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Education Bill

Volume 730: debated on Tuesday 4 October 2011

Committee (11th Day)

Relevant documents: 15th Report from the Delegated Powers Committee, 13th Report from the Joint Committee on Human Rights.

Amendment 145D

Moved by

145D: After Clause 71, insert the following new Clause—

“Assessment on effect of tuition fees on over 19s seeking to reskill

Prior to the implementation of increased tuition fees for persons aged 19 or over the Secretary of State will assess the impact on adults seeking to reskill, with special regard to disability and gender.”

My Lords, this is one of those amendments that speaks for itself so I do not intend to detain noble Lords long on this particular issue. Nevertheless, it is an important issue these days given the levels of redundancy and the need for people to retrain and reskill throughout their working lives. It is important that there is an assessment of the impact. It is difficult enough for people with disabilities to gain employment without any further impediments. Of course, there is the impact on women as well. I would welcome a response from the Minister.

My Lords, I support my noble friend’s amendment. I do so with a certain degree of sadness. It is just under 50 years since I wrote the first paper ever written in the Treasury on loan schemes, and it would never have occurred to me then that we would end up discussing this sort of thing 50 years later. It would never have occurred to any of us who were among the first to think that loan schemes were the right way into student support that we would live in a world in which tuition fees were charged in higher education. That is why I say that there is a certain sadness here.

It may well be that the economy is so dire and so many people want to benefit from higher education that we have to have tuition fees, but it has always seemed quite awful to me. I assume that this amendment has been tabled so that the Minister can tell us exactly what preparations the Government looked at before deciding to go along the path that they have chosen.

I would like to hear what the research is that tells us that those who are disabled will not suffer from extreme disincentives because of these fee increases, and that there is no gender bias in them. I find it very hard to believe that there is no gender bias in what is happening here; quite the contrary. My noble friend has not told us this, but I assume this is why the amendment was tabled. This is all in preparation for the next stage, and for how we analyse these things. I look forward to a lecture from the Minister answering everything implicit in this amendment.

My Lords, I support the amendment. It is an amendment that the Government should welcome, because they are always telling us that we do not have a skilled workforce, and that the workforce needs to be skilled. Here is a specific recommendation for reskilling people who are disabled. I would have thought it would have been welcomed by the Government as being well in line with their policies; the policies they are always telling us about, anyway. Therefore I am very happy to support my noble friend’s amendment.

My Lords, I have some sympathy with this amendment. However, one issue in particular concerns me: the fact that not only degree courses but access courses are subject to loans.

As members of the Committee will know, those who have not gone through the normal route of taking GCSEs and A-levels and entering university by that route, but instead apply to university later, often take courses which are regarded as being the equivalent of A-levels—they are called access courses—at colleges for education. These are normally two-year courses. Many of these students initially do GCSE courses and go on to an access course, so they often have between two and three years at the college of further education. Because these are level 3 courses, and because the people concerned are often over the age of 24, these are regarded as loan courses, and consequently many people will have five years of loans rather than three. Since, almost by definition, most of these people come from disadvantaged backgrounds, the whole problem of debt aversion is one of some difficulty. I am particularly concerned about the build-up of debt in these circumstances.

The accumulation of debt from having to take on debt to put themselves through access courses, and then more debt on top of that to do degree courses, is going to be a major disincentive to using this route to those from disadvantaged backgrounds. Considerable numbers use this route at present. Could the Government look at this? It would be good to have some good news. I know that my right honourable friend Simon Hughes, when he was looking at the issue of access, picked this up, but I do not think anything has yet been done about it.

My Lords, I would like to respond to the amendment of the noble Lord, Lord Young, and also, I hope, reassure other noble Lords that the Government are committed to supporting protected groups. I can assure noble Lords that before we undertake any reforms we carefully consider the impact on protected groups. Our reforms to higher education funding and student finance are no exception. Work undertaken as part of our impact and equalities impact assessments, published in November 2010, and the Government’s skills strategy indicated that changes to funding priorities were unlikely to have a negative impact on protected groups, including disabled people and women. We will continue to monitor the impact of our reforms as we move to implementation.

We want to do more to encourage protected groups to participate fully in higher education. The provision for the first time of loans to eligible part-time students to cover the full cost of their tuition will provide a more viable route into higher education for anyone who does not wish to follow the more traditional full-time route. This should provide more opportunities to work alongside higher education; for example, to maintain caring or other responsibilities. We will also continue to provide dedicated support to help disabled students participate and succeed in higher education. The Government provide funding to HE institutions, through the Higher Education Funding Council for England, to help them recruit and support disabled students; £13 million is being provided for 2011-12.

The Government are also providing a comprehensive package of financial support directly to students, with additional support targeted at those who, through a range of circumstances, need it most. Eligible disabled students studying in higher education are able to access the disabled students’ allowance to enable them to study on an equal basis with their non-disabled counterparts. DSAs are available to both full-time and part-time students. They are paid in addition to the existing standard student support package and are not means-tested and therefore will not need to be repaid.

The Government also make additional support available to eligible full-time students with adult or child dependants. The adult dependants grant, the childcare grant and the parents’ learning allowance are non-repayable. They are means-tested, so that those on the lowest incomes benefit most.

I hope that the noble Lord, Lord Young, and other noble Lords are reassured that the Government have already made an assessment of the impact of tuition fees and I would therefore urge him to withdraw his amendment. To answer the questions of my noble friend Lady Sharp about access courses, I will have to take them away and write to her in detail about what we propose, so I do hope that the noble Lord withdraws his amendment.

My Lords, what specific support is given to lone parents? They may, perhaps, be in the situation that the noble Baroness, Lady Sharp, spoke of. She spoke of childcare support. Can the Minister provide more detail about what incentives are provided to lone parents to engage in education of this kind? I am sure that it must seem also to the noble Baroness that it is extremely important to encourage such people into education.

The noble Earl, Lord Listowel, raises a really important point and I hope that he will allow me to write to him in greater detail with that response.

My Lords, I welcome the reassurances that we have received from the noble Baroness, Lady Verma. I trust that she will circulate to everybody details about the points that have been raised about access courses and the lone parent scenarios. I think that we will study the detail in Hansard in order to assure ourselves that there has been a full assessment of the impact. I beg leave to withdraw the amendment.

Amendment 145D withdrawn.

Amendment 145 E not moved.

Clause 72 : Student loans: interest rates

Amendment 145F

Moved by

145F: Clause 72, page 56, line 4, at end insert—

“( ) not in excess of the average cost of borrowing borne by the Government in the preceding financial year.”

My Lords, Clause 72 amends the powers given to the Secretary of State in the Teaching and Higher Education Act 1998 to make regulations setting interest rates for student loans. As the legislation currently stands, Section 22 of the 1998 Act effectively provides that the interest rates set must be no higher than the rate required to maintain the value of the loan in real terms. So the fee and maintenance loans of students who study at English universities attract interest while individuals are students and when they graduate.

This is charged in line with a predetermined measure of inflation, and if no repayments are made, the size of the loan increases in cash terms but remains fixed in value terms. This means that the value of the money borrowed by students has the same value as the money we paid.

Clause 72 gives the Secretary of State wide and substantial powers to set interest rates. But its intention is to move the policy of the Government away from where it was, and from where its independent adviser, the noble Lord, Lord Browne of Madingley, recommended it should stay, away from zero rates of real interest to where the real interest rate would be three per cent above RPI. The Bill provides the Secretary of State with the power to introduce a positive, real rate of interest in addition to maintaining the value of fee and maintenance loans.

Depending on the size of the loan, the real rate of interest charged in excess of RPI, and the movement in salary levels in the period to 2016, more graduates than at present are likely to find that they do not pay off their loans in full in spite of the apparently higher salary threshold.

The extension of the repayment period to 30 years compounds the problem, and it was no surprise to hear the Deputy Prime Minister, no less, state that up to 60 per cent of graduates are not expected to repay their loans in future. This has obvious consequences, not only for the individual, but for the taxpayer.

So, let us look at this seemingly innocuous proposal in more detail. Why was RPI selected? Is it not the case that the Government’s preferred measure in inflation is CPI? CPI is now used for the Bank of England’s inflation target, for measuring inflation, for pension calculations, and for most salary and other uplifts.

RPI was said last month to be running at about 1 per cent higher than CPI, because it includes housing costs. I suspect that mortgage and other housing costs do not feature in many of the budgets of students taking out these loans. So what is the logic for using RPI and not CPI? I would be interested to hear what the Minister says about this. The Government’s choice of RPI will cost the student more, but will bring in more for the Treasury, when and if the loan is repaid, and in the interim, of course, it helps the department to stay within its budget. I will return to this point later.

As I am sure I do not need to remind the Committee, without the ability to charge such penal rates of interest as are provided for in this clause, the impact of the new loans policy would have put an intolerable strain on public finances. The cost of public funds is the face value of the loans in any one year, less the present value of future repayments. If the fees are higher, the loans will be higher, and if the interest rates are 3 per cent or more above base, the PV of future payments goes up, and the department’s bacon is saved. But is it fair for future generations of students to be charged at this exorbitant rate just because the department got its sums wrong?

My second point is the impact on social inclusion. If the rate of interest charged is in fact 3 per cent above RPI, that would result in interest rates at the moment of about 8.2 per cent per year. These are eye-wateringly high figures. We take the view that the move to impose a real rate of interest is not progressive, and that it will act as a barrier for bright kids from poorer backgrounds contemplating going to university. It may also impact on diversity and equality issues. Is this really fair?

One particular aspect of this is the question of whether such penal rates of interest are Sharia compliant. Sharia law prohibits riba, which means the paying and receiving of interest for profit. At present, even the inflation-only interest that is paid out on student loans for undergraduates is seen as riba, although there are many Islamic scholars who do not see it this way.

A spokesman for the Department for Education and Skills quoted in an article in the Guardian in April 2004 said,

“We appreciate the Muslim position on borrowing. But, it is important to remember that student loans do not incur a real rate of interest and the government does not make any profit out of these loans”.

This is April 2004.

“Student loans do not incur a real rate of interest”.

How interesting. But for new students starting higher education in 2012, a real rate of interest is to be charged. Presumably more than a few Islamic scholars will now come to the view that such a system is not Sharia compliant, and many Muslim students may be deterred from applying to university.

I assume the Government considered this point very carefully before introducing this measure, and I understand that the Government are currently working with various Islamic groups to discuss the issue. On 19 July 2007, the Minister of State for Universities and Science confirmed in the other place that he had met with the NUS and the Federation of Student Islamic Societies to discuss this issue. Will the Minister update us on this, because it is a very important point?

My third point is that there seems to be no justification for the figure of 3 per cent. The Committee will recall that the independent Browne report on higher education recommended that, if fees were to rise, there should be a safeguard to ensure that those making no, or relatively small, repayments did not see the balance of their loan increase in real terms. The Browne report recommended that the interest rate should be set at the rate that the Government can borrow money. He calculated that this would be about 2.2 per cent at the time he submitted his report. Again, our students are being penalised, with the amount that they are having to borrow rising at a rate not only higher than CPI or RPI inflation, but 0.8 per cent higher than it ought to be to preserve the cost of what they are borrowing. Our amendment would have the affect of reinstating what the noble Lord, Lord Browne, recommended, which we think is fair.

My last point is the apparent rise in the salary threshold, which determines when a graduate has to start repaying his or her loans. I say “apparent” because, when this new threshold kicks in, it kicks in for loans taken out in the session 2012-13 so that the figure has to be deflated using RPI in the period to April 2016. My calculator broke down when I was trying to do this calculation before I came upstairs and it is why I was slightly late for the start of the Committee, for which I apologise. I came out with a figure of about £15,000. I am sure that officials will be able to check that quickly and give the Minister the figure to rebut it if it is true. But, even if it is not close to it, it is a lot less than £21,500 and remarkably close to the current threshold. Anyway, my point is that, deflating to today’s figures, does not represent a significant increase at which point the interest repayment trigger is activated.

Before he was reshuffled, the noble Lord, Lord Henley, very kindly wrote to me last month about these amendments. I am grateful to him for doing so. He set out why the Government have acted in the way that they have. No doubt his successor will share these comments with us later in this debate. However, in his letter, the noble Lord, Lord Henley, gave the game away. He said:

“Imposing a cap on the interest charged to borrowers would make it very difficult for the Government to budget for the cost of issuing loans and is likely to make the system unaffordable for the taxpayer”.

I do not really understand the point about making it difficult to budget—unless this has to do with the mess the department is clearly in over the overall costs for this scheme. But we are left with a real reason. The Government have to put a 3 per cent limit on top of RPI because they need, in some ways, to pay for it and reassure the public about the overall costs.

So, the Government have to use RPI, not CPI. They have to charge more than the Browne report recommends. They have to amend the current legislation because they have to cover the cost of issuing loans and because there is a limit to what the country will stand for. Although my party commissioned the Browne report while we were in power, we did not have to make the decisions that arose from the report’s recommendations. Therefore, it is easy for us to say that we would not have done it this way. But this proposal to impose penal interest rates is surely not fair and cannot be in the best interests of this country’s future students. The impact of a positive real rate of interest will be significant and will lead to graduates paying more for their higher education and repaying for longer than at present. Using RPI instead of CPI is wrong and taking powers to impose rates of up to three percentage points above RPI is penalising our young people and their families. It will exacerbate social divisions and it may deter young Muslim applicants. It will generate a high level of debt that will have to be repaid over a period of 25 or 30 years as a contingent tax liability.

A positive real rate of interest will impact in particular on the repayments made by mature students. Getting behind the figures, we find that there has been no increase in the salary threshold, so only the term has changed. However, as a result of that, many more graduates are likely to reach the end of the repayment period without paying off their loans—and I understand that these typically will be of the order of £45,000 at the end of a three-year course. It is also likely to have an inadvertent impact on female graduates and on men at the bottom decile of earnings. I am afraid that it is beginning to sound like a bad deal all round. It will set up a lifelong debt and borrowing habit that some people will take to their graves—a new form of the term mortgage. If this clause stays in the Bill, it should be seen for what it is: deeply unfair and divisive. It is not progressive. Indeed, it is easier to see it as part of the narrative of readying the Student Loans Company for sale as well as depressing demand for higher education than about cutting public expenditure. Our amendment would at least restore the status quo. I beg to move.

My Lords, I am very puzzled by what the Government want to do. I thought they wanted people to “stand on their own two feet”—I think that is an exact quote from the Chancellor. The effect of raising the real cost of repaying loans must act for some people as a disincentive to going into the labour force. Otherwise, in my favourite remark, economics makes no sense at all—you may think economics makes no sense at all, but that is another matter. That is one bit that puzzles me. What do the Government think they are doing? Should they not be pursuing exactly the opposite policy and trying to encourage people where they can to re-enter the labour force?

The second thing, which goes back to the earlier amendment that we did not debate at great length but will on Report, is the gender bias question. Is it part of the Government’s view that they want women not to take out loans and go into higher education so they do not have this burden and therefore it does not act as a disincentive to marriage and family life? After all, if they go into higher education and carry this implicit cost with them, their ability to find a suitable partner, who may have to bear this cost at some point, might go down.

I thought the Government favoured families instead of the reverse. Equally, maybe it is much more subtle than that. Where there are lone parents, for example, who are graduates, maybe we do not want them to stand on their own two feet and take a job and hire a babysitter. Maybe we want them to stay at home, driving themselves round the bend trying to cope with the children, and so forth. My general point from all that, is that I can see no rationality in what the Government are doing, other than: “If we can get some more money from any route that we can find we will take it”. That is not a rational way to produce economic policy.

If I can revert to my 1960s Treasury experience, one of my thoughts listening to my noble friend’s speech was about when I wrote a hotshot paper on student loan schemes—nothing to do with fees, but about maintenance. One question that never occurred to me in what must have been a really bad paper—in those days you did not take home your work so I have no idea precisely what I wrote—was the rate of interest. It never came up in my mind. I just took it for granted that it would be the Treasury bill rate.

My Lords, the noble Lord, Lord Stevenson, has made a powerful and cogent case, and I look forward with more than usual interest to the Minister’s response because there are some issues of real principle. I would add two points. One is that much of the odium for charging fees is falling on universities. I still remember sufficiently far back when that would have fallen on me, and it looks like there is an extra 3 per cent of odium being added. That is not a good principle.

More to the point, I have supported the principle of student fees on the basis that students pay for what they get in educational terms, not for an additional premium for whatever accounting reasons seem necessary to the Government at the time.

My Lords, I wanted in part to make a contribution so that anyone reading the proceedings of this Committee did not feel there were one or two isolated voices concerned about these proposals. The strength with which the arguments were made by my noble friend Lord Stevenson in particular do not need many words to be added and I know that the Committee is keen to move on.

I would fully endorse what my noble friend said and emphasise two points. One is this move around RPI and CPI. The Chancellor was perfectly clear in his Budget of 2011 that the Government were moving to use CPI in respect of benefits and pensions uprating and it is certainly something that has been around for some time. I remember appearing before the STRB and arguing the use of CPI over RPI. I was very glad to have Ed Balls alongside me making the technical aspect of that argument when giving evidence on behalf of the Government against, I think, the teaching unions, who wanted RPI. I would be really interested in the Minister’s response about why we have gone with something different in this case. The second point is the final point that my noble friend Lord Stevenson made around the Students Loans Company. I ask for a direct answer whether in conversations about the Student Loan Company, it has been a condition of being able to sell it off that a commercial rate of interest is chargeable. A direct answer would be helpful.

My Lords, as many people round the Table will know, I opposed the imposition of student fees and student loans even when the Opposition were in power. I continue to have considerable reservations about the system that they introduced in terms of student financing.

I have three points to make in relation to the debate. One is to pick up the point just made by the noble Lord, Lord Knight. Given that the Government have shown that on the whole they prefer the CPI to the RPI in relation to welfare upgrading and pensions, it would seem obvious that they should use the CPI on this occasion rather than the RPI, which tends to be rather higher than the CPI anyhow.

Secondly, I continue to worry about the cost. As the noble Lord, Lord Stevenson of Balmacara, mentioned, something like 60 per cent of students are never going to be able to repay their loans and therefore will have the debt hanging around them for a considerable period of time.

The consequence is that the real cost of these loans is enormous. The Government are making loans. The Government say, rightly, that they are putting a lot of money into this because they are putting the loans forward, and they have to provide the loans in the first place. If something like 50 per cent or 60 per cent of students never repay them, the cost of providing those loans is probably at least as great as the £3 billion that they have taken out of the higher education budget.

The only advantage is that it is off the books, because the Student Loans Company is not regarded as part of the national debt. It does not come back onto the books until 30 years hence. This is one of the issues that I disagree with the Government on, because I feel we are putting a disproportionate amount of debt on the current generation. They have to repay their debt at a rate of 9 per cent. Those who earn only between £20,000 and £30,000 will be repaying that debt for 30 years at 9 per cent. There will be a 9 per cent surcharge on income tax unless, of course, you have parents who are well off enough to be able to pay it off in the first place. Again, the disadvantaged are the people who do not benefit. It comes back on to the books in 30 years’ time so the Government will then have to pay extra interest on the national debt. I said this when we talked about these regulations and I say it again. It means that it is a very expensive system for the Government.

I have a specific point that I ask the Minister to respond on. There is concern about what happens if the Government succeed in selling this debt on. The aim of the coalition Government, as much as the aim of the Labour Government, is that the student loans debt should be regarded as an asset by the Government and packaged up and sold on. Under the Bill as we put it through originally, if the debt were sold on, those who took it on were not allowed to vary the rate of interest on the debt. Does it still apply that anyone who buys the debt and carries it on will have to maintain the same rate of interest as the Government were charging?

My Lords, I understand noble Lords’ desire to ensure parity between the rate of interest charged to students and that which is borne by the Government. However, I would be reluctant to introduce the stringent cut suggested by the noble Lord.

Let me first respond to why RPI and not CPI. We have always taken the view that there is no single measure of inflation that is appropriate for all purposes, but the RPI is commonly used in private contracts for uprating of living costs, payments and housing rents, so it is more appropriate than CPI for student loan interest as it takes account of, among other things, changes in mortgage interest and council tax—typical expenses for graduates that are not included in the calculation of the CPI.

Historically, RPI has always been used for calculating interest on student loans. This means that over a period of years the rate of interest on student loans has been consistently applied on a widely recognised and adopted measure of inflation.

I am getting very confused. Why is it that RPI is appropriate for repayment of student loans but CPI is appropriate for increases in pensions for retired people? Could the Minister explain that? I do not quite understand, from her explanation, why there are differences between the two.

My Lords, the costs for older people are different. It has always been the case that most measures have been taken under RPI. If the noble Lord is not satisfied, I am quite happy to meet him outside the Chamber to further the discussion, but I think I can offer him this one response only. If he is not satisfied, I am quite happy to take the question outside the Chamber with other noble Lords. We can discuss it in further detail and, hopefully, come back with a more detailed response. I do not think I can offer the noble Lord anything other than what I have just offered him: that it is normally the case that it is measured by RPI.

The purpose of us coming along here today is to discuss this and get explanations from the Minister, who presumably had a very extensive briefing before coming along, and presumably inquired of her officials these kinds of questions. She must have anticipated that they would come up.

RPI is being charged to the student when they have to pay the Government, but CPI is being applied when the Government pay me and other retired people. So it is all right that when you take money from other people you charge RPI but, when you give increases to people to pay for all the extra costs of energy and everything else, it is only CPI. Would the Minister take a minute to explain?

Before the Minister stands up, perhaps I could try to be helpful. This is a key question. My understanding is that the only circumstance in which RPI is lower than CPI is when mortgage interest rates are falling and that is relatively unusual, although we have experienced a bit of that recently.

When the Chancellor made his announcement about making the shift from Rossi to CPI, he was honest enough to say that it was to save money—it would save £6 billion to the Exchequer. Would it not be easier for the Minister to have the same sort of honesty as her right honourable friend in the Government and say, “It’s to save money”?

I remind the noble Lord, as he was in Government, that they also used RPI as a measure. It is a commonly used measure. My right honourable friend the Chancellor, of course, is the Chancellor, and has to find all means of reducing the debt that unfortunately we inherited from noble Lords opposite.

We should remember that the changes to the rate of interest on student loans are part of a new student finance package that creates a progressive repayment system and is designed to protect lower earning graduates, as well as balancing the financial demands of universities with the interests of students and future graduates by delivering necessary savings without cutting the quality of higher education or student numbers.

Under the new system, students from lower income households will receive more support than they do now—I hope that that satisfies the noble Lord, Lord Foulkes—although many will pay back for longer than they do now. Their monthly repayments will be less than now, and the variable interest rate we propose will mean that they will also pay back less overall. If we accepted this amendment and capped the rate of interest that we could charge on student loans, we simply could not deliver this new system, nor would it create a suitable or worthy alternative. A cap would have little or no positive effect on borrowers who did not repay in full, nor would it afford greater financial protection.

This amendment would mean that higher earners would be charged a lower rate of interest than under the Government’s proposals. Higher earners would therefore benefit the most from this amendment, since the interest rate that they are now charged would reduce typically from RPI plus 3 per cent to RPI plus 2.2 per cent, while lower earners would not benefit at all as their interest rate would already be less than the Government’s cost of borrowing.

The system of student support would be much less progressive as a result. The Government remain committed to delivering a progressive system whereby those who benefit the most from higher education contribute the most. Would the noble Lord really favour a package that meant that the highest earners did not contribute to the cost of their higher education in net terms, or one that would inhibit our ability to protect lower earners?

What the noble Baroness has said is not quite right. Is it not the case that those very much higher earners whose parents pay off the loan immediately will not bear a higher cost? It is only those whose parents have not paid off the loan immediately who will do so.

Equally, while I am on my feet, I say to the Minister that there is no ideal index number at all. I do not use either of those—I always use the GDP deflator as the correct measure of inflation—but that is another matter; it is not what this debate is about. It is not about an ideal index number, it is about who pays what, and that is all it is about. My noble friends, particularly the noble Lord and I, have made it very clear: all that we are discussing is, who are we going to take the money from? Am I right that the plus 3 per cent is definitely decided?

Yes. And the noble Lord knows that I would be the last person here to make sure that people of low incomes could not get fair access. That is why it is so important that those who can afford to pay more do so, because they benefit more from higher education. Those families on low incomes will actually be able to be better protected. That is the key to this.

I am sorry that the noble Lord shakes his head. There will never be an ideal measure, but we have to have a measure. The previous Government did it and we are carrying on doing it. Anything to do with higher education will be coming up in the higher education White Paper, which we are consulting on at the moment, and of course that will be a wonderful opportunity to get the sort of questions posed by the noble Lord asked and responded to.

It would help us to understand it better if the Minister could reply to the question put by my noble friend Lord Stevenson of Balmacara about the threshold. Is his calculation right, that the payment would begin at about £15,000, which I think my noble friend said? If that is the case then that is at a very low level of income, and it would be very interesting to know what the Government calculate the threshold income to be.

I should like the noble Lord to allow me to make a little progress, but it is £21,000 and not £15,000. It is higher—if the noble Lord will allow me—

On that technical point, and I am sorry to interrupt, no—£21,500 currently cannot possibly deflate over five years to £21,000. I simply cannot accept that.

If the noble Lord will allow me to continue, I am hoping that I will be able to respond to the questions that he has raised.

The system of student support would be much less progressive as a result of the noble Lord’s amendment. The Government remain committed to delivering a progressive system whereby those who benefit most from higher education contribute the most. With regard to imposing the cap, the noble Lord asked if the current £15,000 threshold would have risen in 2016 compared with the £21,000 threshold proposed by the Government. Of course he knows that the previous Government did not raise the threshold annually, which is why we are proposing from 2016-17, as part of the progressive system, that it be introduced.

The noble Lord, Lord Peston, asked about the impact on women. It is important to consider the package in the round. The amount that borrowers repay in a year is strictly linked to income. Borrowers whose income drops below the threshold, for example, when moving to part-time work or seeking downgrade posts at the end of their career, or who leave employment for whatever reason, will be protected because their repayments will cease immediately.

But the repayments are written off after 30 years.

My noble friend Lady Sharp asked about the sale of student loans. The student loans Act makes clear that the borrower will not be affected by the sale. Their loans will be subject to the same terms as those that remain unsold. Nothing in the Bill changes that position.

I would like to finish on Sharia law. In relation to issues around Sharia compliance, the noble Lord mentioned the meeting between the Minister for Universities and Science, my honourable friend David Willetts, the Federation of Student Islamic Societies—a body that represents students from the Muslim faith—and the National Union of Students to discuss the issue. We accept the importance of the concerns raised by those organisations and have an ongoing dialogue to see how we can best ensure that student finance is not impacted on through the systems that we are bringing in. However, it would be better for me to write to the noble Lord on the outcomes after we have made sure that the consultations have been fully gone through.

There is one point that the noble Baroness has not dealt with in relation to my noble friend Lord Stevenson’s introductory speech, which said that the Deputy Prime Minister—who we know is well versed in the issue of student fees—reckons that about 60 per cent of the loans will not be repaid. Is that an official statistic on behalf of the Government? Is that the estimate? Is that how much will not be repaid out of all of this expenditure?

No, the Deputy Prime Minister has not got it wrong; maybe the noble Lord has got it wrong. It is 40 per cent. This is why the threshold for repayment is being increased to £21,000 and why repayments will be taken at 9 per cent above that level. This, hopefully, will mean that individuals will repay less. There will be less opportunity for them not to pay their loans off because we have made it easier for them to repay their loans. The noble Lord makes faces. I am sorry that I am not satisfying him. But I think he will agree, when he reads Hansard tomorrow, that I am laying out a very clear, comprehensive way of making sure that we are protecting most those on the lowest incomes and giving them an easier way of repaying so that there will be less opportunity for them to default and hopefully more students, rather than fewer, repaying the loans that have been taken out.

Before the Minister sits down, could she answer the question that I asked quite directly about whether it is a condition of being able to sell the Student Loans Company book that this arrangement around interest rates is applied?

I am sorry if the noble Lord did not hear my response. I thought I had answered his question, but I will answer it again. The Sale of Student Loans Act makes it clear that the borrower will not be affected by the sale. Their loans will be subject to the same terms as those that remain unsold.

That is not the question. The question was: as part of the Government’s desire to be able to sell off the student loan book, is being able to shift to this more commercial arrangement around interest rates one of the conditions of being able to do so?

I suspect that my answer will not satisfy the noble Lord, because I am not satisfied with it either. However, I will read it out, then look at my civil servants to give me a better response at some point. Looking at the existing loan portfolio now, I do not think that we can give the response that the noble Lord wants.

That has been interesting. A relatively small point at the end of a Bill that is about something else has revealed an interesting range of issues that we may have to come back to at Report. I thank the noble Lords, Lord Peston, Lord Sutherland, Lord Knight and Lord Foulkes, and the noble Baroness, Lady Sharp, for their comments and for illuminating and extending some of my points. As the noble Lord, Lord Foulkes, said, the purpose of discussions at this stage of a Bill is to discuss some of the underlying issues and principles and, if possible, get some illumination on the thinking behind the Government’s plans and understand better the consequences of what they are doing.

I am afraid we did not really get much illumination, and we tended towards the end to run into a sort of blame game. If it was not our fault for having been in Government when the first arrangements were made, it was our fault for not having supported what is currently proposed. Indeed, at one point I heard the Minister say that we should not be discussing this now but should wait for the Higher Education Bill soon to come into this House.

No, what I said was that there are issues coming up in the Higher Education White Paper that is under consultation. That is a good forum for concerns such as those raised by the noble Lord, Lord Peston. That is the place where that would be discussed far more fruitfully than here today.

We beg to differ on that. Actually, I agree on the essence—that a lot of what has been raised today needs to be discussed in a wider context. It is a great pity that we are not able to do that because of the strange way in which the Government have been developing policy in this area. We had an announcement about the funding system detached from the student loan system which is in this Bill. We had a White Paper at the very end of the previous Session but we do not yet know when the Bill that will follow is due, and we are therefore not able to tie all these things together. That is the point I was trying to make.

I do not think we disagree in principle on what any Government would have to do in these situations. We want to fund our universities to the best level possible and we accept the principle that those who benefit from that should contribute to it. The problem is that I do not think the system that is coming out is the right one. The noble Lords, Lord Foulkes and Lord Knight, put a fairly precise finger on the first of my questions, about the difference between RPI and CPI, and I am afraid that I did not think that the answer that the Government came up with was at all credible. We will need to return to this on Report.

On the social inclusion points, I heard the Minister and I admire her aspirations. However, I think that there will be severe problems for women, particularly those in lower-paid occupations, and for mature students. Although I understand that negotiations are continuing about Sharia law compliance, I am worried about this and I hope it will be taken back and discussed seriously. If it turns out this is not a Sharia-compliant issue or is sufficiently close to problems that will cause the Government to reflect on it, we perhaps need an early decision; we are moving quite fast with this Bill and it would be difficult to change it later on, even this month.

On the question of why 3 per cent, I do not think that the Minister gave us much; 2.2 per cent from 3 per cent may not sound a lot but it would make a huge difference in terms of whether loans are keeping pace in value or are increasing in an overall race to the bottom.

On the question of the student loan sell-off, there is more to make of this, and we will need to return to it because I think it is driving some of the policy here. Unless we can get an absolutely clear answer on that, we will have to return to it. However, this is Committee and we have had a very good discussion so I beg leave to withdraw the amendment.

Amendment 145F withdrawn.

Clause 72 agreed.

Clause 73 : Limit on student fees: part-time courses

Amendment 145G

Moved by Lord Stevenson of Balmacara

145G: Clause 73, page 56, line 26, at end insert—

“( ) Notwithstanding the above, student fees for part-time courses must not exceed £1,000 per annum.”

Lord Stevenson of Balmacara: My Lords, I am moving Amendment 145G and I shall also speak to Amendment 148 in the name of the noble Baronesses, Lady Brinton and Lady Sharp of Guildford, which we support. The noble Lord, Lord Browne, in his review, and the coalition Government in their agreement, strongly supported the need to improve provision for part-time students and to assist the institutions that teach them. So far, so good. So you would think that the Government would therefore agree with one of the main aims of the Browne review, which was to abolish the arbitrary distinction between full-time and part-time study. Unfortunately, the Government’s announcement that from 2012 the system of loans they are introducing for full-time students will be extended to part-time students does not create parity. Indeed, it is going to wreak havoc in this sector. The amendment in my name is a probing amendment, but if it were accepted it would effectively extend the status quo. At any rate, it allows me to set out some questions for the Minister. Amendment 148 makes some detailed proposals on the same topic, and I look forward to hearing the noble Baroness’s reply.

Part of the problem is that the Government’s proposals do not seem to have caught up with the way part-time courses are now operated in the UK. Part-time undergraduate provision is very different from full-time undergraduate provision. 40 per cent of students in the UK studying at undergraduate level study part-time. Part-time students do not apply through UCAS; they apply directly to the university of their choice. Part-time applicants often apply very late in the cycle: typically, half of part-time applications are received in the three months before the autumn term starts. This, of course, is not lack of planning—it can typically take part-time students two or three years to move from first inquiry to application—but it is the necessary caution of mature students waiting to see if work, family and money issues make it possible to study. I would like, at this stage, to declare a past interest, in that I studied part-time for a professional accountancy qualification by attending evening classes while working full-time, so I know the sort of pressures that that generates. It took me about three years and a couple of false starts to get going and then it took me six years to complete my course. A six-year commitment is not one you undertake without considerable reflection and thought.

Part-time students are mostly not in school or college when they apply, so frequently they apply unsupported and without detailed knowledge of the system. They are less likely to have traditional qualifications, such as A-levels. They rely heavily on the university they apply to for information, advice, guidance, support and, perhaps most important of all, confidence. Part-time students are more likely to come from the most non-traditional and hard-to-reach groups. They are often not geographically mobile and so usually apply only to one local university.

I am grateful to Birkbeck College which gave me the following information about its current student cohort, which is, I think, very interesting. The college, as I am sure many noble Lords will know, has 20,000 students, with a very small minority of these on full-time courses, and the rest studying part-time. The majority of these—75 per cent—combine their studies with work. Some 50 per cent work full-time alongside their studies. The college recently carried out a survey of its year students, and some of the headline results are that the majority of part-time students are women—64 per cent at Birkbeck—and the majority are aged over 30. The majority of students stated that they could not afford to give up work, which means that, for most students, the alternative to part-time study is not full-time study, but not studying at all. Career development and personal development were stated as the main motivations for studying and compensating for having missed out earlier in life was also stated as a reason by a significant number of respondents.

As part-time fees are currently unregulated, each institution can set its own fees. Birkbeck College tells me that for entry in 2011 the fee range is £2,478 to £3,090. Those courses which have additional costs—laboratory work or field trips—or with high student demand or strong career outcomes, such as financial courses, fall into the higher tiers; it is really a market-led solution. Part-time students are not confined to part-time provider institutions, such as the Open University or Birkbeck. In many modern universities, over a third of students study on a part-time or a flexible basis. In the modern universities, both part-time and full-time study is based on modules and credits. There are 120 credits in an academic year.

Under the Bill, part-time course grants will be removed and part-time students will be entitled to fee loans—but not maintenance loans—if they study at 25 per cent intensity or more per annum. Presumably, that means more than 30 credits in a year. Part-time student fee loans will have the same conditions attached to them as for full-time students, but only for three and a half years of study. In other words, loans will attract RPI plus interest at 3 per cent. Thereafter, part-time students whose earnings rise above the earnings threshold of £21,000 will be required to start repaying loans at RPI plus 3 per cent of earnings. Part-time students will therefore be subject to different repayment regimes compared to their full-time peers. So there is not much parity there.

Many universities have adopted a single fee of £9,000 for the 120 credits required for a full-time course. Others will be choosing fees, for example, of £6,000 for 120 credits. The current proposal will mean that there could be a different price per credit depending on whether individuals studied full-time or part-time at the same institution for the same course. This can only invite perverse behaviour.

The Bill proposes to give the Secretary of State the power to specify in regulations the maximum tuition fee that higher education institutions may charge part-time undergraduate students in a given year. There is a query about what these figures are. The upper fee amount is now specified as £6,750. The lower fee amount has been given as £4,500. In fact, we now know the detailed regulations for this.

I do not think many people on the Committee will know this, but the student support statutory instruments 2011 were tabled in Parliament on 9 August 2011 and came into force on 4 September 2011—slightly odd to do that in the deepest Recess. I would like to quote them:

“The amount of a fee loan in respect of an academic year of a designated part-time course must not exceed the lesser of (a) the fees payable by the student in connection with that year; and (b) the maximum amount. For the purposes of this regulation, the “maximum amount” means £6,750 where the current part-time course is provided by a publicly funded institution, and £4,500 where the current part-time course is provided by a private institution, other than on behalf of a publicly funded institution”.

I wonder whether the Minister could explain a little more about this and give us some context. Why is that particular figure of £4,500 based on an ostensible private provider, and what relevance has that got to the normal vision of part-time courses in the country?

Can the Minister also confirm that this means in practice that the same fee levels as for a full-time student will apply but on a pro rata basis, and that while it will be for each institution to set their own fee levels, loans for part-time students can only be available up to 75% of the maximum full-time loan, namely £6,750?

If that is correct, then I deduce that the situation is that part-time fees are set to go up from about £1,000 per annum—these are Department for Education figures—to £6,750. Part-time students will not be eligible for maintenance loans or grants as they have been in the past, but such students will in future have to borrow to pay the much higher fees that they are going to be charged. That seems a bit like Alice in Wonderland.

This may be of benefit for the institutions, who will clearly benefit from the additional cash, but for many part-time students, particularly those who already have significant borrowing or other financial commitments, this does not seem to be a good deal.

So my questions for the Minister are: why are they introducing a different approach for part-time students to that for full-time students? If the university is setting a fee which they think the market will bear, and the Government are prepared to extend the voucher system to part-time students, why cap these loans at 75% of the maximum for full-time courses?

The intention is that students on full-time courses become liable to repay their loans the April after they finish or leave their course. So with a full-time course of three years, you are eligible to repay 3.5 years after you start that course. Comparable part-time undergraduate degrees obviously take longer than full-time—in many cases four or five years, in my case six years. But for part-time loans the Government have proposed that repayments must commence 3.5 years after the loan is taken out. This means that part-time students will begin to repay their loans while they are still studying. In some cases, they could be repaying their loan for nearly two years while they are still studying. Full-time students only repay when they have completed their studies.

Surely the Minister would agree that it is logical and fair for all students to start repayment of loans six months after they have finished or leave the course, thus allowing the student to benefit from an improved job or salary before being asked to pay the loan.

The former Minister, the noble Lord, Lord Henley, kindly wrote to me and other noble Lords about this group of amendments. He says that the 3.5 year repayment due date is,

“consistent with the current average time when full-time borrowers studying a three year degree course reach their repayment date”.

Consistent? Such sophistry demeans the case. Surely the consistency we want is around the point when you complete the course. If full-time students have the opportunity to complete their studies before they have to start repaying the loan, why on earth is this logic not also applied to part-time students?

In his letter, the noble Lord also makes the point that if the repayment date were delayed by a year or more, students may accrue more interest, as that period could be charged at RPI plus 3 per cent. Well, we knew that, and the Committee will know from the previous amendment that I would not have started from here in this discussion. In any case, this hardly outweighs the absurdity of a part-time student having to repay a loan before benefiting from the course for which he or she has taken out the loan in the first place.

Can the Minister confirm that loans will not be available to part-time students who are studying for an equivalent or lower qualification than the one they already hold? Many students may be studying to change career, or acquire skills in an area they are currently working in, which may be unrelated to their previous qualification. In fact—if I can again plead my case—when I was considering taking a course, I already held a degree in chemistry, but I wanted to requalify as an accountant, as that was more relevant to my then job as an administrator. Under these rules, I would not have been eligible for a loan.

If the intention of the scheme is to improve the quality of the workforce in the UK by encouraging study and training, why are you putting barriers in the way of those who want to train for gain? Can the Minister explain why such students are being excluded from access to the scheme? I believe that the proposals for part-time students in the Bill are not fair, and will not achieve the aspirations of either the Browne report or indeed the coalition agreement.

There surely ought to be much more parity between full-time and part-time provision, while reflecting the very different circumstances of those who study part-time. In particular, the concept of students borrowing to pay their fees in the latter stages of courses, while at the same time being asked to repay the loans they have already taken out for the earlier years, is not only completely daft, but has the feel of a Ponzi scheme.

What is proposed in this clause simply does not seem to help those students who take part-time courses for career development, or as compensation for having missed out earlier in life. I hope it is not too late for the Government to think again. I beg to move.

I speak to Amendment 148, which is very different in approach to Amendment 145G, but I believe there are some similarities, as it is essential that we truly believe that part-time students have access to loans to cover fees, and should be on a par with full-time students, pro rated of course to give them the same opportunities that full-time students have had for years. I am delighted that the coalition Government are offering loans for fees for part-time undergraduates for the first time.

After fees were introduced for the first time in 1997, it was always iniquitous that the previous Government did not provide any access to loans for fees for part-time students, many of whom came from backgrounds where they were often the first person in their family to go to university, and came from a low-income background; exactly the sort of group that we should be encouraging. With over 40 per cent of undergraduate students in the UK studying part-time, this is not just a small group of students being disenfranchised from the previous system; it is close to half of them.

The current BIS adverts are rightly trying to set out the real financial arrangements for the new student finance system. They have the snappy phrase, “Start to repay when you graduate”, which is a very important message about the new system that many do not understand. I am very grateful to the noble Lord, Lord Henley, who wrote to me on 3 September setting out the details of the thinking behind the two issues that we raise in our amendment.

First, it does seem extraordinary that part-time students might be charged a different rate of interest from full-time students, and therefore I am grateful to the noble Lord for making it clear in his letter that it is the present Government’s intention that rates of interest for part-time and full-time students will be the same. This is good news. My amendment would make this plain in the Bill, and I am happy with the Minister’s assurance.

The second part of the amendment, though, addresses an anomaly which remains. The proposal to implement part-time fee loans risks undermining the principle of equity which I thought the coalition Government agreement had aimed to achieve. It should be noted, however, as has already been raised, that this equity is only on fee loans, because part-time students are still not eligible for means-tested maintenance loans and grants. The real difficulty with the Government’s proposals is that part-time students should start to repay their loans from the April three years after they commence studying, if their earnings reach £21,000.

While I think this is probably a fairly small group of students, I do know from my experience in higher education that mature students often make the decision to study while working either part-time or full-time, and while an income of £21,000 sounds like a good deal for a 21 year-old, it is not necessarily a high salary for someone in their thirties or forties with home and family responsibilities to juggle alongside their study. In particular for single parents, often but not always mothers, it can be a very fine decision about whether they can afford to study alongside work.

But there is also the fundamental question of equity. A full-time student undergraduate on a four-year course, whether an engineer or a linguist, for example, will not start to repay until they finish their course—four and a half years. Part-time students, though, are asked to start repaying at three and a half years, regardless of the number of modules they are taking, and over what period. Simply by virtue of being part-time students, none of them will have concluded their course by three and a half years.

The noble Lord, Lord Henley, expressed some concern to me about an open-ended commitment if we change the arrangements to ensure that no part-time students start to repay until they finish their course, which might be 10 or even 15 years on, which is unlikely. I accept the point that the noble Lord, Lord Stevenson of Balmacara made about six years, but that is also unusual. I understand that the vast majority of part-time students have completed their course by the fifth year.

I am not arguing for a complete deferral, but a move to defer the repayment starting at four and a half years has the merit of including the majority of part-time students concluding by that time, with only a very few going on beyond five years of study.

Additionally, this arrangement may also impact on those adults taking Level 3 courses part time, who are now eligible for loans for fees. These part-time students are 84 per cent of the total currently taking Level 3 courses. I ask the Minister for reassurance that these students would also not start repaying before they complete in the same way that I am arguing for part-time undergraduates.

I have recently received a copy of a letter that the Minister for Universities and Skills has written to million+, responding to another problem in the arrangements for regulating fees for part-time students in universities. Because it is so recent, and because it is highly technical, I am not asking the Minister to respond today, but would be grateful for a written response in due course. Because it is a highly technical one, my view is that it is not appropriate to have it on the face of the Bill, but it does need to be aired, because it is in the regulations, and may cause some chaos.

The proposal aims to restrict part-time fee loans on 75 per cent of a £9,000 fee in an academic year. This is a completely arbitrary cap, and I worry that to have drafted it shows little understanding of the academic framework, or that part-time and full-time study alike is based on the 120 credits required for a full-time course, rather than on a percentage of intensity.

In practice, there is a good deal of flexibility, which reflects the differing circumstances of part-time students, for instance in terms of work and family commitments and the number of modules that students have been able to study in previous years. It is not 25 per cent, 25 per cent, 25 per cent, 25 per cent; it can often be 20 per cent, 50 per cent, 20 per cent, 10 per cent. Students simply do not study in modules which are nicely linked with percentage intensity, and the proposal will create unnecessary and avoidable administrative complexity in universities, with the potential for part-time students to be levied different charges, part of which the noble Lord, Lord Stevenson, referred to earlier.

The BIS proposal is not even linked with the 75 per cent of the full-time fee charged, but with 75 per cent of a £9,000 fee—the higher fee cap. This has the effect of undermining the principle of equity of treatment for full-time and part-time students, and allows part-time students to be charged proportionally more that their full-time peers, according to the full-time fee levied in the university. It will also undoubtedly restrict the potential to incentivise more flexible learning opportunities in the context of part-time study.

This is not only a Government aspiration, but is also in the Exchequer’s interest, because part-time students, unlike their full-time counterparts, are not eligible to claim means-tested maintenance grants or loans.

In the letter to million+ from the Minister, David Willetts, he talks about regulation, but there is no reason to regulate part-time fees, other than to ensure that fee loans are available on a basis which does not exceed pro rata of the full-time fee. I fear that the real reason why this system is being proposed is made clear in the last paragraph, which reveals that officials have already given a brief to the Student Loans Company to design a system that fits within the 75 per cent proposal set out by BIS. The letter says,

“The Student Loans Company is also now sufficiently advanced in its systems design that a change of this size could not be implemented without putting the launch of the service at risk. We will though, of course, monitor the rollout of this new system, and respond as necessary if clear evidence of needs emerges”.

These proposals are perpetuating policies and funding regimes which treat flexible and part-time learning as a percentage of full-time, missing the opportunity to align flexible learning with the credit system and the needs of students—all before the legislation has been passed or the debate on the primary legislation has concluded in Parliament. I repeat: given the short notice and the technical nature of this issue, I do not expect the Minister to reply today, but I hope that she can help with a written reply in due course.

Let us give a cheer that at last the Government propose equity of experience for part-time students, but the interest rate, the time when students start to repay or the financial arrangements for taking modules are all at risk because of some of the detailed small print that sits behind the Bill. I hope that the Minister will be able to help us provide that equality of access that the coalition Government seek and which those of us on these Benches wholeheartedly support.

I wish to support Amendment 148. I am afraid that I cannot support Amendment 145G, for reasons that I think are fairly obvious. If you have students in this position and you want a degree of equity they should be contributing pro rata to their colleagues in full-time education. However, I congratulate the Government on moving on this issue and moving part-time students into the arena of those who will be given loans against fees.

The arguments already put in favour of Amendment 148 are strong and powerful. I suspect there has been some oversight here; there is a much broader discussion to be had about the place and funding of part-time students, but that will come perhaps after the consultation on the White Paper is finished and it is brought back here. For the moment, we need as near an equitable position as we can and four and a half years as the period at which repayment is required seems to me a reasonable compromise for the moment.

I would also very much like to support Amendment 148. As has already been said, not only does it address the important move of part-timers into access to loans, which is crucial, but for me it also sets out in parts 1 and 2 the right way in which it can be sorted out so that students can have completed their studies. I am also aware from my own experience and from what the noble Lord, Lord Stevenson, has said that there will be a huge number of women in this situation. For those reasons too it is very important that they have this new opportunity to study at a later stage in life; to catch up after what was often bad or lack of the right information about the courses they might have thought of studying when they were younger.

So I hope very much that the Government will see the sense in Amendment 148 and will be able to accept it in its entirety. It certainly takes me back to the many occasions when I have discussed this, particularly with the noble Baroness, Lady Sharp. I will not go any further than that, but I hope the amendment can be supported.

Very briefly, I entirely endorse what my noble friend Lady Brinton has said about Amendment 148. It is a very good compromise and I hope that the coalition Government will listen to what we have been saying here. As the noble Baroness, Lady Howe, has just mentioned, I have fought for a long time for equity for part-timers and it is splendid that we are almost seeing equity now. It would be very nice if it were rather fuller equity. I hope we shall see this.

My Lords, may I ask for an assurance from the Minister on a small detail? Many social work students will be studying part-time and if they are doing a degree-level qualification, that fee will be waived. It is very welcome that the Government are raising the threshold of entry into social work and it is now becoming more expected that students will have Level 3 qualifications, so I would appreciate a reassurance that they will not be charged when they are at further education college doing their Level 3 qualifications. It is a point of detail; maybe the Minister could write to me on that.

My Lords, I would like to respond to the amendments of the noble Lord, Lord Stevenson, and of my noble friends Lady Brinton and Lady Sharp, in turn. I know that many noble Lords, like me, welcome the extension of loans to eligible part-time students studying at publicly funded institutions to cover the full cost of their tuition. Upfront tuition costs were identified by Lord Browne in his independent review of higher education as the primary barrier to students who want to study on a part-time basis and we have removed that barrier.

I thank the noble Lord, Lord Stevenson for introducing his amendment, which raised a debate in this Room about the extension of loans to part-time students. The introduction of caps on tuition charges for part-time courses is an important part of our higher education reform. It will enable the Government to provide, for the first time, loans to eligible part-time students to cover the full cost of their tuition at publicly funded institutions, just as it does for full-time students. The Government agree with the overarching principle of Lord Browne’s independent review that those who benefit most from higher education should make a larger contribution to its costs. This holds true for those who choose to study part-time as much as those who pursue it full-time.

The Government’s reforms mean that while the teaching grant for the Higher Education Funding Council for England is being reduced or stopped completely for some subjects, universities will have access to a steady income stream from subsidised tuition loans and will get the future of sustainable funding that they need. We would be reluctant to limit to £1,000 per year the amount that institutions can charge for part-time courses. Such a limit would pose a serious risk to the financial sustainability of the part-time sector, as it would restrict a now primary source of funding. This would place part-time students at a significant disadvantage to their full-time counterparts and I am sure that the noble Lord is not advocating that.

Amendment 148 seeks to ensure that the amount of interest that could be charged on loans for part-time students should not be higher than the rate charged for full-time students. My noble friends raise an important point and one with which I agree wholeheartedly. Part-time students should be treated in exactly the same way as full-time students in the way in which interest is applied to their loans. We have never intended that full-time and part-time students should be treated differently in this respect. I hope that the indicative regulation published when this clause was in the Commons will also reassure my noble friends on this point. The regulation showed that student loans will bear interest at RPI plus 3 per cent until the individual becomes liable to repay. From this point, we will introduce a progressive system whereby low earners—again, regardless of whether they studied full-time or part-time—will be protected and accrue interest only at the rate of inflation. Those with an income of £21,000 or less—below the repayment threshold—will not need to make any repayments and will accrue interest at RPI only, which will maintain the value of the loan in real terms. For anyone with income greater than this, the rate of interest applied will increase gradually with their income, reaching a maximum of RPI plus 3 per cent at an income of £41,000. Those with incomes of £41,000 or more will accrue interest at a rate of RPI plus 3 per cent.

I hope that that has reassured my noble friends on those points. As it is our intention to apply our proposals to both full-time and part-time students and the individual’s mode of study has no impact on how the rate is calculated, it is therefore unnecessary to set this out in primary legislation.

Moving to the second point in this amendment, I understand the concern about the date that part-time students become liable to repay, though it is important to remember that whether they will actually have to begin to repay will depend on their income. Under our current proposals, part-time students become due to repay on 6 April following the third anniversary of the start date of their course, even if they continue to study. We have chosen this date as an equivalent to the time when a full-time borrower studying a three-year degree course would reach their repayment date. However, it is important to remember that no one will have to repay if their income is below £21,000. The added benefit for those part-time students who have incomes less than £41,000 is that they will at this point see a reduction in the interest that they are charged. Once part-time students become liable to repay, their interest will be dependent on their income, whereas students who have not yet reached their statutory repayment due date will be charged interest at RPI plus three per cent.

I know that some higher education institutions feel that delaying the repayment point by a further year would benefit their students, particularly those studying the equivalent of a three-year course part time over four years. I can see that this might be the case at least for those part-time students earning more than £21,000. However, the converse would be true for many other part-time students, particularly those earning under £21,000. They would be charged a higher interest rate for a further year but would not be required to repay during that year. However, I have listened to the argument very closely and I think that it would be prudent of me to go back to my right honourable friend David Willetts and raise these points with him again and commit to writing to noble Lords about these concerns. This is a very valid point and one that we need to consider very seriously.

On that particular point, the Minister has been very helpful. But I am not absolutely clear about whether she will go back to the Minister with a view to accepting this amendment. What I understood by the very eloquent speech of the noble Baroness, Lady Brinton, was that the administrative scheme that has already been promulgated anticipates the legislation even though the legislation has not yet gone through this House, which is a very serious situation. There is no point in going back to David Willetts if this has already been decided by an administrative scheme.

I can reassure the noble Lord that it has not been set in stone. I have listened very carefully to the argument today. It is a very valid argument. It would be a great benefit to go back to my right honourable friend and raise with him genuine concerns. While I cannot commit to the exact amendment as it is, it is worthy of a revisit with my right honourable friend.

I would like to finish by responding to a couple of the points made by the noble Lord, Lord Stevenson, about the loans available to part-time students. I think I have covered it in my presentation. I will reiterate in case it has not been made clear. Part-time students will meet the amount charged subject to the passage of this clause. The introduction of regulations to cap fees at the level the noble Lord has indicated means that there may be institutions that do not choose to raise fee-charging to the maximum level. We are making an assumption that that is what is going to happen, but we must not because there may be institutions that do not follow that path. For equivalent and lower qualifications, my right honourable friend the Minister for Universities and Skills has in the past indicated his regret that loans cannot be offered for a second qualification.

I am sure that, when the noble Lord’s party was in Government, they also had the same regret. But, unfortunately, budgets are limited. We have to work within our means so that those who have not got a first-time qualification are given that opportunity. The noble Lord’s Government agreed with that principle; we are following it through. I hope that the noble Lord will be reassured—as my noble friends are—that we have taken this very seriously. I have promised to take away what my noble friend Lady Brinton has raised. We hope to come back to it on Report with some findings.

Before the noble Baroness concludes, I thank her very much for the response and for taking the matter back to the Minister for Universities and Skills. We would be very grateful if we could participate in that meeting, particularly on the two technical points that I raised, that I said I did not need answers to today, because obviously it will take a lot of time to write back on them.

Absolutely, and I would encourage any other noble Lord who would wish to be at that meeting to indicate that they would like to be present, so that we can offer an invitation to whoever wishes to be there.

My Lords, me too. I would like to come to that. It would be fascinating. I am sure the noble Lord, Lord Foulkes would be present in spirit even if his considerable bulk was not present in fact at the occasion. We will bear in mind his useful and helpful interjections during the debate on these two amendments.

I thank the noble Baronesses, Lady Brinton and Lady Sharp, for their amendment, which has won the day. The speech of the noble Baroness, Lady Brinton, was indeed very eloquent, as has already been said. One point which I would like to finesse back to the Minister was that in considering the question of the timing for which loans should be available for part-time equivalent to full-time study for degrees, she also made the point—which I tried to make, but did not make it so well—that institutions have a long and distinguished history of setting good levels of fees for part-time courses. It is not clear at all to me why the Government feel they need to regulate.

The documentation I have seen suggests that there is a fear that if the new loan system comes in, institutions cannot be trusted to restrict the level of fee, when it comes down to it. Again, that might be worth waiting for, to see, and to have the power to intervene if necessary. As the Minister said, there may be a number of institutions who, for good and persuasive reasons, decide to cap fees much lower down the scale, in which case the figure of 75 per cent of £9,000 is otiose, and we should bear that in mind as we go forward.

I also thank the other speakers in this debate, because although mine was a probing amendment, I did want to raise the points that have been raised. I think they were picked up. I am delighted that the Minister has reassured the Committee about the equivalence of interest payments between full-time and part-time students; that is important. I am delighted that she is going to take back the arguments we made today, and I hope that at Report or earlier, we will be able to have some good news. On that basis I would like to withdraw my amendment.

Amendment 145G withdrawn.

Clause 73 agreed.

Amendment 146

Moved by

146: After Clause 73, insert the following new Clause—

“Disclaimer of eligibility for student support

(1) Any student over the age of 18 (or if under that age, with the consent of the student’s parents or guardian) may disclaim the right to such financial support or arrangements as may from time to time be offered by or on behalf of the Secretary of State to such students.

(2) Such a student may then apply to be admitted to a university as if he or she were a candidate from outside the European Union, and shall for all purposes be considered to be such a candidate.

(3) A student who has made such a disclaimer may withdraw it at any time, but not in respect of any course to which he or she has been admitted as if he or she were from outside the European Union.”

I beg to move Amendment 146 and speak to Amendment 147A. My objective is to nudge the Government gently in the direction of common sense and fairness in these two amendments. One of the effects of the Government’s policies over the last year or two, particularly with regard to the Office for Fair Access, which looks set to reduce the number of students going from high-performing English schools to Oxford and Cambridge by about 500 a year, and as an effect of the fees increase, has seen a very considerable rise in interest in the prospect of going to university overseas.

At the cheaper level, it costs about a couple of thousand pounds plus living expenses to get a very decent university education in the Netherlands. That is becoming an increasingly popular destination, notably for the leafier end of the state school system. I thoroughly recommend Maastricht as a university, begging the pardon of my more sensitive colleagues on these Benches. It is actually a very fine and innovative university, and for those parents who would intend anyway to repay their children’s debt, and not leave them with that hanging over them, it represents a very considerable saving.

To have our children going abroad anyway is probably quite a good thing for this country, and over the long term it should increase our understanding of the world outside our shores, and bring us added understanding, if not prosperity. At the higher end, principally affected by the changes being made in OFFA, we are seeing very substantial increases in numbers of students interested in going to the United States. The rate of application is up by about 30 per cent this year. Fees in the US are extremely substantial. There are some good scholarships available. Some of the brighter state comprehensives have been picking up one or two of them, and long may that continue. However, a lot of this outflow will be children who have gone to independent schools, whose parents see that they have the qualifications that would formerly have taken them to top universities, but who have now been squeezed out—so they are off to America, Canada, Australia or, indeed, China. You can get to some very high-ranking universities in Hong Kong for not much more than the cost of a British degree. Indeed, one of them is a subsidiary of Nottingham University. So you can pay to go to a British university overseas. It seems a bit daft to me that our own universities, which are strapped for cash enough as it is, should see this flow of students going out to pay high fees overseas and not be able to bring them back and have those fees for themselves. Why should we deny our universities that benefit? Why should our students find that the only universities in the world that they cannot pay a fee for are our own universities and why should our universities find that a natural flow of students is denied to them? So I hope, while not expecting any immediate comfort today, that the Government will think along those lines.

I would like to see some progress today on Amendment 147A. It has long been the practice of universities, when students were largely funded by the Government, to rob Peter to pay Paul—to take money that was notionally allocated to students studying humanities degrees and use it to fund courses being pursued by those studying science degrees, in particular. That is all very well when it is just reallocating government money, but when you are taking money that a student has invested themselves and transferring it away from that student to some other student’s course, I think that that becomes morally indefensible. I would very much like to see any such activity done openly and with a proper disclosure of what a student is receiving in return for their fees and where the money is being spent by the university. Then a student who is looking to go on what has been traditionally a rather underprovided course with few contact hours can see whether or not they are being offered a reasonable bargain in return for their £9,000 a year. I beg to move.

My name is also on Amendment 146 and I very much support what my noble friend has said. I shall add one or two other arguments to the powerful arguments that he has already made.

My noble friend said that losing some of our good students to go abroad for their studies might be a good thing. Yes, it would be good for a few. International education, whether at undergraduate or graduate level, is a well established tradition among the brighter and best students, and that is a good thing. But it is a very foolish country that stands aside and watches a very large number of its brightest and best students being lost, particularly since those who go to the United States tend to stay. There are good statistics showing this. We lose some of our best talent if we allow them to go and finish their undergraduate and postgraduate study there and then be snapped up by American companies.

The other argument that has always seemed to me quite powerful is that we have and recognise in this country, without much debate, that we have private schools as well as state schools. We know perfectly well the way in which private school fees have been accelerating in recent years. Many parents are now paying £12,000 or £13,000 per year for day schools, if they are lucky—some more than that—and, for boarding schools, at least double that. It has always seemed very strange that those same parents whose children go on to higher education are suddenly released from what many of us see as the burden of school fees to a very much reduced sum of money. I have many times dwelt with friends on one anecdote from my time as head of a Cambridge college. One of my fresher students came bouncing up to me in the first week of term and said, “Oh, come and look at what my daddy has given me as a present for coming up to university”. It was a brand new BMW 7 Series, which would have accounted for at least three years of fees at £9,000 a year plus, or her maintenance. I thought, yes, Daddy is celebrating because he does not have to pay your very high school fees any longer. I am sure that my college and university could have done with that money and made good use of it.

It seems quite extraordinary that we do not allow parents—who could very well afford to continue to pay the fees—simply to opt their children out of the entire loans company system and, therefore, to have their children treated like overseas students, where the university can set their fees and they are outwith the quota for those eligible for loans. Putting these very bright students off-quota and giving them the encouragement and opportunity to go to our best universities would be to their benefit and hugely to the benefit of the country. Therefore, I wholly hope that the Government will seriously consider this possibility of having private students who would be off-quota but who of course would have exactly the same entry requirements as those who are eligible for loans. As my noble friend says, we do not expect an answer today. This is not a backdoor route for people to buy their way into higher education. Their access arrangements and entry requirements would have to be exactly the same. But it would enable us to keep some of those very bright young people here in British universities.

My Lords, I was hoping that the noble Lord, Lord Lucas, was going to refer to what has been the most discriminatory and unfair decision in relation to student fees ever, anywhere in the United Kingdom. This is the decision by the Scottish Government to charge students domiciled in England, Wales or Northern Ireland who choose to study at Scottish universities fees of up to £9,000 a year. As the professor, my old principal, will know—though he was not principal when I was a student; he is not that old—if the Scottish Government are allowed to go ahead with what they are planning, English, Welsh and Northern Irish students will have to pay £36,000 for a four-year degree course at a Scottish university. It is really outrageous. It is particularly outrageous because of the rules of the European Union, whereby students coming from other countries in the European Union—whether it be Lithuania, Poland or any other country in the European Union—will get a free education just like Scottish students. I do not understand how anyone in England can sit back and accept this. I do not know why people are not rioting in the streets at this kind of discriminatory decision.

However, there will be an opportunity to put it right. I have tabled an amendment to the Scotland Bill, which means that this sovereign United Kingdom Parliament would make it illegal for the Scottish Administration to charge discriminatory fees. We are still the supreme Parliament. The Scottish Parliament is a devolved Parliament. I hope that all noble Lords will talk to their colleagues and that, for once, I might get support from all sides of the House—that would be a novelty—so that we can end the discrimination that is being proposed by the SNP in the Scottish Parliament.

My Lords, I am not rising to the bait of the noble Lord, Lord Foulkes, other than to add a fact that he may find interesting and so may the Committee. The Scottish Government’s budget presented roughly two weeks ago requires the universities to raise roughly £60 million in fees from students from the rest of the United Kingdom. On my own estimate, two years ago the cost of students from the European Union was £85 million a year. These are frightening figures and they raise a quite separate issue, but this is not the place to do it. I want to speak to the two amendments.

I appreciate the spirit of Amendment 147A: the spirit is openness and reassuring students that the money they pay for their education is actually being used for their education. That is absolutely right; as well as funding universities, that was the whole point of fees introduction. I support the principle, but I think the mechanism and the detail in subsection (2) would frighten the wits out of anyone running a university to provide that degree of information for every student.

I feel more strongly in support of Amendment 146. I simply want to add the fact that this is already in practice in a very select group of cases. The select group is of students who are taking a second degree, having already had the benefit of the first degree. The obvious case is veterinary studies, which was well represented in the university of which we have been speaking. The university found it possible to admit additional full-paying students on non state-funded places. Therefore, it seems the principle has been operating and has been conceded. In which case, there is a way of pushing it forward as in Clause 146.

My Lords, these are two slightly different amendments, raising different points, which are slightly oddly grouped together. However, they raise good points and I look forward to hearing what the Minister will say about them. On the first point, following the noble Lord, Lord Sutherland, and stepping sideways around the noble Lord, Lord Foulkes—a difficult task I know—architecture is another subject where you would have the benefit of having done a first qualification and then come back in and done further study, for which again these would not count.

On a point of information, it is not because veterinary studies required an earlier qualification, it is because many students want to take it, whose parents can afford to pay the extra fee. They take it, if they are admitted, whatever their background.

Which is the point I was about to make. The sheer serendipity of being able to do this does not make it right. Earlier points on other amendments, which were about the need of the whole country to work out how we pay for higher education, and to make sure that those who benefit from it also contribute back, do not get caught by this amendment. However, it may be worth further discussion, and I look forward to hearing what the Minister says.

On Amendment 147A, as has already been said, this is presumably the first of a number of points to be discussed as we get more to the market that the students will be dominating in future places, because in order to do that they will need this sort of information. I agree with the noble Lord, Lord Sutherland, that this is a tad more difficult and complex than any standard university secretary would be able to respond to. However, it gets the right message across, which is that there is not very much information available for students to judge what sort of university they are going to. The courses are beyond their experience by their very definition, but as for the way in which they are taught and the amount of student contact, there is already enough circulating to make this an interesting area, which we will track with interest.

There has been a report in the papers today that comments from students that have been surveyed about what they thought about university courses in relation to fee levels of £9,000 were distinctly unflattering. If that is the way this is going, then this sort of amendment may well be something we need to discuss later.

My Lords, the recently published Higher Education White Paper places students at the very heart of the higher education system. Our goal is a system that offers students better information and opportunity, is more responsive to student choice and helps to improve social mobility. We will ensure funding follows the student, is progressive and fair, and better responds to their situation and choices.

The amendment of my noble friend, Amendment 146, seeks to allow home and EU students to opt out of their eligibility for student support. First, let me make it clear that there is no requirement for students who have already been offered a place in higher education to draw down their entitlement to student support. At the moment, we have to control student numbers overall because we must control the costs to the public purse.

This amendment would mean that students who could afford to pay up front the full cost of their courses would then be at an advantage because they could pay. In effect, it has bypassed our student number controls. On the face of it this may appear attractive, but there would be a strong perception that wealthier students or their families would be able to buy a university place.

The Prime Minister has made the Government’s position absolutely clear on this. University access is about the ability to learn and not the ability to pay. There is no question of people being able to buy their way into university, however attractive that proposal looks. The Government are interested in expanding employer or charity sponsored places outside the quota system and are committed to freeing up the controls on student numbers in general.

In the Higher Education White Paper, we have committed to increasing such opportunities, provided that they do not create a cost liability for Government and that they meet three key principles: there should be fair access for all students applying, regardless of their ability to pay; the places must be genuinely additional; and there must be no reduction in academic standards in recruitment. The Higher Education Funding Council for England is looking at options to incentivise more sponsorship and will include this in its consultation this winter. This is a sensitive issue and we will consider carefully the outcomes of both these consultations before introducing further changes to the system.

On Amendment 147, I absolutely agree with my noble friend Lord Lucas that students need accessible, accurate and reliable information that clearly shows what they expect from their courses, helping them to make informed choices. We are doing a great deal of work in this area. It is our intention that by September 2012 all higher education institutions will publish key information sets for each course on their website. These sets will provide the information that students request the most, together with information about course charges.

The White Paper encourages good practice in institutions to allow students to become more discerning in understanding how their tuition charge is spent. It recommends that institutions provide the sort of material that local councils offer their residents to demonstrate where council tax is being spent. We have therefore asked the Higher Education Public Information Steering Group to consider whether this sort of data should form part of the future wider set of information we ask institutions to provide for prospective students.

I hope that I have reassured noble Lords, but before I conclude I would like to respond to the question of the noble Lord, Lord Sutherland. He mentioned that students taking their second first degrees would be outside the student number controls and would be able to pay for their courses. He is correct, but the Government, like the previous one, is regulating students’ first degrees. I hope that answers the noble Lord.

May I just ask what the point of the regulation is? Is it to save money, because the students in question will not cover the full cost of the fees; or is it because the Government have a pre-set notion on, for example, how many vets we need and how many should be eligible to take a veterinary studies degree?

I think the bottom line is, of course, that it is all down to affordability. We need to be clear on that. Universities have a finite budget too.

I will not fall into the eloquent spider’s web of the noble Lord, Lord Foulkes. I shall just say to him that Scotland has a devolved Administration and therefore sets its own agenda. Steering neatly away from that, I take this opportunity to thank all noble Lords for their contributions on this Bill today, given that this was my first outing in higher education. It has been quite a baptism, but I am hoping that when I come in on higher education matters in the future, I will be there from the beginning and will understand a little more clearly the temperaments of noble Lords.

This is the final group of amendments, but I understand very clearly that there will still be questions that remain outstanding. Therefore I am happy to meet noble Lords, be it after this meeting in Room 16 on the Principal Floor, or in future. I have very much an open-door approach to the way I do my business in the House.

I give this opportunity to all noble Lords to come and speak to us. We want to make sure that the legislation, when it goes from this House, is in its best form, and noble Lords are there to ensure that with me. The Welfare Reform Bill is about to commence, so on that note I will sit down and allow the noble Lord to withdraw.

My Lords, I thank my noble friend for that answer. To be disappointed by my noble friend, and encouraged by the noble Lord, Lord Foulkes, is indeed unusual. I hope that we will have at least the second part of that again. I shall now take an interest in the Scotland Bill.

I am grateful for what my noble friend said on Amendment 147A. I will read it carefully and come back to her on that. Because there is so much past practice in this area, this is something we need to take carefully.

As for Amendment 146, I find this an odd position for us to be taking. There are an awful lot of people in this country who pay for education from the ages of five to 18, and indeed before that. To suddenly cut that off at 18, as if it was in some way dirty, seems to me to be odd. If we are conducting things so that we are not displacing poorer children from the education they might otherwise receive, but are increasing the amount of money which is available to the institutions which are educating those poorer children, then that seems to me to be a sensible and constructive way to go.

I do not know how my right honourable friend the Prime Minister’s dictum should be applied to his alma mater, but perhaps one day I will be able to listen to him on that. For the moment I beg leave to withdraw the amendment.

Amendment 146 withdrawn.

Amendments 147A and 148 not moved.

Clauses 74 to 79 agreed.

Bill reported with amendments.

My Lords, the Grand Committee will now adjourn until 17.42, when the Committee will begin consideration of the Welfare Reform Bill.

Sitting suspended.