right hon. Friend listens to the responses to the Browne report and develops the Government’s final proposals in the weeks ahead, can he tell me how he will ensure that our Government do not do anything to discourage young people from estates such as the Tabard Gardens or the Four Squares in my constituency, and millions of others, from going to university because of the risk of having significant debt at the beginning of their working lives?

Yes, indeed. We certainly need to be very conscious of the position of people at the bottom end of the social scale, which is why I emphasise the importance of a social mix in universities, and of course of middle earners too; this is not simply a question of the most deprived communities. Two issues affect the people about whom my hon. Friend is concerned. The first is the poverty of their own families, which is why we need to have generous support, through grant and loan provision, for maintenance. The other is the psychological impact of people being deterred by extremely high fees, which potentially some universities would charge if they were allowed unlimited permission to do so. That is why we are hesitating before accepting that recommendation and are considering carefully the very strict conditionality that would have to be attached to any movement on that score.

Does the Secretary of State agree that our higher education sector is one of the most successful in the world and is probably our single most successful sector, and that that is so not because of the top four or top six universities, but because of the 100-plus universities that provide a fantastic service? We had this blood on the floor when we introduced top-up fees all those years ago, but after we did it we could see that the money we raised flowed into university salaries and into research. Will he guarantee me not only that this money will flow into our universities, but that he will not cut drastically the universities’ budgets in a week’s time?

I can certainly guarantee the hon. Gentleman that these sets of proposals will be welcomed by the university sector; if he reads the response of Universities UK, he will find that it welcomes them.

I welcome the report’s recommendations to extend support to more part-time students and to raise the threshold to £21,000, both of which would benefit students at the university of Worcester, which I represent. However, may I urge the Secretary of State to ensure, in implementing this report, that such universities, which have a strong record of securing long-term employment for their students after graduation, are encouraged to continue to focus on employability?

Yes, there is a major problem of employability, as unfortunately we have a growing pool of graduate unemployed. At the same time, there is a chronic shortage in some subjects, notably science, technology, engineering and maths—STEM subjects—which suggests that the existing system is not giving the right signals to universities. What we certainly want to see is much greater attention being given to universities’ demonstrating their record on employability, performance and teaching, so that students can make informed choices in future.

Will the Secretary of State acknowledge that although the Browne report’s proposals address higher education institutions in England, they will have implications for such institutions in Northern Ireland? They will certainly have implications, by way of variable fees, for students who would wish to come to courses here. Will he discuss those implications with relevant Ministers in the Northern Ireland Executive and in Scotland, or does he hope by default to impose the policy changes that he has just undertaken on the devolved Administrations?

Of course we respect the separate position of the different nations of the UK, and I am very happy to discuss it with the hon. Gentleman.

The hon. Gentleman asks about Scotland. I was there last week discussing this with university authorities, who told me that the existing model in Scotland is not sustainable and that they may well have to move to a model similar to that in England and Wales. So I think that in Scotland, as elsewhere in the UK, these realities will have to be faced.

May I welcome Lord Browne’s report, the Secretary of State’s statement, and his recognition that a graduate tax would be ruinous for this country? Could the right hon. Gentleman reassure the House that under his plans, no student will be penalised for early repayment of their loan?

It is certainly feasible under the existing system—and it will be in future—for people to pay their obligations early, but we need to be very clear that we cannot allow very affluent people to be able to buy their way out of their obligations under a fair graduate contribution system. Anybody who has tried to pay their mortgage back early will have discovered that there is something called a redemption fee to maintain the integrity of the system. We need to look at ways of ensuring that there is no mechanism that allows people to avoid making a fair contribution to universities.

Can the Secretary of State confirm that when we set up the Browne review, we asked Lord Browne to look at an employer contribution? The Secretary of State said nothing in his statement about the position of employers, despite the fact that they clearly benefit from higher education. Will he take this opportunity to correct that position?

We will certainly look at that suggestion, but I have not heard any detailed, practical proposals from the right hon. Gentleman or anyone else on the subject. A good many courses at university, particularly apprenticeships at university level—at skill level and full level—are funded by employers, and I am sure that we would want to see that extended.

I also thank Lord Browne for his report, and am thankful for the influence of the Secretary of State and Liberal Democrats in the coalition Government; it has made the report rather more progressive than the original commissioners might have envisaged when the remit was set. Much of the attention has been on collection arrangements once people graduate, but far more attention needs to be paid to young people much earlier in the graduate journey, when they are teenagers making their decisions in, say, the deprived parts of Sheffield or Bristol, or even in the south Wales valleys. Will my right hon. Friend undertake to ensure that much more attention is given to that stage, so that children from poorer backgrounds see that university is for them?

Yes, absolutely, and that message fits in with the broader direction of Government policy on education. The simple truth is that very large numbers of people are being failed by the school system at present. They have to find a second chance, for example in further education colleges. That direction of policy—particularly with the idea of the pupil premium, which will help people through the school system—is very much part of our thinking, and we intend to carry that philosophy into the university sector.

The Secretary of State emphasises the importance of STEM subjects. What with today’s report, the propositions that are starting to emerge in relation to the comprehensive spending review, and the impact of changes to overseas student rules, does he not see that he is leading us headlong towards massive cuts in STEM provision? Which departments does he want to see closed, and which does he want to keep open?

I certainly do not want to see that outcome; we want to see the exact opposite. We want more investment in STEM subjects. The hon. Gentleman will know that a level of, say, £7,000 would not cover the full costs of many STEM courses, and the Government will continue to support them through the teaching grant.

I was lucky enough to go from my outstanding comprehensive school to a world-leading university, and then took time out of the work force to raise my family—a decision that I have never regretted. Millions of women choose to do the same. Can the Secretary of State assure the House that there will be provision, when the proposal eventually comes to Bill stage, for women like me—and, indeed, men—who choose to take time out to raise their family and then return to the work force?

Yes, indeed, and that is a very important consideration. Of course we want women to have equality. The gender gap has got to be closed, and the issue of taking time out is an important part of that. Of course, during the period that women—or men, in certain circumstances—take out of the labour force to care for their families, the real interest rate would not accrue.

Like the Secretary of State, I was the first person in my family to go to university. The key thing is that I am not sure that I would have gone if I faced the debt that is likely if the general thrust of Lord Browne’s report is followed, as the Secretary of State said it would be. What reassurance can he give young people from backgrounds like mine that they will not be unfairly disadvantaged by the reluctance of his Government to invest properly in higher education?

The Government are going to invest in higher education. It will be properly funded as a result of this package. I make the point to the hon. Lady again—I made it in my statement—that the average university graduate earns cumulatively over a lifetime well over £100,000 more than someone who chooses not to go to university. That is a substantial graduate premium. We need to communicate to many people in disadvantaged communities that it is in their interests to pursue higher education. We will make sure through the careers service, a proper system of advice and the support that we give in maintenance that they have that opportunity.

Will it not be a sad day for academic meritocracy if and when able students from poor backgrounds are deterred from going to top universities because those universities are allowed to charge more than other universities in fees to students?

Yes, the hon. Gentleman is quite right, and for that reason he will recall my comments about the need to be careful about following through the request of the Russell group universities for unlimited fees. There are serious problems with that. Of course there are advantages in terms of world-class universities, but we need to be careful about going down that road, and we will reflect further on it.

I strongly oppose variable tuition fees and a market in higher education, and so did the Liberal Democrats. May I tell the Secretary of State today that the Lib Dem website still has a six-point timetable for scrapping tuition fees, and it is in a section entitled “What we stand for”. The coalition agreement already includes provision for Liberal Democrats to abstain on the issue and not opt out from what they stand for.

May I ask the Secretary of State this question? Today he has nailed his colours to the mast on variable tuition fees and a market in higher education, but what is it to be for other Liberal Democrat Ministers? Is it to be their manifesto and a principled orange line in the sand or betrayal of their voters and a miserable white flag of surrender?

When the Government’s economic policies have produced the successful outcome that we all expect, we can return to the question of how universities can be supported in a more generous way, but at the moment we face a massive financial crisis that we inherited from the Labour party and we therefore have to make choices that he and his colleagues ducked.

Young people in my constituency have some wonderful options on their doorstep. There is Huddersfield university and the expanding Kirklees college, and some local engineering companies are offering apprenticeships. With that in mind does the Secretary of State wish to revise the target of 50% of young people going to university, or is he sticking by it?

We do not believe in prescriptive targets. The 50% target was a serious mistake, not least because it sent the wrong signals to the further education sector that it was undervalued and that vocational qualifications did not have the same status as graduate degrees. We intend to change that approach fundamentally and look at post-16 and post-state education as a whole, giving vocational and academic education equal status.

Does the Secretary of State agree that implementing Lord Browne’s review will lead to the financial collapse of 30 wide participation universities such as Bolton in my constituency, which has a number of mature students attending it? Will he ensure that the interests of students such as those attending Bolton university and others are protected?

I think the hon. Lady’s central point is that it is possible that some universities will be in financial difficulty. They already are under the existing system, and we are having to consider how universities in that position will be dealt with. The analogy is with the banking system. If banks collapse, the depositors are protected—in other words, the students are protected so that they can complete their education—but the management of failed institutions has to change. We are currently working through a failure regime to deal with institutions that find themselves in difficulties. The number that the hon. Lady mentions is almost certainly implausibly high, but there will be some.

Will the Secretary of State consider carefully how we can prevent students from being deterred from undertaking longer courses such as medicine and pharmacy—very able students in particular may be put off those courses—perhaps by introducing a three-year cap on fees?

The answer to that question is similar to the one that I gave on the other STEM subjects. Medicine is a costly course, which is why continuing support is needed through the teaching grant from Government to keep graduate contributions at a moderate and reasonable level, and that is what we shall aim to do.

I was one of 33 Labour Members who voted against the introduction of fees in 1998. I took that view then, and I have not changed it at all—I do not believe that it is unaffordable or unsustainable. May I suggest to the Secretary of State that the Government seriously attack the tax gap, as less than 10% of the tax gap would pay for fees or, indeed, a quarter of the amount of tax breaks for the rich on their savings?

I think that the hon. Gentleman will have to apply his considerable powers of persuasion to his Front-Bench team, because they have not yet caught up with his ideological journey.

Will my right hon. Friend consider a reduced graduate contribution for those subjects where we have a real need and where there is a skills gap such as maths, science and engineering?

I thank the hon. Lady for her question but, again, I have answered that in different ways. We accept that one of the fundamental problems at the moment is the imbalance in the graduate population. There is a severe shortage of engineers in particular, but in STEM subjects in general. Unfortunately, there is a growing pool of graduate unemployment in other areas, so we must support the STEM subjects, and we will continue to do so through the teaching grant.

The Secretary of State mentioned the advent of real interest rates, but he does not seem to understand that their introduction means that a maths teacher on a middle-income salary will ramp up a bigger debt than, for example, an economist in a multinational company. Is he trying to tell us that in reality injustice is the new fairness?

I know that the hon. Lady is highly economically literate, going back over her history, but I think that on this particular issue, she has not read the report or perhaps not followed it closely enough.

The proposal for real interest rates applies only above the £21,000 threshold. Some numbers were published on the front page of The Guardian this morning that probably gave rise to the conclusion that the hon. Lady has drawn. Those figures are wrong, and the Institute for Fiscal Studies, which was quoted, has disowned them. It is clear from the analysis that the structure is progressive, but not in the way that she described.

For many mature students, the most cost-effective way to pursue a university degree is to do so as close as possible to their own home. Will my right hon. Friend encourage universities to collaborate much more closely with the further education sector to use FE campuses to help them deliver higher education degrees?

That is a helpful intervention, and I completely agree. We certainly wish to see the university sector evolve in that direction more flexibly, providing more genuine choice, including two-year degrees, and portable qualifications between universities. The model that the hon. Gentleman described is very much the model of the future. I used to teach in a Scottish university where that was the norm, and that is a form of good practice that we could adopt here.

A number of Members have referred to the most regressive part of the report on variable fees, although it promotes as a positive the proposal that universities should compete on price. Will the Secretary of State give us his reassurance that he will look at that again to ensure that students choose the course best matched to their intellect and ability, not their bank balance?

We already have variable fees as a result of the system that was brought in under the last Government. The difficult issue now is how far to allow variability, particularly for a small group of universities that want much larger fees, and, as I have already said, I am very conscious of the problems that that would present.

To ensure that students do not end up with increased amounts of debt from which they then do not reap the rewards, what support does the Secretary of State intend to give pupils to ensure that they choose the right courses, and that when a course does not necessarily suit, a mechanism is in place to prevent them from being kept on it for the purpose of funding the university rather than their own education?

That is a good question about one of the imperfections of the system at the moment. Many young people go to universities completely unaware of the employment possibilities that arise from their university education, and one thing that we hope to ensure through the information systems that will develop is that people will know exactly the performance of the universities and departments that they intend to go to, and the employability that would result from that. I hope that that will avoid the kind of problems that my hon. Friend describes, which are currently very serious indeed.

Whatever the merits or demerits of the Browne review, will the Secretary of State admit that not just he or the Deputy Prime Minister but every single Liberal Democrat Member has broken a firm pledge that they made to the voters less than six months ago? Yes or no?

As I think I said earlier, the roads to Westminster are covered with the skid marks of different political parties changing direction on this issue, not least those on the Opposition Benches. I would say this at the present stage: the two parties in the coalition are now very much agreed on the way forward. When we look opposite, we see two fundamentally different approaches to higher education—the existing system favoured by the shadow Chancellor, and a new system of graduate taxes favoured by their leader.

We are all agreed on the need to ensure that the very best people go into our public services where perhaps salaries are somewhat lower. With those graduates now potentially facing largely inflated and increased debts, what assurances can we have that the very best graduates will be supported in going into our public services under these proposals?

Anybody going into relatively low-paid employment, whether in a vocational approach to public service or in other ways, will be protected both by the £21,000 threshold and the system of variable interest rates. Many, many people in low-paid occupations will not be required to pay off any accumulated debt. It will be written off at the end of the period as a result of the progressive element built into the proposals.

As has been said, every single Lib Dem MP signed the pledge—and appeared in a photograph—to vote against any fees increase. The question is: what will they choose—power or principle?

The Opposition do themselves no favours simply drawing attention to the fact that they themselves are hopelessly divided on the issue and have no answer to the issue of how higher education would be funded.

Yesterday, the Prime Minister said that coalition politics involved compromise, and he was absolutely right. However, will the Secretary of State accept that there has been compromise by many people who now accept that in the current economic climate it is no longer possible to abolish tuition fees at their current rate? Does he also accept that increasing fees to more than twice the level that they are at is a compromise that some people simply cannot and will not accept?

I know that the hon. Gentleman has strong feelings on the subject and we have debated it. The first part of his question posed the problem correctly. The idea of abolishing tuition fees or even freezing them at their present level is simply not feasible, and I think that he acknowledges that. We must work towards a level; I specified £7,000 on behalf of the Government, which we think is the only way in future in which universities can be properly funded to carry out the functions that he and all of us want to see them perform at world-class level.

The only thing that has changed since the Secretary of State and his colleagues put their skid marks on the student declaration before the general election is the scale and speed of the cuts that the Liberal Democrats have signed up to and are supporting the Tory party in carrying out. Children from many middle-income families will be turned from going to university as a result of these changes. If the changes come about, will the Secretary of State give an undertaking that any future changes will come back to the Floor of the House, as they have to now, and that they will not be able to be slipped through by some future Secretary of State who wants to increase fees even further and deter even more students?

I think that the hon. Gentleman came to the House the same year that I did. Before we get any more righteous indignation from Labour Members, I should say to him that he may remember campaigning on a manifesto that promised to abolish top-up fees but did absolutely nothing of the kind when the Government were returned.

Will the Secretary of State examine the international evidence that shows that countries with higher fees and a decent loan system to support them have higher participation from the lowest-income quartile socio-economic group? I am thinking of the US, which has 50% participation from the lowest-income quartile, and Australia, which has 30%. That compares with 17% in this country under the previous Government.

My hon. Friend is absolutely right and she is right to emphasise the fact that the approach that we are recommending is evidence-based. Certainly she is right about the combination of graduate contributions, which are progressive, and proper support in the form of maintenance for students from deprived backgrounds. In that way, we get high quality and social mobility as well.

In his remarks, the Secretary of State made reference to the pledge that he and some of his colleagues apparently signed. I have not seen it. Could he tell us what it says? Will he place a copy of it in the House of Commons Library, so that hon. Members can study it more carefully and perhaps give it a wider audience?

The sense of humour coming from Opposition Members is becoming a little bit tired even for those among their own ranks. If we want to play silly games, I am afraid that I will constantly have to go back to them and ask how, if they do not want a system of graduate contributions of the kind that we are recommending, they would fund the system, given the massive cuts that they would have to make if they were still in government clearing up the mess that they created.

I particularly welcome Lord Browne’s proposals about part-time students. My constituency is home to the Open university and I am well aware that part-time students are currently at a disadvantage because they have to pay up-front fees and that the part-time sector was hit badly by the previous Government’s decision on equivalent and lower qualifications. I draw my right hon. Friend’s attention to comments this morning from the vice-chancellor of the Open university. He urges the Government to seize this historic moment and, once and for all, level the playing field between full-time and part-time students.

My hon. Friend is quite right. More as a result of negligence than intention, the last Government did terrible damage to the Open university and Birkbeck. We are very conscious of that problem and of the need to encourage part-timers and treat them on the same basis as full-timers. He is right to point out that this morning there was a very positive endorsement of the Browne report and its approach from the heads of those two institutions.

The House will know that the National Union of Students will be holding a demonstration on Wednesday 10 November. Will the Business Secretary have the courage to come with me, face student leaders and explain why he has betrayed the promise that he made just a few weeks ago?

I am in constant touch with the National Union of Students. We have a very good dialogue with its representatives. They have made suggestions, some of which are helpful and some of which involve very substantial reductions in the amount of student maintenance support, to keep fees down to a level that they would prefer. We are continuing the dialogue. We welcome it, and it is good natured. We disagree on this particular point.

Will the Secretary of State confirm that the current system, in which students incur debt that they have to pay back when they finish, and do not have any advice or support in choosing the right courses or understanding their employability when they finish them, is significantly worse than what is being proposed today, which is more support and advice?

We have covered this point several times, but it is worth reinforcing. Simply introducing a higher level of contributions, albeit a fairer one, will not in itself produce good outcomes unless students are properly informed about the advantages and disadvantages of going to different institutions. That is a key parallel component of the policy that we are adopting.

Has the Secretary of State given any thought at all to the impact of these policies on Wales? I am thinking in particular of Barnett consequentials.

The Chancellor will announce his wider proposals on public spending, but as far as I know there is no intention to change the Barnett formula.

In many university towns, students play an important role in the local economy. Will the Secretary of State outline his proposals for how to support student living costs?

As I have indicated, student living costs and the maintenance to pay for them will be subject to a series of separate announcements. Once the spending review is announced, we will know how much it is possible to provide in the form of grants and maintenance loans. It is worth pointing out the base that we start from, which is that the current system of support for maintenance is probably the most generous in the world. As the hon. Member for Banbury (Tony Baldry) pointed out a few moments ago, it is quite possible that we could move to a more sensible system whereby many students study in their home town.

Are these proposed funding arrangements based on the current number of students attending undergraduate courses or on the inevitably reduced number who will attend due to very high fees? If fewer students attend university, does the Secretary of State expect that there will be still fewer students paying even higher fees in future, with fewer universities existing to supply their courses?

That question rather disregards past experience. There was a great deal of pessimism about the consequences of the system that the previous Government introduced. In the first year, there was indeed a fall in applications, but applications subsequently continued to rise. On the basis of our own historical experience and the experiences of other countries, we have no reason to believe that that pattern will not be repeated.

I congratulate my right hon. Friend on his courageous statement. Is not one of the great advantages of the coalition Government that Members on the Government Benches can disagree and reach a better policy? Some coalition Members might vote the other way, but the Government will continue.

We can disagree, but I think that we actually agree to a remarkable extent. However, there is a coalition agreement, and under its terms my colleagues who feel that our policy does not meet their expectations can abstain.

I made a pledge to students in my area that I would vote against an increase in tuition fees, and I will stick to that pledge. Further to the question asked by the hon. Member for Foyle (Mark Durkan), has the Secretary of State assessed the implications for the devolved Administrations? The implication for Wales could involve a sum as great as £140 million. Has he also discussed the matter with relevant Ministers?

We have certainly discussed the matter with relevant Ministers, and we can produce a formal analysis of what the policy will mean for different parts of the UK. That is a perfectly legitimate matter to pursue.

I still support the eventual abolition of all domestic tuition fees, although that is possibly more than six years off now. However, will my right hon. Friend confirm clearly whether he intends less well-off students to pay less while at university than they did under the Labour Government, and less well-off graduates to pay a smaller proportion of their wages in tuition fee repayments?

That is factually correct and has been endorsed this morning by the Institute for Fiscal Studies. My statement was originally going to say that 20% of graduates would pay less than they do at the moment, but I was fortified by discovering from the IFS’s commentary that the percentage is actually 30%. Almost one in three graduates will pay less than they do at the moment under the scheme that the Labour Government introduced.

Earlier, the Secretary of State used the term “hypocrisy”. As my hon. Friends the Members for Glasgow Central (Anas Sarwar) and for Leicester West (Liz Kendall) have highlighted, it is hypocrisy that he and every single one of his Lib Dem colleagues signed the National Union of Students election pledge just five months ago. My hon. Friend the Member for Cardiff West (Kevin Brennan) has asked what was in that pledge, so it will be useful for us to remind ourselves. The pledge said:

“I pledge to vote against any increase in fees in the next parliament”.

Will the Secretary of State confirm that he and all his Lib Dem colleagues will break the personal promises that they made to their local constituencies?

I signed that pledge with my colleagues, and I have explained the reasons why I did so. It was a stand from a commitment to try to keep universities free, which is what I enjoyed. I have explained, however, that in the current financial situation, which is truly appalling and which we inherited, all commitments and pledges will have to be re-examined from first principles.

I commend the Secretary of State for making his statement. Does he agree that the contribution made by graduates is not only economic and that it relates to social capital? They provide positive role models in society and make a contribution back into the community. The way we will achieve that is through the Finance (No. 2) Bill.

I think, if I understand the question correctly, that the hon. Gentleman is making the point that there are high social as well as private returns from higher education. That is one of the reasons why the Government continue to support it.

At the beginning of his statement, the Secretary of State commended my right hon. Friend the Member for Southampton, Itchen (Mr Denham) for his integrity in resigning from the previous Administration. Given that the Secretary of State has now told the House that he will not honour his pledge, will he show similar integrity?

I was completely sincere, and I commend the decision that the right hon. Member for Southampton, Itchen took. I hope that he will maintain that tradition of integrity by explaining how the Labour Opposition intend to finance higher education.

Although the Browne report was commissioned by the previous Government, it rightly received cross-party support in recognising how difficult the subject is. Is the Secretary of State as saddened as I am that, following the Labour leadership election, that cross-party consensus seems to have broken down? It is not working in the national interest.

I genuinely hope, even at this late hour, that that consensus has not broken down. The right hon. Member for Southampton, Itchen was ambiguous in his approach to graduate tax; he referred to it, but he did not commend it. It may be that that is part of a journey—a rather short one—back to some form of consensus on higher education. There have been occasions when the parties in this House contributed greatly to long-term economic thinking. On the pension age and the age of retirement, for example, we came together on very difficult decisions. It has been a struggle to get all three parties to face up to the realities of the costs of higher education, but I have not given up on the Opposition.

The Secretary of State has said that before May he did not consider that a huge increase in tuition fees was needed or desirable for the long-term funding of our universities and students. The only thing that appears to have changed in his thinking is his belief that the deficit has to be wiped out very quickly. Why are two or three whole generations of students being asked disproportionately to pay for that deficit? Is he not mixing up the long term, which is what the Browne report was supposed to be about, and the short-term issues relating to how we overcome the deficit?

I know that the hon. Lady did not mean this, but it is often believed that fees are paid by students as they study, but they are not. We are talking about a graduate contribution that extends for a considerable period and that will relate to the ability to pay. She seems to be minimising the substantial financial problem that the Government have inherited, which is severe. I hope that Opposition Members will become a little more serious about the country’s financial problems.

I congratulate the Secretary of State on his statement and Lord Browne on his work. As the Secretary of State works on his proposals on encouraging lower-income students who might never have thought that university was for them to go, will he consider the work of organisations such as Aimhigher, which is based at the university of Winchester? It has an excellent track record in getting such students through to higher education.

We definitely need to learn from that experience. Most of the things that we have discussed today are essentially about money, but getting into higher education is about not only money, but encouragement, support and mentoring. The scheme that my hon. Friend has mentioned is certainly one from which we can learn.

Is the Secretary of State telling the House that he did not understand that the United Kingdom was in dire financial straits when he signed the pledge five months ago?

Of course we realised that the financial position of the country was serious. We must now make very difficult choices on the back of that, which I am sure is understood as well in Northern Ireland as it is everywhere else in the UK. I am sure that the hon. Gentleman’s party, which shares in government in Northern Ireland, accepts that extremely difficult decisions on higher education need to be made there as elsewhere.

Like the Secretary of State, I signed the pledge, which, as I remember, calls for a fairer system. I therefore congratulate him on lobbying Lord Browne into producing a report that will lead to a fairer system—the system will be more progressive and part-time tuition fees will be scrapped. However, that does not mean that the system is fair enough. Will the Secretary of State put me in touch with his private office, so that we can look at the nuances of some of the modelling of the net present values?

My hon. Friend asks me to share the modelling with hon. Members. I am improvising, but I do not see any problem with that. There is probably an intellectual property issue, but in the public interest, we should of course share the analysis.

What will be the effect of the proposals on the funding of universities such as Bolton, which has widened participation by attracting poorer and part-time students, especially if they feel that they must charge less than the £7,000 that he suggests they may charge?

I do not know the full details of the financial position of the university of Bolton, but I would have thought that it could draw two sources of strength from our approach. First, our approach encourages part-time students by making university more financially attractive for them. Secondly, Bolton can choose to attract students by offering a lower graduate contribution, which it may well succeed in doing.

What steps are the Government taking to encourage the development of a greater endowment base for university funding, thus eventually reducing universities’ reliance on taxpayers and students? If the Government are about to dispose of a large number of properties and fixed assets, should not the proceeds be used for long-term investment rather than as a one-off boost to Government funds?

I have not referred to endowments, but it is probably fair to mention that there is quite a substantial section on them in the Browne report, which I hope that hon. Members look at. The report says that endowments are a potential additional source of finance beyond graduates and the Government. As my hon. Friend will know, endowments are a major source of funding in the United States, and they need to be made attractive and encouraged in this country. Obviously, I cannot predict what the Chancellor of the Exchequer will do in his next Budget, but such encouragement relates in large part to tax treatment.

The publication of the Browne report and the Government’s response this afternoon marks the point of no return in the marketisation of higher education. May I ask the Secretary of State, who I am told was once a social democrat, whether he is happy with letting the market rip in higher education?

Markets are not being allowed to rip—if they were, I would not have mentioned a £7,000 level; we would have simply lifted all restrictions, and there would be no question, as Browne suggested in his report, of extensive conditionality. If the hon. Gentleman is worried about that problem, why did he participate in a Labour Government who introduced variability in fees?

Given the Government’s determination to link graduate contributions with ability to pay, will my right hon. Friend ensure that those with the greatest ability to pay, who can afford to make payments early and therefore choose to avoid progressive interest rates, will still be required to make the greatest contribution?

Yes. One of the scandals under the existing system is that affluent people can take advantage of loans at subsidised rates and invest the money. That has happened on a substantial scale, but it will no longer be attractive to people on very high incomes.

I urge Labour Members to have a careful look at the income analysis in the report. The explanation of how the interest rate relates to work is technical and complicated, but even with a system of early repayment—I am sorry to go into economics jargon—the net present value of high earners’ contributions will remain higher than for any other income group.

The Secretary of State has said many worrying things, but in particular it worried me that he said that it would be better if a higher percentage of students went to universities or colleges in their home towns. If he really expects every young person in the Rhondda to aspire only to go to a university in Glamorgan, he will be letting down future generations. I want to ensure that there is no disincentive for rich or poor kids to go on the right course for them, whether in England, Wales or wherever.

Of course nobody wishes to stop people travelling to other communities in pursuit of the best course—[Interruption.] I was simply making the point that for many universities, especially those that absorb people from less privileged backgrounds, the students live locally in their home environment. That is the common practice in London, Glasgow and other big cities. It is not true for all, and we do not want a one-size-fits-all system. We merely want to have more flexibility and choice, and that is one of the models available.

Over the past 10 years, we have seen an 83% increase in the number of children from Walthamstow going on to higher education as a result of the previous Government’s work on increasing participation. If we do not see a similar trend under the new Government and these proposals, will the Secretary of State commit to coming back to the House to justify the waste of potential that that represents to our country?

We certainly regard it as a reasonable challenge to ensure that the higher education system takes a larger proportion of people from disadvantaged backgrounds, and I have made that very clear. On most measures, social mobility declined under the previous Government.

Is it the Government’s intention to accept the recommendation to restrict access to student finance on the basis of aptitude, and if so will the Secretary of State consider the view that UCAS points are not always the best indicator of future academic potential? What will he do to encourage young people who might show future potential, especially those from disadvantaged backgrounds?

There are proposals in the Browne report on the reform of what is called the tariff system. We need to look at those carefully, as they are technically complex and may well have the unintended consequences that the hon. Lady has described. However, I am not making a recommendation on that point at the moment.

The minimum tariff entry standards, which have just been mentioned, include a system for rationing provision based on academic ability. What is the assumption of the number of points that will be needed in the Secretary of State’s current modelling of student finance?

Those issues are completely unconnected. As I have just said, the Browne report includes recommendations on the reform of the tariff system, which we need to examine carefully. Admission to university is already based substantially on UCAS points and, in that sense, it is highly meritocratic.

In the Secretary of State’s replies to several questions from my hon. Friends, he has acknowledged that if the cap on fees is lifted, we risk creating a situation in which families will have to sit down with their children and make a decision about the university of their choice on the basis not of their qualifications or ability to learn, but of their ability to incur huge levels of debt. If he acknowledges that, will he reject that free market now—or is that another Liberal Democrat principle that has been thrown out of the window?

Nobody is suggesting—I have never suggested this—a free market in this area. The same points were made several years ago when we debated the fee-based system introduced by the previous Government, who accepted that on the balance of argument—the case was made initially by the right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett), who was ahead of his time on this issue, and later by the new shadow Chancellor—the system had to move in that direction. It is a highly constrained market and not a free market environment at all.

As a college principal over the past few years, I was proud to witness the growth in aspiration and widening participation of students from all backgrounds in Scunthorpe. One analysis out today suggests that implementing the Browne proposals as they stand will result in 17,500 fewer students going on to university. Does the Secretary of State want fewer university students and fewer universities?

As I explained earlier, when the previous Government put in place a substantial increase, numbers initially fell before subsequently recovering. As I said in response to earlier questions, it is not the job of the Government to be prescriptive about numbers. I return to the point that I made at the outset: there is a danger of looking at universities in isolation. There are many further education options for people post-18, including apprenticeships and vocational training. We have to treat all those on their merits and give them equal status. The number of people going to university is not, in itself, a useful measure of anything.