HC Deb 20 July 1989 vol 157 cc506-7
3. Mr. Barron

To ask the Secretary of State for Northern Ireland if he will make a statement on the progress of the introduction of student loans.

The Parliamentary Under-Secretary of State for Northern Ireland (Dr. Brian Mawhinney)

Arrangements for the introduction of top-up loans for Northern Ireland students are proceeding in parallel to those in Great Britain.

Mr. Barron

Does the Minister share the view of the Secretary of State for Education and Science that student loans are excellent and offer good value for money? If so, what does he think of the estimate of the Government's consultants, Price Waterhouse, that the scheme will cost £100 per debtor to administer, and the estimate made by Dr. Nick Barr of the London School of Economics that it will take 100 years before the cost of the scheme is recouped?

Dr. Mawhinney

Of course, I agree with my right hon. Friend. As the hon. Gentleman takes an interest in these matters, he will know that those views are not shared by the Department of Education and Science.

Mr. Harry Greenway

What proportion of the extra 200,000 students in higher education now, compared with in 1979, come from Northern Ireland, and how much does the average student in higher education in Northern Ireland borrow?

Dr. Mawhinney

There has been an increase in university students in Northern Ireland and my hon. Friend will be pleased to know that the participation rate in Northern Ireland universities is 20 per cent., compared with 15 per cent. in Great Britain. That is a reflection of the high standing of Queens university and the university of Ulster.

Mr. Beggs

I congratulate the Secretary of State on the confidence that he exhibited at the Dispatch Box today, which may be due to the recent success, but one swallow does not make a summer. Perhaps, there are promises of promotion in the wind. However, the right hon. Gentleman is to be congratulated on his performance so far.

Is the Minister aware of the widespread concern in Northern Ireland that many able students may not benefit from higher education because of the freezing of the student grant and the introduction of the loans scheme? There is particular concern among medical students, who study for 45 weeks of the year for five or six years, with little time to work in the holidays to earn additional income. I hope that the Government will reconsider the scheme and encourage the thrifty use of grants rather than introduce students to the burden of debt and the further anxiety that that would entail.

Dr. Mawhinney

We are the only developed country with no system of top-up loans alongside grants. The Government have a responsibility to find a balance between benefits to students and the cost to the taxpayer. In 1984, the latest year for which figures are available, support for students in the United Kingdom cost about £750 per annum. In France it was £180; in West Germany, £70; and in Japan, £30. If that does not represent a disincentive in those countries, I fail to see why there should be any disincentive in the United Kingdom or in Northern Ireland.

Mr. John Marshall

Does my hon. Friend agree that the loans scheme will be particularly welcome to students who do not receive the full assessed parental contribution? Does he also agree that since graduates can look forward to much larger incomes than the community at large, it is only right that they should repay to society part of the benefits that they are getting from their university education?

Dr. Mawhinney

My hon. Friend is right on both points. About 120,000 university students receive no grant at all because they are means-tested out. About 50,000 receive no mandatory grant and about 160,000 receive only partial grants. All those students stand to benefit from the introduction of top-up loans. My hon. Friend will agree that the introduction of those loans at a nil real interest rate is a further incentive.

Mr. Flannery

Does the Minister realise that the introduction of loans will be a disincentive to entering higher education? The last time that Britain had a loan system was before the war. We do not have to follow blindly countries such as West Germany, because we have about £100 billion from North sea oil. Will not many young people be detered from becoming students? If they become students will they not leave their studentship in debt? It took me four years to pay back my debt.

Dr. Mawhinney

I know that the hon. Gentleman finds facts uncomfortable, but nevertheless the fact is that loan schemes do not act as disincentives in other countries. The hon. Gentleman fails to make an argument for why this country should be any different.

Ms. Mowlam

Is it not difficult for the Minister to accept facts? Does he accept that the study by Dr. Barr mentioned by my hon. Friend the Member for Rother Valley (Mr. Barron) stated clearly that when students complete a three-year course they will have a minimum debt of £7,000? Does not the study by Price Waterhouse which was commissioned by the Government show that when half the students graduate by 1995 they will either default or defer on their debts? Is that opening up higher education and increasing access, or will it achieve the exact opposite?

Dr. Mawhinney

Norway has a default rate of 1 per cent. and Sweden and Japan a default rate of 2 per cent. Although there is no loan system at present, the statistics show that the projected levels of borrowing outlined in the White Paper are less than the exact borrowing figures in countries that have loan schemes. The hon. Lady's information and facts simply do not impress me.