Motion to Regret
That this House regrets that the Higher Education (Basic Amount) (England) Regulations 2016 and the Higher Education (Higher Amount) (England) Regulations 2016 together with retrospectively changed loan conditions for existing students are further incremental burdens on students that risk worsening the opportunities for young people from low-income backgrounds, mature students and those undertaking part-time courses; and calls on Her Majesty’s Government to report annually to Parliament on the impact on the economy of the increasing quantum of graduate debt, estimates of payback rates, and the estimate of the annual cost to the Exchequer of the present system.
Relevant document: 21st Report from the Secondary Legislation Scrutiny Committee
My Lords, I declare a previous interest in that some time ago I worked in what is now Edinburgh Napier University. My wife is a governor of a university in London and I have two children, believe it or not, currently studying at British universities and one who graduated two years ago.
The Higher Education (Basic Amount) (England) Regulations 2016 and the Higher Education (Higher Amount) (England) Regulations 2016 set variable limits on the maximum fees that publicly funded English higher education institutions can charge students. They are negative instruments and the time for praying against them has long passed. However, in its 21st report, the Secondary Legislation Scrutiny Committee drew these instruments to the special attention of the House,
“on the ground that they give rise to issues of public policy likely to be of interest to the House”.
I am taking up that challenge. Despite the fact that we spent something like four months looking at the Higher Education and Research Bill, I still hope to engage the interests of Members of your Lordships’ House.
I am going to argue that the neoliberal marketisation of our higher education system is wrong in principle, because higher education is not a market; that it loads students with personal debt; that it will not improve opportunities to study for young people from disadvantaged and low-income backgrounds, mature students and those who wish to undertake part-time courses; and that linking fee rises, thereby increasing the personal debt of students, to only one of the attributes of a good university is a mistake. I will end by arguing that the cost of these polices to the public purse is now so complex and uncertain that it is virtually impossible to challenge what the Government are doing: we need more and more regular information and I call on the Government to provide it.
I went to university in the 1960s: my fees were paid by the state and I received a full maintenance grant. I would not, and indeed could not, have gone to university without that support, and I am sure my life would have been very different had I not had those chances. Education has been, and always will be, an important ladder out of social disadvantage.
In the period since 2012, our higher education system has been transformed. The tripling of fees, the introduction of income-contingent tax liabilities—loans in common parlance—and the ending of maintenance grants were described as market-driven, aimed at putting students at the heart of the system. According to classical economic theory, those 2012 reforms, with their direct grant payments to institutions, and fixed undergraduate recruitment caps replaced by a voucher system financed by loans, should have improved student choice as the money followed the applicant. Good institutions would expand to meet demand and those that struggled to recruit would have to either up their game or exit the market.
But have these reforms actually achieved what they set out to do, and has it been for the good? According to the IFS think tank, we have students leaving university with personal debts of around £53,000 for a three-year course. A large majority will not repay their loans in full. We have the most expensive courses in the world, and there has been a complete collapse in part-time provision, mature students have all but disappeared, and there is a dearth of home-based postgraduate students.
Even if the reformers of 2012 were right to bring competition into the sector, it was hardly a resounding success. First, all institutions gravitated to the highest possible fee—then £9,000. Those that did not were regarded as inferior, so that in truth all that was created was a monopsony: a rigged market where prices are set by producers. Secondly, the undergraduate tuition fee is not a price. As 90% of eligible students take out a loan to fully cover tuition fees, the cost of the degree is actually determined by the loan repayments made, not the amount borrowed, and this can vary widely. Somebody who never earns more than the repayment threshold pays nothing, and very high earners have to repay it all. The price signal is determined primarily by future income, not graduating debt. It is smoke and mirrors. That is why the expert commentator in this policy area, Andrew McGettigan, argues that,
“the tuition fee cannot signal as a price should in a perfectly competitive market”.
At this point, in my view, Ministers should surely have given up the experiment in neoliberalism. Instead, they have decided—and brought forward in the current Bill—that what was missing from the 2012 reforms was better information and a thorough shake-up of the system by stimulating an influx of challenger institutions. One cannot argue against changes that improve information, but it has to be high-quality. The current proposal for a teaching excellence framework to provide the market with a proxy indication of teaching excellence in each HE provider is, to my mind, hopelessly flawed.
There is widespread agreement on the need to ensure teaching of the highest quality in our higher education system. Indeed, students paying £9,000 or more a year are surely entitled to expect a consistently high quality of teaching, wherever they undertake their degree. But there are, I suggest, four main practical reasons why the Government’s present approach is wrong.
First, the TEF is not ready. There is not yet a settled methodology, no agreement on the metrics to be used, and no agreement on the balance between the metrics and provider submissions. We are clearly some way off where we need to be on even the basic wiring. Secondly, currently the TEF rating will relate to the university and not to the subject or course. We will not see subject-level ratings until 2020, and even that may be an ambitious target. Thirdly, the customers who are supposed to be benefiting from this behemoth—the students—are vehemently against the proposal. Fourthly, universities are not just teaching machines, and linking fee rises to a faux framework which does not even address teaching in the classroom is to diminish the regard we should have also to scholarship and research excellence, engagement with wider society, and the dissemination and application of knowledge. A good university should be judged across all its missions.
However, there are also principled reasons why the current TEF proposals should be abandoned. As the noble Lord, Lord Sutherland, who created Ofsted, said at Second Reading of the Higher Education and Research Bill, it is simply not possible to devise a robust and sustainable scheme of evaluating teaching excellence if it does not start in the lecture theatre or classroom. Any scheme that relies on second-order metrics is simply not fit for purpose. Any scheme to measure teaching excellence, particularly if it is to operate at course or class level, surely has to be based wholly or mainly on the systems already in place in higher education providers which ensure that the courses offered are taught to a high standard. Most current HE providers of high standing already have such systems in place. Why duplicate them?
Surely the better way is to build trust and co-operation with the institutions themselves to get this right, subject only to a proportionate and risk-based assessment procedure. Assessing that good-quality teaching exists is one thing, but a system of rating universities gold, silver or bronze with the flawed TEF will jeopardise the excellent international reputation of British higher education, which does so much to attract overseas students and extend British influence and soft power abroad. Why rush to introduce an untested system, which will create the impression that some universities are failing when they are not?
We must not forget that there is a huge downside at a personal level. Students who get a bad deal from a course or institution have very limited abilities at present to revisit their choices. They even seem to have their own initiatives penalised by the current system, which does not support transfers or credit accumulation —although I hope that that will change. In any case, caveat emptor is surely not the responsible policy for higher education, which is still the main ladder for those striving to escape from social disadvantage. I conclude that these latest market reform measures will not provide the sustainable HE sector that this country will need in the medium term, let alone in the long run.
The SIs before us change the system of inflationary fee increases, which have been in place since 2004, to one which ties the fee level that may be charged to an assessment of teaching excellence in the sector. According to the Secondary Legislation Scrutiny Committee, the department’s assessment is that the potential increase in fees will not be significant enough to alter participation decisions by prospective students. However, at the same time as laying these regulations, the DfE published an equality analysis covering detailed changes to maximum fee caps for 2017-18 and their impact on protected and disadvantaged groups of students. It is a good report. In its EA, the DfE accepts that one impact will be an increase in student loan debts. However, it also accepts that the current evidence suggests that students from ethnic minorities, less advantaged backgrounds and mature students are more debt averse and cost sensitive than the others. But are these not the very groups that we want to attract?
The committee rightly asked the DfE to comment on this astonishing admission. The department’s response includes a statement acknowledging that there is still much to do. It says that,
“Young people from disadvantaged backgrounds are still much less likely to go to university than their more affluent peers”.
Am I alone in finding that comment deeply troubling?
Where are the policies to reinvigorate part-time provision? The collapse in enrolments at Birkbeck, University of London and the Open University coincided with the hike in course fees and the introduction of maintenance loans. No real change in approach is signalled in the higher education Bill or in the Technical and Further Education Bill, which passed through this House yesterday. There are plenty of good ideas out there. It is a pity that suggestions such as have been made for a specialist advice and admissions service for lifelong learning courses, similar to UCAS, the creation of a community learning centre in every major city and the reintroduction of individual learning accounts to support flexible learning throughout life have not been given more consideration in either of those Bills. So we have a policy approach which will not work: a system of fee increases, and thereby personal borrowing increases, which will not enhance social mobility or improve part-time provision.
What about the impact on students themselves? In Budget 2015, the Government confirmed that they would freeze the loan repayment threshold for five years and lower the official financial reporting discount rate for loans from RPI plus 2.2% to RPI plus 0.7%. Those of your Lordships who are not numerate in economics or in the detailed and sophisticated analysis of interest rates may wish to drift out for the next few minutes because this is quite technical—I did not say leave, as noble Lords would miss what might be my last speech from the Front Bench, which would be terribly upsetting. I play all the plugs when I need the support.
On the question of abolishing maintenance grants, the IFS said:
“The poorest 40% of students going to university in England will now graduate with debts of up to £53,000 from a three-year course”,
which is up from £40,500. It also points out that high earners coming from poorer backgrounds will now repay for longer,
“with the average individual contributing an extra £9,000 towards the cost of their degree”,
in net present value terms. The IFS concluded that freezing the repayment threshold for five years means that graduates would see their repayments increase by £3,800, on average, and that a median lifetime earner would see an increase in repayments of £6,000. For those who started between 2012 and 2015, this represents a sizeable retrospective price hike on what they were promised before signing up to their loan agreement. That is bad enough but, as the IFS points out, compared to the 2012 reforms the 2015 measures are regressive. They affect those coming from the poorest backgrounds adversely and affect median earners the hardest.
Finally, in some ways the most worrying thing of all is the huge uncovered gap in public finances which this system is creating, although I fully admit that it is very hard to untangle the figures as so little is published on this issue. According to a recent report of the Education Policy Institute:
“The contribution of student loans to net government debt is forecast to rise from around 4 per cent of GDP today to over 11 per cent in the 2040s”.
There are some published figures about the value of the student loan book, which the Government are trying to sell. At the end of March 2015, existing student loans had a face value of £64 billion—what was nominally owed to the Government—and were expected to generate repayments equivalent to only £42 billion in net present value terms. Who is covering that gap? Where is it held in the government accounts? Have the figures been audited? To which department are all these debts being booked?
By the end of March 2016, following changes in the discount rate, which have been described by some commentators as window dressing for the purposes of the sale of the loan book, the face value of the book had increased to £76 billion, with a fair value of £57 billion. There is still a stonking great £19 billion gap which has to be financed, presumably on the market.
If noble Lords do not follow the maths here, I can sympathise. We are trying to understand a system that requires long-range forecasts, upwards of 30 years, of complex issues including: estimates of gross and average salary levels; emigration; morbidity; and likely future participation in the workforce. These are mind-bendingly difficult to model, let alone to comprehend, even if we could see all the figures.
The issue is that we are kept totally in the dark. The only thing I have been able to find on this issue is figures in the BEIS accounts, which are a year late—that is no criticism, it is just that they are published a year behind. They report that the official RAB estimate for new loans issued is 23%, down from more than 40%, which was the original estimate, but that the Treasury has set a target RAB of 28%, which is plus 5%, although it is down from 35% in the forward plan, which mainly reflects the rebasing of the discount rate change. What does that actually mean in plain English?
This is not good enough. This is why my Motion calls on Her Majesty’s Government to report annually to Parliament on the impact on the economy of the increasing quantum of graduate debt and asks them to provide estimates of payback rates and an estimate of the annual cost to the Exchequer of the present system. It is not a lot to ask, and it is a no-brainer if the Government want to convince us that they are on the right track. I beg to move.
My Lords, we on these Benches support the case put so eloquently by the noble Lord, Lord Stevenson, and we much regret that he is stepping down from his Front-Bench role. We seem to have had to work together a lot in recent days, and it has always been a great pleasure to do so.
This increase in tuition fees is a significant further step towards full marketisation of the UK higher education sector, which threatens the accessibility and reputation of this vital sector. Allowing some universities with higher teaching ratings to charge higher fees means that students will increasingly have to weigh the opportunity presented by a particular course against the fee being charged. In fact, such a step could simply encourage the development of a two-tier university system whereby richer students go to higher-rated universities while the most disadvantaged students go to the lower-rated universities or not at all.
We on these Benches totally reject the idea of linking fees to teaching excellence framework gradings, as the noble Lord, Lord Stevenson, set out. They are an untried and untested form of assessment which should not be used to determine fees. There appears to be no correlation between increased fees and improved teaching quality. The National Union of Students points out that:
“Since tuition fees were trebled in 2012, there is no evidence to suggest that there was a consequential improvement in teaching quality. There has been no change in student satisfaction with the teaching on their course, while institutions have instead been shown to spend additional income from the fees rise on increased marketing materials, rather than on efforts to improve course quality”.
Doubtless some universities have used the fees to improve quality, but there is no guarantee that that is what the fees are there to do.
We have argued for many years that there is a serious lack of attention to teaching quality in universities. The emphasis has been heavily weighted to research for prestige, funding and career promotions, and we welcome the aims in the Higher Education and Research Bill to redress the balance, but we do not believe the way to solve this is through linking teaching quality to fees.
These changes come on top of other deeply damaging changes to student finance. First, there was the abolition of maintenance grants for lower-income students, which makes these regulations all the more damaging. Getting rid of grants while increasing the cost of university education may put lower-income students off attending higher-performing universities. Secondly, the retrospective change in loan conditions to freeze the repayment threshold for tuition fees at £21,000 breaks the deal done with students by the coalition and changes the terms for many students, meaning paying back from a lower starting point.
These measures will in no way encourage diversity or open access to mature or part-time students, nor encourage lifelong learning. We acknowledge the welcome increase to £833 million for the Director of Fair Access to improve student success for the more disadvantaged, but that is not going to solve the problem. Social mobility is simply not good enough. These measures will do nothing to improve opportunities for those from disadvantaged backgrounds. We join in the regrets.
My Lords, I declare my interests as a visiting professor at King’s College London, an adviser to 2U and an honorary fellow of Nuffield College, Oxford. I am discovering that this debate is a kind of valedictory for the noble Lord, Lord Stevenson. I would like to say how much I have enjoyed his interventions from the Front Bench during the debates we have both participated in. I am sure he will continue to contribute to this House; we need his contributions, and I have greatly appreciated what he has done.
It is rather peculiar that on this valedictory we are having a debate about these measures, when of course the truth is that the structure of higher education finance we are considering is one that all three parties have introduced during their times in government. If there is any example of a shared consensus on how to finance higher education, it is the Blair/coalition Government proposals for fees and loans. It is now a stable system, and one that all three parties have contributed to and should support.
It is of course not a system of up-front payment; that is its crucial feature. It is a graduate repayment scheme. When graduates repay, at a rate of 9% on earnings above £21,000, it is nothing like having a commercial debt. If a child of mine left university with £25,000 on their credit card or an overdraft of £50,000, I would be extremely worried as a parent. However, knowing that during their working lives they were going to pay back 9% of their earnings above £21,000, and that they would do so only if they were earning more, and if for whatever reason they were earning less they would not have to—in other words, they would be paying through PAYE—would not cause me concern.
Far more importantly, it does not concern students, which is why we have seen steady increases in the numbers of young people going to university as the successive changes have been brought about. Those changes have led to a growth in the number of places, particularly at universities that students have been choosing. We have indeed begun to see growth and shrinkage between different universities, reflecting student choice. We have seen more undergraduates getting their first choice of university. We have seen more places at university in total; indeed, these reforms made it possible to remove the cap on student numbers.
The increase in the number of university places has been particularly beneficial to students from lower-income backgrounds—the marginal students who are not otherwise getting in. Indeed, we have seen a surge in the number of people going to university from low-income backgrounds. At the beginning of this process, nearly 10 years ago when the Blair changes were first brought in and my party opposed them—with exactly the argument that we have been hearing again today: that they would put off low-income students—10% of students from the poorest backgrounds were going to university. After 10 years of these changes, 20% of students from the poorest backgrounds are going to university. That is not good enough—it is still way behind the 60% of young people from the most affluent backgrounds going to university—nevertheless, it is a doubling. We are on a journey in which we are gradually improving social mobility, with more young people from low-income backgrounds having this opportunity.
So the evidence is that they are not, to quote the noble Lord, Lord Stevenson, “debt-averse”, for the reason that it is not debt. I love the noble Lord’s example of his time at university. When he left, I suspect—because we are roughly contemporary—that he was facing an income tax rate of 35%. Now graduates face an income tax rate of 29% above a very high threshold. If he was not income tax-averse to going to university, why should they be income tax-averse now if they are facing a 29% rate of PAYE above a high threshold?
I will not detain the House for much longer, but it is possible, if you get into the figures, to take a flow of payments and convert it into a stock. You can create extraordinary figures for liabilities or assets if you take what is essentially a flow of payments and convert it into a stock.
For example, graduates, during their working lives, are very likely to pay at least £500,000 in income tax. As, by and large, people who go to university earn a bit more, they leave university with the prospect of £500,000 of income tax debt, at least, around their necks. Should we be anxious about that? No. In their working lives, if they earn a decent income, of course we will expect them to make a contribution to the Exchequer through income tax. Just as you can apparently create enormous figures for debt by aggregating lots of years of income tax, if we think of the amount that we as a nation will spend on the National Health Service over the next 20 or 30 years, we can also construct an enormous figure by taking £100 billion a year or whatever and multiplying it by 20 or 30. So graduates have an enormous pile of income tax debt—£500,000 at least—in order to pay for trillions of pounds of National Health Service spending. That is because government is a going concern. Neither of those figures should be of concern to us, because we can manage them through the annual flows of income and expenditure.
I should like to draw these brief remarks to a close, however, by welcoming a point in the Motion of the noble Lord, Lord Stevenson, because it is the only way I should conclude a short speech when we are apparently saying farewell to his Front-Bench service. I agree that we need from time to time to look at how the system is working. We do not need to change the structure—we do not need another big review; another Dearing or Brown—but of course there is a social choice in this system. The social choice is the balance between private repayment by graduates, and the public—the generality of taxpayers—taking the burden of writing off repayments that will not be made by graduates who, for example, do not earn enough to reach the threshold. That is a public-private balance which, in a way, reflects that of public and private benefit from higher education.
It is legitimate from time to time to have a debate about what is the right balance between graduate repayment through PAYE and the likely level at which, eventually, graduates’ loans will be written off because they cannot afford to repay them. Incidentally, that would be impossible if we fixed the term in the way the party opposite want, but I think that every five years—once during the lifetime of a Parliament—such a structured review would be worth while.
I end by welcoming that aspect of the noble Lord’s proposal. This need not be done every year: the information is available. Once again, I thank him personally for the lively and well-informed contributions he has made to our debates on higher education and other matters in the recent past.
My Lords, I particularly support the final part of the Motion to Regret of the noble Lord, Lord Stevenson. I add my voice to that of other Peers to say how much we have benefited, especially during the passage of the higher education Bill, from the contributions that he has made in this House. Following the example of the noble Lord, Lord Willetts, I declare my interest as a visiting professor of King’s College, Cambridge, an honorary fellow of King’s College London and an honorary fellow of Pembroke College, Cambridge.
In the first part of his speech tonight, the noble Lord, Lord Stevenson, expressed his rejection of what he regarded as the neoliberal approach to higher education. I must confess that my heart warms to that. Part of me that wants to recommend to Ministers the recent book by Stefan Collini on higher education, published by Verso, but I accept that for some years we have had a tripartite consensus about these fundamental matters of financing higher education, and I see little possibility of that consensus changing significantly. I should say, as someone who has worked all his life in the university sector, that I understand that it is not the function of the general public just to keep us in the style to which we have been accustomed. None the less, the last part of the noble Lord’s Motion to Regret contains something of great seriousness. I am more uncomfortable than the noble Lord, Lord Willetts, about the spiralling figures in this area. Everything that we look at unnerves me somewhat. Student loans, for example, in the last year rose to £12.6 billion—17.1% as the first cohort of students who claim the higher level of them graduated. Graduates who pay fees up to £9,000 a year are estimated to have left university with an average of £44,000 worth of debt compared with an average of £16,200 faced by students who graduated five years earlier.
Something seems to be happening with these numbers which must unnerve anybody who is connected or who has a serious interest in our public finances. The noble Lord, Lord Stevenson, has already referred to the Institute for Fiscal Studies, which claims that 70% of the students from those who graduated in the last year are expected never to repay their loans. These things have to concern us. Of those who graduated in 2002, 44% paid the total amount within 13 years. So, we are in a different place now. These are worrying figures. I think that the request that we have an annual report to Parliament which spells out where we are is perfectly reasonable. In that respect I am very happy to support the noble Lord’s Motion to Regret.
My Lords, I start by thanking the noble Lord, Lord Stevenson, for tabling this Motion. Before I respond, I shall, if I may, take the opportunity to say a few words about the noble Lord. The House now knows from remarks he made towards the end of Third Reading of the Higher Education and Research Bill last night that he is stepping down from his current spell of active Front Bench responsibilities. This is certainly a surprise to me, and I am genuinely very sorry to hear it.
I have engaged with the noble Lord fairly intensively on a number of Bills in this House over several years, as he will know, as have some of my colleagues. It is fair to say that we usually know where we stand with him. He can be direct; he sometimes tells it as is, which he should certainly take as a compliment. He also looks to be helpful and constructive—while emphasising his party’s perspective, of course. Above all, I will miss his humour, sometimes cryptic, often sharp and always quick. My colleagues on these Benches have great respect for him and regard him as a bit of a magician—a member of the Magic Circle, perhaps—for his ability to juggle several Bills at the same time with relatively little support, although I am sure it is quality support. He will not be leaving the Front Bench entirely, I understand, but we all wish him well for the future.
These words have nothing at all to do with me trying to warm the seat for the noble Lord as I move on to respond to the concerns he has raised this afternoon. We take pride in the fact that Britain has some of the best universities in the world. To make sure that this continues, it is important that we put universities on a strong, sustainable financial footing. Indeed, Andreas Schleicher of the OECD said in September 2016 that,
“the UK had been able to meet rising demand for tertiary education with more resources … by finding effective ways to share the costs and benefits”.
However, the £9,000 fee cap that was set in 2012 is now worth £8,500 in real terms. If we leave it unchanged, it will be worth £8,000 by the end of this Parliament. As my noble friend Lord Willetts alluded to in his speech, the Labour Government under Prime Minister Tony Blair sensibly put in place new legal powers in 2004, which allow Governments to maintain university fees in line with inflation through a negative procedure. Rather than increasing the fees for everyone, we are allowing only high-quality providers to increase their fees in line with inflation. Universities UK and GuildHE, the two main representative bodies that collectively represent more than 170 higher education providers in England, Wales, Scotland and Northern Ireland have made it clear that allowing the value of fees to be maintained in real terms is essential if our providers are to continue to deliver high-quality teaching.
The importance of this was expressed by Gordon McKenzie the CEO of GuildHE when he wrote that,
“fees had to rise by inflation at some point and it was fairer for students if those rises were linked to an assessment of quality.”
The vote on Report of the Higher Education and Research Bill was obviously disappointing. However, I remind noble Lords that the parliamentary process is still ongoing, and I look forward to Peers’ further engagement on this matter. Our policy intention remains to link maximum fees to the quality of provision via the teaching excellence framework as part of our wider reform package, as we are doing through these regulations. It is counter to government policy to see fee caps rise under any other circumstances.
As I mentioned, the fee link has been strongly supported by sector organisations GuildHE, as well as Universities UK, which said,
“allowing the value of the fee to be maintained in real terms is essential to allow universities to continue to deliver a high-quality teaching and learning experience for students”.
The noble Lord, Lord Stevenson, stated that the TEF was not ready and that we needed to move to the subject-level TEF. His opposition to TEF flies in the face of the support given to it by the sector bodies—and I have just added a few quotes to support that. It is absolutely our intention to move to subject-level assessment, but carefully, after two years of rigorous pilots.
I refer to the points raised in the Motion about the importance of ensuring access to university for everyone. Through universities being sustainably financed, we have been able to lift the student number cap, meaning that more people than ever before have been able to benefit from a university education, as my noble friend Lord Willetts said. Many people said, when fees were increased to £9,000, that it would dissuade people from disadvantaged backgrounds, but the opposite has happened. For this academic year, 2016-17, the entry rate for 18 year-olds from disadvantaged backgrounds is at a record high—namely, 19.5% in 2016, compared with 13.6% in 2009. So far, that has continued into 2017, with record applications for the 15 January deadline. Disadvantaged young people are now 43% more likely to go to university than in 2009, or 74% more likely to go to university than in 2006. In addition, those who go to university have more funding available to them. By replacing maintenance grants with loans, we have been able to increase the funding for living costs that some of the most disadvantaged students receive. It is an increase of over 10% in the current academic year, with a further 2.8% increase for 2017-18.
The noble Baroness, Lady Garden, stated that there were too few BME students, and of course we would always want more. However, we have record numbers of black and minority ethnic students going into higher education, and we want to go further still. We are legislating for greater transparency that will provide unprecedented access to anonymised applicant data on gender, ethnicity and socioeconomic background, as I think she is aware.
Universities, too, are spending even more to help those from disadvantaged backgrounds to access higher education. In 2017-18, institutions are expected to spend over £800 million on measures to improve the access and success of disadvantaged students, which is more than double what was spent in 2009-10 and can continue to increase if fees are allowed to keep pace with inflation. The Government’s policy will further build on this success, as stated by Les Ebdon, the director of the Office for Fair Access, that,
“TEF will ensure that higher education providers have to carefully consider about how to provide excellent teaching for all their students, whatever their background”.
On the repayment of loans, I wish to assure noble Lords that our repayments system offers a fair deal to students. The current student loan system is heavily subsidised by the taxpayer and universally accessible to all eligible students, regardless of their financial circumstances. While the Motion in front of us states that the Government retrospectively change the terms of loans, I would remind the House that nothing in fact has changed. Our repayments system is based on income and not the amount borrowed. Again, my noble friend Lord Willetts alluded to that issue. Graduates with post-2012 undergraduate loans pay back only when they are earning more than £21,000, and then only 9% of earnings above that threshold. After 30 years, any outstanding debt will be written off, with no detriment to the borrower. That is entirely different to a commercial loan. The maximum fee cap is rising only by inflation, so it will not increase in real terms for anyone going to university.
We believe that it is right for those who benefit most from higher education to contribute to the costs. We should not forget that higher education leads to a better chance of being employed compared to those holding two or more A-levels, and an average net lifetime earnings premium that is comfortably over £100,000.
The noble Lord, Lord Stevenson, asked about reporting to Parliament on student loans, which is a fair question. I reassure the House that the debt repayments and costs associated with the present system of student loans are already reported annually to Parliament in the Department for Education’s annual report and accounts, the next set of which is due to be published this summer. In addition, student loans also feature regularly in the economic and fiscal outlook publications from the OBR, which are laid in Parliament twice a year.
Finally, I reassure your Lordships that the fee increase under these regulations is open only to those institutions who meet high-quality standards. For this year this meant that they passed a quality review carried out by highly respected bodies such as the QAA, and those that wanted to charge the highest fees will need an access agreement.
As the TEF is fully implemented, the assessment process that universities will have to meet to be judged as good enough to raise their fees in line with inflation will become even more rigorous and more robust. The TEF will provide strong reputational and financial incentives to prioritise the student learning experience. We are linking funding to quality of provision, not just quantity of students, and ensuring that providers must demonstrate high-quality teaching if they wish to maintain their fees by inflation.
The TEF has been strongly supported by organisations such as OFFA and the Sutton Trust, bodies whose fundamental purpose is to support the life chances of those from disadvantaged backgrounds. The Sutton Trust, for example, has said that,
“we need to shake the university sector out of its complacency and open it up to a transparency that has been alien to them for far too long. It is good that they are judged on impact in the research excellence framework, and that the teaching excellence framework will force them to think more about how they impart knowledge to those paying them £9000 a year in fees”.
Ensuring that people from all backgrounds are able to go to university is an essential part of the Government’s ambition to support all people to realise their potential, whether they are young or mature students and whether they study full or part-time. The increases to maximum fee caps set out in these regulations are critical to achieving that objective. They ensure that our university sector has a sustainable financial footing so that it remains world-class. I remind noble Lords that we are allowing fee caps only to keep pace with inflation—and in real terms they will be less than in 2012. Equally, we remain firm that these fee increases should not be automatically given but awarded to those that provide high-quality teaching and value for money to students.
I will answer some points on student funding made by the noble Lords, Lord Stevenson and Lord Bew. We believe our student funding system is fair and sustainable. The resource accounting and budgeting charge is not an unintended loss nor a waste of public money. It is the policy subsidy required to make higher education widely available, achieving the Government’s objectives of increasing the skills in the economy and ensuring access to university for all. After I answered an Oral Question from my noble friend Lord Flight the other day, I wrote quite a lengthy reply to him on this matter, and I am more than happy to put a copy of that letter in the Library if it is not already there.
The Government’s policies increase the number of people who are able to benefit from university education, resulting in record numbers of young people from disadvantaged backgrounds applying to university. Those opposing the increase in fees in line with inflation have not explained how they will find the £16 billion of which they will be depriving our universities over the next decade, risking universities’ financial sustainability and depriving universities of the funding they need to provide a high-quality education.
Therefore, in the light of my remarks, I hope that the noble Lord, Lord Stevenson, will consider withdrawing his Motion.
My Lords, I thank noble Lords very much indeed for their comments, particularly about me. I am a deeply private person, and I hate it when the spotlight suddenly swings round and catches you like a rabbit—which I am here today. I did not want that or expect it, and I certainly did not want it to spoil the debate. I hope it has not, because the contributions have been on a serious level, and I thank the Minister in particular for dealing with the issues as they were presented.
The question of personality in this House is interesting. When you first come into the House, the thing that is impressed most on you is how it has to be treated as a third person in a passive sense—namely, as your Lordships’ House. You never speak about individuals. You certainly do not use first names. So the sudden emergence of an individual who has something to say is really rather shocking, and I hope that it does not get repeated—certainly not to me.
We have had a good debate. I have now realised, after nearly seven years here, that the way to tackle these issues is by tabling this sort of Motion because in the normal cut and thrust of debate and in the discussion of legislation and questions, one can never get down to a serious debate about serious issues. Therefore, I agree with the noble Lord, Lord Willetts, that a Motion such as this is a good thing to have now and again—not all the time, but just occasionally—to enable us to have a detailed discussion of issues causing concern. I fully accept what the noble Lord, Lord Bew, said—some of these issues are rather worrying.
The Minister said in his conclusion that he thought we had a fair and sustainable student finance system. It may or may not be fair—I am reminded of Zhou Enlai who, when asked about the impact of the French Revolution, said that it was too soon to say—and we will not know that for 30 years until we look back at the system when it has ended. However, we cannot wait that long. Therefore, the suspicion is that it is not fair. Is it sustainable? We cannot tell that because the figures are very difficult to interpret. The noble Lord, Lord Willetts, with several brains working full time, has not been able to crack it all and will be able to give us lectures and seminars to end all seminars. I look forward to those. However, I cannot cope with that. I just want something simple. If we cannot interpret this system on the basis of the DfE’s published accounts, perhaps tabling another Motion at an appropriate time agreed with the Minister, because he is a friend as well, would be the way forward. However, in the interim, we should get things started by testing the opinion of the House on whether it would like to see more information on this interesting area.
5 April 2017
Division on Lord Stevenson's Motion
Motion agreed.View Details
House adjourned at 7.12 pm.