Skip to main content

Higher Education Funding

Volume 517: debated on Wednesday 3 November 2010

With permission, Mr Speaker, I would like to make a statement on higher education funding and student finance. This follows the statement made by my right hon. Friend the Secretary of State for Business, Innovation and Skills on 12 October.

Our higher education system has many strengths, but also faces challenges: the need for more focus on the student experience, the need to widen access and the need for sustained funding. These challenges led the previous Government, on a cross-party basis, to set up Lord Browne’s review. We are grateful to Lord Browne for his excellent work. I think he has made us all re-examine our positions.

On 12 October, my right hon. Friend said that the coalition endorsed the thrust of Lord Browne’s report, but was open to suggestions, before making specific recommendations, which would be radical and progressive. We have listened very carefully and with open minds, so I can now give the details of our proposals.

First, we will introduce a progressive system of graduate contributions to the cost of their university education, with nobody having to pay up-front fees. Lord Browne suggested that there should be no cap on the graduate contribution; we believe that a limit is desirable and are therefore proposing a basic threshold of £6,000 a year, and in exceptional circumstances there would be an absolute limit of £9,000. No publicly funded university will be able to charge more than that for its undergraduate courses. Because there will be a cap, we see no need for institutions to pay back a proportion of the graduate contribution as a levy to the Exchequer, as proposed by Lord Browne.

We are also proposing a more progressive repayment structure. At present, graduates start repaying when their annual incomes reach £15,000. We will increase the repayment threshold to £21,000, and will thereafter increase it periodically to reflect earnings. The repayment will be 9% of income above £21,000, and all outstanding repayments will be written off after 30 years. Raising the threshold will reduce the monthly repayments for every single graduate.

We will introduce a real interest rate on a progressive taper. For graduates earning less than £21,000, the real interest rate will remain at zero. For graduates earning between £21,000 and about £41,000, a real rate of interest will be tapered in to reach a maximum of inflation plus 3%. When graduates are earning more than £41,000, they will be making a full contribution to the costs of the system, but still incurring interest well below normal commercial rates. Under our proposals, a quarter of graduates—those on the lowest incomes—will pay less overall than they do at present.

The Government are committed to the progressive nature of the repayment system. It is therefore important for those on the highest incomes post-graduation not to be able to buy themselves out of the progressive system unfairly by paying off their loans early. We will consult on potential early repayment mechanisms similar to those paid by people who prepay their mortgages. Those mechanisms would need to ensure that graduates on modest incomes who strive to pay off their loans early through regular payments are not penalised. For example, a 5% levy might be charged on additional repayments each year over a specified amount such as £1,000 or £3,000. Alternatively, those on higher incomes—for example, over £60,000—who made an additional repayment could be required to pay a 5% levy on that sum.

Although participation in higher education has improved in recent years, there has not been enough progress in securing fair access to some of our best-known universities. We can make progress by improving the school attainment of pupils from disadvantaged backgrounds. That is why the Government are investing in a new premium for two-year-olds, and in the pupil premium. However, we want that focus on improving the life chances of those from disadvantaged backgrounds to continue to university. For that reason, as the Deputy Prime Minister has already announced, we will also establish a new £150 million national scholarships programme, which will be targeted on bright potential students from poor backgrounds to encourage them to apply to university and meet their aspirations.

All universities that want to charge a higher graduate contribution than the £6,000 threshold will be obliged to participate in the national scholarships programme. We will consult students and university organisations on the details. We will seek to increase the leverage of Government funding by securing matched funding from universities. Our current preference is for universities to offer scholarships to targeted students, including the principal beneficiaries of the pupil premium. That would mean that at least their first year at university was free. Other attractive ideas include expanding the model of a foundation year for young people with high potential but lower qualifications.

To ensure that the universities that charge tuition contributions above the £6,000 threshold take account of their particular responsibilities to widen participation and fair access, we will introduce a tougher regime of sanctions. Each institution will draw up a new access agreement with the Office for Fair Access. It would be expected to include activities such as outreach initiatives to attract more pupils to apply from disadvantaged backgrounds, and targeted scholarships and financial support for poorer students. OFFA will agree with universities a programme of defined progress each year towards their access benchmarks as calculated by the Higher Education Funding Council. If they are not making adequate progress towards those benchmarks, a mechanism will be established to allow OFFA to redirect a proportion of the income from contributions over £6,000 to specified access activities.

Our student support system is one of the most generous in the world. We will make it more progressive. Lower-income students, while studying, will get improved help with their living costs. Students from families with incomes of up to £25,000 are currently eligible for a maintenance grant, which is not repayable, of £2,900; we will increase that to £3,250. Those from families with incomes of up to £42,000 will be entitled to a partial grant. There will also be increases in maintenance loans for students from families with incomes from £42,000 to £60,000. We will also retain a higher maintenance loan for those studying in London.

All parties agree that the current system gives a raw deal to part-time students. They are particularly likely to be mature or disadvantaged students. Even the great higher education reports of the past, such as Dearing and Robbins, largely ignored them. Lord Browne has confronted the challenge head on. At last, under our proposals part-time students will be entitled to a loan for tuition on the same basis as full-timers, and this support will be available to those studying for at least a third of their time, unlike the current grants for tuition, which are only available to those studying for over half their time.

Overall therefore, this is a good deal for universities and for students. The bulk of universities’ money will not come through the block grant, but will instead follow the choices of students. It will be up to each university or college to decide what it charges, including the amounts for different courses. All universities and colleges, whatever contribution they decide to charge, will be expected to publish a standard set of information about their performance on the indicators that students and their parents value: contact hours, teaching patterns and employment outcomes. We also propose to open up higher education provision to new providers, including further education colleges. These proposals offer a thriving future for universities, with extra freedoms and less bureaucracy, and they ensure value for money and real choice for learners.

We need to act quickly so that prospective students know where they stand. We intend to implement these changes for the 2012-13 academic year. We will therefore bring to the House our proposals on changes to graduate contributions before Christmas. Both Houses will have the chance to debate the proposals before a vote is taken. I am today placing in the Libraries of both Houses additional material that explains the modelling that we have done. We will also take powers next year to set a real interest rate for graduate contributions. We will, as usual, publish the details of the university financial settlement for 2011-12 in our annual funding letter to HEFCE next month.

Later this winter, we will publish a higher education White Paper covering the wide range of long-term issues that arise from Lord Browne’s report. We will hope to bring forward legislation in due course. Given the time scales, we would not expect to be implementing those changes before the 2013-14 academic year.

Lord Browne’s report has rightly generated much debate. When the review was established exactly a year ago, it was on a cross-party basis. I hope the Opposition will feel able to maintain that spirit. From our side, the two parties in the coalition have accepted the report’s broad thrust and are today putting together a single, coherent and progressive policy. It will deliver a better deal for our students, for our graduates and for our universities. I commend it to the House.

I am grateful to the Secretary of State for giving me an advance copy of his statement, but is not the truth that what he has announced today is a tragedy for a whole generation of young people? It makes it much more difficult to protect our world-class university system and, for the country, puts the very building blocks of our economic future at risk. Even though there has been movement since the Business Secretary’s statement, is it not the case that our students will now face some of the most expensive and worst-funded degrees of any public university system, with students paying fees that are higher than those of the average public university in the United States? Our universities will be plunged into turmoil, facing massive funding cuts just when we need them most, supporting economic growth. All this because of choices being made by the coalition. The first is the choice to make reckless cuts in public spending. The second is the choice to put a disproportionate share of those cuts on to higher education. The third is the choice to bring about the biggest and most ideological upheaval in higher education since the Robbins report in the 1960s. All this is set to be rushed through Parliament without proper consultation with the sector and without our even yet having a higher education White Paper to tell us how this brave new world is supposed to work.

Is the reason why fees will be so high not very simple? Despite the Prime Minister’s claim that he wants to see well-funded universities, is the truth not that what motivates today’s announcement is a massive cut in the funding of universities? We are talking not about a cut of 19%, 25% or even 40%, but about an almost 80% cut in the undergraduate teaching budget. Is the truth not that universities will lose millions of pounds, that the London School of Economics stands to lose all its teaching funding, that Oxford and Cambridge between them will lose almost £56 million a year in teaching funding, that Sheffield Hallam university will lose more than £63 million and that Kingston university will lose more than £44 million? The Government do not have to do this, but the Minister and his friends in the Conservative party want to do it. They believe that a crude competitive market, with the Government largely kept out of the way, is the best way forward for higher education.

Like Lord Dearing, Labour Members believe that higher education funding should be a partnership between taxpayers and graduates. It should involve the taxpayer because the whole country benefits from good higher education and graduates get a direct personal benefit. So how much extra income will our universities have as a result of the Minister’s proposals today? Our fees brought more than £1 billion extra into higher education. Most graduates will now be expected to pay for the whole cost of their degrees. Many courses vital to a growing economy, such as those in the creative arts and digital industries, will receive no public funding. Why is this country joining Romania as the only OECD country to be cutting investment in higher education and science?

Has not the right hon. Gentleman managed to produce the worst of all possible worlds? Not only will most graduates be paying off their debts for 30 years and most universities will need to charge fees of at least £7,500 just to avoid losing money, but with some universities charging £9,000 many students will feel forced to choose the cheapest course, not the one that is best for them. Why does the coalition reject any idea that universities, employers, students and the Higher Education Funding Council should work together to make sure that we have the quality higher education that we need? Everyone believes that student choice is important, but why do the Government rely entirely on the choices made by students, who have very different levels of knowledge, aspiration and confidence about what higher education can offer them?

Labour Members welcome moves to improve access for those from low-income backgrounds, but does the right hon. Gentleman recognise how unfair the system will seem to those on middle incomes, who have worked just as hard to help their sons and daughters get to university? The Business Secretary says that he is against a graduate tax. Is it not true that Lord Browne proposed a system where more than half of graduates will pay 9% of their relevant income every year for 30 years and never pay off their debts? How many more now will never pay off their debts as a result of the Minister’s proposals? Will he confirm that those who are wealthy enough to pay up-front fees will pay less than those on middle incomes, such as teachers, police officers and engineers, who have to take out a loan? He says that universities will be able to charge the most fees only if they are working to increase access for those from low-income backgrounds, but is the truth not that universities are already carrying out the very measures he says they will now have to carry out? So his comments today on access are just a meaningless fig leaf.

The right hon. Gentleman has proposed today that higher earners should pay higher interest rates. Will that raise extra money? If so, will the extra payments go back into higher education or back to the Treasury? This is the day we found out how much Liberal Democrat ministerial cars cost—£9,000 a year, for students. All those principles so boldly championed have been forgotten; all those solemn promises to students and their families up and down the country waved away. All so that the right hon. Member for Tatton (Mr Osborne) can carry on as the real Deputy Prime Minister. After weeks of being told that Liberal Democrat Back Benchers were in full rebellion, have tuition fees been reduced as a result? No, they are set to treble. What a huge success those Back Benchers have had and how they have made their leadership listen. This is not a sustainable system of university funding and it is not a fair system of student finance. We will not support it.

What we just heard from the hon. Member for Harrow West (Mr Thomas) was a classic old Labour attack, when all it can do is complain about cuts and make its own uncosted and indiscriminate public spending pledges. Last week we heard from the shadow Business, Innovation and Skills team that they did not approve of what we are doing on regional development agencies. They want to spend more on RDAs. Today we hear that they want to spend more through HEFCE on universities. How would they pay for it? What is the costing of that? Are we supposed to cut the science budget, which we are protecting so that we can invest in our future? Are we supposed to cut apprenticeships, which we are increasing by 50,000, or is it just a general belief that public spending can rise, from the party that brought us the fiscal crisis that we are having to tackle?

Even with the fiscal crisis that we face, we are nevertheless able to produce proposals that are progressive and recognise that there is a continuing role for Government. It remains the case that of every £100 that Government loan to students, just as with the previous Government, we accept that we will not get back £28 because it is a necessary subsidy for poorer students and people who have intermittent earnings. We have improved the maintenance package. As part of our Government’s commitment to our universities, we have secured a ring-fence for science and research spending, much of which money will go to our universities.

The hon. Gentleman asked specifically about student choice. I thought his point about student choice got to the heart of the difference between us in the coalition and the Opposition. He says, “You can’t trust students to choose.” We say, “Of course, we trust students to choose, but we are committed to more information, better information, advice and guidance, and proper careers advice because we want to see students driving the system.” That is what we believe in, and students will know that the Opposition do not trust them.

The hon. Gentleman asked about interest rates. The higher interest rate of the retail prices index plus 3% will go into financing the system as a whole, but it is a more favourable interest rate than anyone would be able to secure on the open market for a loan of the sort that is being offered—an unsecured loan that does not have to be repaid if the borrower’s income falls below £21,000.

What was missing from the hon. Gentleman’s speech was any clear Labour alternative. He announced that he was against this policy, but he did not explain what his policy was. Surely we are at least entitled to know whether he agrees with his own leader. The Leader of the Opposition—I quote from only 14 October this year—said:

“I do favour a graduate tax. I said that during the campaign and that remains my view . . . I am someone who believes in the graduate tax.”

That is the policy of the Leader of the Opposition. As for the shadow Chancellor, he has a rather different view. Also in the past few weeks he said:

“I like the two lads”—

that is, the right hon. Members for Doncaster North (Edward Miliband) and for Morley and Outwood (Ed Balls)—

“dearly, but I can’t understand why they are pushing the Graduate Tax and even going further in suggesting the introduction of tuition fees was one of the things we got wrong. It wasn’t. . . It was one of the things we got right.”

If Labour cannot even resolve a fundamental disagreement between the shadow Chancellor and the leader of their party, why should we take what it says on this subject remotely seriously?

I thank the Minister and the Secretary of State for working constructively together to construct a graduate contribution scheme that has many progressive elements in it and is a much fairer system than was left behind by the last Labour Government, especially for students who study part-time. But the Minister knows that my concern, and that of my colleagues, has always been to make sure that students from poor backgrounds are not put off accessing the best universities in our country. Will he confirm that the access arrangements that he outlined will be rightly demanding of universities, but will be transparent and easy to understand for prospective students?

The hon. Gentleman makes an important point. He is correct that part of the process whereby the coalition developed these policies was a recognition of the importance of improving access to some of our most prominent universities. We are absolutely committed to what he proposes.

Order. A very large number of colleagues are seeking to catch my eye so, as usual, brevity from both Back Bench and Front Bench is vital if we are to make some decent progress.

May I first repeat to the Minister the commendation expressed by my right hon. Friend the Member for Southampton, Itchen (Mr Denham) on the statement of 12 October for the work of Lord Browne? On any basis, whatever the final view that people take, it was an extraordinary effort.

May I press the Minister on what will happen to the Exchequer contribution to universities? That is a matter for the Government, not for Lord Browne, and it seems to us in the Opposition to be the most serious defect in what the right hon. Gentleman is now proposing—almost that pound for pound, the increase in fees will be used to offset a reduction in Exchequer contribution.

Our proposals do, indeed, save public money, but they are not simply a matter of saving public money. They are also a reform of higher education in universities, which we believe will strengthen them and offer a fair deal for students, especially students from poor backgrounds. The overall position is that we will set out in the letter we will be sending to HEFCE at about the end of this year what the teaching grant is, but much of the money that currently reaches universities through the teaching grant and through HEFCE will in future get to universities via students and through the choices that they make. They will not have to make any up-front payment, but they will be expected to make a graduate contribution after they are earning in order to pay for the university education that they enjoy.

I particularly welcome the statement today from my right hon. Friend as it relates to part-time students in further education colleges, which is good news for the sector. Does he agree that it is essential that we have well-financed and excellent, world-class, independent universities offering a good student experience and student choice?

I am grateful to my hon. Friend. He is right, and I know that he was a lecturer in an FE college before. The opportunity for the delivery of more higher education in FE colleges is an example of one of the many freedoms that we are trying to introduce.

The Minister has rightly emphasised measures taken to improve access for low-income students. In my constituency, West Bromwich West, the education maintenance allowance, coupled with the Aimhigher project, have made significant improvements in the take-up of university places by lower-income students. Can the Minister guarantee that whatever steps are taken to replace those—if indeed they are replaced—the level of Government funding under the previous Government will be maintained?

What I can guarantee is that we will place on universities an obligation to achieve the things that were previously being achieved by the kind of schemes that the hon. Gentleman described. That, we think, is the best place for the obligation to fall, and we are looking carefully at the best and most effective way in which that can be done, but it should be for individual universities to come up with their proposals for how they can best improve access.

I congratulate my right hon. Friends on achieving increased funding for the university sector while avoiding students having to pay anything up front and not having to start repaying their loans until they are almost on average earnings. I also welcome the impetus behind attracting students from poorer backgrounds. May I draw the attention of my right hon. Friend to the foundation course offered by King’s college London’s medical department, and the impact that that is having in getting poorer students in to study medicine? Could he comment further on initiatives to encourage universities to that course of action?

That is exactly the kind of initiative that we wish to encourage. It is obviously up to individual universities to come up with proposals that they wish to put forward, but I agree that that proposal is a very interesting model from which we can learn.

What analysis has the Minister made of his proposals on our world renowned institutions, such as the music and dance conservatoire Trinity Laban in my constituency?

I am not aware of the specific financing point that the right hon. Lady has in mind. I have to say that I had an interesting discussion with our drama schools and conservatoires and I felt I was able to persuade them that many of our ideas would give them the greater freedom they wished for.

The Minister of State and our right hon. Friend the Secretary of State both well appreciate the long-established reasons why I cannot go along with this particular direction of travel. It is to do not just with the last election but with the two previous general elections, during which I had the privilege to lead the Liberal Democrats. We made a lot of this policy area, as the Minister well knows.

That being said, may I come back to what the Secretary of State said to me in the House on these matters on 14 October? He referred to

“the growing funding crisis in Scottish universities”.—[Official Report, 14 October 2010; Vol. 516, c. 469.]

We all acknowledge that whatever one’s view of this policy in England, there is an immediate knock-on financial impact on the Scottish sector, particularly on those Scottish universities in the Russell group. As the Minister is coming to visit Glasgow—we are looking forward to welcoming him—will he confirm that it is of intense importance that Ministers in London keep the communication line open with Scotland to ensure that we do not skew the playing field intellectually within the United Kingdom?

I accept the right hon. Gentleman’s point—it is very important that we consider the links between the English and Scottish systems while respecting the Scottish devolution settlement that means we do not have direct responsibility for the teaching settlement. Of course, research is also a UK-wide responsibility and that is an area in which we are committed to supporting Scottish universities through the research funding. Of course, as my right hon. Friend the Business Secretary made clear the other day, we accept the right hon. Gentleman’s invitation to consider the Scottish angle.

Tuition fees—started by Labour and taken up with such relish by the Con-Dem Government—could, as the right hon. Member for Ross, Skye and Lochaber (Mr Kennedy) said, have a disastrous impact on Scottish universities. Will he therefore pledge not to bully and cajole further the devolved nations to follow these appalling proposals? Will he respect our tradition and culture of free education in Scotland?

I do respect the devolution settlement. From reading the press, it is clear that there is a growing debate in Scotland about how Scotland is to finance its universities in the longer term. I watch with interest some of the suggestions that are emerging as part of that Scottish debate.

May I welcome the statement by my right hon. Friend, particularly for part-time and disadvantaged students? As a recent visitor, he knows that Reading has an excellent university whose success has been partly constrained by a central cap on student numbers. Will my right hon. Friend confirm that under his plans universities will now have the freedom to recruit students in an open market?

I do remember my visit to the university of Reading, which is a very impressive university. One of the chapters in Lord Browne’s report tackles the crucial question of how we can have greater freedom and flexibility in the regime on student numbers. Our proposals today do not directly touch on that, but it is one of the issues that we want to tackle as we put forward our long-term response to Lord Browne. Our belief is in greater freedom and flexibility for individual universities.

Does the Minister understand that this is fundamentally about trust in politics and will he confirm that all his key proposals, including the huge cuts in teaching funding, will be subject to a vote in this House so that those on the Government Benches—including the Business Secretary—who are so shamefully breaking their promises can be held to account?

I thought that my right hon. Friend the Business Secretary, in his statement on 12 October, set out very powerfully the reasons why we offered this broad endorsement of Lord Browne’s proposals. We are of course bound by the coalition agreement and we believe that these proposals meet the criteria set out in the coalition agreement. Of course there will be an opportunity for the House of Commons to vote on them.

On Friday, I will be attending the graduation ceremony of Bournemouth university, voted Britain’s No. 1 new university. Future graduates of Bournemouth and other universities will welcome the Minister’s proposal to increase the repayment threshold to £21,000. Is he in a position to give the House more detail on how that will be reviewed in coming years so that the threshold goes up along with average earnings?

It clearly will be important to uprate that figure periodically on the basis that my hon. Friend suggests, and we will consider that. He is absolutely right that one of the most progressive features of these proposals is the fact that the repayment threshold, which is currently £15,000, will increase to £21,000— different from a graduate tax, which would have meant people making higher payments as soon as their incomes went above £6,500.

What analysis has been undertaken to consider the differential impact on different universities, different types of universities and different faculties? Will the Minister publish any such analysis, because it is quite clear from discussions with some vice-chancellors that some institutes are at risk as a result of the proposals?

The crucial decisions will be taken by students. It will be the universities that win the students that also win the funding that comes with the students. It is right that we must expect a diversity of responses from universities. When it comes to individual departments, universities will wish to consider whether they have a single charge at an agreed rate across all their departments or whether they want to propose different charges for different departments. That will be a decision for them.

Can the Minister tell the House which categories of future part-time or full-time students in Southwark and everywhere else in England will be financially better off under these proposals than under the current arrangements?

We believe that people will be assisted in several ways. The increase in the maintenance grant for the poorest students at university is a clear gain for them—an improvement in the current system. In fact, we believe that more than half a million students will be eligible to get more non-repayable grant for living costs than they do now. We believe that about a quarter of graduates will contribute less than they do now, and indeed around half will have some of the balance written off. We have tried to rise to the challenge of ensuring that this is a progressive settlement.

The hon. Gentleman asked about part-timers. We estimate that about 60,000 part-timers are currently eligible for a tuition grant, and under our proposals about 150,000 may be eligible for loans on a more extensive basis than at present.

The decision to withdraw state funding from arts and the humanities entirely—from politics, geography and history—is a huge constitutional decision that cuts to the heart of what it means to be a democratic country. Will the Minister confirm that there will be a vote on the Floor of the House, not in a Committee room, and that the entirety of his proposals—widening participation and the fee levels—will be debated together?

There will be a vote on the changes that are necessary in the regulations for fees that are in the legislation that we inherited from when the right hon. Gentleman’s party was in government. Yes, I fully recognise that this is a matter of great interest to Members on both sides of the House and we undertake that that debate should take place on the Floor of the House. The exact amount of time will of course be for the usual channels and party managers to decide.

Is the Minister aware of the words of Michael Arthur, chairman of the Russell group of universities, this morning? He said of the coalition’s funding initiative that it sends a signal that the Government recognise

“the importance of higher education to the future of our country, its economy and our ability as universities to help the country out of recession.”

I did hear that interview and I thought that the leader of the Russell group made the point very well. We are backing our universities. The combination of the new freedoms we are offering them today and the excellent settlement for research and science in the comprehensive spending review enables them to go forward on a solid footing.

Many of the students at Liverpool’s three fantastic universities have been helped by the Aimhigher programme. Across the UK, the programme has helped more than 2,500 schools and 300 colleges and has provided summer schools at which young people can stay for three to five days. It has provided impartial workshops and bespoke programmes, particularly for people with disabilities as well as for looked-after children. Will the Minister guarantee that all the activities currently provided by the Aimhigher programme will continue under his plans?

It will be for individual universities to put forward their proposals on what they believe to be the most effective way of widening participation and access. It will then be for the Office for Fair Access to set, with them, benchmarks for their progress. We think that trusting universities to come forward with initiatives and then rigorously assessing their performance against them is the right way forward.

I, too, warmly welcome the announcement regarding part-time students; it will do much to help the Open university, which is much cherished on both sides of the House. On making higher education more flexible, may I urge the Minister to look closely at the model being pioneered by University Centre Milton Keynes in partnership with local FE colleges?

My hon. Friend is a very powerful champion of the Open university, which I have enjoyed visiting in his constituency. The aim is to have much more flexibility, and the models he describes are the kind that we wish to flourish in a more diverse university system.

The Minister has described his proposals as delivering

“a better deal for our students,”

but given that costs might go up by 100%, many people will not see them as a good deal. What steps is he taking to ensure that universities do not simply increase fees for students rather than considering the costs of the degrees they are supplying, which seem excessive in many cases?

The hon. Gentleman is absolutely right. We need to have tough pressures on universities to hold down their costs in times such as these. That is why the £6,000 threshold we propose will act as a discipline on universities and will ensure that they have to hold down their costs. We expect universities to respond to that pressure, and the Secretary of State and I have made it clear to universities on many occasions that we expect greater efficiencies and the holding down of costs as a result of the proposals.

Some of the best and brightest students and researchers in the country come through Oxford universities and contribute enormously to our economy and society. I welcome much of the report as progressive and I believe it can offer as sustainable a funding solution as possible in the current economic climate, but can the Minister assure me that the proposals will not compromise our universities’ international competitiveness? Also, will he explain how he intends to improve careers and financial advice for students as we expect them to make greater contributions?

It is very important that our internationally competitive universities are able to compete with the best in the world. That is why we understand their arguments about the need to recruit and retain staff of the highest quality. My hon. Friend is absolutely right about information, advice and guidance and I know that the Minister for Further Education, Skills and Lifelong Learning is working very hard in the Departments for Business, Innovation and Skills and for Education to ensure that we have a significant improvement in those areas. The destruction of the professional careers advice function under the previous Government has been a disaster for social mobility.

A couple of months ago, the Minister published a book about the unfair advantages that the baby boomers had. Will he explain why he has now come to the House with a proposal that will burden the next generation instead of following the example of my hon. Friend the Member for Harrow West (Mr Thomas) in placing the burden, through our taxes, on those of us who had such an excellent free education?

I am grateful to the hon. Lady for the plug for my book—that was very good of her. It is available in all good bookshops. I do not accept the way that she characterises our policies, which will offer a better deal for students because universities will have to focus on the quality of the teaching experience they offer. Graduates, not students, will have to pay the costs only when they are earning £21,000 or more, which is close to median earnings.

I welcome some of the changes. They are more progressive than the Conservatives would have achieved on their own, more progressive than Browne and more progressive than the Labour party intended—the same Labour party that introduced both fees and top-up fees having promised not to. However, I do not support an increase in the cap, as the Minister well knows. Does he share my concern that the increased level of student debt will provide a disincentive to students entering university and will make it harder for them to get mortgages and loans after they leave?

I hope that the hon. Gentleman recognises that the proposals clearly offer a progressive way forward whereby graduates will have to start repayments only when they earn more than £21,000 a year. That will have a crucial implication for the issue he raises because their monthly repayments will be lower than they otherwise would have been. They will be paying at the rate the previous Government fixed, at 9%, but they will be paying 9% of their earnings over £21,000 rather than those over £15,000. When many building societies and lenders assess young people and graduates for mortgages, they will see lower monthly outgoings under our proposals than they would under the system that we inherited from the previous Government. I hope that the hon. Gentleman will consider that important point.

Why does the Minister think that the Lib Dems in coalition with Labour in Scotland stuck to their promise to students whereas those in this coalition are so willing to break their pledge?

When I follow from the sidelines the debate in Scotland about financing its universities, it is clear to me that many universities in Scotland are concerned that they are not on a secure, long-term financing basis and that they are looking at a wider range of options. They might even be reading Lord Browne’s report with interest.

Croydon college has recently started offering degrees from the university of Sussex. Does my right hon. Friend agree that there is huge potential for a much more diverse higher education sector in which people can study degrees from our top universities closer to home, potentially over two years rather than three?

A cause to which my right hon. Friend the Secretary of State attaches particular importance is having a more diverse range of degree courses, particularly two-year courses. We need the kind of freedoms we are putting forward and the incentives we are describing today to encourage that type of provision in future.

The Minister referred to the interest rate that will be reclaimed as 3% plus inflation without being precise about which measure of inflation he was adopting. I think I detected from a subsequent answer that he was proposing to use the retail prices index. Given that the Government propose to substitute the consumer prices index for the RPI in relation to a huge range of benefit payments that involve the Government paying out, why is he proposing to adopt the RPI in this regard, particularly considering that he has talked about trying to minimise repayment costs for students?

In January 2010, it was estimated that 18.5% of school-age children in Hastings were on free school meals, against the national average of 14%. Can the Minister reassure me that the national scholarship scheme will particularly help the young people in my constituency, some of whom come from very low-income families?

My hon. Friend makes a very important point. The ambition is to tie together a coherent package of support going through the different stages of childhood and on into adulthood. There is more help for early years, we have the assistance in the pupil premium for children on free school meals and we are using those sorts of criteria to continue to assist those young people through into university. That is absolutely our aim; there is a lot more work to do on the detail of the national scholarship scheme, and her thoughts and those of Members on both sides of the House will be very welcome as we develop our proposals.

The Government’s policy represents a major shift in all sorts of ways, not least because it is based on a massive 80% reduction in public sector funding for higher education teaching. Surely, therefore, it is crucial that the Government ensure a proper debate on those changes by publishing a White Paper as soon as possible.

We are going to produce a White Paper, and I have also made it clear that there will be a proper opportunity for debate in this House.

I congratulate the Minister on delivering what the Secretary of State promised, something even more progressive than the Browne review, and I reassure my hon. Friend the Member for Cambridge (Dr Huppert) that plenty of progressive Conservative Members have been pushing for just that. However, the great step forward in support for part-time students will benefit a great number of mature students, and my local university, the university of Worcester, looks after many of them. Does the Minister accept that many of those people are concerned about the suggestion in the Browne report of a UCAS points threshold? As his statement does not address that issue, can he assure me that the White Paper will?

Those are exactly the kind of long-term issues in Lord Browne’s report, and my hon. Friend is quite right: we were not able to cover them in the statement. A lot more consideration is required, and that will lead into the White Paper that we will publish over the winter. My hon. Friend was also quite right in that this is absolutely a coherent, single, coalition proposal, in which we have worked together as a coalition and come up with a set of proposals that will probably be better than either party could have come up with on its own .

The Minister suggests that the proposals are good for universities, so will he explain how it is good for them to have 80% of their teaching income withdrawn? Why is he not making it clear that the money from additional fees will largely be replacement income, not the additional investment that our universities need to be internationally competitive?

The money will reach universities in a different way; it will come via the choices of students. Students will not have to pay out of their back pocket—they will not have to pay directly—but eventually the money will reach universities. When graduates benefit from higher earnings as a result of their study at university, their graduate contribution will pay for the system. A graduate contribution is the right way—an equitable way—of paying for that system, because it empowers students and, at the same time, secures progressive access to universities.

The lobby for university students is particularly powerful, but for those studying for vocational qualifications less so. In that light, can the Minister reassure me that today’s proposal will not have a detrimental impact on those students from low-income backgrounds who study for such qualifications?

All Ministers in the Department for Business, Innovation and Skills are very strongly committed to the vocational route. One thing that has gone wrong with this country has been the creation of a bottleneck owing to the belief that university is the only route into a career and a well-paid job. We will put forward our skills strategy in the very near future, and I hope the hon. Gentleman will recognise that it addresses absolutely the point that he rightly raises.

I am in no way a nationalist, but there is clearly an impact on Scotland, even under the current fees structure, with many English students moving to cheaper education in Scottish universities. If the fee is a graduate fee, would it not be appropriate for the Minister to say that his minimum charge of £6,000 should follow every student who leaves England for cheaper education in Scotland?

We will be in close touch with the Scottish Administration, and of course we will continue to have our arrangements for funding English students when they go to Scotland.

I detect widespread support for the proposals to improve access to universities, which is an extremely important issue. Does the Minister think, therefore, that it is incumbent on all of us, whether or not we support the whole package, to make sure that we explain to students and to people thinking of going to university that they will not pay anything until they earn £21,000 and that access will be broader?

My hon. Friend is absolutely right, and the crucial thing is the number of young people who are anxious because they think that they somehow have to pay fees up-front, when that is not the case. [Interruption.] During the Labour leadership contest over the summer, it became clear that at least one candidate seemed to believe that students paid fees up-front. That is not the system, and our proposals, with our new graduate contribution, are a fairer, more progressive way, because the point at which graduates start repaying will be so much higher than it is at the moment.

As well as giving extra support to those on low incomes, a genuinely progressive student finance system would ensure that those who ended up on a middle income, let us say of £21,000 to £41,000, paid proportionately less of their income and lifetime earnings than higher earners. Can the Minister guarantee that that will be the case?

Yes. On the estimates that we have done—and we are placing some of our figures in the Library, not least because of the request from the shadow Secretary of State—it is clear, contrary to the rather misleading report in The Guardian the other week, which in turn drew on some work by the Social Market Foundation, that as graduates go through each stage on the earnings scale, they will be expected to pay more.

I accept and welcome the fact that this proposal is more progressive than the current system, but I cannot accept that it has to be tied to an increase in fees. That is something that I cannot and will not accept. Will the Minister acknowledge some perversities within the idea of increasing fees? First, increasing fees to £6,000 leads to the possibility that students going into lower-entry courses and institutions will subsidise those on higher-entry courses. Secondly—

Order. The hon. Gentleman will resume his seat. I am sorry but this is the second—[Interruption]. Order. This is the second time that this has happened today. There are lots of Members trying to get in. I want to help the hon. Gentleman and other Members, but we cannot have twin-hatted questions. It will not do.

I am not aware of any feature of the proposals which would lead to the cross-subsidy that concerns the hon. Gentleman.

Considering that higher education funding structures in Wales are more or less tied to those in England, following our adoption of top-up fees, what discussions has the Minister had with the Welsh Assembly Government concerning today’s announcement?

I have had discussions over the months with Leighton Andrews, who has described to me his proposals for Wales, where I know there is an ongoing debate about university financing. I hope to be able also to have a quick phone conversation with him about our proposals today and, of course, to keep in close touch.

Does my right hon. Friend agree that, although it is undeniably true that earlier generations of students, including most of us, got a much more generous deal, it was always based on a very restrictive formula for exactly to whom it could be generous? We all benefited. In future, if we want to have wider access, improve social mobility and protect the high quality of our university education, which does carry a cost, exactly this sort of measure, which ties contribution more closely to cost, will be necessary—

My hon. Friend is absolutely right. Many of us in this House benefited from a higher education system that was funded in a very different way from today’s system, and we were able to enjoy that system only because such a small proportion of young people went to university. As we see so many more people going to university nowadays, which is a trend that we welcome, it is right and necessary to put university financing on a better basis.

Order. I would like to accommodate a few more, but I really do appeal to Members to help each other.

Does the Minister not understand that many talented young people will simply feel unable to choose to go to university because they will be terrified of leaving with debts hanging over them of more than £20,000, which they might never be able to pay off?

I hope that the hon. Lady will join me in sending the very clear message to young people that the system is not like having a credit card debt of £20,000. It is a graduate contribution scheme in which there is no repayment unless someone earns more than £21,000, and, if for whatever reason, they become unemployed or withdraw from the work force during that time, they will not have to make any repayments. It is far better than conventional debt, and it is important for all of us in all parts of the House to make that clear.

How does today’s announcement sit with the Government’s wider approach to higher education, such as the funding of the science and research budget and other university income streams?

In the comprehensive spending review, we were able to secure a very good settlement for science and research, protected with a ring fence. The combination of that ring-fenced support and these reforms offers a very good, strong prospect for our universities.

Will the Minister stop referring to his policy as progressive and fair, because it is no such thing? What assurance can he give me that the university of Derby, which is one of the institutions that could be adversely affected by his proposals, will still be in business in 10 years’ time?

Our proposals are progressive, because they help to encourage people from poorer backgrounds to go to university, because of the higher education maintenance grant, and because of the higher repayment threshold. That crucial commitment to taking progressive measures is one of the reasons we commend these proposals to the House.

I welcome the progressive and fair announcements that my right hon. Friend has made. How can we ensure that we still get enough science, engineering and technology graduates, and how will this measure help?

This relates to the mechanisms whereby the teaching grant is allocated. For the more expensive, lab-based courses, there will of course continue to be teaching grant to recognise the extra costs involved in delivering those courses. We believe that that will maintain a continuing level playing field for STEM—science, technology, engineering and mathematics—subjects.

The right hon. Member for Ross, Skye and Lochaber (Mr Kennedy) has already detailed some of the implications for Scotland. May I ask the Minister specifically about the impact of the RAB—resource accounting and budgeting—payments, which will have a direct impact in Scotland? My hon. Friend the Member for Glasgow North (Ann McKechin) wrote to the Secretary of State on 12 October asking for a meeting with Scottish MPs, but despite continual chasing up, that meeting has not yet happened. Will he undertake that it will happen as soon as possible so that we can discuss these issues with Scottish MPs?

We have to respect the devolution settlement, and I am very aware that we are talking about higher education finance for England. However, I keep in close contact with Scottish colleagues, and I am sure that the Secretary of State or I will be very happy to have such a meeting.

Does my right hon. Friend agree that these welcome proposals will begin to even up the opportunity for British students who, when competing for places at our best universities, compete with overseas students with bigger cheque books?

I hope that these proposals will ensure that British students have a very fair deal at our universities; indeed, that is a key feature of our proposals.

The Minister will no doubt be pleased that in the past fortnight the six-point timetable for scrapping tuition fees has been deleted from the section of the Liberal Democrat website called “What we stand for”. Strangely enough, however, it does not mention any rise in fees. My question is another book plug. In his recent memoirs, the Secretary of State described himself as a “free radical”, but in reality has not he, and every single Lib Dem Minister, now become a £9k Conservative?

I think that “free radical” captures very well the enormous contribution that the Secretary of State makes—and what a pleasure it is to work alongside him.

If raising the repayment threshold is to benefit every single graduate, in the Minister’s words, can he confirm that current students—and indeed, current graduates—will see their repayment threshold raised also?

The hon. Gentleman makes a very important point. These are proposals for the future, which come in for 2012. They are not retrospective changes, and for current graduates the existing regime will not be changed. This is only for the future from 2012 onwards. I am grateful for this opportunity to make that clear.

My question rather follows on from that point. Young people who are in their final year of a level 3 course—say, doing A-levels—might choose to take a gap year next year and therefore apply to UCAS through deferred entry for a 2012 start. Will they be affected by these changes, or will they go to university under the current rules?

All students going to university in 2012 will do so under the regime that I have proposed to the House. Some young people—this is a very important practical point—may already have applied for deferred entry as part of not going to university in 2011-12. Admissions procedures are the responsibility of individual universities, but we hope that universities and UCAS, working together, will open a window to enable those young people, if they wish, to have the opportunity of going to university in 2011.

May I warmly welcome my right hon. Friend’s statement and this package, which is a good deal for students and universities? Can he give me an assurance that while universities will rightly be under an onus to attract applicants, and to give appropriate financial support in certain cases, admissions to university will remain a matter entirely for individual universities judging on individual merit and academic potential?

My hon. Friend is absolutely right. Universities must maintain control of their individual admissions procedures; of course, we respect that freedom. Although we are absolutely committed to broadening access, the reports in the press this morning about so-called quotas were completely misleading. Neither the Secretary of State nor I believes in quotas.

Everything that the Minister has said about student choice suggests that we are moving towards a market in higher education. When I asked the Secretary of State about this when we discussed the Browne report, he gave a categorical assurance that we are not moving towards a market. Which one of them is right?

We are in a system where there will be a continuing and very important role for the Government, through providing financial support and through the new regulatory regime that emerges as we think through the proposals from Lord Browne, and where there is a very clear cap—a threshold of £6,000, and in exceptional circumstances, up to £9,000. That is the right way of combining freedom of choice for students and the legitimate role of public policy.

I have never liked tuition fees; I did not like them when the Labour party introduced them. My concern is for people going into our public services who will most likely be just above the £21,000 threshold but will then be faced with having to pay down tens of thousands of pounds-worth of debt. What can we do to encourage the very best graduates to continue to go into our public services rather than to take the possible route of going for a dash for cash as they attempt to pay off these huge fees?

I hope that the careers advice and guidance function will be very important in this respect, because those are indeed very satisfying careers to which many young people aspire. I hope that my hon. Friend agrees that, with the new threshold of £21,000, people in the circumstances he describes will face lower monthly repayments than they do under the current system.

Prior to the general election, the Government parties rubbished Labour’s proposals to get more than 50% of young people into higher education. Now they are talking about widening access. What effect does the Minister think that the abolition of the education maintenance allowance will have on wider access, and what effect will the £6,000 to £9,000 cap have? Is it not a huge disincentive?

We believe in broadening access, but we do not believe in artificial targets for the number of people going to university. The 50% target was a suspiciously round number—it did not sound like a carefully thought through proposal. We believe that the number of people going to university should emerge as a consequence of the choices of those who have the aptitude to do so.

The £150 million scholarship fund is great news for low-income students, but many young people tell me that they are unclear about what bursaries and scholarships are available to them. May I urge my right hon. Friend to promote this fund so that every young person is aware of the great opportunities that exist to get free education if they need it?

My hon. Friend is right. Some evaluations sadly show that bursaries, despite a large amount of money going into them, have not been very effective in broadening access to university. That is why we want to give universities much greater freedom to design schemes that actually work. A single £150 million national scholarship scheme is a great opportunity to communicate the fact that support will be available.

Many Members will have heard about the tripling of tuition fees this morning on Radio 4, and the Minister has given further details from the Dispatch Box. Given that these are the biggest changes to student funding in a generation, why does he believe that the Business Secretary has been struck mute today?

The Secretary of State and I work so closely together that we are, for all practical purposes, interchangeable.

I welcome the Minister’s statement as a constructive and progressive way forward. Will he clarify whether students from my constituency who go to university in London will receive a London weighting with their maintenance grant?

My hon. Friend is quite right to raise that matter. We are indeed committed to keeping the special arrangements for London maintenance.

Medical students face many extra years of learning and could end up with debts in excess of £70,000, enough to buy a small house in the north-east of England. We need many more home-grown doctors. What will the Government do to help reduce the burden on such students and encourage them?

I do not recognise the figure of £70,000, and of course there is continuing support from the Department of Health towards the costs of medical education.

Does the Minister agree that one purpose of higher education is to equip our students for the workplace, and that by allowing the money to follow the students, we can put real pressure on universities and force them to up their game?

One of the big sources of frustration for students at the moment is that they do not feel that they get enough practical experience of the world of work while they are at university, and they do not think they are properly prepared for it. That is why we are asking all universities to produce a statement of what they are doing to ensure employability for their students. We want much more, and much more precise, information to be available in future so that prospective students can see the graduate employment prospects of individual courses at individual universities.

The Minister’s boss said in the House when he last spoke on the matter that the reason why he and his colleagues had swallowed these proposals, and indeed their pledge, was the need to pay down the deficit within five years. If the change is about deficit reduction in such a short period, why is it necessary to invent a system that will burden several generations of students?

We have been completely frank with the House throughout in saying that of course there are public expenditure savings here, which are necessary because of the mess that we inherited from the previous Government. However, this is not simply a matter of saving public money. We are also using the challenge of doing that to propose what we believe is an improved and progressive system. We are delivering reform as well as saving public money.

I understand that there is now no target for the proportion of young people who go into higher education. Will my right hon. Friend tell the House what proportion of young people do so today, and what his central estimate is of the proportion who will do so in 10 years’ time, after the new scheme has come in?

Slightly over 40% of people now go to university. We envisage the absolute number of students remaining broadly flat, although we cannot be sure exactly. To ensure that the vocational route is available, we are also investing in 50,000 extra apprenticeships this year, rising to 75,000 by the end of the public expenditure period, as an alternative route into well paid work for many young people.

The Minister is a very honest man. Does he genuinely believe that the next generation of middle England will be gainers rather than losers as a result of the debt that he is loading on to them?

I hope that the experience of young people at university will improve as a result of these reforms. Under successive Governments, we have ended up with a system that has sharp incentives for research but not comparable incentives to focus on teaching. These changes will lead universities to focus much more on the quality of the academic experience and the teaching that goes on at university, and young people will be the beneficiaries of that.

I am really concerned about the effect of these proposals on universities such as Bolton, which draw their students largely from poorer backgrounds. Specifically, has the Minister considered the effect of raising the fees so high on students from Islamic backgrounds, who for religious reasons are reluctant to take interest-bearing loans, or are prohibited from doing so?

We have indeed considered that carefully, and we are very happy to meet representatives from the Islamic community to discuss it with them further. Our belief is that the terms on which the money is being lent are so much more favourable than the commercial terms available in the market that they would not be covered by Islamic rules, but we are happy to discuss the matter further with the Islamic community.

The Minister has admitted that this is not simply about saving money and is in fact a fundamental and deeply ideological remodelling of our university system, with the withdrawal of public funding from the majority of courses and the introduction of a market in which the best courses will cost up to 50% more than the basic fee level proposed. There was no mandate for either governing party introducing those changes. We know about the worthless pledges that the Liberal Democrats made, but the Conservative party did not have anything about the changes in its manifesto. Is it right, therefore, that these proposals should be rushed through, or should we wait for a full debate when the White Paper is published, about what sort of higher education system we want?

Many of the proposals emerged from the report of an inquiry that the previous Government set up, which Labour Ministers endorsed. The previous Government set out the terms of reference, and I was consulted, which I appreciated. They were agreed and made public, and the proposals are within the terms of reference of the cross-party inquiry.

The bottom line is that for a three-year course, fees will cost £27,000. Adding on the costs of going to university, accommodation and so on, especially for students living away from home, the cost could be £45,000. That is double the average wage in my constituency and the cost of a small house. I passionately believe in choice and in the ability of every young person in my patch to choose the course that they want to study at the university of their choice. How will the Minister ensure that that choice is available to them, particularly as many of them might otherwise feel that they have to go to a university in Wales rather than having the freedom to go anywhere across the UK?

I do not recognise the hon. Gentleman’s figure of £45,000. The crucial point, which Members of all parties should get across, is that this is a graduate contribution scheme, and people will have to start paying back only if they are earning more than £21,000 a year, which I suspect is higher than median earnings in his constituency.

Order. I will let her off on this occasion, but let me just say to the hon. Lady, who is a new Member, that although she is not the only offender, Members really should not wait until virtually the end of a statement and then suddenly start popping up when I am about to move on. I will let her have her say today.

Sorry, Sir, and thank you.

I have discovered that £19 million of bursary money was apparently not spent last year. Does the Minister believe that is correct, and will there be some way of preventing that appalling situation from ever happening again?

I was not aware of that specific sum of money, but I would be interested in looking into the matter further. There is certainly a wider problem that bursary spending does not appear to be influencing access and participation by prospective students. That is why we believe there should be initiatives by individual universities, and that their performance should be monitored externally. That will be a far more effective way of spreading participation and broadening access to our universities.