Lords Sitting of 27 February 1990

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Sheffield.

Student Grants: Parental Mortgage Debts
Earl Russell Earl Russell asked Her Majesty's Government:
Whether, in assessing parental contribution for student grants, they will take account of mortgage debts beyond the first £30,000.
Baroness Blatch: My Lords, the Government have no present plans to do so.
Earl Russell: My Lords, is the Minister aware that according to government figures, 35 per cent, of parents fail to pay the full parental contribution? Is she also aware that according to government figures given in a parliamentary answer last week the average new mortgage in London is now £60,000? Does the Minister entertain the hypothesis that those two figures might in some way be connected?
Baroness Blatch: My Lords, the Government are aware that there is a burden on parents that needs to be addressed. It is probably right to say at this time that much of the debate for the next few hours will address that concern.
Lord Grimond: My Lords, is it not true that much of the debate over the next few hours will also focus on the complaints of students that they are poor? Part of the reason is the failure of parents to pay their parental contributions. If this proposal of my noble friend would help in extracting the parental contribution from reluctant parents would it not be worth considering?
Baroness Blatch: My Lords, any change to the ceiling on mortgage tax relief helps only a very small number of people. Those above that threshold will not necessarily be affected by being brought into the grant and those below the ceiling will not be helped at all.
Lord Harmar-Nicholls: My Lords, would it not have been generous on the part of the noble Earl to withdraw this Question in view of the time that will be spent on the same subject matter as a result of his amendment later today?
Baroness Blatch: My Lords, I think I addressed that point in my previous reply.
Lord Peston: My Lords, I was not aware that we intended to take a long time this afternoon on student matters. For those of us who are parents and who have been involved with parental contributions,
592
is not one of the problems the incredibly complicated form that we have to fill in? I recall that when I filled in the form I could not understand a word of it or what the final assessment was. Will the Minister ask her right honourable friend the Secretary of State for Education and Science, if he ever has any spare time from his other responsibilities, to look again at the parental contribution form, at least with a view to simplifying it so that some of us parents can understand it?
Baroness Blatch: My Lords, I always take the messages I receive to my right honourable friend. If it is an idea that can simplify matters, that is important, but simplification can often introduce even more rough justice. That also must be kept in balance. However, the system which is used at the moment to arrive at a fair assessment assesses gross income with a number of required deductions. I have no doubt that that matter will be addressed later today.
Earl Russell: My Lords, will the Government entertain the idea that in handling young people they regularly assume a contribution from parents which they nevertheless do not require parents to pay and that the effects of this in many cases may be unfortunate? Do the Government consider that the whole subject may need reconsideration?
Baroness Blatch: My Lords, I agree with the noble Earl that there is concern as regards those parents who have an obligation to pay their contribution but who do not meet the obligation. It is for that reason that the top-up loans scheme is being considered. Again we shall have ample opportunity later today to discuss that aspect of the top-up loans scheme.

Elderly People in Residential Care: Funding
2.40 p.m.
Baroness Turner of Camden Baroness Turner of Camden asked Her Majesty's Government:
What steps are being taken to ensure that adequate funding is available to meet the cost of providing residential care for elderly people who need it.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Hooper): My Lords, the National Health Service and Community Care Bill makes provision for a new system of community care from 1991, including residential care, and the Government recognise that local authorities will need adequate resources to enable them to discharge their new responsibilities, including assessment, care management and securing the provision of appropriate care. We are taking the necessary steps to ensure this.
Baroness Turner of Camden: My Lords, I thank the noble Baroness for that reply. Will the provision that is to be made cover the situation where elderly people have resources which have run out and where they simply do not have the money available to meet the costs of residential care where that is required?
Baroness Hooper: My Lords, in determining the resources that will be made available, account will certainly be taken not only of income support that would have been payable under the present scheme to people in private residential care and nursing homes but also of demographic trends and the rate at which local authorities will assume responsibility for the care of new clients. Certainly the system will allow for assessment of needs as and when they arise, whether that is at the initial stage or in the course of a period of residential care.
Lord Mellish: My Lords, the Minister will be aware that recent surveys have shown that by the turn of the century the number of elderly people will be enormous. Thanks to advanced medical knowledge, people are today living at ages over 80. That is quite common.
Lord Hailsham of Saint Marylebone: Hear, hear!
Lord Mellish: My Lords, I thought that would give the noble and learned Lord, Lord Hailsham, a bit of a fillip. People are living much longer and are much healthier today. The need for residential care will be quite extraordinary in years to come. The Minister said that local authorities had been given special funds. Will she make sure that they use them?
Baroness Hooper: Yes, my Lords. In order to reassure the noble Lord, I can tell him that it is intended there shall be a special weighting factor for those aged over 85.
Lord Taylor of Gryfe: My Lords, I welcome the assurance that old people will be taken care of and funds made available. Will that be in any way influenced by the desire of the Government to put a limit on local authority spending?
Baroness Hooper: My Lords, I believe that is a separate question. As I said in my original Answer the Government recognise that adequate resources will be necessary.
Lord Dean of Beswick: My Lords, over the past 20 to 30 years some local authorities have had to take care of an increasing number of elderly people in their areas. They have had to build residential homes at substantial cost to their taxpayers. Is the Minister saying that because of the increase in the number of ageing people, as mentioned by the noble Lord, Lord Mellish, ratepayers will no longer have to bear the funding? Will the Government pick up the bill as they ought to have done in the past?
Baroness Hooper: My Lords, we believe that an uneven playing field exists under the present system and that encourages a healthy mixture of statutory residential accommodation provided by local authorities, and residential care and nursing accommodation provided by the private and voluntary sectors. The provision in the White Paper seeks to promote this mixed economy of care. It is intended that the demographic trends be taken into account.
Lord Monkswell: My Lords, are the Government aware that central government lay continual burdens on local government to provide services, particularly to the elderly? Are they also aware that central government have continually over the past 15 years constrained the abilities of local authorities to raise their own revenue? Are they aware that the introduction of the poll tax has further constrained the ability of local authorities to raise revenue to fulfil their duties? Are the Government looking at changes to the way in which local authorities can raise revenue in order to meet the responsibilities laid on them by central government?
Baroness Hooper: My Lords, as I said before, I believe that the reference to the community tax is a separate question. My understanding is that the community tax will only produce one-quarter of the local authorities' spending revenue. The revenue support grant will be assessed in the usual way and will make a substantial contribution particularly in the area of community care.
Lord Stallard: My Lords, is the Minister aware that since the registered homes tribunal began operating in 1984 over 100 cases have been heard? That includes many cases of serious incidents of abuse against vulnerable residents. In addition, the poor condition of the homes and the inadequacy of the local authority resources for alleviating the problem have been mentioned. Will the new powers to which the Minister referred assist in, for instance, introducing a national standard of contributions for residential homes?
Baroness Hooper: My Lords, the Government's policy continues to rest on the principle that it is the duty of local authorities to provide residential care. Under the new proposals there will be stricter arrangements for assessing needs for residential care as opposed to the possibility of elderly people remaining in the community with appropriate back-up services.
Lord Ennals: My Lords, I wish to put two questions to the Minister. First, she referred to legislation. Can she tell the House, in relation to the community care part of the legislation, at what stage the Government will make a statement about the additional resources to be made available for the fulfilment of the obligations?
Secondly, the Minister will recall that last week I asked her a question about community tax capping. I was then worried about the homeless. I am now worried about whether expenditure of local authorities on elderly people could be cut. Will the Minister repeat the assurance she gave me last week that there is no proposal to put a cap on local authority expenditure in this connection?
Baroness Hooper: My Lords, I am not sure that I gave the noble Lord that assurance last week. What I seem to recollect saying is that we believe that local authorities have a duty to deal responsibly with their local needs. That does not mean that they should be expected to raise revenues through the community charge. That charge and the resources

595
are being assessed for the purposes of community care through the revenue support grant mechanism.
Lord Ennals: My Lords, perhaps the Minister will look again at the assurance she gave me last week. I thought that it was fairly firm.
Baroness Turner of Camden: My Lords, perhaps I may thank the noble Baroness for her response to my question. Will she give some attention to the interim situation before these provisions come into operation? According to information that I have received from Age Concern, there are a number of cases outstanding where people require this care and simply cannot find the resources to pay for it.
Baroness Hooper: My Lords, my understanding is that the arrangements at present in place will continue for this interim period and that the new assessment arrangements and care arrangements to be made will operate from April 1991.

Carbon Dioxide Emissions
2.50 p.m.
Lord Hatch of Lusby Lord Hatch of Lusby asked Her Majesty's Government:
Why they refused to set targets for reducing carbon dioxide emissions and did not respond to requests to help developing countries curb greenhouse gases at the recent United Nations conference in Washington.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Hesketh): My Lords, as we recognised in the Noordwijk Declaration, the basis for the target of stabilising carbon dioxide emissions will be considered in the light of the IPCC report and the second world climate conference in November 1990. We are aware of the needs of developing countries and at the meeting in Washington we pledged additional funds to enable developing countries to participate in the work of the IPCC.
Lord Hatch of Lusby: My Lords, does the noble Lord agree that the problem of the greenhouse and related effects is the most fundamental challenge facing our world over the next quarter of a century? Is not the pledging of targets for the control and reduction of carbon dioxide emissions one of the most important efforts to be made in that regard? Within that framework, is there not a danger that in raising their standard of living the third world may well reduce any benefits from reductions in the northern world? Is it not therefore essential that third world countries are enabled to raise their standard of living without at the same time damaging the prospects of the planet's environment?
Lord Hesketh: My Lords, I believe that the noble Lord is repeating the thoughts that he must have had in order to decide to put down the Question and my main Answer dealt with what he has just presented to noble Lords.
Lord Hatch of Lusby: My Lords, that does not answer the question. Did not both the British and United States Governments refuse at the IPCC Conference in Washington to set targets and just put it off until later, as they did before?
Lord Hesketh: My Lords, as I am sure the noble Lord is well aware, the suggested targets were not on the original agenda. Her Majesty's Government played an important role in assuring that a compromise resulted from that meeting. If we are to launch a successful attack upon the problems that face the global planet, it is important that we do so by achieving compromise and agreement, not by having divided parties.
Lord Dean of Beswick: My Lords, bearing in mind the fact that recent reports, including one debated in this House, show conclusively that one of the greatest culprits in encouraging the greenhouse effect is fossil-fuel power stations, what has become of the Government's programme to deal with that situation in this country?
Lord Hesketh: My Lords, this country has a substantial nuclear programme. Under the new energy Act, some 600 million megawatts have been allowed for renewable resources. I await the conversion of the noble Lord, Lord Hatch of Lusby, to the nuclear cause.
Lord Dean of Beswick: My Lords, I asked what had become of the Government's programme to deal with fossil-fuel power stations and the emissions from their chimneys which cause the greenhouse effect. How far are the Government into the programme which was announced some time ago?
Lord Hesketh: My Lords, the Government are already committed to some £600 million of expenditure on detoxifying fossil-fuel power stations.
Lord Mcintosh of Haringey: My Lords, reference has already been made to the important debate on that subject which was held in the House a few weeks ago. Does the Minister recall that a major conflict was pointed out between his department's forecasts of the emission of greenhouse gases in the form of carbon dioxide and those implied in the Department of Transport's forecasts of increased car ownership? Can he say whether his department is winning the battle against the Department of Transport?
Lord Hesketh: My Lords, there is never a conflict between the departments of this Government. I should point out that it is entirely right and proper for the Department of Transport to consider the prospective requirements of the individual.
Lord Stoddart of Swindon: My Lords, once again the noble Lord extolled the virtues of nuclear energy. At what stage will the Government have second thoughts, bearing in mind the increasing proof that nuclear energy causes cancer, leukaemia and all kinds of other diseases?
Lord Hesketh: My Lords, as I am sure the noble Lord will be aware, as will those Members of the House who watched the Channel 4 programme on the environment on Sunday night and saw the removal of carbon from heavy diesel engines in trucks, which is also thought to cause cancer, emissions from fossil-fuel power stations may possibly cause cancer. It is a nasty fact of life that all forms of pollution, from whatever source, may be a danger to human life.
Lord Hatch of Lusby: My Lords, if there is no dispute between government departments, there should be. How can the Department of the Environment be pledged to reduce carbon dioxide emissions when the Department of Transport is preparing for a 142 per cent, increase in the use of cars in the next 20 years? Is that not a cause for dispute between the departments? With regard to the noble Lord's Answer concerning the Government's pledge to increase funds to third world countries to help them develop without polluting the atmosphere, what was the figure that they pledged at the IPCC Conference?
Lord Hesketh: My Lords, it would be extremely irresponsible for the Department of Transport not to inquire into prospective and possible figures. The House would be extremely dissatisfied if a Minister of Her Majesty's Government came forward in 20 years' time and said, "Oh dear, we didn't know and we didn't think". We must inquire about possibilities. Then common sense will rule between the departments of this Government.
Lord Hatch of Lusby: My Lords, will the noble Lord answer my second question? What was the figure which he mentioned in his Answer that was pledged by Her Majesty's Government to the third world at the IPCC Conference?

London Underground: Quality of Service
2.57 p.m.
Lord Tordoff Lord Tordoff asked Her Majesty's Government:
Whether the increases of up to 20 per cent, in basic fares on the London Underground at the beginning of February have been accompanied by improvements in performance.
Viscount Davidson: My Lords, London Underground fares increased by an average of 10.4 per cent, on 4th February. I am confident that the quality of service objectives set by my right honourable friend in December, together with the significant increase in government funding announced in November, will ensure that London Underground delivers an improved service to the travelling public.
Lord Tordoff: My Lords, noble Lords on all sides of the House will be grateful for that assurance of improved services on the London Underground. It may come as a surprise to them. Does the recent statement that the intention of increasing fares was to reduce the number of passengers on the London
598
Underground have the Government's support? If so, are the Government aware of the dangers of increasing the amount of traffic on the roads as a result of such a policy?
Viscount Davidson: My Lords, I am not clear where that statement came from. However, I can tell the House that the overall increase was 10.4 per cent.—about 3 per cent, in real terms—and that ordinary adult fares, including those in the heavily congested central area, have increased by an average of 13 per cent. I do not believe that that will have any bearing on road traffic in London.
Lord Boyd-Carpenter: My Lords, has the Government's hope for an improvement in the service rendered by the London Underground yet shown any signs of realisation? How many escalators are still out of service and how many breakdowns of rolling stock and hold-ups resulting from them have occurred in the last few months?
Viscount Davidson: My Lords, the noble Lord, Lord Tordoff, asked a Question about escalators last November. At the time I told him that 73 per cent, of escalators were available. I can tell him and my noble friend that during the four-week period ending 3rd February escalators were available for 82 per cent, of the time. There has, therefore, been a 9 per cent, increase in usage.
Lord Molloy: My Lords, is the noble Viscount aware that both the general public and the ordinary staff on the Underground realise that its present system of administration and performance is redolent of the Augean stables? When one speaks and complains to the ordinary men who run the trains and to the inspectors who keep them going, they say that the fault lies in the administrative headquarters at St. James's. When one asks them why they make a special broadcast just as a train came roaring into a station so that everyone has to listen hard to what is going on, they say that the people who run the system have never been down there in their lives. Those people complain about the hold-ups on the way home in their Rolls-Royces. Instead of bothering with the people at St. James's, is it not about time for a conference to be held of the ordinary men and women who represent the public, the guards and the signallers on London Underground so that they may give their advice and make recommendations?
Viscount Davidson: My Lords, I am most interested to hear that from the noble Lord. I can only tell him that I shall draw his remarks to the attention of LUL. Perhaps he might volunteer to call such a meeting himself.
Lord Gainford: My Lords, has my noble friend the Minister any estimate yet of the improvement of services that may happen as a result of the travel survey carried out by London Transport with reference to the card that I was handed at Victoria Station today and which I showed him earlier this afternoon?
Viscount Davidson: My Lords, I am grateful to my noble friend for showing me the card. I am sure that the House will be pleased to know that LUL is putting its customers' requirements first and planning for the future.
Lord Underhill: My Lords, the noble Viscount referred to the short-term objectives set by the Secretary of State in his letter to the chairman of LRT. As those short-term objectives include "peak capacity, reliablity and availability of lifts and escalators", why is it that the date for completion of those short-term objectives has been put back as far as March 1992? Does he agree that those objectives should be completed long before then? I further ask the Minister whether this increase in fares was discussed with the London Regional Passengers Committee. If so, what was its attitude?
Viscount Davidson: My Lords, to answer the second question first, I understand that the London Regional Passengers Committee was not consulted about the increased level of fares but has raised no complaint about them. However it was consulted about the Government's quality of service objectives with which it expressed satisfaction as well as LRT's plans for increased investment. So far as concerns the objectives announced on 20th December, as the noble Lord said, they set performance targets. They are to be in place by April 1992. Clearly, quite a lot of the improvements will take place much more quickly than that; but I can tell him that LUL's performance record will be published regularly during this period.
Lord Tordoff: My Lords, do not the Government consider that fare increases of this size are inflationary?
Viscount Davidson: Yes and no, my Lords.
Lord Molloy: My Lords, will the Minister bear in mind that all the matters that we are discussing are not the responsibility of the people who operate the Underground? They are the responsibility of those who are right at the top. Until they are made accountable for the salaries that they earn one can understand why the staff are now losing their morale. They do not want it. They are proud to work for London Underground.
Lord Denham: My Lords, I wonder whether the noble Lord will ask his question. We have already been dealing with Questions for 25 minutes. Perhaps the noble Lord will put his question, my noble friend will answer it and then we might move on to the next business.
Lord Molloy: My Lords, perhaps the chairman of London Transport will call together representatives of the workers under his control who actually operate the system and listen to their points of view.
3.3 p.m.

Landlord and Tenant (Licensed Premises) Bill
Brought from the Commons; read a first time, and to be printed.

Greenwich Hospital Bill [H.L.]
The Parliamentary Under-Secretary of State, Ministry of Defence (The Earl of Arran): My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the order of commitment be discharged.
Moved, That the order of commitment be discharged.—[The Earl of Arran.]
On Question, Motion agreed to.

Education (Student Loans) Bill
3.5 p.m.
The Paymaster General (The Earl of Caithness): My Lords, I beg to move that the Bill be now read a second time.
If one is going to propose a new system it is worth discussing the present system first and where the problems lie. The system we now have has its origin in the report of the committee chaired by Sir Colin Anderson which led to the Education Act 1962 relating to England and Wales and comparable arrangements applying in Scotland and Northern Ireland. The aim was to provide the opportunity for all suitably qualified people, regardless of age and sex, to undertake a full-time course of higher education. That was an excellent aim then and one we endorse today. The aim has far exceeded its target. The Anderson committee envisaged an eventual expansion of the higher education system to perhaps 175,000 people. That figure was reached within three years of the 1962 Act and in the next academic year we expect that there will be more than a million students of all kinds in higher education including 450,000 with mandatory awards. That is a success story and one that we wish to continue. The Government are looking to a doubling of the proportion of young people participating in higher education over the next 25 years. The Government recently published expenditure plans to provide for the first steps towards that. The key questions are these: how is the present system funded? Is it fair? If it is not, is there a better system?
Funding of the present scheme can be divided into two parts: the costs of tuition and the living costs of students. The present arrangements for the costs of tuition are met entirely by the taxpayer. That will continue and, let me make it absolutely clear, this Bill does nothing to change that. Students' living costs are supported from two principal sources: grants from public funds and contributions from the student's parents, the student's or his or her spouse's

601
income where means permit. At present the taxpayer now funds about three-fifths of the living costs of the student.
Is this a fair system? It is not. Supporting the living costs of today's students, let alone the increased numbers, is a burden that cannot be borne by taxpayers and parents alone. The cost to the taxpayer of supporting students' living expenses has risen, in current prices, from £236 million in 1962 to £623 million this year. Nevertheless, parents have been asked to make a large increase in their contribution. The reason for this is that successive administrations of different political colour have judged that the contribution of taxpayers to students' living expenses could not be sustained at the 1962 level in view of other pressures on public expenditure. This means that the real value of the grant (including contributions) to the individual has steadily declined. It is worth some 75 per cent, of its 1962 value. So we need to relieve the burden on parents and taxpayers and at the same time to give students access to more money while they are studying. We need a fairer system and in seeking that we carried out a very full review of all the options which varied from a full grant system through to a graduate tax. But the fairest to our mind was a form of loan. Our policy was set out in the White Paper of November 1988. We sought views on it from those with an interest in student support.
The White Paper also made a thorough analysis of student support in other countries and two main points are worth stressing. First, loans or a mixture of loans and grants are entirely standard elsewhere. The United Kingdom is the odd one out.
The second point that emerges from overseas experience is that loans do not—I stress do not—inhibit entry to higher education. On the contrary, countries with long-established loan schemes in general have a higher proportion of their young people going into higher education than we do.
In the light of the 170 responses received on the White Paper the Government have refined their proposal. The basic scheme still stands. It can be summarised as follows: a loan added to the grant, at zero real interest, with the vital proviso that repayments are due only when graduates' income rises above a threshold. Those key features together meet the concerns that have been expressed. I shall explain the details more fully shortly.
Having explained how the scheme was conceived and has been developed, I turn to the Bill before your Lordships. It is confined to a single purpose: the introduction of the loans scheme for students' maintenance.
Clause 1 gives the Secretary of State power to make arrangements for the provision of loans as a contribution towards students' maintenance. The main features of the arrangements are governed by Schedule 2, under which the Secretary of State is also empowered to make regulations as to the terms of the loan. Clause 1 also defines the students eligible for loans in terms of the courses they attend, and provides for the Secretary of State to prescribe in regulations other conditions of eligibility.
602
Clause 2 relates to the parallel provision to be made for Northern Ireland. Clauses 3 and 4 make the necessary financial provisions and give the usual short title, interpretation and extent.
Schedule 1 defines precisely the courses of higher education for which eligible students will be enrolled. The Secretary of State may amend the schedule, by order, provided that Parliament does not object, so as to keep abreast of developments in higher education. Schedule 2 sets out in detail the ground to be covered in regulations as to the terms and conditions on which loans will be offered, and the administrative arrangements.
There has been some criticism that the Bill does not spell out the details of our proposals. There is a very good reason for that. It follows the precedent of the 1962 Act in which the details of the grant system were left for secondary legislation because of the annual changes. That has not caused problems in the past nor has it prevented your Lordships or another place discussing the annual measures, though they are not always taken to a debate. Similarly because of the annual changes to the loan scheme in future it would, and here I am sure the vast majority of the House would agree, be preferable for them to be taken in secondary legislation.
I said that the Government have considered alternative schemes to loans and it may be helpful if I outline the three main options before explaining the Government's proposals.
First, on providing the additional resource as grant rather than loan, this would cost more than the Government's proposals from the first year, with an insupportable built-in liability for the future. The additional £400 million a year cost of this alternative is not a policy that any responsible Government could impose on taxpayers. It is worth remembering that most of those taxpayers are less wealthy than the average graduate, or than the parents of the average student. It would be a case of taxing the poorest to fund the education of the potential high earners.
Secondly, there is the proposal that the loans should be repaid through an additional national insurance contribution. Some of your Lordships may have seen a letter which is in the Library from my right honourable friend the Secretary of State explaining why he has rejected that option. Perhaps I may stress just two of the arguments. It is wrong as a matter of principle to use the national insurance system for debt collection, and it would be administratively cumbersome and expensive in the extreme. There is no question of simply "piggy-backing" loan repayments onto the national insurance scheme. Employers around the country would be put to enormous cost and inconvenience in applying the special national insurance contributions to their graduate employees.
Much the same objections apply to the third alternative option, the graduate tax. The idea is that graduates should pay an additional income-levying tax for a fixed period. This would be unrelated to the public support they received as students. People contemplating higher education would thus have no idea in advance what financial commitment they

603
were taking on. Justice requires that the levy should bear only on graduates who had received support from British public funds—not, for example, those who financed themselves, or those who obtained their degrees abroad. Taxing some graduates while exempting others would be an administrative nightmare.
I turn now to the Government's preferred course, the loan scheme, for which the Bill provides the powers. The Notes on Clauses provide the detail. As I have said, the Bill provides for loans to be made towards students' living costs, not the cost of tuition. They will supplement the existing means-tested grant, not replace it. The grant will continue, and be uprated in the autumn. The loan, provided on top, will offer students £178 million in addition to the grant. These arangements will give students access to a 25 per cent, increase in resources this autumn, compared with the current grant. In 1991–92, however, the grant will not be uprated. Instead the total resources available—that is grant and loan together—will be uprated, but the uprating will be provided only as a loan. That will be repeated in successive years until the loan and grant each provide half the resources available to a student. How fast that point is reached depends on the rate of inflation; it is expected to be early in the next century. One result of this progressive reduction in the real value of the grant is a progressive reduction, starting in 1991, in the real value of the parental contribution. It is the rise in the amount of parental contributions that is one of the problems with the present system and parents will welcome this relief.
Loans will be funded by the taxpayer and will be available to all eligible students including those who have already embarked on their courses. They will be offered to full-time home students, other than post-graduates, aged 50 or less, on higher education courses lasting at least one academic year. In order to be eligible, the student's course must either be at a publicly-funded institution—such as a university or polytechnic—or on a list of designated courses offered at private establishments. The list of such courses is now being settled. The student must also meet the requirement for ordinary residence in this country, as indeed they have to do for the grant.
The loan will not be means tested against personal income and its availability will not depend on the student's financial record. There will be no means testing against the income of a parent, a spouse, or any relative: the loan will therefore help the 40 per cent, of students whose parents do not make up in full the assessed parental contribution.
The size of the loan facility will vary according to whether the student studies in London, elsewhere, or from the family home. The current level of the mandatory grant varies in the same way. The loan facility for a student's final year will be less because it does not need to cover a summer vacation. For 1990–91, as I have said, the loan when added to the uprated grant will provide an increase of fully 25 per cent, on the public support available for 1989–90. In addition, the full range of additional grant allowances will continue. These provide extra grant for extra weeks of study, for mature students, for
604
disabled students and for other special circumstances.
Students will have access to the loan on extremely favourable rates. There will be a zero real interest rate. Thus the value of the repayment is the same in real terms as the value of the amount borrowed. That will be achieved by indexing the amount outstanding in line with the RPI. I know some of your Lordships are concerned about the terms of repayment and I hope that what I say now will clarify the position. Repayment will not start until the April after the student leaves the course. That is a nine months' grace period. There will be a fixed repayment period, of five years initially, except where deferment is allowed on low income grounds. As the scheme develops, and the maximum amount borrowed increases, the repayment period will be extended, to keep maximum annual repayments at about £400 a year at today's prices.
The cash amount repaid will depend on a variety of factors: whether the student takes out the maximum loan; the length of his course; the extent of movements in the RPI; and the point to which the scheme has developed.
Those repayments will be required, as I have said, only from those with healthy incomes. Deferment will be available for those with incomes below 85 per cent, of the national average. If the scheme were in operation today, it would mean that graduates could defer unless they were earning at least £11,500. I am sure many would agree that £7 a week is not too onerous for someone earning over £11,500 a year. Any amount outstanding will be cancelled after 25 years or when a borrower reaches 50, whichever is the sooner, so long as there has been no evasion of repayments. For anyone whose income remains below the 85 per cent, threshold each year until cancellation that person will make no repayment at all. Deferment offers relief to anyone choosing a lower paid vocation, as well as to the women who choose to bring up a family.
What we propose is a most generous system in comparison with what other countries offer so let me summarise the principles. No repayment will be made unless and until at least nine months after the course has finished and the graduate is earning 85 per cent, of national average income. The loan will be provided at a zero real interest rate. The capital sum will be uprated annually in line with inflation but interest will not be charged.
I turn now to how the administration will work. The loans scheme will be administered by Student Loans Company Limited. We saw some advantage in making the expertise and the branch networks of the banks available to help with administration of the scheme; but the banks decided that there was no commercial benefit for them. In practical terms, the withdrawal of the banks means only that bank branches will not be available to handle loan applications. Thus applications will be made to the company, which will send the money to the students. The company will also collect repayments, and operate the deferment and cancellation procedures. It is well advanced on preparatory work to enable the loans to be made available this autumn, if Parliament approves the Bill.

605
When loans are introduced full-time students will no longer be eligible for unemployment benefit, income support or housing benefit. That will apply to post-graduates and further education students aged over 18 as well as those eligible for loans. An exception will be made for students who are disabled, single parents, and those with dependants; they will retain entitlement to benefits. The Government believe that students should rely wholly on educational resources for their support while they are studying.
However, we recognise that there may be some circumstances where further help is needed. We shall set up three special funds known as the access funds. These are not credit funds but they are flexible and friendly. They will have a value of £5 million each to provide additional discretionary support to students at publicly-funded institutions. There are three funds to cover the three groups of people currently able to claim benefit; namely students eligible for loans, post-graduates and students in further education aged over 18. The funds will be administered by the students' own university, polytechnic or college as they are best placed to assess each student's circumstances. This scheme has been designed with the needs of all types of student in mind and it rightly makes proper provision for those with special needs and circumstances.
I hope that my remarks have eliminated many of the myths being propagated about the potential effect of loans on participation in higher education. Although loans will give students more money while they are studying, demand for higher education is not simply a function of the level of support available to students. The Government intend the introduction of top-up loans to release a financial constriction on supply because without them the taxpayer would be unable to afford the cost of the necessary expansion of higher education. The Government also have policies aimed at demand which your Lordships will discuss tomorrow. As at present, students will continue to weigh factors outside the education system; notably, the opportunities for graduates in all walks of life.
The loans scheme asks students to make a risk-free investment in their own futures. The argument that students from particular groups—the ethnic minorities, for instance, or from working-class backgrounds—will be less able to perceive the benefits of the investment is clearly misplaced.
I have taken some time to explain to your Lordships the background to the Government's decision; the fact that a White Paper was published which was followed by consultation; the contents of the Bill; why it is in its present form; the details of the scheme we propose; and how that compares to the three main alternatives. In addition to the White Paper the Department of Education and Science more recently set out afresh (in a leaflet entitled Top up Loans for Students) what the scheme means from the student's point of view. It explained who will be eligible; how much the loan and the grant will be in 1990–91; the indexation of inflation; and the vital deferment arrangements. The Notes on Clauses give a good deal of further information. Yesterday the
606
department published a document headed Rules and Procedures setting out the administrative routines that are being set up.
Yet, despite that weight of material, the noble Earl, Lord Russell, has tabled a reasoned amendment regretting that the Government have not given sufficient information to judge whether the proposals in the Bill are capable of being put into effect. Let me make the effect of the amendment absolutely clear. If your Lordships do not like the idea of any repayment by graduates then this amendment is of no benefit to you. If however you agree that partial or total repayment is right but do not like the loan scheme, then again this amendment has nothing to offer you. The noble Earl's amendment is tantamount to asking for a vote of no confidence in the Government because it is alleged that we have not provided sufficient information to your Lordships. I have to say to the House that the noble Earl, Lord Russell, has not asked me for any information whatever on our proposals. My concern is that, far from lacking information, your Lordships may have been overwhelmed with detail.
I must however draw the House's attention to one feature not detailed in the Rules and Procedures outline; that is, the administrative procedure to be followed when a student applies for a loan. This is the point that my right honourable friend the Secretary of State wished to discuss with the representatives of the higher education institutions on 19th February before making the further details available. Regrettably however they did not wish to discuss it.
As a result of the meeting, my right honourable friend is considering his position. However, so that there is no misunderstanding, let me say that the scheme need not depend on the higher education institutions' co-operation in passing the papers on behalf of their students. Your Lordships will of course have the opportunity to debate any amendment to the Bill that might be necessary. If Parliament approves the Bill, I am sure that not only the noble Earl but the whole House would wish to see those involved in higher education, whether they like the scheme or not, making it work in the best way for the students.
I hope that I have demonstrated that the Government have considered the matter deeply and that the proposals are thoroughly workable, unlike the alternatives proposed.
When they respond to the White Paper the Vice-Chancellors proposed, and have continued to stress, that any revised system of student support should be judged against four criteria: adequacy; certainty; simplicity; and social justice. In finalising their scheme, the Government sought to meet all four criteria. First, adequacy; the Government intend to provide a 25 per cent, increase in students' resources this autumn. Secondly, certainty; this additional resource will be offered on very favourable terms. Students will be able to choose how much to borrow, up to a maximum. In doing so, they will know that they will be required to pay back the same sum in real terms, neither more nor less. They will also know that repayment will not be required if ever their income is low.

607
Thirdly, simplicity; from the borrower's point of view the operation will be very straightforward. Payments will be received from the company in Glasgow, and repayments will be made to it. The account will operate on the same basis as ordinary consumer borrowing, but with the safeguards that I have described. Fourthly, social justice; students themselves are the prime beneficiaries of higher education and it is right that they should make a direct financial contribution. That is widely accepted and regarded as entirely normal in other countries. Top-up loans will share the burden of financing students' living costs more equally between students, parents and taxpayers. Top-up loans relieve the burden on the taxpayer in the medium term. They promise relief for parents from 1991–92. And they mean more money for students this autumn.
I commend the Bill to your Lordships' House.
Moved, That the Bill be now read a second time.—(The Earl of Caithness.)
3.27 p.m.
Earl Russell Earl Russell rose to move, as an amendment to the Motion, That the Bill be now read a second time, at the end to insert ("but that this House regrets that the Government have not given sufficient information to judge whether the proposals in the Bill are capable of being put into effect").
The noble Earl said: My Lords, I should like to congratulate the noble Earl, Lord Caithness, for introducing the Bill with the clarity and good humour that we have become used to expecting from him. I also wish to declare my interest in the Bill. As a serving university teacher, I make my living from teaching and writing for undergraduates: no undergraduates, no income. Therefore, it is my interest that whatever form of student support is in place should be workable. It is my belief and my hope that that interest does not conflict with the public interest. It is right that your Lordships should be able to decide that point for yourselves.
It is perfectly possible to be a supporter of student loans without being a supporter of this scheme. Indeed, a number of noble Lords who intend to speak in support of the amendment are supporters of the principle of student loans. I am grateful to the noble Earl for helping me to make clear to the House the precise effect of the amendment which relates to the contents of the Bill. Logically, it is equally possible that, if I could find any supporters of the scheme who were not involved in the drafting of the Bill, it would emerge that it would be possible to be a supporter of the scheme without being a supporter of the Bill.
The amendment which appears on the Order Paper relates solely to the Bill. I have tabled it at this stage because I cannot see how to pursue the points which concern us in Committee for the simple reason that you cannot amend what is not there. The noble and learned Lord, Lord Simon of Glaisdale, has a sensitivity which I share towards the length of time that the debate is likely to take the House and he has removed his name from the speakers' list.
However, he has left me with a story which I wish to tell. Before the South Sea Bubble burst companies were mushrooming in all directions. One company invited funding for a purpose which was thereafter promulgated. That appears to be the case in respect of the Bill and such a matter is difficult to tackle in Committee. Also, in previous cases where we had doubts as to whether substantial sections of a Bill could be put into effect—for example, Part I of the football membership Bill and the privatisation of nuclear power—because we were not addressing the whole Bill, it was possible to tackle the problems which caused us concern in Committee. Because I could not see how to do that as regards this Bill, I tabled my amendment on Second Reading.
I would rather have had this Bill pulled up by a Select Committee of the sort proposed by the noble Lord, Lord Rippon of Hexham, on 14th February. However, when we put forward that proposal on 14th February the noble and learned Lord the Lord Advocate said that that proposal was unnecessary because this House has sufficient powers at all stages of the passage of a Bill. It was at that moment that my last hesitation about tabling this amendment disappeared.
Although this amendment relates only to the Bill, I should not wish to prevaricate with the House. Therefore, I confess that personally—and here I do not speak for all supporters of the amendment—I am against all three provisions, but the lion's share of my time will go to the Bill.
On the subject of loans, I share the normal academic bias in favour of teaching the ablest people. Therefore, I like to see selection on the basis of merit without any financial element. If we increase the price of any commodity, we must risk diminishing its demand. I cannot see how any government who deny that can very well claim to believe in the principles of the free market.
I have also wondered why it is that so many times since and including the Anderson Committee committees and bodies have considered the possibility of loans and have ultimately decided against them. It looks as though proposals for student loans are in some way jinxed. I believe that the answer to that is the problem familiar to any mortgage holder; namely, that as soon as the element of interest is added the cost is increased. At interest rates of 15 per cent., the debt only needs to continue for six years in order to add a sum equivalent to the whole of the original capital. Therefore, I think that one problem about loans is that they are expensive.
The scheme also causes considerable difficulties. It is interesting that the Government have not come forward with student loans as a Bill until they have a motive other than saving public expenditure. The motive was expressed by the Parliamentary Under-Secretary in the words, "To make students feel the cost of their education". As this debate continues, we shall find that the issue, when other loan schemes are put forward, will increasingly concentrate on the question of whether repayment is to be strictly proportionate to the amount which the graduate borrowed or whether it is to be proportionate to the amount which he earns.
The argument about the principle of accountability will be put forward from the Government Front Bench, as it has been put forward by the Secretary of State in answer to the noble Lord, Lord Allen—and I should like to thank those concerned for letting me see an advance copy of that—which is an argument painfully familiar to the noble Earl, Lord Caithness. We heard of that principle over and over again in the debates on the Local Government Finance Bill. I sometimes wonder whether the noble Earl has ever woken up in his sleep murmuring, "This does not respect the principle of accountability".
I believe that there is an argument here which he will recognise. On 20th October the Secretary of State argued that this was important for the effect on the labour market. Let us consider that. I cannot see that it will do anything to encourage the recruitment of teachers, which is something we desperately need. The same applies to nurses.
The Parliamentary Under-Secretary may say that the sum concerned is no more than the cost of a skiing holiday. In saying that, I do not believe that he shows any awareness of the intensity of the financial difficulty facing young people trying to buy a house. It is interesting to look at the effect of the loan scheme in America where I have taught for a long time. It is common gossip among American undergraduates that if your loan gets too big, you go to law school. The result is that since 1960 there has been a 327 per cent, increase in the number of lawyers in the United States. Many noble Lords know that I have nothing against lawyers, but you can have too much of a good thing. American legal fees are a concealed tax for student support and I believe that that can become extremely expensive.
The worst criticisms relate to the Bill. As discussion of the Bill progresses your Lordships will find that there are two different lines of criticism of it. The first is that which I hope we shall hear of from the noble Lord, Lord Rippon of Hexham; namely, that this is an enabling Bill and not merely an enabling Bill but a Bill which, as my honourable friend Mr. Beith put it in another place, contains almost nothing but the power to make regulations. In fact, it is a Bill which almost reaches the point of threatening the principle that it is Parliament which makes the laws.
The other line of criticism which I hope we shall hear of from the noble Lord, Lord Dainton, and others is an educational and practical one; namely, that we simply do not know enough about how the Bill will work to be able to judge it. It is my contention and it remains my contention, even after the small additional amount of information which has been put in front of us today, that those two points are logically connected. The use of enabling powers is usually attacked as being a tendency to arbitrary government. For the occasion, I shall acquit the Government Front Bench of that. I believe that they are taking enabling powers and not writing the provisions into the Bill because they simply do not know what they want to do.
I am reminded of an occasion at a faculty meeting when I was young when I complained that the junior
610
staff were being kept in the dark. I received the reply, "But you see, there is no light".
The problem here is the haste, of which we have heard many times recently, with which the Government bring forward their legislation. That is commemorated, if I may say so, in a small mark on today's Order Paper which indicates that the Bill is being debated outside the permitted degrees of time. The effect of that haste is that because the process of legislation is a great delay to a government and a great irritation to them—and I can see that—they decide to use enabling power to put forward the legislation first and decide what they are going to do afterwards. The effect of that is that they use their enabling powers very much like George Lansbury's conscience, hawking them round, asking what to do with them.
The noble Earl, Lord Caithness, gave a remarkably clear example of that in his speech. He quoted the approach from his right honourable friend the Secretary of State to the vice-chancellors about certification on 19th February. That should have been done long ago. It should have been done before the Bill was ever drafted because a procedure for certification is likely, once it is worked out, to affect the whole scope of the legislation.
On this subject the Secretary of State has threatened to impose the duty on the vice-chancellors. It is his legal right to do so, and if it is imposed on them they will of course do it. However, I take the Secretary of State for a reasonable man. I deem him to intend the natural consequence of his acts. If the universities are to carry out the certification, they must take on staff. Universities have no additional funds, so that if they take on additional staff they must dismiss teaching staff. Universities have already cut to the bone the number of teaching staff for their present number of undergraduates. If universities dismiss teaching staff in order to employ staff for certification, they must reduce their student intake. If that is the object of the Secretary of State, he should spell it out because it is a significant change in government policy.
I shall not enlarge my argument on enabling powers at length. I did so in a speech on 31 st January which the noble and learned Lord the Lord Advocate was kind enough to describe as helpful. Of course we recognise that there is a place for enabling powers. The contention is that this Bill very much exceeds that place.
The easiest way to tackle this subject is to explain why I think the noble Earl's precedent of the 1962 Bill is not on all fours with this one. First, that Bill was introduced by all-party agreement. It may be proper to use enabling powers where there is agreement, but it is not proper to use them in a matter of great political controversy both inside and outside Parliament.
Secondly, the 1962 Bill dealt with a known quantity. Local authorities were already paying student grants. We knew how the system worked. Here we are doing something which has never been done before. We have never had a student loans scheme. We are entitled, as a revising Chamber, to ask how it will work. The Bill does not spell it out. Thirdly, the 1962 Bill was giving away money; this

611
one is getting it back. I think most of us agree that it is a good deal easier to give money away than it is to get it back.
Fourthly, there was no doubt in 1962 that the proposals could be carried out; they were being carried out. Here there is considerable doubt about that. Fifthly, and most importantly, that done by regulation, whatever the Parliamentary Under-Secretary may suppose to the contrary, cannot be amended.
We in this House do not reject proposals; we amend them. Putting proposals forward, therefore, in a form which cannot be amended is a deliberate slap in the face for the powers of this House and I think the House is entitled to resent it. My honourable friend Mr. Beith remarked in another place that it is almost impossible that these regulations should be put forward in a form which is wholly without fault or flaw; there is bound to be something in them which could be improved. We in this House are usually very responsible in trying to improve even proposals which, in principle, we dislike. We are being denied the opportunity to do that.
I accept what the noble Earl, Lord Caithness, said—that statutory instruments may be discussed, though if they are negative they are not discussed in another place nearly as easily as they are here. However, the purpose is not only to discuss them; it is to amend them. Let us take some things which are not spelt out in the Bill but which this House might perfectly legitimately wish to amend; for example—a very basic point—the size of the loan. That may perhaps have been adequate in November 1988 when the figure was promulgated. It has not been updated for inflation since.
I appreciate that we can table amendments of any sort, but we find ourselves trying to amend what is in the White Paper. That is an unsatisfacotry procedure because the Government are not committed to the White Paper. They are not committed to any proposal until they spell it out in the Bill. In fact, the Secretary of State recently said that there are considerable advantages in having an enabling Bill which enables him to change course rapidly.
That indifference to parliamentary amending powers is becoming a course of conduct. I take as an instance of that the proposal to take students out of the social security system, which is part and parcel of the proposals embodied in this Bill. That, we were recently told, is done by regulation. The Government commonly give as an excuse, when they do not want to embody something in a Bill, the need to avoid overcrowding the parliamentary timetable. That excuse of course has force; noble Lords frequently complain about the overcrowding of the parliamentary timetable. But that excuse does not belong in this place. There is already a Social Security Bill before Parliament in which those proposals could perfectly easily have been embodied. I can think of at least one case—I shall not bore the House with it—where those regulations, if they take anything like the form announced, could with benefit have been amended.
We have been told very little about the repayment scheme. I am grateful for the little bit we were told today. It tends to illustrate the value of putting down amendments in this House. However, we should consider the specifications for repayment. All those who are repaying will change addresses. Something in the region of 40 per cent, will change their names. It may be that something in the region of 30 per cent, will change their jobs. They will be in and out of eligibility. They have to certify themselves in what the Parliamentary Under-Secretary described as a simple test relying on the honesty of graduates.
I am glad the Parliamentary Under-Secretary thinks so well of the honesty of graduates. That is normally deserved, but there is no walk of life in which everybody is honest. It is not the office of legislators to make laws for the honest, but on the assumption that there will be some who are dishonest. I think I am entitled to be rather fed up when I look at the estimates for default in my poll tax payment; for example, with a situation where those of us who are honest subsidise those who are not. This proposal makes that situation worse. Until there is something a little more practical than this procedure of self-certification I really cannot be convinced that the money will be recovered. We are told that the object is to save public expenditure, but if the money is not recovered the object is defeated.
Anyone thinking of voting against this amendment simply in order to avoid rocking the boat should reflect on the last two occasions when measures were before us which many of us suspected were impossible—the football membership Bill and the privatisation of nuclear power. The passage of those measures in an unamended form did not do the reputation of Parliament any good. I regret that. I beg to move.
Moved, as an amendment to the Motion, That the Bill be now read a second time, at the end to insert ("but that this House regrets that the Government have not given sufficient information to judge whether the proposals in the Bill are capable of being put into effect").—(Earl Russell.)
3.49 p.m.
Lord Peston: My Lords, I thank the noble Earl, Lord Caithness, for his introduction to this debate. It is not the first time I have heard him defend the indefensible, and he does it very well. It would be easy to devote all one's contribution to this Second Reading debate to an exposure of the inadequacies of this ill thought out and universally condemned Bill. While I intend to say something of that sort, in my view it is more important to concentrate on general principles.
We must address ourselves to the problems of student support and ask in what ways public money can and should be devoted to solving those problems. My main complaint is that the Government failed to consider the right questions and have put back the process of reform by many years.
Before getting properly started, however, let me utter a plea. There is a real danger that a debate of this kind will degenerate into a continuous complaint

613
by old people regretting the ways of the young; telling them what to do and, all in all, intensifying the war of the generations. We know that our generation of students was far superior to any other in its behaviour and because we always listened to our elders and betters we deserved what we were given. No one was ever as excellent as we were and standards have certainly fallen. I hope we can get that off our chests and that that will do for all of us. I really believe that what the young get up to today is their business and not mine; and I have no intention of pontificating further in that respect.
I return to general matters. Our point of departure must be higher education itself. This has always been valued for its own sake, for its devotion to scholarship and for the preservation and handing down of our cultural heritage. However, it has also been vocational; albeit in preparing people for the priesthood, for medicine or for teaching rather than for accounting, foreign exchange dealing and business management. Times change. There is no difficulty in recognising that the individual student benefits from higher education, but so does society at large.
The latter consideration once manifested itself in charitable support for the bright children of the poor and also originally lay behind state support of a similar kind. However, following the Second World War there was the major initiative of the forces education and training scheme. A grateful nation decided that all those who engaged in war work, who were qualified to go to university and wished to do so should be accepted without fees and with a grant for maintenance. Incidentally, that was the first scheme of its kind in which women received equal treatment to men. That principle was extended to all students, as the noble Earl reminded us, following the Anderson Report in 1961. That is broadly the grant system that currently exists.
I remind noble Lords opposite that their party has a good record in this respect and, more generally, in expanding higher education. After all, the Robbins Committee was appointed by the noble Viscount, Lord Eccles, and it reported in 1963; though its recommendations were initially put into practice by a Labour Government. The Robbins Report, until apparent recent attempts to repudiate it by this Government, stood for two decades as the locus classicus of higher education policy. Again, noble Lords opposite may wish to reflect on the Johnny-come-latelys who seem to have taken over their party and not only condemn our record in this connection but also their own.
On state support, it has always been distasteful that the stupid children of better-off parents could pursue a university education but the brighter children of poorer parents could not. I go further. While academic study must always be the most important part of higher education it must not be the whole of it. I confess that I was a swot at university but I did not resent the presence of those who used their time to prepare for careers in the theatre, politics or cricket. On the contrary, it was the mixture which comprised our education from
614
which we and society benefited. However, I reiterate the point that that was enhanced by the breadth of backgrounds of the students who attended the university. That, in turn, justified state support for students from poorer families, and not merely for brilliant students from poorer families.
It has also been agreed, independent of party, that student grants was an area in which the progressive tax principle should apply. That was the origin of the so-called parental contribution. Students for the most part were deemed to be members of their families and grants were adjusted, as we were discussing earlier, by a rather arcane formula based on parental means.
That leads us immediately to the first of the problems that we ought to be considering. If people can vote at 18 and marry without parental consent, why should they not be treated as independent for maintenance grant purposes? To turn the point on its head—we heard a few remarks on this not more than a few minutes ago—why should parents be obliged to support their grown-up children? I speak as a parent who did, but why should parents be obliged to support their grown-up children and be pilloried for not paying the parental contribution? The point holds a fortiori when we realise that the same person who goes out to work will be assessed separately for income tax.
I am not naive. I am aware that there are two answers which may be forthcoming to the question that I have just put. The first, on my side of politics, is that if we abolish the parental contribution we would still see the money going to the better off. The second answer is on the other side—simply that they do not want to spend the money. I am not sure which side is the more irrational. However, for that reason I, for one, felt that an appropriate place for an experiment in repayable grants contingent on income would be to cover the parental contribution. No additional cost would be imposed on the poor but the children of families with an income not much above the average would gain. That is one of the many examples I can give where a form of student support is desirable and would receive wide support not based on party policies.
I briefly mention some others. A student who discovers he is on an unsuitable course may continue because he cannot afford to finance an extra year to start again. A student may go on a degree course because a mandatory award is available although what she really wants is a diploma course for which the award is only discretionary. A student may study full time for the same reason—that an award is available—although a part-time study would be more desirable.
Indeed, I must press the point most strongly about the arbitrary treatment of part-time study. There is the question, of course, of what is meant by part-time study, especially given that the Government wish to encourage students to take jobs even in term time. I question whether that is the best way for students to use their valuable time. It may lead to our highly efficient universities becoming as ineffective as their foreign counterparts.

615
More than that, why should support not be available to part-time students? I refer specifically to married women who choose to study part time while also raising a family. Why are they not worthy of any kind of support? The question applies more generally to adults who wish to study part time. Again, we have the anomaly that a person over 25 years of age receives a full grant independent of means if he or she studies full time but nothing for part-time study. I also ask—I look forward to an answer—why under the current loan scheme on reaching the age of 50 it ceases to be available? What is different about the age of 50?
I have emphasised these matters at some length because I wish to establish that there is nothing sacrosanct about the present system of maintenance grants. Reform is needed and we must be willing to consider a wide range of possibilities. However, it is evident that that is exactly what this Bill fails to do. It does not address itself to the problems and therefore offers no solution. It gets in the way of rational thought rather than helping it. Indeed, the Government ought to withdraw the Bill. As an incentive, and speaking as someone who has devoted much of his life to the economics of education, if the Government wish to start all over again I will give them all the assistance I can.
In that regard may I say that I was very much taken aback by what the noble Earl said about the department—I am not sure whether this is the view of the DES or the Treasury—and alternatives to the government scheme. I hope that he is aware that both the graduate tax and the national insurance contribution types of scheme have been studied by people of great expertise and who have argued, both here and in the United States, that both are feasible and desirable schemes. I know of no such expertise in the DES. I know of no published work in the DES which could possibly lie behind the claims that the noble Earl has just made. We will return to this matter in Committee and endeavour to discover exactly what it is that makes almost every researcher in the field wrong but the DES—or the Treasury—right.
I also ask the noble Earl to look at a further matter which is puzzling me. He said that the Government cannot continue with the grant scheme because, in a sense, they cannot afford it. The country today, even on the most dismal view of its economic performance which I often put forward as opposed to the noble Earl, is richer than it has ever been. Is it not paradoxical that whereas when we were poor we could afford a grant scheme now that we are richer we cannot? I ask the noble Lord to at least think about that.
I now turn to some points of detail. Like all noble Lords I have to use my imagination because of the way in which the Bill is presented to us as a generalised power for the Secretary of State to do more or less what he wants by way of regulation. Furthermore, at the moment he does not even know what he wants but appears to make up the whole thing as he goes along. We have been given, as the noble Earl said yesterday, some more details of what the department has in mind but they are not, of
616
course, part of the Bill. I promise to scrutinise in time for the Committee stage the new documents which have just appeared, although I hope that by then the Government will not have again changed their mind and I will have to read yet another set of documents.
No doubt noble Lords will comment on the constitutional niceties of the Bill, as the noble Earl, Lord Russell, has already done. I am not an expert on that, but I wish to make the following points: first, we must be unhappy about the use of the negative procedure for regulations. Some noble Lords may argue that the Secretary of State can introduce good regulations rather than bad ones so to speak. However, that is to miss the whole point of the objection. It is improper to do something as drastic as this by the use of enabling legislation. It is not sufficient to say that you either like or dislike the scheme: it is the procedure which is wrong.
In that respect perhaps I may comment on what the noble Earl said about confidence. I am amazed by what he said. As he knows, I do not have any confidence in this Government, but that has nothing to do with the Bill. I find it extraordinary. I have also read in the newspapers that the Government have decided that the ability of the Secretary of State to make regulations of this kind must be a matter of confidence. I find it amazing that that is the view being taken by the noble Lords opposite. I say to the noble Earl again if it will encourage him that though I do not support this Government, if they were to withdraw the Bill, my confidence in them would increase rather than decrease. I am somewhat mystified by the noble Earl's position.
As regards other matters of detail, I must remind noble Lords of the scale of the loans obligation as it builds up. Your Lordships should not be deluded by the figures quoted for 1990–91. What matters, first, is the Government's intention that eventually the loan will comprise 50 per cent, of the maintenance. If by some mischance the Government are re-elected they might not stick to that figure because they are not obliged to do so. Secondly, if the loan is not repaid immediately the obligation will rise by the rate of inflation.
It is all very well to say that the interest rate will be zero in real terms, but I hope that I do not have to remind the House that real terms never paid any bills. Money is money. I shall give an example. At the current rate of inflation the interest charge will be 8 per cent. I agree that that is better than the excessive interest rates demanded by the credit card companies but it is more than the zero charge which students on full grant are currently paying.
I also ask what the rationale is of the 85 per cent, figure in determining the obligation to repay the loan. Since the whole theory of the loan scheme revolves around graduates as a whole earning more than average earnings, why have the more stringent 85 per cent, rule? I also make the point that a graduate on average earnings is not exactly well off, especially if individual circumstances are taken into account, which the loan scheme does not do.
Despite what the noble Earl said about the difficulty of tabling an amendment on this matter, I

617
ask why those who earn little, or in the case of married women nothing at all, should not have their obligation to repay permanently deferred. I for one recognise that graduates who earn a great deal might accept an obligation to repay to the community some of the cost of their education. But I have always made the point that other graduates repay the community by the nature of the work they do. I refer to nurses, those who enter the Church, those who engage in voluntary work overseas and many others. They are in occupations which are already underpaid. I do not see their employers having the funds to raise salaries to enable them more easily to repay loans. Therefore, the sensible thing to do is to say that for every year that a young person works in a recognised list of occupations, one-fifth of the loan should be regarded as repaid.
I cannot refrain from pointing out overall how reactionary the Bill is. That may appeal to some noble Lords since I am told that one or two of them are turning up especially today to vote at the Government's behest. I hope that they have the courtesy to listen to the debate in the Chamber as it goes on. In that regard, when we come to reform this Chamber it will be as well to remember who brings it into disrepute with such activities.
Those noble Lords—they are in all parties—who value our universities and take seriously the need to deal with the difficult problem of widening access to them must find these proposals alarming. One thing is clear: children of poorer parents who now receive a full grant will be worse off. For them a loan which has to be repaid replaces part of the grant. That will also be true of mature students who receive a full grant. The children of rich parents who receive a partial grant or no grant at all will be better off because they will now be given a subsidised loan.
The Government have already shifted the tax scheme entirely in favour of the rich. This scheme adds insult to injury. Those of us who have experience of education are aware of how difficult it is to persuade the children of unskilled and semi-skilled parents to continue their studies. The key group is the 16 to 19 year-olds. The money being wasted on managing the loan company would be better spent on them. Above all, the last thing we want to do at the moment, having persuaded such young people to go on to A-levels, is to frighten them off with talk about loan schemes.
Those of us, including myself, who accept the logic of repayable grants are fully aware that the test we must pass is not to deter the one group of students we most want to encourage. I admit that it is not easy. But the government scheme totally fails the test and it would be difficult to think up a scheme which could be more harmful.
This is a minor piece of legislation and that is why I do not understand the confidence point at all. Increasingly it looks as though the legislation will have serious consequences, which may have been unforeseen when the Bill was drafted but they have now emerged most clearly. One of them derives from the problem of default. Students will have the debt hanging over them. They are liable to repay it once
618
their income exceeds 85 per cent, of the national average. I have emphasised, and I continue to do so, that that is not a very high income. There will be some whose circumstances will make it difficult, if not impossible, for them to cope with the debt. As the noble Earl himself has confirmed, such a person may eventually find himself or herself in court. Is that really what we want to happen concerning the treatment of our students?
What seemed to be a simple scheme—I thought it was when I first heard about it—is turning into a bureaucratic nightmare. It appears that Ministers have only just thought of the problem in that there exists no procedure for informing the loan company when one's income exceeds 85 per cent, of the national average. Incidentally, are we to have a statutory definition of average income and is it to be published every year? Will the same figure apply to men and women? Logically, there should be two average incomes. I imagine that the Treasury has thought of that, but I find it hard to believe that the DES has.
There is another problem which I believe Ministers have not considered. On marriage women will be obliged to inform the loan company of their change of name. In addition, anyone leaving the country to work abroad will have to inform the loan company of that fact. These do not appear to be just minor interferences with the liberty of the subject, and they do not become acceptable merely because we have something similar concerning income tax. Having seen today the leaked specimen loan form, I shall also be interested to know what business it is of the student loan company to ask for the student's national insurance number. That is not exactly compatible with one's views on liberty.
But possibly more important than any of those matters is the suggestion that in order to get his own way the Secretary of State is proposing to amend the Bill to make universities, polytechnics and colleges take over a significant part of the administration of the scheme. The fact that the Government are not willing to pay for it, and, therefore, as the noble Earl said, are happy to see funds for academic purposes spent on officialdom, is irritating though not fundamental. But the fact that the Government are to interfere with the independence of our academic institutions is fundamental. If they can act in this way for such a minor end, what other threats to academic freedom and independence do they have up their sleeve.
For reasons totally beyond me the Government are desperately anxious to get the Bill on the statute book. They want it to be law before Easter. I for one cannot see what the hurry is. I suppose that someone intent on suicide chooses every weapon possible. In Committee my noble friends and I will do what little we can to make something as atrocious as this piece of legislation a little less bad. However, in conclusion I must repeat my plea and my offer. My plea to the Government is please take this noxious thing away. My offer is that if they do we on this side of the House, and everyone in the higher education community, will do all we can to assist the Government in putting forward something better and without much delay.
4.10 p.m.
Lord Butterfield: My Lords, I should like to thank the noble Earl, Lord Caithness, for introducing the Bill in the way that he did. I am on my feet to make some remarks very largely out of sorrow. Just at a time when it seemed that we should be doing all we can to increase the participation of our young people in higher and further education in order to provide the best opportunities for future competitiveness, we are about to take steps to create diversions which may inhibit some people from going to colleges and universities. That is why I support the noble Earl, Lord Russell, in his amendment.
I began to think about the proposals in terms of true perspective and so I looked at the Government's expenditure plans. I found that by 1993 about 3–5 per cent, of government expenditure will be concerned with education and science. The figures given by the noble Earl this afternoon indicate that about one-tenth of that expenditure will be directed to our talented young people, the seedcorn, as I should like to believe they are, going on to higher and further education. Noble Lords will therefore understand how discouraged I was to hear this morning—admittedly filtered through the BBC system—of all the steps being thought out to ensure that those who reneged on their student loans would not be able to get away with it. That did not seem to me to be the right way to encourage people to go on to university.
I began to think too of other things that my students tell me. They are genuinely concerned about the increased costs they will face in the near future as a result of the freezing of their grants and as a result of their being unable when they live out of college to receive housing benefit. I thought of the way in which those who are unable to get work during the long vacation may lose up to £760 income support. Needless to say, there is a good deal of talk in Cambridge of students having to pay an extra £90 for the community charge. They believe that their total losses may be as high as £1,200 a year and that the loan, which was to be £460 although it may be upgraded, will still leave them hard up.
We seem to be indulging in party exchanges—indeed, there is an element of confidence in this debate—at a time when all sides should be collaborating to try to find the best possible way to encourage people to polish their talents and improve their skills. I make no bones about it. I have been moved by the egalitarianism and the skilful force lying behind the proposals put forward by the heads of all our educational institutions, the colleges and polytechnics as well as the universities. There is an extraordinary strength of egalitarianism among the young. Noble Lords who have offered to help a child or a grandchild by speaking to an admissions tutor or dean may well have heard the words, "Please, please, I want to get there on my own strength".
I believe that students would be willing to face up to loans but they would approach them in much better spirit if we were to follow the proposals of the Committee of Vice-Chancellors and Principals and their other colleagues under which they would be able to take a loan or not as they wished but would
620
be subject to a graduate tax repayment system. They would look on that much more in the spirit of national service. They would all be students, but the ones who did well would pay much more than the ones who pursued callings whose remuneration was poor. I am on the side of the noble Earl, Lord Russell, because I should like to have seen the Bill withdrawn. I now realise that, as confidence is involved and as people have been taken on the strength of the new company, I am probably whistling in the wind.
I hope that the Minister will be able to clarify some details. For example, what will happen in Scotland where there are four-year courses? Students will have four years of loans to repay. At Cambridge we are about to introduce a four-year engineering course. The country is quite clear that it wants more and better engineers. Just as it takes five or six years to train a competent young doctor, it will take more than three years to make a really competent engineer. Might we hear people saying that they would rather do the three-year course and not incur the loan? My daughter was at the University of Edinburgh. When she heard this she said, "I hope to goodness that I am not at a disadvantage with your sons, father", as they went to English universities. She meant in terms of the loan, of course.
There are also the poor dental and medical students who train for five years or even more. I have been concerned recently with dental research. If dental research in this country is to get on its feet, more young dental students must do the intercollated year—the BSc year—to get their foundations in science. Will they be interested in doing so in the face of the loan scheme as presently adumbrated? I do not believe that they would feel so badly if they thought that the loans would be repaid by the cohort of students of their year. They as a cohort would be putting money back into the education system for the students who followed. That, I know, is unprovable but that is how I feel their pulse. I believe that there is a strong streak of egalitarianism in them.
I am wearing the tie of Johns Hopkins Hospital medical school. I was privileged to spend two years at Johns Hopkins during the war as a Rockefeller student. My student comtemporaries there had incurred loans during the four years of their undergraduate course, they were incurring loans during the four years of their medical course and they expected to incur even more loans when they went on to their specialist training. My British student colleagues and I were appalled by how money conscious and finance conscious those young American medical students were. It was an enormous pleasure to come back to England and find that people did not talk all the time about how they would repay their loans and how they would make a lot of money in their profession.
I worry that with the proposals in the Bill we shall come close to creating professional classes who are much more money conscious than professional people are at present. I had lunch with some judges today. I said that I tended to give jobs in my department to the man who when asked, "What is your present salary?", replied, "Oh my God, professor, I have no idea". That was the kind of man

621
I wanted. I do not think that we shall have that situation if we go down the road proposed in the Bill.
Let us not forget that the nursing profession is aiming to become one of student nurse graduates and that in the next century the health service will have 500,000 student nurse graduates who will have incurred these debts. It may be a good excuse for keeping their salaries down as they will not then fall into the category of having to repay the debt. But if we have in the National Health Service 60,000 or 70,000 doctors and 500,000 nurses who are money conscious in this way, I fear that our present very inexpensive health service will find itself one of standard costs. And that I would regret. I thank noble Lords for their kind attention and I must say to the noble Earl, Lord Russell, that I am behind him and that I hope we shall achieve a delay and a rethinking in respect of the present Bill.
4.20 p.m.
Lord Kilmarnock: My Lords, I should like to start with one point upon which I and my colleagues are in agreement with the Government. We agree that if a dramatic expansion of higher education is to take place, there will have to be some contribution from graduates whose earning power has benefited from public funds. However, from that point on we part company with the Government on two grounds. The first is the nature of the Bill which is brought before us today to which the noble Earl, Lord Russell, has objected so eloquently. He is right that it is an appalling Bill, which virtually cuts this House out of the legislative process. It does not contain a single word of detail about the proposed scheme, even in the schedules.
The Student Loan Company Limited receives a mention in the Explanatory and Financial Memorandum but appears nowhere on the face of the Bill. To get any inkling about how the Government propose to operate the legislation if it becomes law we have to turn to the brochure which the Secretary of State has so graciously circulated or to the notes we received yesterday from the noble Earl. It is legislation by brochure, legislation by leaflet, or, as the noble Earl put it, legislation by White Paper; it is not legislation by the proper processes of Parliament.
It will be extremely difficult to amend the Bill because of its lack of detail. The whole scheme is to be introduced by orders under the negative procedure and even if we change it into the affirmative procedure in Committee, as perhaps we may, we are still unable through long-standing convention to amend statutory instruments of either kind. Thus, to all intents and purposes the revising function of this Chamber is quite simply bypassed. All that adds up to contempt of Parliament in general and of this House in particular. On those grounds we shall vote for the reasoned amendment of the noble Earl.
I turn to our objection to the substance of the Government's scheme so far as we understand it from the previous White Paper, the brochure, the press releases, the notes and the like; and of course the speech of the noble Earl, Lord Caithness. The
622
whole proposition stands or falls on whether it acts as an incentive or a disincentive to wider participation in higher education. The balance of informed opinion is that it will be the latter; that is, a disincentive, a deterrent. That sits ill with Mr. Baker's commitment to doubling the student population by the year 2020.
I think the noble Earl, Lord Caithness, said something similar in his speech. However, Mr. MacGregor seems to have backed off this commitment in his recent speeches. It would be helpful, therefore, if at the end of the debate the noble Earl would clarify what target of student numbers the Government aim to achieve.
To be fair to the Government, it must be said that the existing grant system with means-tested parental contributions, which was intended to increase the participation of students from lower income backgrounds, has not had that effect. The result has been that the generality of taxpayers has had to maintain a largely middle-class student population, which is manifestly unfair. The outrage of the middle classes when the noble Lord, Lord Joseph, tried to do something about this was not very edifying. The sheer volume of protest was evidence that unjustified privilege was being threatened.
However, what have the Government now brought forward? They have brought forward a relatively cheap but not zero, as has already been pointed out by the noble Lord, Lord Peston, borrowing facility which those same middle classes will seize upon once the ritual furore has died down. Anyone who is half well-heeled will have an incentive to borrow as much as possible and put it into a building society, as was cogently pointed out last October by Mr. Anthony Nelson, the Conservative Member of Parliament for Chichester in another place.
On the other hand, lower income families—that is, poor families; I do not wish to mince words—will look upon these loans with extreme suspicion. I say that because the combination of yearly revaluation of the loan at 7 per cent, or 8 per cent., plus the rising volume to bring it up to 50 per cent, of maintenance, possibly to be accompanied by extension of the same system of fees after the next election—if the noble Earl wishes to deny that this is a gleam in the Government's eye he will have the opportunity to do so later in the debate—could together lead to a negative dowry of debt amounting to many thousands of pounds once the scheme gets into full swing. If that is not a disincentive to thrifty people, I would be hard put to devise a better one. When you add in that repayments are to start at 85 per cent, of national average earnings, which would bring in nurses and junior teachers, who are hard enough to recruit anyway, you have a recipe for disaster in those professions.
The mechanism which the Government appear to have in mind is extremely complex and expensive. In fact, the Government seem to be developing a genius for inventing methods of collecting money which are expensive to administer and likely to lead to a high default rate. The poll tax is the classic case in point. In this instance what is proposed is a debt collection quango—and I still recall how the Conservatives in opposition used to abhor

623
quangos—which we are loosely told in the Explanatory and Financial Memorandum will cost £10 million to £20 milion, though Mr. Jackson in a Written Answer given in another place on 24th July last year put the higher of these figures on it (at col. 441 of Hansard). Then, to cap it all, the Government, through the company, will be facing a default rate which is the inevitable accompaniment of such schemes and which has reached 14 per cent, in the USA.
None of this amounts to a sensible way of going about things. Therefore, where do we go from here; or where might we go if the slippery surface of the Bill gave us any foothold for a sensible amendment or amendments? How can we achieve the perfectly legitimate aim of bringing graduate money back into the system without diminishing, and preferably much increasing, the flow of graduates?
The Committee of Vice-Chancellors and Principals, together with other representative bodies of higher education, has put forward a plan which I am happy to say is very close to that advocated by the SDP in its Green Paper No. 45 of May 1989. Incidentally, this was enthusiastically pioneered by our students. In the document the vice-chancellors, polytechnic directors and other principals lay down four basic principles: adequacy, certainty, simplicity and access. Adequacy means that the funds available must cover the students's needs. Certainty means they must be received in full—a condition often vitiated by the parental contribution. Simplicity is certainly not met by the government scheme, as students would have to deal with at least four bodies or persons: their higher education institution, the government loan company, the local authority, their parents—and, very possibly, a commercial bank. As regards access, I think that I have already shown that the Government's policy is almost bound to undermine the vital principle of wider access.
What would the adoption of these principles mean in practice? It would mean that all certified students would be entitled to a full grant. The parental contribution would be abolished. It is quite simply unreasonable to require anyone of the age of 18, who is considered as an adult for all other purposes, as the noble Lord, Lord Peston, said, to rely on parental whim. That is the cause of huge uncertainty and most drop-outs. Repayments would be made very simply through the tax system by adjusting the graduate's tax code. There has been a suggestion that this should be done through the national insurance system but there are technical reasons—and I agree with the noble Earl, Lord Caithness, in this respect—into which I shall not go at present why income tax should be preferred.
If those proposals were adopted, the loans company would become redundant; the local authorities (whose administration cost for mandatory grants are not, I believe, refunded to them) would be cut out and effectively there would be only two bodies involved: the higher education institution concerned and the Inland Revenue. The universities, polytechnics and colleges have said—that is, if I have understood them correctly—that they would be prepared to
624
administer this scheme, certify the students, issue the cheques and advise the Inland Revenue when the course is completed. What could be simpler? In any sane society this would be an offer which the Government could not refuse. It also has the minor, but not insignificant, advantage of preserving the confidientiality of student records which, if the loan company was eventually sold by the Government to a private operator, might well not be the case.
Finally, I should just like to look briefly at how this might work out for both students and the Government. If the Australian version were followed—that is, the Australian version of graduate tax—there would be no disincentive to relatively low earners, because repayments only begin at the average wage and not at 85 per cent., as the Government propose. The system does not have the disadvantage mentioned by the noble Earl, Lord Caithness. A percentage of the cost is selected by the Government for repayment. If I have the correct figure, in Australia it started at 20 per cent, of the total cost of the course, not merely maintenance. Obviously we can go for a different variant or combination.
Graduates on above average earnings would pay back on a sliding scale of increasing marginal rates, which has the advantage to them of a quicker discharge and for the Government of a swifter return flow of funds. An additional advantage for the Government is that there is virtually no chance of default, other than by someone working abroad—which could be resolved by reciprocal arrangements inside the European Community. I thought that it was disingenuous of the Secretary of State in his letter of 26th February to the noble Lord, Lord Annan, which was kindly circulated to some of us by the noble Earl, Lord Caithness, to quibble about this relatively minor difficulty while ignoring the much larger default problem of the loans scheme.
Turning to long-term costs, the Government gave some projections in Written Answers in another place on 24th July and 27th November last year. Defaults permitting, and depending on whether their scheme achieves 80, 90 or 100 per cent, take-up, there is a range of points early in the next century, as the noble Earl pointed out, at which the loan element appears to become self-financing. However, there is still the remaining grant element, so the savings on the current maintenance expenditure will not be enormous.
Furthermore, any such savings depend, according to the figures given on 24th July, on freezing the grant-eligible student population at 427,000 from the year 2000 to the year 2027, which is at direct variance with Mr. Baker's proclaimed ambition to double the student population; an ambition that has significantly not been endorsed by his successor. Of course the demographic profile means that this would represent a rise in the age participation rate between 18 and 24 but it does not begin to approximate to our real needs for students and skills. Nor does it even touch on how to facilitate access for mature and part-time students, who appear to have been left out of these calculations altogether.
If the scheme that we propose were to mirror the Government's scheme as regards student numbers

625
and an eventual 50 per cent, repayment rate, we should be somewhat more expensive because we are eliminating the parental contribution and starting repayments at 100 per cent, rather than 85 per cent, of average earnings. But we shall also have eliminated most of the worst disincentives. This confronts us squarely with the decision about whether or not we are going to invest in a larger student population, and a more highly-skilled labour force. The penalty for not doing so could be horrendous.
If, for example, the aim is to double the number of students in higher education by 2010, as we advocate, the cost will inevitably rise even if part of it is clawed back. It is a political decision how much to claw back. It must not be so little as to make the scheme of little practical value in recouping costs, nor so much that it deters. If is is set at the right level it should ensure a constantly growing proportion of high-earning graduates paying back at a fairly rapid rate into the system. That is what we want to ensure, and what we are convinced our scheme would do more effectively than the Government's.
That, finally, brings me back to the Bill. A properly drafted Bill would have given us the opportunity to put these arguments in more detail in Committee, and in moving amendments to seek to convince the House and your Lordships of their merits. As it is drafted it may be difficult, if not impossible, to do that. We shall have to seek advice about what, if anything, we can do in Committee. The noble Earl, Lord Russell, suggested that it would be precious little. On those grounds, I and my colleagues will vote for the noble Earl's amendment.
4.33 p.m.
Baroness Young: My Lords, I should like to rise to support the Government in this Bill, but in the time available, and with the number of speakers on the list, I shall not rehearse all the arguments in favour of it. I think that these were clearly covered by my noble friend Lord Caithness. Rather I should like to concentrate on the effect of the amendment were it to be passed tonight, and to hope that the House will not support it but will support the Government in the Lobbies when a vote is taken later. As I am a reasonably regular attender of your Lordships' House I hope that I shall pass, if I may call it this, the Lord Peston test.
Let us start on a point on which I think we can all agree, and that is the need to have a far greater number of young people entering higher education. We recently debated this matter in a debate on education and training introduced by the noble Lord, Lord Peston, only a few weeks ago. There was agreement from all parts of the House that we need to have a far better educated population than we have. Indeed it is a major theme of all the briefing that I have had from the Committee of Vice-Chancellors and Principals.
The prospect of 1992, let alone the general need for a far better educated population, makes this both clear and urgent. Therefore, we all agree on the need, and the question is how to achieve it. All those noble Lords who have spoken since my noble friend the Minister introduced the Bill today have argued
626
against this particular form of trying to increase the numbers of students. Therefore, let us start with the present position, because there seems to have been an implied suggestion that the present position is working well and is perfectly fair. In reality it is a very unfair situation in many respects. Despite the fact that we are spending more in grant per student than, so far as I know, any other country in the world, we have the smallest proportion of students from less well off groups in higher education. I do not think that any of us can take any particular pleasure from that fact.
The noble Earl, Lord Russell, said that he believed in selection on merit—I think I quote him correctly—and so I think do we all, but the fact is that since 1979 the number of students in higher education has increased considerably. I think there are now over 200,000 more than there were, despite a fall in the real value of the grant and some other difficulties that they have faced. Therefore the difficulties that they have faced have not stopped the numbers coming in.
One point that has not come out from any speaker—and I was particularly interested in what the noble Lord, Lord Butterfield, said about the undergraduates at Cambridge—is that the people who are really hard done by today are those young people who leave school at 16 or 17 without any further academic qualifications, who go on to do a job, and who then pay taxes to support those in higher education who will subsequently earn a great deal more. If there was ever a silent majority in this debate it is that group of people. I think that we might focus on their needs while we are considering those of the students. After all, they all have a case to be put, and so far as I can see nobody has considered their particular needs at all.
The fact that many parents either do not pay the parental contribution or do not fully pay the parental contribution—I believe it is 41 per cent, who fall into that category—means that a large percentage of students are already on an unofficial loan scheme, and an expensive one at that. Therefore, the idea of having a properly-funded and organised loan scheme should at any rate improve their lot. I think that that is the present situation. There is a question as to whether we could in fact simply continue it by paying more money. The implication of what the Labour Party is saying is that it simply thinks that we should have more grants.
The noble Lord, Lord Peston, raised a point and asked why, when we are better off now—I am glad he agrees that—in the 1990s than we were, we are not able to afford just higher grants and more grants. I suspect that the reason why grants were introduced at the end of the war was not just in recognition of the debt that the country owed to those who fought in the war, although that was clearly one factor, it was in recognition of the importance of education and a world in which there was a large number of young people. The birthrate was rising rapidly and it was dominated by the young.
Now, whether we like it or not, the country's social problems are, in a sense, dominated by the elderly, who will be an expensive group. The paper from the Committee of Vice-Chancellors and Principals

627
recognises that increasing amounts of government money will inevitably have to go to the elderly. I think I am right in saying that the fastest growing group in the population is those over the age of 85. It is a serious matter, and the whole balance has, in a sense, changed. That does not in any way alter my conviction—or I believe that of the Government—about the importance of looking after the students and of getting more into higher education. It is just a background fact to it.
I regret that all the universities and polytechnics do not like the proposed scheme. So far as I can see that seems to be a fairly unanimous view, although we are all agreed on the need to try to find a way of getting more students into higher education. They have made two proposals; either through the national insurance contributions or through a graduate tax. Because I wanted to satisfy myself before coming to this debate, I took the opportunity to discuss these possibilities with my right honourable friend the Secretary of State. I have at least assured myself that he has considered those matters closely. After all, why not? If it is possible to resolve the problem and meet someone's wish, that would be the much more sensible thing to do. Having gone through all those arguments, I suspect that he believes that the suggested proposals will be much the better ones at the end of the day.
The noble Earl, Lord Russell, put forward two further arguments, which have been repeated, for his amendment which would delay the Bill. One is what may broadly be called the constitutional argument of which I am sure we shall hear much more during the course of the afternoon. As my noble friend made clear when introducing the Bill, the mechanism by which it proposes student loans follows the precedent of the Education Act 1962. Through regulations, the Bill allows for flexibility each year to revise matters such as the amount of the loan, the period and manner of repayments, changes in eligibility and a great many detailed matters. No doubt we shall discuss them at considerable length in Committee. It therefore seems to me that one can hardly argue that the Bill provides something new. A precedent has been set.
As I understand it, were those details to be embodied in primary legislation, should a future Secretary of State wish to amend any of those matters he would have to bring forward primary legislation. That would clearly not be practical for any government of whatever complexion.
The noble Earl also asked for more information. I am surprised that he has not received enough. I have a great deal of information and more seems to come through my letterbox every time I collect my post. I hardly feel that I need more information at the moment. My noble friend has been most helpful in supplying further information when one thinks of more questions. It is difficult to escape the conclusion that the amendment is a wrecking amendment. Perhaps that would not matter. Noble Lords opposite shake their heads, but one can always ask for more information. Have not we all in a difficult situation asked for more information?
628
One can think of more facts that one would like to have. It is most unlikely that the Government will change their view on the main issue of repayment through a graduate tax or national insurance contributions, and therefore to ask for more information is to use a delaying tactic in order to put off the Bill. Some people may say that that would not matter; but it is important to get this proposal on to the statute book.
The number of students entering higher education next October is already showing an increase, so they have not been put off by the prospects of loans or of the Bill. I believe that we shall see increasing numbers of students entering higher education over the course of time.
Having said that I support the Bill, there are a number of matters which I hope my noble friend will look at in Committee with some care and about which I have some concern. I hope that he will look at, for instance, the whole question of Access Funds. There is a genuine point of concern when we consider loans and the abolition of housing benefit and some of the other grants. One needs to assure oneself that those who may well find it extremely difficult can be helped.
One needs to look at a longer period for repayment. I take the point about medical students and those studying to be vets and architects and others whose course is longer than three years. That is an issue upon which it would be helpful to have information. It would also be useful to have more information about part-time students, the number of whom is growing rapidly and who form an important sector. There are a number of women part-time students. I wonder whether my noble friend will consider having the regulations brought in by affirmative rather than negative resolution. That would meet some of the anxieties that have been expressed without in any way undermining the Bill's important central focus.
We shall all listen carefully this afternoon to what is an important debate. It is a short Bill, but it matters a great deal to the individuals involved. It matters a great deal to the country as a whole that we should have the best educated and most skilled population possible. We owe it to them and to ourselves to debate the matter thoroughly, but I hope that the House will support the Government in this matter.
4.45 p.m.
Lord Glenamara: My Lords, I believe that I am one of the few people in the House who went to college with a loan. Indeed, until last evening I thought that I was the only one, but I discovered that my noble friend Lord Murray of Epping Forest also went to college with a loan. For us, the Bill amounts to putting back the clock more than 50 years because my loan (a local authority loan) was interest free. The proposed loans, despite what the Minister has said, bear interest, because the outstanding amount of the loan is to be updated each year according to the retail prices index. If the scheme were in operation, any outstanding loan this year would be increased by 8 per cent. How can anyone say that the loans are interest free?

629
In the early years of my career I was carrying the intolerable burden of having to repay that loan. Since then, I have been implacably opposed to student loans. I view with enormous regret the Government's proposals that in 1990 we should be returning to such a system. There are those who say—it was said many times in the other place—that students will value more that for which they have to pay. What does that mean in practice? Does it mean that in college I worked harder than my fellows who did not have a loan? In practice, it means nothing. It is one of those parrot cries which are always used by people who oppose any kind of centrally funded benefit. It was used when the Beveridge Report came out; it is used today.
I am closely associated with a large academic community. Students today work extremely hard and are dedicated. They do not need this barbaric motivation—perhaps I should say goad—which the Government propose.
There are those who are attracted by the American system, as the noble Lord, Lord Butterfield, said. One works one's way through college and amasses a whole complex of loans at different rates of interest from all kinds of sources, but over a flexible number of years. I happen to have some first-rate personal knowledge of that system because I have two American grandsons. In middle-class America today it is common for parents to take out a second mortgage on their houses when their sons and daughters have to go to college. Anyone who suggests that we move to that system, to be blunt, needs his brains examined.
Despite that, I saw a quotation in The Times Higher Educational Supplement from a DES spokesman who said:
"The general philosophy is towards self-help, encouraging young people to work their way through college".
The British system of intensive, concentrated, three-or four-year degree courses is infinitely preferable. The Tory manifesto for the last general election, of which I am a regular student, stated:
"The British system of higher education is among the best in the world".
To try to amalgamate those two systems by maintaining our intensive degree courses while expecting students, by the sweat of their brows, either in college or afterwards to finance their courses will bring the British system into international disrepute. The Labour Party could well adapt a slogan that the Conservative Party used in the late 1970s. The Labour Party could adapt it to say:
"The British system of higher education is among the best in the world: don't let the Tories ruin it".
We are told that the growth in mortgages demonstrates a changing attitude towards debt. However, in Thatcherite Britain taking on a crippling mortgage on a house is about the only way most people can get a roof over their heads. They have to do that. Taking on this kind of expensive debt is poor evidence of a willingness to compound the problem by taking on another debt. The Government's scheme would impose a heavy burden on graduates in the early years of their careers. I ask the Government again not to tell us that the loans will be interest-free and that they are top-up loans.
630
We know quite well what the Government's ultimate intention is: that loans should become the principal method of providing student support. They are intended to replace the greatest part of student support.
There is a special problem for women graduates who may not, for perfectly good family reasons, have continuous employment. Loans could reverse the trend for more women to enter higher education. In the past and even now in some parts of the world women bring a dowry to their marriages. In the early years of this century, in working-class homes at any rate, they brought something called a bottom drawer to their marriages. That so-called bottom drawer contained embroidered tablecloths, pillow cases and that kind of thing. However, in the declining years of Thatcherism women will bring a negative dowry to their marriages. They will bring a debt. That is if they get married, because the effect that this measure will have on the marriageability of women graduates can only be guessed. I doubt whether true love will overcome this blight on women graduates.
As the noble Earl said with some pride—we are all proud of the fact—there has been a considerable increase in school leavers entering higher education over the past 25 years. I applaud the Government's wish to see that expansion continued. However, the rise in the past quarter century masks an interesting but sad fact; namely, a relative increase in the proportion of those from working-class homes, that is, social classes C2, D and E, in the 1960s followed by a fall in that proportion ever since the early 1970s. I hope the Minister has noticed that. It is clear that the increase we all wish to see can only be achieved by a much higher than average proportion of young people entering higher education from the classes I have mentioned. Therefore it follows that the major criterion for judging the Government's loans proposals, in as far as they have told us what they mean, must surely be whether or not they will encourage a higher proportion of young people from working-class homes to enter higher education.
The Government over the past 10 years have carried out what can only be described as a war of attrition against our student population. The student grant has declined in real terms by 23 per cent, since 1979. That war of attrition is continuing this year with the withdrawal of unemployment and housing benefit and the imposition of 20 per cent, of the poll tax on our students. This war of attrition has reduced our student population to a condition of near penury. I have close contact with large numbers of students and I know they have absolutely no slack at all in their budgets. They can barely afford to buy sufficient to eat. Perhaps the Minister will tell us how the 15,000 to 20,000 students in Newcastle will be able to find £70 on 1st April this year for the poll tax. Where will that £70 come from? I hope that the Minister will tell us when he replies.
We must ask ourselves whether young people from working-class homes, whom we must attract into higher education, will be prepared to endure that penury for three or four years in college followed by a further period of acute financial stringency when they leave college. They will have to endure all that in the expectation of a so-called good job when they

631
leave college. Is the Minister aware that for tens of thousands of graduates that so-called good job is in teaching where, on 1st April this year, a newly-qualified teacher will receive £9,000? It will take him six years before he qualifies, if that is the right word, to repay his loan. How much will it have increased by that time at the present rate of inflation? It must increase by 50 per cent, at least. By then that young teacher will be 28 years of age. He will be just the age when he has probably got married and has young children. He will then have to repay a loan which has probably increased by 50 per cent. What will he feel after six years if he has to start to repay a loan for his university education?
A great many students will become social workers and a large number will be nursing graduates. There are of course many nursing graduates now and their starting salary is £9,165. In my opinion not only will the Government's proposals and the other changes in student support that they are making not encourage these young people to enter college but they will also positively deter them from doing so. It should be remembered in this context that the 18 year-olds who have the necessary A-levels to get into college are the very ones who will find it easiest to obtain employment at the age of 18 and opt out of the education system. That fact should be borne in mind too.
Some graduates will of course obtain much better paid jobs than teaching and social work jobs. But how just is it to say that they obtain their well paid jobs because they possess a degree, the cost of which they must repay? How much does general ability count in getting a well paid job, or motivation, or social and family connections? The latter factors count a great deal in this country. How is it possible to say with any justice that John earns £25,000 a year at 30 because he has a BA when William who has a similar and perhaps better degree only earns £12,000 per annum? It is extremely difficult to pinpoint that matter and say that a person earns a high salary because he possesses a degree. I cannot believe that the high salary that Mr. Lawson now receives is a result of the BA that he obtained at Oxford University. He obtains his high salary because of the knowledge he gained in the Treasury. Therefore, it is extremely difficult to ascribe high salaries to degrees.
The Committee of Vice-Chancellors and Principals, the Committee of Directors of Polytechnics and the Standing Committee of Principals of Colleges—that is, the whole higher educational world—proposed to the Secretary of State a graduate tax, as operated in Australia. Many noble Lords have referred to that. I should say at once that I have personal reservations about a graduate tax, but it would obviate some of the injustices that I have mentioned. I watched Sir Edward Parkes on television after his meeting with the Secretary of State. He said bluntly that the Secretary of State refused to consider the graduate tax. However, the Minister today told us that the Secretary of State had considered it beforehand. Nevertheless, he refused to discuss it with that deputation. The whole spectrum of representatives
632
from the higher educational world that I referred to went to see the Secretary of State and they put forward a perfectly reasonable alternative to the present proposals, although I personally have doubts about it. However, the Government refused to discuss it with them. What an arrogant Government this is.
When the White Paper consultation process took place I am told that only one of the organisations that replied was in favour of the Bill. The Minister can correct me if I am wrong on that. The Bill is opposed by the whole educational world in Britain, not to mention the banks. The Government have no mandate for this proposal. Again, I read the manifesto?
"Top-up loans are one way to support grants".
But later it went on to say:
"No final conclusions have been reached".
As these conclusions will affect the family budgets of thousands of families and tens of thousands of young people, why were the conclusions not put to the public of this country in a general election?
This is a nasty little Bill. Constitutionally it is a sheer outrage. It shows the Government's contempt for Parliament. That is not overstating it; I am not the only one who said that. It really is an outrage and it displays a mean and vicious attitude towards the most able of our youth. The least that the Government should do is to defer its operation until after the next general election.
5 p.m.
Lord Mackie of Benshie: My Lords, I rise to support my noble friend Lord Russell in his efforts to make the Government think again—perhaps "again" is the wrong word. The crux of the matter appears to me to be how we are to attract more people into going to university in order to make the nation better and richer. We are not succeeding in this, nor in taking the reservoir of clever, working class children—the last reservoir we have—into the universities. The reason for this is that they are not motivated to go to university because they see their brothers and sisters earning money without the sweat of study and hard work. They see people at university extraordinarily hard up and in what they regard as a poorer position than people who go to work immediately after school.
That is the main point which deters our essential young people in this country from going into higher education. It is no good saying that other countries are able to do it with a loan system. That is like saying that because the Germans eat sauerkraut, we should like sauerkraut here. We are accustomed to the system, it is competent and can repay the grants which we give.
It is interesting that, for instance, in Aberdeen, in Scotland, when the oil industry arrived there, jobs were available for anyone on the rigs at high pay. A youngster could earn £300 a week on a rig. The result was that I know examples in Aberdeen of middle class, professional youngsters who say to their parents, "Right, I can go on a rig and earn £300 a week. Why should I go on to study?" That is basic

633
in many of the working class families in the country, burdened as the parents are with various other expenses such as the high cost of mortgages.
If we are to increase the university population, I am certain that loans are not the way to do it. The Government say that we must save money, but the money for the loans will come out of the Exchequer and there is no certainty at all that it will be repaid. One problem that we suffer from greatly, as we all know, is that many of our brightest people go off to seek high salaries all over the world. This will be another incentive for them to do that—not a very noble incentive—if they have large sums to repay in this country.
If we attract more people to universities and apply their skills we shall have a richer country. When it comes to paying for the grants, we shall be able to do so. But if we go on to a system which drives people—as it will in this country—out of higher education, then we shall all be worse off. That is why I support the amendment of my noble friend.
5.5 p.m.
Lord Beloff: My Lords, it is perhaps not surprising that I should rise to support the noble Earl, Lord Russell—the last Tory supporting the last Whig. I speak foremost as a member of my party who is deeply distressed at having to take this line. For the past two or three years, as many noble Lords who are my friends will be aware, my principal purpose in attending your Lordships' House, speaking in debates and meeting Members of Her Majesty's Government, has been to try to prevent the growing breach between the academic community at all levels and the Government. The introduction of the Bill into the House after the mauling it received in another place suggests that I have totally failed in my objective, and that the Government are indifferent to what may go on in the minds of the academic community.
I was surprised and saddened to find that my noble friend Lady Young supports the Bill, if not perhaps in every detail. I cannot believe that when she visits Oxford—and she spends more time there than I do—she comes away with a different impression. I have found no one in the Oxford academic community who has a good word to say for the scheme. It is bad for the party. A recent poll suggested that fewer than one in 10 persons employed in an institution of higher education would vote Conservative.
However the scheme is bad above all for the country. No country can afford a total breach between those who do the thinking, research, the teaching and the learning and those who are responsible for national policy. We have seen some excellent or, if you will, some terrible examples of what happens when year after year regimes become further out of touch with their students and their teachers.
Therefore this Bill—though a miserable thing in itself—worries me most because it comes after so much else that this House has tried to prevent the Government from bringing about: the terms of reference of the Universities Funding Council and
634
the incompetence and busybody-ness of its operations. I rarely agree with the noble Lord, Lord Glenamara, but on this occasion I must say that there has been a long period during which students have had their standards of living lowered. In spite of what the noble Earl, Lord Caithness, said, this measure this year will not improve their position. As the noble Lord, Lord Butterfield, has made quite plain, it will make it worse.
After all, one has to take into account what are the losses as well as what is given in the loans. I do not think that in an ideal world we should use the social security system to upgrade the income of students. Beveridge never thought that we should. But that is how we do it. Unless the Government are prepared to do something about the housing costs of students in Cambridge, Oxford and Edinburgh—and I have received strong representations from the University of Edinburgh—and to make sure that the three-year concentrated degree can be undertaken without financial worry, the Government are reducing and not increasing the status of students. As several noble Lords have pointed out, they are discouraging further access from the pool of potential students whom all of us in the universities most need.
What is the Government's reply? As noble Lords on this side of the House will be aware, it is a three-line whip. How is that justified? It is justified by the Bill being a manifesto commitment. The noble Lord, Lord Glenamara, has saved me the trouble of reading the manifesto. The manifesto of the 1987 election said that the important thing was to increase access to universities and that top-up loans would be examined as one possible way of doing that. Since the Bill is likely to decrease access, it would therefore be better to say that this is an anti-manifesto Bill and should be condemned on this side of the House as much as on the Opposition side.
People have argued that there is enough in the Bill for the House to exercise its revising powers. That is clearly not the case and the Government admit that it is not the case. When the noble Lord, Lord Rippon, directed our attention a couple of weeks ago to enabling legislation, three noble Lords in that debate—the noble Earl, Lord Russell, the noble Lord, Lord Mishcon, speaking for the Opposition, and I myself—pointed out that we had a classic example of the worst kind of enabling legislation in the student loans Bill.
That debate was replied to by the noble and learned Lord the Lord Advocate. In that reply, which lasted 20 minutes, he made no reference at all to the student loans Bill which had figured in three of the seven preceding speeches. Anyone who knows the noble and learned Lord would not dream of accusing him of inadvertence, still less of discourtesy, so one must assume that he was silent because he could find no way in which the constitutionality of the Bill could be defended and therefore thought that it was better to hold his tongue.
Sometimes one thinks that the reason for enabling legislation is, as I believe the noble Earl, Lord Russell, said, that it may conceal some deep and wicked purpose. In this case we can absolve Her Majesty's

635
Ministers of anything so machiavellian. The reason there is so little detail in the Bill is that it was made up as it went along in another place. It was modified basically when the banks withdrew, as everyone except the Parliamentary Under-Secretary of State for higher education knew they would. The Government can only go on improvising answers to all the points that are raised if there is nothing in primary legislation that they would then have to amend.
I wonder whether noble Lords have looked—I have no doubt that some have—either at the proceedings in another place or at the change that has been made in the Bill. The proceedings are interesting because not a single Member of another place known for having university experience or a university connection—I think, for instance, of the honourable Member for Cambridge or the honourable Member for Leeds, North-West—had a good word to say for the Bill. In consequence, the Government's majority fell on Third Reading from the nominal 100 to a mere 60, the majority largely composed, as is not infrequent, of the payroll vote.
Ministers try to dismiss their ineptitude by saying, "Well, the changes do not mean very much". Let me refer noble Lords not to the text of the Bill, which hardly changed, but to the financial memorandum. Under the heading which is usual in Bills,
"Effects of the Bill on Public Service Manpower",
the original version stated:
"Student loans will be administered by a private sector company established and wholly owned by financial institutions. No net increase in public service manpower will result from the enactment of the Bill".
However, after it had been through another place the financial memorandum had to be revised because the private company had meanwhile disappeared. It now states:
"There will be no net increase in civil service manpower".
I suppose that that means that the employees of that unfortunate institution in Glasgow will not have the guaranteed status of civil servants.
I was a little surprised that the noble Lord, Lord Butterfield, should have thought that the appointment of persons to jobs in what we might for convenience call the student loans company—SLC is difficult; let us call it MacGregor and Jackson Inc.—meant that the Government would be bound to go through with the scheme. If I were asked for any advice by someone seeking employment with that company, I should point out what has happened to the employees of a certain great broking firm which went in for junk bonds. Student loans of this kind are the junk bonds of Academe.
It is therefore understandable that we should have an enabling Bill which we shall find it difficult to amend, although I hope that our ingenuity is not beyond amending it, particularly as we now know that the Secretary of State will introduce an important amendment of his own to compel the universities to participate in a scheme of which they heavily disapprove.
Again, I cannot accept the argument, which I believe was proposed by my noble friend Lady
636
Young, that it is essential that it should all be in delegated legislation—in regulations—because one might want to alter the figures. It would be perfectly possible to say that we shall put the full scheme—the conditions of access, the mode of repayment, the nature of this absurd company—into the Bill but that the figures from year to year will be dealt with by regulation. Given the state of our finances, I do not think that anyone would cavil at that, but that is a far cry from saying that if one wants to know what the scheme is one must look at a little coloured leaflet.
It is true that there is a good deal of information in that leaflet for anyone who can understand it, but a coloured leaflet or a circular from the DES is not quotable in a court of law and is not binding on Her Majesty's Government or on any official. Such documents have no standing. All that has standing is legislation passed in Parliament and delegated legislation made under the terms of the parent Act. It is therefore more than a mere cavil.
Finally, my sorrow is compounded by my affection and respect for my noble friend Lord Caithness who has had the invidious task of producing a brief from the Department of Education and Science which is not—I shall not use the word "disinformation" because it has been questioned in this House—let us say, wholly complete. It is true that a number of European countries have loan schemes. No one denies that. It has not been mentioned that the Federal Republic of Germany, which is the most important of them, is in the process of reversing that position and going in for a grant scheme because of the difficulties that it finds.
The Minister referred to the United States. He did not say that in the United States the position on defaulting is such that the whole federal loan system is now in grave danger and there is talk of forcing the institutions to pay when their graduates do not. In the United States that would be a major change in the relations between the federal government and the institutions of higher learning.
Finally, I come back to the unwillingness to consider, and indeed the contempt expressed toward, the alternative scheme of the Committee of Vice-Chancellors and Principals, supported not only, as the noble Lord, Lord Glenamara, said, by the two other associations representing higher education in England but also by the associations representing the institutions of higher education in Scotland other than the universities which are represented in the CVCP.
The reason given is an extraordinary one—not for rejecting the national insurance scheme because there are difficult technical questions which may well not be satisfactorily answered but for rejecting the graduate tax (to use shorthand). I should have thought that a system of repayment by graduates through the income tax system is not beyond the ingenuity of the Inland Revenue. I regret that the noble Lord, Lord Cockfield, who was with us earlier is not in his place. I am sure that he would have told the House that there is no problem about adding G for graduate, with some numerical addition or explanation, to the ordinary coding of income tax. Nor does it seem to me to matter that this would

637
not reflect actual loans, because graduates, whether or not they have received maintenance from the public purse, will certainly have received benefit from the tuition and the research; and we have been told that there is no intention of treating those in any other way than they have been treated before.
I return to my first point. We have an academic community which is prepared to look at the total financial position in the light of the Government's own declared objectives. We have a Government who talk of consultation but who reject that community's opinion in favour of the opinions of—whom? We do not know. If any noble Lord can give me the name of a single person of consequence in the university world today who thinks that this is a good scheme I shall apologise to that noble Lord, However, I think that he will find that very difficult indeed.
5.23 p.m.
Lord Annan: My Lords, anyone who is so unskilled at debate as I am will find it very hard indeed to reply to the Philippic of the noble Lord, Lord Beloff. Of course his speech was animated by those two principles, which those who admire his speeches as much as I do will recognise as being the principle of personalised animus against the Under-Secretary of State responsible for higher education and generalised animus against the officials of the Treasury. However, before I move on to what I had thought I would say, I shall try to explain to the noble Lord, Lord Beloff, why universities are bound to be tangled with the government of the day.
In the 1960s a committee on student support was set up under Sir Colin Anderson. That committee made the recommendations with which we are all very familiar and which have governed student support ever since. Sir Colin Anderson never consulted Lord Robbins' committee nor, I think, did he receive any lead from the noble Lord, Lord Murray of Newhaven, who at that time, before the Robbins Committee ever reported, was setting up seven new universities. If Sir Colin Anderson and his committee at that time had envisaged the expansion of higher education that was to take place, to say nothing of the 32 polytechnics which later Mr. Tony Crosland set up, they could never have reported in the sense that they did.
We have been existing on a Rolls-Royce system of higher education ever since the 1960s and the terrible truth is that if we are to expand the numbers of those entering higher education, something has to give. That is why inevitably those in higher education have been so deeply disappointed, disgruntled and indeed bewildered by what has happened in the past 10 years when the Government have been trying to find ways of financing the further expansion that we all know is essential if this country is to compete with its competitors. I shall say no more about that because by chance I shall be coming back to it in the House tomorrow afternoon. I shall simply say that when I entered the House I thought that there was at any rate general agreement on one point; namely, that we must have more young people entering higher education. I also thought that there was general
638
agreement on another point: we must in one form or another get the students to pay something toward the cost of their education.
I was much moved by the speech of the noble Lord, Lord Glenamara, and by what the noble Lord, Lord Butterfield, had to tell us. I now realise that the view is in fact held in your Lordships' House that we should simply go on increasing the grant. I do not believe that that is a possibility. There are only two runners: the graduate tax and loans.
That was why I went to the Secretary of State and asked to hear what he had to say about a graduate tax. Yesterday I received a letter from him. Of course the vice-chancellors want a graduate tax. It has the merit of being much less unpopular than are loans. Since most graduates pay tax, they will hardly notice if they pay a bit more on their income tax.
What is the Government's answer to that? They reject that tax because it offends against their political principles. The first principle is that they have been trying to reduce the burden of income tax and in fact have brought down the threshold now to £2,785 for a single person. They have been trying to make income tax simpler and fairer and therefore are hoping to reduce, presumably, the number of officials in the Inland Revenue. That is the first reason that they do not like that tax.
The second reason they do not like it is because it offends against one of the Government's dearest principles. It is a principle very dear to their heart; namely, that people should be made to realise the cost of the services that the state provides. They want each student to know precisely how much he has borrowed. They also want him to be able to make a reasoned estimate, at any rate, of how much he will have to repay. It is the same principle that animated the poll tax. That may well cause some Members of the Government and their supporters to think again.
The Government are revolted by the idea that someone whose parents contributed to the cost of his higher education should pay the same tax as someone whose parents could not afford to do so and indeed a graduate who obtained his degree and put no burden on the Exchequer could be forced to pay a graduate tax.
Lord Beloff: My Lords, perhaps the noble Lord would give way for a moment. I thought I had made clear, but I thought it was not necessary because the noble Lord must know it, that even if no maintenance grant is paid, a great deal of public money goes into educating anyone who goes to university because the fees come nowhere near the expenses of teaching.
Lord Annan: My Lords, let me continue. The Government want each student to know how much he has borrowed. They want him to be able to make a reasoned, although not exact, estimate of how much he has to pay back.
Both sides claim in this debate that the administrative costs of the other scheme are absurdly high. Dr. Barre of the London School of Economics declares that the administrative costs of the loan

639
scheme, which is scheduled to pay for itself by 2006, will be £150 million. The defaulters will cost another £150 million. Why not simply increase the maintenance grant?
The Government say that a graduate tax will place a new and intolerable burden on the Inland Revenue. The administrative cost of the graduate tax would be at least as great as that of the loan scheme. The burden would also fall on employers because they would have to alter their PAYE schemes. How would the Inland Revenue identify and charge the graduates? How would it identify the self-employed? Therefore the Government emphatically reject the scheme of a graduate tax.
The figures quoted on each side as to which is the least burdensome to students are irreconcilable. I confess that I am dazed, having been buffeted by the figures that the noble Lord, Lord Adrian, gave to Peers on these Benches, and battered by the figures thrown at me by the Government. The Oxford students say that at worst they will be losing £31 a week or a yearly loss of £1,630. The Cambridge students say that they will be £380 worse off, or at worst £760 a year worse off. The students refer to the loss not only of the housing benefit, but to the fact they they will have to pay poll tax.
The Government argue that according to the universities' own figures, 40 per cent, of students do not claim housing benefit. Those who do, receive an average of £310 in benefit and will now be able to borrow £420. Of course the Government admit that there are large variations. There will be hardships and anomalies. That is why the Government have allocated £5 million to each of the three higher education sectors.
On the reasons that have been adduced as to whether this enabling Bill is a fair and constitutional measure, I shall give no opinion. All I shall say is this. We have heard so many complaints in the House about the detail of legislation which is presented to the House. We have here a Bill in which there are certainly not many details. The reason that there are no details is very simple. No one really knows how it will work out. Perhaps the Government have learned from the poll tax that these things can happen. I personally believe that it is a very sensible way of dealing with the matter and that, indeed, one does need latitude. I shall come back to the question of latitude before I sit down.
I wish to say one thing more regarding the opponents of the scheme. They have many good points. One of the points that has moved me very much indeed is on the question of women and what they will pay. I must confess that I am not clear on one matter about which the noble Earl may perhaps enlighten me at a later stage. It was raised, I think, by the noble Lord, Lord Glenamara. He doubted whether the loan scheme would have a very beneficial effect upon marriage. However, as I understand it, if a student marries and has no income of any kind herself—and we all know that married women are now to be assessed separately from their husbands—is it not correct that she will have to
640
make no repayment of the loan until she is in a positon to do so? If she reaches the age of 50, having held no job of any kind, she will never pay it back. It seems to me a most admirable way of strengthening the institution of marriage that I have heard of for a long time.
One factor also worries me very much indeed. The students at this time will not only lose their housing benefit, they will be liable for the poll tax. I very much hope that the noble Earl can give us some assurance that that has been taken into account by the Government in introducing this scheme at this very moment.
Finally, perhaps I may also say how much I approve of what the noble Lord, Lord Butterfield, said about Scottish students. Something must surely be done not to penalise people whose studies for degrees will last four years. It is not culpably their choice. One can of course say that they do not have to study for a degree that takes four years. But where would we be if the noble and learned Lord, Lord Hailsham, had not taken Greats at Oxford which certainly takes four years? It is very important that such people do not suffer.
It is for these reasons that I shall find myself unable to follow the Government into the Lobby unless the noble Earl can give an assurance that the Government will consider again the figure of £15 million Access Funds. I believe that they will need at least double that figure because there will be a great many anomalies in the scheme. If it is to operate—I shall not say "fairly" because there can be no scheme that operates fairly compared with conditions today—at all reasonably, the Government will need to be prepared to put more money into rectifying anomalies than they are doing at the moment.
Perhaps I may conclude by referring to our relationship with Europe. All North European countries operate a loan scheme. I was sorry to hear the noble Lord, Lord Mackie of Benshie, ask why we should follow the Germans in this matter when we do not eat sauerkraut. We have not been eating sauerkraut; we have not been eating omelettes; we have not, I fear, been eating spaghetti, and that is why this country is lagging behind our neighbours in Europe.
We must pay attention to what other countries do. The noble Lord, Lord Beloff, is better informed than I am. He said that the Federal Government of West Germany is going to revise its scheme. I have not seen anything so definite as that yet. Certainly the other countries in North-West Europe operate loans. Perhaps I may try to counter the possibility that the Germans will alter their scheme. There is a very good chance that the Swedes, who operate not a loan scheme but a graduate tax, will change their scheme because their economy is in some difficulty over the height of social benefits. On balance one is bound to have to turn to Europe and ask what our competitors and indeed our colleagues in Europe are doing. That is one reason why I shall find it rather difficult to vote for the amendment of the noble Earl.
5.38 p.m.
Baroness David: My Lords, I find it difficult to follow the rather strange speech of my noble friend Lord Annan. I wonder whether he made the speech that he intended to make when he came to the House. Possibly he has been influenced by some of the comments that have been made about the Bill by almost every other speaker.
We are faced with yet another education Bill which has incurred hostility from those both providing higher education—the Committee of Vice-Chancellors, the Committee of Directors of Polytechnics, the colleges and local authorities—and consumers of higher education, except possibly those rich enough not to be eligible for grants who can claim the full amount of the loan, invest it and have a nice little nest egg at the end of three years.
I am amazed that the scheme has not been vetoed by the Treasury. Perhaps that can be explained by the Prime Minister's enthusiasm for it. It has triumphed even though we have had two Secretaries of State for Education considering and wanting a loan scheme but finally having to decide against it. I am sorry that today we shall not hear from the noble Lords, Lord Carlisle or Lord Joseph. Perhaps that is significant.
The Bill has been opposed by Members on all sides of your Lordships' House. It is looked upon with as much ridicule as was the Education (Corporal Punishment) Bill 1985 which your Lordships' managed to amend to such an extent that it had to be withdrawn. If the noble Baroness, Lady Cox, were present she would remember that Bill because she was in the unfortunate position of having to push it through the House. I hope that noble Lords present can provide as useful a service to education by showing our total disapproval of this unconstitutional Bill and carrying the amendment tabled by the noble Earl, Lord Russell.
We have heard speeches on the constitutional aspects but no one has yet mentioned the odd fact that the chairman of the Student Loans Company is to be Mr. John Vereker who is also a deputy secretary at the Department of Education and Science. Surely that is an unusual job for a civil servant. Is there a precedent for that?
I wish to concentrate on access. The Government have repeatedly said that they wish to increase the number of people entering higher education. As was said by the noble Lord, Lord Kilmarnock, there is doubt about whether it remains their intention to double the figures in 25 years. If the Minister tells us that that is the case, perhaps in winding up he can explain whether the doubling is to be entirely in degree courses, or in those courses together with certain others not now eligible for mandatory awards. Can that doubling figure be achieved? Is the loan provision likely to increase entrants from social classes three, four and five? We have heard constantly that the take-up from those classes must be improved.
In November last year the Institute of Manpower Studies produced a report entitled How Many Graduates in the 21st Century? The Choice is Yours. It urged the need for a massive increase to meet the
642
needs of the economy but indicated that plans for student loans would be a hindrance. It pointed out that more than 60 per cent, of students come from professional classes one and two, although they make up only 31.6 per cent, of 18 year-olds. The other groups make up 58 per cent, of the population but take up only 19.9 per cent, of undergraduate places. The report rightly draws attention to the staying-on rate among 16 year-olds in this country—that is about 50 per cent.—compared with those in other European countries. In Holland and Denmark the figure is about 90 per cent.
Some financial incentive there, together with a broadening of the sixth-form curriculum, would do much more to increase participation than would the loans scheme. The noble Baroness, Lady Young, spoke of the 16 year-olds and said that, if they were paying tax, they would bear some of the burden of others in their age group going on to higher education. However, if we had the graduate tax, as has been suggested, that matter would be taken care of because the well-paid graduate would be paying back a good deal more.
There have been many surveys. The evidence from the students shows that the loans scheme is more likely to be a deterrent than an encouragement. In a Written Answer given last December Mr. Jackson said:
"The Government are confident that the increase in resources will make higher education more attractive to students from all backgrounds".—[Official Report, Commons, 15/12/89; col. 833.]
But he has produced no evidence. I agree that we cannot have conclusive evidence either way. And it is true that the younger generation does not have the aversion, indeed fear, of debt that my generation certainly had. However, I repeat that there are better and surer ways in which to encourage greater participation than this loans scheme.
Just as for social classes three, four and five, similar considerations apply to those from the ethnic minorities where take-up is low. The Commission for Racial Equality has produced a convincing paper supporting its belief that loans will further reduce ethnic minority participation in higher education. The commission believes that, because of discrimination in graduate recruitment, their older average age and greater family commitments, those students will be deterred because of worries about loan repayments.
The commission is also apprehensive about the situation of students on access courses who are not entitled to mandatory grants. Their financial needs appear to have been totally ignored in the Government's proposals. Then there are women, particularly those entering higher education later in life because of child rearing. As grants become a smaller proportion and loans a larger proportion of the student's income, the prospect of future debt could well deter potential students. Mr. MacGregor constantly speaks of £400 as the loan, but soon it will rise to half the grant; that is about £1,500 and a very different figure.
Once the scheme is fully operational it will mean monthly payments over a five-year period of £70.20 That is not a happy prospect particularly to those

643
entering lower paid employment such as teaching, nursing and the caring professions. Those who have to defer payments as the debt continues to accrue with interest equal to the RPI will be paying back significantly larger sums of money than those who start on higher wages. However, it has been suggested that there could be advertisements such as, "Become a primary teacher; you will never have to pay off your loan"!
Among mature students there is a large proportion of women who are likely to be scared of running up debt because they probably have family commitments already. According to the Office of Population Censuses and Surveys in a survey commissioned last year by the DES, a large percentage have been running up debts dating back for a period of 12 months. Surely that is no argument for saying that they will not mind running into more debt, as the DES appears to say. Help by way of tax incentives—for example, being exempt from tax on income used for paying fees for courses at the OU, Birkbeck or elsewhere—would do much more to encourage mature students.
I now turn to part-time students. Why are they to be excluded from the scheme? They are among the most highly motivated and the keenest to improve their qualifications. With their new qualifications they will be able to make a more valuable contribution to the economy. I hope that we can move amendments to bring part-time students within the compass of the Bill. In the White Paper they were led to believe that they would be given a helping hand but there is no sign of that. Their numbers are most significant. According to Social Trends 1989, in 1986–87 they represented 37 per cent. of all students in higher education. While there has been a slow growth in the number of full-time students, the number of part-time students more than doubled between 1971 and 1985. They should not be ignored.
Why has the age of 50 been chosen as a cut-off point? Why are 50 year-olds discriminated against when they are highly motivated? Perhaps their children have grown up and are independent and they now wish to change job or train for higher paid jobs. Will proof of age—a birth certificate for instance—be demanded? Let us think of the success of the University of the Third Age. I hope that this House, the majority of whose Members are over the age of 50 and lead active lives, will be sympathetic to a change in that respect.
Finally, I turn to access for disabled students. RADAR, the RNIB and the RNID are concerned about the effects of the loans scheme. The disabled student allowance of £765, which is means tested and open to different interpretations by different LEAs, is quite inadequate for many students. The cost of special equipment can be high. An electronic braille machine costs about £5,000 and there may be a need for sign interpreters. One deaf student paid £1,302 for her own personal interpreter. There may also be a need for note takers for the deaf.
Charities such as the Snowden Award Scheme estimate that about 300 students a year need more
644
than the allowance can provide. In 1989 the RNID gave grants to more than 20 deaf students who found the allowance inadequate. They needed anything from an additional £40 to £12,000 in order to complete their course. The need for modern language students to study abroad can impose considerable extra costs.
As regards repayments, the same threshold of 85 per cent. of the national average income is proposed for disabled graduates. That takes no account of extra disability-related costs of living. A disabled graduate may have an income of 86 per cent. of the national average but meeting disability costs may well reduce the disposable income to 75 per cent. There can be no doubt that the Bill as it stands will act as a disincentive to the disabled who are already under-represented in higher and further education. There are only 3,000 disabled students in higher education on full-time courses and 3,700 at the OU.
Research undertaken by the RNID shows that in three of the nine countries which have loan schemes, disabled students are exempted from loans and receive the full grant. In all nine countries communication support is provided for the deaf.
It has been suggested by Ministers that Access Funds will be of help. However, if those funds are divided up, each institution receives only £100,000. That is not a great deal when it is also intended to cover post-graduate students left out of the loan scheme—and we shall have to look at that in Committee—and further education students as well as those coming within the scope of the scheme. A fourth Access Fund for the disabled has been proposed.
In Committee in another place the Minister acknowledged that some of those students had costs in excess of the allowance. He said that he was reviewing the matter and that a statement would be made. I ask the Minister when we are to have that statement and whether he can give us some indication during his reply of the Government's intentions.
Today I received from the noble Earl who is to reply Notes on Clauses and the paper on rules and procedures which sets out:
"the administrative routines of the scheme".
They are long and complicated and include the use of tracing and debt collection agencies to provide addresses. Those are not part of the Bill and have no standing as the noble Lord, Lord Beloff, said. Anything in that paper could be changed by the Secretary of State. The Bill is solely an enabling Bill. It will be difficult to amend substantially but I hope that I have suggested some amendments which we could make that would help to improve access to and participation in higher education.
With this loan scheme there are great inadequacies and injustices. The Bill is universally disliked and instead of being a saving to the taxpayer, there will be a very heavy cost well into the next century. I shall vote for the amendment.
5.52 p.m.
Lord Butterworth: My Lords, listening to the debate this afternoon, I am beginning to come to the

645
conclusion that there is more agreement between different sides of the House than some parts of some contributions may seem to indicate. I suspect that many of us are agreed that our economy needs more students in higher education. The health of the country and the economy makes it absolutely essential that the numbers should be increased.
If we are to do that, something must give. Already our grants, compared to grants in other developed countries, are generous. It may be that we fell into a system where higher grants were needed when after the war, in my view rightly, we took the view that for a student to go away from home to university or polytechnic was a valuable part of education. However, it meant that the bill was increased. Maintenance grants had to be higher and more residence was required all over the country. We should not forget those matters. However, we now have to adjust our system in order that the difficulties in the economy can be faced and overcome.
I should like to be brief this evening because there are so many speakers. I shall start with the document circulated by the Committee of Vice-Chancellors and Principals, which lays down criteria by which they propose any system of student support should be tested. However, I submit that the way in which those criteria have been interpreted makes it difficult to see how any loan system could ever be acceptable to the committee. Indeed, all the institutions in higher education have now come out in favour of grants rather than loans and have produced this system whereby graduates who accept a grant will be saddled with a higher tax contribution. Of course, the repayment cannot be related to the loan because there is not one. The repayment will be related to ability to pay over a unspecified period of time. We may have different views about those proposals. However, it seems to me that such a scheme could well persuade good graduates to join the brain drain rather than accept a disciminatory tax rate later in life.
Not only the Government but many people see an advantage in the loan scheme, in that students should make some contribution towards their education. Many people see an advantage in the financial commitment being an indication of serious intent. However, in my view that argument should not be pushed too far. I went a long way with what the noble Lord, Lord Glenamara, said. In my experience, the overwhelming number of students are fully committed, serious and extremely hard working. In fact, too many of them are too serious, too hard working and might obtain more benefit from the universities if they took advantage of what are sometimes called extra-curricular activities. I am sorry that the noble Lord, Lord Peston, is not in his place: otherwise I should be tempted to say that we do not want people who are too serious and too splendid and too much like the noble Lord, Lord Peston. We need more who are fun-loving, full of adventure and spirit.
Perhaps I may test this document from the vice-chancellors' committee by taking what I believe is one of their most important criteria; namely, that the scheme must not deter applicants from less well-off
646
families. The supporters of the Motion claim that we do not have enough information on which to form a judgment. However, let us look for a moment at the information which we have. First, the White Paper points out that hire purchase and credit cards have introduced society to loans in a way which was unknown to us 20 or 30 years ago. On the other hand, the Market Research Society has revealed that, given a buoyant labour market, students from manual backgrounds will generally opt for employment rather than for further study.
We have all heard this afternoon the full details of the scheme proposed by the DES, which must take something out of the sting of a loan. There will be no repayment if the graduate's income falls to 85 per cent, of the average income, which we learn today is £11,500. Any loan outstanding will be cancelled after 25 years or when the borrower becomes 50. The details of the repayment loan were given to us by the noble Baroness, Lady David, so I shall not repeat them.
We may differ in our view, but I certainly urge that tonight we have enough information to form a judgment on these matters. That is my first point. My second is that rather than delay a decision, in my view all the arguments are in favour of launching the scheme as quickly as possible, and for this reason. Under the provisions of the Act—though I personally would prefer an affirmative resolution—the scheme can be amended from year to year in the light of experience. If it is progressively adjusted and improved the scheme stands a good chance of being efficient and equitable by the time the loan element begins to ramp up. In my view it is for the benefit of the students themselves that the scheme should be put in hand to operate early and that it should be amended in the light of experience to ensure that when fully operational the loans are both efficient and equitable.
6.1 p.m.
Lord Grimond: My Lords, I shall of course vote for the amendment of my noble friend, but I confess that I find this Bill blissfully intelligible. It is the only Bill over the past four or five years of which I am certain I understood the whole purpose. That does not mean that it is constitutionally absurd and there is no reason why it should not have contained a great deal more information about payment and repayment of these loans. However, I hope the result of the criticism in this House will not mean that we return to those endless farragoes from which we have suffered in previous Bills.
For my part, in all honesty, I must say that I was supplied with a great deal of information by the Ministers in charge of this Bill and have no complaint whatever about their courtesy or the trouble that they took to explain their decisions. There is a feeling that they may have been discourteous, but they were certainly not discourteous to me.
I am rather worried that the legislation will create a great deal more work for the universities, technical colleges and polytechnics. I should be interested to hear from the Minister whether he thinks that that

647
is so, and if it is so, whether those institutions will receive any extra payment or staff to deal with the extra work.
I entirely agree with the noble Lord, Lord Glenamara, that the students are squeezed as far as they can be, but so, in a sense, are the staff of the universities. They are overladen with administration to a point at which it seriously interferes with academic work. It may be possible to introduce some economies into the system; for instance, the third term in some universities, particularly in Scotland, is not sufficiently devoted to teaching. It may be that there are other elements—indeed the whole university year—which might be re-examined. However, I feel certain that it will be extremely difficult to deprive the individual student of any more contribution whether by way of grant or social security. A lot of them are already in debt and are by no means affluent.
The main point I wish to make with regard to this Bill is that the argument for loans depends upon the belief that students at higher education gain a great deal from it—which they do—and many of them are enabled to go into well paid jobs and should therefore make some return to the taxpayer for the extra money which they are able to earn. That is certainly true, but it is also true—indeed the White Paper acknowledges it—that these students make a certain return to the public at large. There is a social return as well as a personal return.
I believe that the social return is very much greater than the White Paper's estimate. It is surely of enormous advantage to any country to have a population which is versed in judgment, in the history of the country, in its customs, languages and so forth; quite apart from any personal advantage, the country must gain very much from that. At this time when so many decisions depend upon a rather wider perspective and knowledge about particular matters it is of particular importance that as large a proportion of the population as possible undertakes some higher education. That may be achieved in various ways, but my point is that there is a public good which is quite separate from the public good which the country may obtain from having better doctors or engineers. There is a public good which it obtains from having better trained people in general; better people.
The purpose of higher education is not only to produce an excellent chemist or doctor; it is to produce an excellent person. That is a public good of immense value to the country, particularly at this time when so many decisions involve a wider knowledge of affairs than is given to people through specialist education and particularly also when we look forward to a time when there is a great deal more leisure in the country. It is important to train people so that they may take advantage of the opportunities which leisure can offer them.
That being so, I do not think that all grants should be reduced or cut off on leaving school. My view is that every student should be entitled to at least one full year on full grant at whatever institution of higher education he chooses to attend. In America
648
that is met largely by the colleges—colleges within the universities and without them. Here it is probably better met by the first year or two-year courses in the faculty of arts. I personally am an admirer of the sort of attempt made at Keele to introduce every student to a wider course before he or she specialises. I do not think it is right that people should specialise as soon as they leave school. There is a view that students will greatly benefit from a year between school and university. That too might be looked at, but at the moment I am concentrating on the point that there is this general higher education, this humanist higher education, which we should encourage and not penalise.
I therefore ask the Government to look at the proposal, if they are determined to go forward with this Bill—which I am sure they are, whether we like it or not—that loans come in when the student specialises; when he is learning an occupation which will benefit him a great deal and has already taken a year or so of general education at a higher level.
I also ask the Government what is to happen to those subjects which do not offer any immediate income of any real importance? What is to happen to theology? What is to happen to philosophy and to the more obscure languages? One of the Ministers to whom I spoke said that he did not think that people who read these subjects would be penalised because a first-rate brain who read Latin, Greek, theology or philosophy, would find it perfectly easy to obtain a job and would not therefore suffer in after life. There is a certain amount of truth in that.
We used to be told that it was more important to be good at games than to be good at work if one wanted a good job. Nevertheless, the whole emphasis of this Bill is that by undertaking specialist training one earns a lot of money and that is what is so desirable. However, I maintain that one cannot leave out mediaeval history, Latin, Greek and similar subjects which do not appear to yield, at first sight, a very big income. What proposals do the Government have? I suspect that we already have far too few students in philosophy and such subjects and that this Bill is in danger of reducing them further.
I come back to the question of a fourth year which is, as has been said, of very great importance in Scotland. Am I right in thinking that the loan can be claimed for as many years as one remains in higher education? Of course, if the Government think that to be able to claim a loan, as against a grant, is a great advantage, then I can see that the Scots are actually going to benefit; but that is not their view. Their view is that they will be forced to undertake their longer courses at some disadvantage. The Government should pay attention to that.
The Government will also be aware that the Church of Scotland has raised the question of students for the ministry. Apparently the Church is under the impression that such students will not be entitled to loans. Again, I should like the Government to consider that aspect.
However, my main point is, first, that the Government cannot go on squeezing students. It may be possible to squeeze the institutions in some other way, though I do not know how. Secondly, we

649
must not lose sight of the point that higher education is not simply specialised technical education, important though that is—and it is extremely important. It is equally essential to introduce as many students as possible to a wider education and to a real knowledge of history, of the habits of their country and Europe, and of European civilisation. That will become more important as we are drawn further and further into Europe.
6.11 p.m.
Lord Boyd-Carpenter: My Lords, I do not propose to take up the time of the House in discussing the Motion of the noble Earl, Lord Russell, partly because it is no more than a gesture which can have no practical effect on the passage of the Bill and partly because if the criticism in the Motion of the drafting of the Bill is just—and there is a perfectly good argument for saying that—then the time to say that there is insufficient information before your Lordships for proper consideration of the Bill is not now but on Third Reading when there has been full opportunity for Ministers and the rest of your Lordships to express their views. Moreover, if we spend time on this Motion it amounts to a distraction from what is infinitely more important; that is, the Bill itself and what it seeks to do.
It is no pleasure for me to have to tell your Lordships that I find myself singularly unhappy about this measure. Your Lordships will be aware that I am not a regular critic of Her Majesty's Government. Indeed, sometimes noble Lords on the Benches opposite have ventured, however incorrectly, to suggest the converse. However, I feel that with this measure the Government—of which I am, and remain, a firm supporter and believer that they have done and will continue to do a wonderful job for the country—have made a mistake and that it is no part of a loyal supporter of the Government to stay silent when the administration in which he believes appears to be making a bad mistake.
The first mistake is this. There is already far too much indebtedness in this country. Credit is far too easy. I am not referring specifically to mortgage payments because in that respect the person borrowing is obtaining a share, year by year, in a physical asset. However, there is far too much borrowing simply for day-to-day expenditure. Therefore, socially, it seems quite wrong that we should compel every student, on becoming a graduate, to emerge as a debtor. I believe that the effect on the social life of this country and on the economy, perhaps particularly in relation to inflation, is very serious.
I remind your Lordships of the good lines of Shakespeare:
"Neither a borrower nor a lender be; For loan oft loses both itself and friend, And borrowing dulls the edge of husbandry".
This is a Bill for borrowing and to my mind that itself raises an objection to it. However, your Lordships will not be surprised if I say that I am not an inveterate opponent of the control of public expenditure. Indeed, I have spent a great deal of my life incurring vast unpopularity from time to time
650
in seeking to limit public expenditure. However, for a number of years this Bill will not do that. I wonder whether your Lordships have looked at the Explanatory and Financial Memorandum. At the top of the second page are these significant words:
"In due course, loan repayments, combined with savings arising from excluding the majority of students from social security benefits and from ceasing to up-rate the maintenance grant, will exceed loan outgoings and administration costs, resulting in net savings to the Exchequer".
I repeat the words "in due course". It is my understanding—I hope that my noble friend the Minister will feel able to deal with this because the source of my information comes from close to him—that "in due course" means into the next century. Therefore, your Lordships are faced with the fact that for a number of years—certainly for the next two parliaments after this—if we carry this measure we shall not be giving any relief to public expenditure; on the contrary, we shall be increasing it.
It is perfectly fair to say that when we get into the next century there will be some relief for public expenditure; but is it really worth while and does it make sense to inflict upon the universities, colleges and students this system of loans for the sake of a relief to public expenditure 10 to 15 years hence? Who can judge what will be the economic situation of this country at that time? If we continue the wise policies of Her Majesty's Government the creation of wealth will continue on such a scale that what at present looks like a very heavy burden of public expenditure for the maintenance of, I hope, an increasing number of students will be a burden which the economy is perfectly able to bear. It would be a very rash person looking 10 to 15 years ahead who would dispute that that is a possibility. My own view is that it is a probability.
Therefore, It would appear that the Government are inflicting upon themselves, their supporters and the universities the heavy burden of an unattractive scheme for the sake of what is, at best, a remote relief to public expenditure. I hope that your Lordships will be prepared to look at the matter in that way.
The loans themselves, of course—I believe this has already been said, but it needs driving home—are not, as once suggested, interest free. On the contrary, interest is to be piled up on them at the rate of inflation. Again, it is hoped that inflation will fall, but it means that at the present rate an interest liability of between 7 per cent, and 8 per cent, will be incurred. What has not wholly emerged is that a graduate who is earning below 85 per cent. of the average wage will not for many years be relieved of the burden. On the contrary, the loan will be left waiting for the 85 per cent, level to be exceeded and, of course, it will increase year by year in accordance with the rate of inflation for the years concerned. Therefore, it is a mistake to suggest that, because of the 85 per cent, rule, this scheme will not hurt the less well-off student. It is more than likely that someone, particularly with a degree, who is unable to earn more than the 85 per cent. average earnings to begin with, will reach average earnings and above in due course. He will then be faced with a very substantial liability indeed.

651
How is the system of repayment going to work? My noble friend Lord Butterworth referred to the brain drain and able young people going abroad. If every graduate who stays at home is saddled with a debt and repayment is insisted on, he is being given an incentive to go abroad where he cannot be pressed to repay. It would be silly to speculate on how heavy that burden would be in any particular case, or how significant, but it must be a factor. When a graduate is deciding where he is going to work it must be a factor in his mind to know that if he decides to go to the United States or to Saudi Arabia, where incidentally, he can earn at a much lower rate of taxation, he will also be slipping away from the liability to repay the debt. That must be a factor of a very damaging kind because the students affected are precisely the young people who have been fully educated and trained and who have taken a degree: we need them to build up the country's economy at this time.
Your Lordships will consider the American experience and the difficulty of extracting repayment not only in such circumstances. One has to consider also the situation of a girl. Very nearly half the number of students these days are girls. A girl marries, has a baby, and does not earn. For years she will not be making a repayment and therefore for years will not be helping to relieve public expenditure even if, at the end of the day when her children are grown up and she begins work again, she is made to pay a very substantial sum indeed with the accumulated interest.
There is also the question of people who go sick and there are other categories of people whom it will be singularly difficult to pursue. It is significant that, when they got down to studying the scheme, the banks hastily got out of it. That is very significant. Sometimes the banks strike one as rather credulous institutions. They were prepared to make massive loans to rickety South American republics for year after year, and that indicates no undue caution on their part. Even these institutions which are prepared to lend money to the Argentine have very sensibly decided that they are not going to take on the duty of obtaining repayment of the loans which we are discussing.
We return to the question, what is all this legislation in aid of? As I have already said, according to the Government's calculations there will be no relief to public funds until well into the next century. If those of us who doubt whether a substantial proportion of these loans will be repaid and who doubt the efficacy of enforcement are right, it will be even longer before there is any relief. This should suggest to the Government the need for a certain amount of caution. I personally regret the removal from students of the social security, unemployment and housing benefits and the rest. These are the kinds of benefits with which I was concerned as Minister of Pensions and National Insurance and I have the greatest enthusiasm for them because they are targeted benefits. They are guided by experienced staff to the people who really need them. Now that students have received them in appropriate cases for many years, it is a pity that they should be taken away.
652
Therefore, I express great unhappiness about this Bill. I hate to have to say it to the noble Earl the Paymaster General because, like all of your Lordships, I have enormously admired his conduct in your Lordships' House of other measures which have been nearly as difficult as this matter. I hate the idea of adding even an iota to his difficulties with this legislation. When one thinks of his ancestry, there is a possibility of his going berserk and getting up and saying, "The Government are going to drop this Bill. We have listened to your Lordships and to people outside and we realise that it is a nonsense". I do not know what his ministerial colleagues would say, but the rest of us would say that he was quite magnificent.
6.26 p.m.
Lord Dainton: My Lords, it is extremely difficult to follow such eloquence as has come from the noble Lord, Lord Boyd-Carpenter, and with whose views I agree in many respects. I want to make it absolutely clear from the beginning that I am not opposed to a mixture of loans and grants as a means of financing students in higher education. To adopt that method is merely to systematize a point of equity; namely, that benefits come to individuals in higher education. Their life chances are enhanced by it and there are also benefits of a very obvious kind which come to the state. I see no objection in the principle.
It is almost 20 years ago since, with Professor Roy Niblett, I proposed a scheme which was published and which advocated this method as a means of increasing the availability and access to higher education and in making government money go a little further with the benefit of increased access. That paper is part of the flotsam and jetsam of the educational literature. One aspect which made me very keen on such a scheme was my experience which I believe has been shared by many other people. The major obstacle to undergraduates succeeding if they were admitted, and to students actually deciding to go to university, was the great problem of the parental contribution which some parents were reluctant to give and which, in other cases, students, sensitive to their parents' financial position, were very reluctant to ask for.
If we could have removed that obstacle, then I, Professor Niblett and others, felt that we would have done a service to many of our young people of ability who came from those lower income groups and whom we very much wished to see recruited to higher education. I must also add on a personal note that had I not been able to borrow money from my own local authority about 57 years ago, then university education would have been entirely beyond my own financial reach.
Noble Lords may well ask why I am in favour of the amendment tabled by the noble Earl, Lord Russell. The answer is that I simply had insufficient information to be able to form an opinion on the value of the Bill as it stands. I could not deduce whether it was going to be an effective mechanism or whether it would achieve that degree of social justice to which the Government attach as much attention as I.I simply will not buy a pig in a poke.

653
All I could discover from the Bill, as the Minister confirmed, was that if it were to become law as an Act then the Secretary of State would be enabled to make loans to students on full-time courses, if they had the residence qualification, and to recover those sums, but with an unspecified amount of interest—though that has become clear from what the noble Earl has said. It is not interest but merely maintaining the real value of the loan according to the changes in the price index.
There were certain consequentials like certification of eligibility for these top-up loans which were to be provided by the institutions to which the students were seeking entrance. As one read it further it became quite clear that the Secretary of State would be able to do these things exactly as he in his wisdom saw fit. In order to flesh out the bare bones of the Bill, I had to go to the White Paper of November 1988 to which many noble Lords have referred. One could not deduce from that how the Government intended to implement each of the proposals so carefully laid out in Chapter 3.
Indeed one did not know that it was an intention of the Government to go that way for it was specifically labelled merely as a consultative paper. It was not until the eleventh hour, or to be more precise early this afternoon, that I learnt of the rules and procedures that the Secretary of State proposes to adopt. They were put into my hands in the Printed Paper Office. To judge from the style, which I can only describe as staccato, and by the print, which I can only describe as government word processor, it suggested a last minute attempt by the Department of Education and Science to give us some real information on how the system would work, but of course far too late for debate in any effective and meaningful sense.
It was also apparent even at a first glance that when account is taken of the withdrawal of the housing and other benefits which have been mentioned, and of the necessity for students to pay around one-fifth of the community charge, the total income available to students would clearly be inadequate to meet their needs. This is hardly likely to attract more students from lower income groups in our society. That point must be elaborated on and dealt with more generously by the Government. There was certainly no time to scrutinise the proposed arrangements with the care that they deserve and that this House, with its wealth of educational administrative experience, could give.
What will concern noble Lords who share my taste for the basic idea of this mixed financing is the fact that, first, the banks have refused to play any role in it; and, secondly, that the local education authorities appear not to be involved though they are the bodies which administer the mandatory and discretionary awards and have great experience also of operating loan systems. In my own experience—and I hasten to tell the House that after 57 years I am no longer in debt to my local authority—local education authorities are very effective in doing their job of administering a loan scheme for students.
But most serious of all, and a point to which little reference has been made this afternoon, is the fact
654
that last week representatives of the Committee of Vice-Chancellors and Principals and of the Committee of Directors of Polytechnics and of the colleges in England and in Scotland to whom the scheme will apply met the Secretary of State. The meeting was abruptly terminated by him. The schemes which they had prepared in all good faith as their contribution to the discussion to help forward the Bill and their intentions and their proposals as to how the Bill might become a reality were simply rejected by government.
Events such as these in which government proposals are neither welcomed by the banks nor carry sufficient endorsement from the executive heads of our institutions of higher education to satisfy them that the scheme ultimately to be adopted by the Secretary of State is workable, let alone the best that can be devised, are bound to raise suspicion even in the minds of those most well disposed to the Government's intentions that their ideas for implementation are seriously flawed in ways as yet undisclosed and certainly not debated Among the suspected flaws in the Government's scheme are that it will be expensive and bureaucratic, that there will be delays in regard to students receiving payments and, as the noble Lord, Lord Boyd-Carpenter, so eloquently pointed out, that there will be very great delays in the return to government of the moneys that have been borrowed.
This serious situation can only be resolved in one of two ways. At the very least the Government should resume the discussions with the heads of the institutions. If, as a result, the Government's proposals or some modification of them were to prove acceptable to the heads of the institutions of higher education, I believe that most noble Lords would acquiesce in the Bill's passage. I therefore urge the Government to reconvene such discussions as soon as possible. There is everything to be gained and nothing to be lost by so doing. If agreement proves to be elusive, then this House should at least be provided with sufficient information, and in sufficient time, to be able to discuss the manner in which the Secretary of State proposes to implement the Bill, a state of affairs which I hope devoutly will be unnecessary.
6.36 p.m.
Lord Nugent of Guildford: My Lords, the need for a new system of student finance arises out of the success of our education policy in the rapid expansion of numbers of students. It has already been mentioned that there are 200,000 more students in further education than there were 10 years ago and it is forecast that the numbers will double in the next 25 years.
I say that again, although it has been said before, because in this debate the Government have been on the receiving end of such a sharp attack that it is fair to remind noble Lords that the need for the Bill arises out of the success of the Government's education policy in the growing body of young men and women taking part in further education. The heavy cost of student maintenance, amounting to, as my noble friend the Minister told us, £633 million a year, is set to increase steeply in years to come.

655
The Government have an absolute obligation to present a plan for relieving the general taxpayer of at least some of this heavy cost. The Opposition solution of simply increasing the grant is not a viable solution for any government. I am sure that memories of 1976–77 are still fresh enough for noble Lords to know that money which does not exist cannot be spent for long.
The alternatives mentioned in the debate—the national insurance scheme and the graduate tax—have been well explored. The noble Lord, Lord Annan, dealt faithfully with the graduate tax. I have a copy of the seven point letter sent to him. I shall not weary the House by reading them out but they are fairly cogent. In the letter the Secretary of State explains why the graduate tax would not work. I also have a copy of the Secretary of State's letter to Sir Edward Parkes, the chairman of the Committee of Vice-Chancellors and Principals, who had advocated the national insurance scheme. In that letter there are no less than nine cogent reasons why it will not work.
Therefore we are left with asking, "Well, all right, how are you going to do it?" After a good deal of examination the Government have brought forward the student loans scheme. It is relevant to remind your Lordships that the White Paper, which is a pretty full document, was based upon a very detailed survey carried out by two quite distinguished Members of Parliament and junior Ministers on the various countries which were practising loans schemes. This was done to ascertain how they worked and the survey concentrated especially on Europe.
I follow the point made by the noble Lord, Lord Annan, that the loans scheme is generally used in Europe, as well as in the United States, Canada and Japan. I should point out that those countries all have a much higher GDP than this country. It is unlikely that we in Britain can continue to finance forever a 100 per cent, grant scheme with a fast-increasing student population. On the other hand, in my judgment—despite what my noble friend Lord Boyd-Carpenter said with his great knowledge of such matters—the present system of dependence on social security grants is based upon a misconception.
The grants are not designed for educational purposes; they are designed for social purposes to help low income groups, and the general taxpayer is willing to meet that cost. However, to encourage students into this form of dependence upon the state—that is, the taxpayer—is in my view to undermine the sense of independence and responsibility which certainly I want them to learn. I want to encourage students to see their higher education as an investment in themselves and to see loans as a help from the taxpayer which is to be repayed when they have reached the stage of having a secure job.
In one way or another university graduates will become leaders of the community in the future. During their years of study, besides learning academic subjects, they begin to learn a sense of independence and responsibility on which their
656
future success will depend. I do not see the present system of social security grants as being a suitable one. That brings me to a most important point which was dealt with very cogently by the noble Lord, Lord Glenamara. I refer to the anxiety about children from working class families. I certainly share the anxiety that they might be disadvantaged by loan schemes. That was a point which was especially looked at by the two Ministers who carried out the survey in other countries to see how the schemes were working out.
I shall concentrate upon one point which they made. In Germany there are three times as many students from working class families as there are in Britain. Further, with the introduction of the loan scheme in that country, the numbers of such students actually increased from 16 per cent, to 18 per cent. of the total. That experience from other countries is reassuring and it should certainly be watched. It seems natural that a boy or a girl from a low-income family would feel an extra incentive to win a university place in order to raise his or her position and income in the community.
It is a fact that here in Britain we start from a relatively low rate of working class participation—and more is the pity. It probably stems from the low rate of these children staying on at school after the age of 16. It is, however, encouraging that there has been a welcome increase from 34 per cent, to 42 per cent, in this context over the past 10 years. The figure needs to be worked upon. There is a good prospect that the percentage of working class children in universities will continue to increase. Again, that is clearly a point which should be watched.
As regards the danger that students will generally be deterred by the loans scheme from university or college entry, there seems to be substantial evidence to the contrary. I refer to the size of the 1988–89 entry. Those entrants will join universities and colleges next autumn. University entry has increased by 7 per cent, and that in respect of polytechnics has increased by 10 per cent. They would be the first batch of students to be picking up loans. It does not seem that they had been deterred and I do not believe that they will be.
I conclude by saying that university funding is already under pressure in the national Budget. The annual cost of student maintenance grants is already high; indeed, it is three times the estimate in the original Robbins Report. Further, with our policy being to double the student numbers in the future, some relief from the rising cost of growth is needed to ward off the danger of some future government actually being obliged to limit student numbers in order to keep general education expenditure within the Budget.
If the richer economies of overseas nations cannot afford to run 100 per cent, grants for maintenance, it is a reliable indication that Britain cannot do so. The loan top-up scheme works well in other countries. Yes, there are various aspects which are objectionable and of which fun could be made, but who knows of a better scheme? Certainly, no one has put any such scheme forward today—and no one is likely to do so. I support the Bill.
6.45 p.m.
Lord Cocks of Hartcliffe: My Lords, I have found this to be quite a fasicinating debate because throughout it and throughout all the lobbying which has taken place we have seen the academic establishment closing ranks. Indeed, even today we have had a veritable Milky Way galaxy of academic expertise put at our disposal. In such a firmament an extremely highly powered telescope would be needed to find me. I say that because I went to Bristol University on an ex-serviceman's grant and received a second-class degree. It will not surprise your Lordships to know that it was a lower second-class degree, and while some people may regard that as an attendance certificate, I like to think that it combines the optimum conditions of both brains and brawn.
I was very moved by the speech made by my noble friend Lord Glenamara, especially as regards his remarks about his experiences in the North-East of England. He mentioned the question of working-class children having access to higher education. When I read the report of the Second Reading debate which took place in another place, I noticed that all my colleagues who spoke also mentioned that point. While it is extremely important, I have a certain feeling of déjà vu about this because of an experience which I had soon after I became a Member of the other place. At that time there was a dispute over the county councils' decision to reinstate the taking up of free places in the direct grant grammar schools. The reasons put forward were that those schools had a wider social mix than the comprehensive schools, that the free places gave children of poor parents a chance to go to the direct grant schools and that they benefited working-class children.
I received many letters about the matter. I must say that most of them did not come from my constituency; they came from other parts of Bristol. Therefore, I obtained the figures for the five years from 1968 to 1972. During that time 433 non-Catholic free places were awarded. When these were broken down I found that 119 of them went to children in independent or non-maintained schools. I suppose by definition those parents were able to pay. The remaining 314 places went to children from the Bristol primary schools. There were 91 non-Catholic primary schools, and 161 of the 314 free places—that is, over half—were taken by children from only seven of the 91 primary schools. Those noble Lords who know Bristol well will recognise some of those schools—Stoke Bishop, Henleaze, Westbury on Trim and Westbury Park—as being situated in the most prosperous areas of the city of Bristol.
The other 84 primary schools over the same five years provided only 153 of the children taking up the free places. In my constituency there were 21 schools which had 29 free places over that whole five-year period, an average of under six a year. Some parents came to see me, and after I showed them these figures on a map they had very little to say because the way in which working-class children did not benefit from this system was so manifestly plain.
658
I believe that much the same thing is going on today in the university system, particularly with regard to Oxford and Cambridge. Some figures were published recently in the Independent on 29th December regarding Cambridge. Dr. Rae Mitchell, who is an admissions tutor at Magdalen College and chairman of the committee of college admission tutors, said that he believed that for the first time the university had taken in more students from the state sector than from the independent sector. I believe that this situation has not yet been reached by Oxford.
As a mere redbrick graduate I would not dream of entering into the question as to which of these universities is superior, although one friend of mine last night when I was talking to him pointed out that the proof of the pudding is in the eating. He said that the substantial number of Oxford graduates holding senior positions in the Civil Service was responsible for the very much better road system serving Oxford, whereas Cambridge was comparatively difficult to get to.
I believe that there is almost a mass cross-party conspiracy in this country to ignore the facts about higher education today. Fortunately I was supplied with some information today by the Committee of Vice-Chancellors and Principals. They sent me an editorial from the Observer of 25th February at page 18. They drew my attention to the fact that the editorial says:
"From 1962 to 1985 the proportion of 21-year-old children of manual labourers in full-time study only rose from 3.2 to 6.9 per cent."
Those figures are a disgrace. While we often pay lip service to working-class children going to university we are not analysing the true extent of the problem and the failure to do anything about it.
The same hand-out from the Committee of Vice-Chancellors and Principals said that they were anxious about the Bill that we are discussing tonight because nothing must deter students from less well-off families or mature students from entering higher education. I suggest that their efforts to encourage these students have so far been pretty unsuccessful.
I went on to look at their proposals and I saw that one of them was to abolish the parental means test. You can imagine these vice-chancellors sitting around, nodding their heads, and saying, "Yes. Next item". What in fact does that cost the nation? On current figures the abolition of the parental means test would cost £390 million a year. Who would actually benefit from that? Certainly not the poorer parents. I do not suppose that the Committee of Vice-Chancellors even gave a moment's thought to how the Government would make up that £390 million per annum. It is probably such a sordid matter that it would not really rate discussion.
The cost of the education system today is very high. When we think about the lack of working-class children in universities, what should be remembered is that a large proportion of income tax and the other taxes today is paid by these same working-class people whose children do not have the benefits of this higher education system.

659
Another point made in the other place by my colleagues was that the student at university sacrifices the opportunity while he is there to earn income, and therefore should not be put in a disadvantageous position. The recent figures for 1987 said that at the age of 25 the average earnings of a graduate are £60 a week more than the person who is not a graduate; at the age of 30 the differential has gone up to £100 a week; at the age of 35 it has gone up to £130 a week; and at the age of 40 it is £150 a week. There is a substantial financial benefit for a large proportion of people who graduate from university.
This was recognised by an article in the Observer on 11th February entitled "Banks chase the smart money". It went on to say that banks recognised that university graduates were tomorrow's high earners and they wanted to get hold of their business. What the universities should do if they are serious about broadening the choice of entrants is to widen and reassess their entire admissions policy.
I would make one more point before I close, and that is regarding the question of housing. I have spoken before in your Lordships' House about the need to ask the universities to reassess their admissions policy to take more students who are home based. This is one way in which a substantial improvement could be made in the housing problem. We are often said now to be a non-caring society because people are to be seen, particularly in the vicinity of Westminster, sleeping in cardboard boxes at night. It does not mean that we are not a caring society. It means that we care more about some other things than we care that this is going on. If we were really serious about this we would do something about university admissions.
The noble Lord, Lord Beloff, in mentioning the question of housing costs said that the Government should do something. I think that the universities should do something. Students who study while living at home are making a valuable contribution to society because they are not costing the country so much in grant and they are not putting pressure on scarce housing resources. When I was at university I was chairman of the home students' society for a year. Our membership was then large enough to produce rugby teams to play the halls of residence, and usually win. The home-based student population at Bristol University is now 0–8 per cent., and 58 per cent, of the students are in private lodgings. Every student in private lodgings is putting a strain on the housing resources there. The waiting list is bad. The homeless list is nearing 1,000. If the university would reassess its admissions policy a great contribution could be made to solving this social problem.
If it is so good for students to go away from home, why can we not encourage sharing opportunities or swap opportunities such as people exchanging council houses between Newcastle and Bristol so that a family whose child goes away from home to study can take in somebody else from another part of the country who is studying at the local university? All sorts of things like this could be tried, but so far as I can se there is no will. There is only a will on the part of the academic establishment to defend the existing position.
660
The Government, apart from talking about doubling the numbers in higher education, ought to take more seriously a skill shortage that is going to hit us hard in terms of industry, with skilled machinists and people of that nature, just at a time when we are going into the single market. I beg my colleagues to be actively concerned about the lack of working-class children in higher education because it is something that can be cured only by constant pressure. I ask the universities to have a good look at themselves, because a bit more concern from them about the disadvantaged would benefit everybody.
7 p.m.
Lord Rippon of Hexham: My Lord, I support the policy of student loans, and to that extent I support the Bill. I am influenced, I must confess, to a considerable extent by the fact that, like the noble Lord, Lord Dainton, I benefited as an undergraduate from a loan from my college for which I am extremely grateful. I am therefore not at all impressed by students marching with banners that say, "Grants not loans". They are more privileged than they apparently appreciate. As my noble friend the Minister explained, we are already providing the most generous system of student loans in Western Europe, and one which is infinitely better than the arrangements in the United States or Japan. As I understand it, that is what we shall continue to do.
I am sure that it is not widely understood—at least not outside the Chamber—that the loans will relate to maintenance costs only, which account for about 10 per cent, only of total student costs, and that the Government will continue to pay all tuition fees. Indeed, as my noble friend the Minister explained, students will have recourse, as I understand it, to 25 per cent, more funds in the next financial year. That is why, as my noble friend Lord Boyd-Carpenter as usual so cogently explained, this is not a measure designed in the short term to cut public expenditure at the student's expense. To that extent I welcome it.
I share some of my noble friend's anxieties about the loss of social benefits which is to take place simultaneously, at least until there is better provision for student accommodation across the the board. I am also not at all impressed by the banks' attitude. My noble friend Lord Boyd-Carpenter thought that their attitude to the third world was naive. My view is that they were rather greedy. After nearly ruining the third world with high rates of interest now they are of course trying to recoup some of their losses at our expense. As my noble friend explained, we are deluged with offers from the banks to borrow more money. The last that I received from Lloyds Banks said that If I took out a personal loan I might have the chance of winning a car or a holiday.
What is not fully recognised is that students are already borrowing from the banks at an average of about £350 a year at interest rates that once would have been described as "loan sharking". Many of them have a pocketful of credit cards. I share all the anxieties expressed by my noble friend Lord Boyd-Carpenter about credit being too easy. That is why I believe that students will be much better off under the Government's proposals, with loans

661
indexed to give a zero real interest rate, especially if the loans are increased, as I hope they will be, in due course.
I do not believe that a grants-only system in itself encourages more people to go on to higher education, or that changes of the kind proposed would reduce numbers or prejudice the prospects of poorer students. The reverse may very well be the case, because while we spend more on student support we still have fewer students in higher education than those countries which have the mixture of grants and loans. In that regard I am sure that your Lordships, like I did, listened with great respect to what the noble Lord, Lord Dainton, had to say.
Like my noble friend Lord Nugent of Guildford, I find it striking that in the Federal Republic of Germany, where the average student loan is £2,000 a year, the percentage of students from the poorer sections of the community is, as he said, about three times greater than in the United Kingdom. I also believe that it is sensible over a period of time to reduce not just the percentage of grant but the parental contribution. There again I agree with what the noble Lord, Lord Dainton, had to say. Obviously, for the reason given by the noble Lord, Lord Cocks, that cannot be done overnight, because, as he elicited in a Written Answer which appears in Hansard today it would cost £390 million. The parental contribution should go as soon as possible. Many parents either cannot or will not pay, and indeed students who are over 18, who are treated as adults in all other respects, should stand on their own feet in that regard and rely upon whatever combination of support is given by the Government and their universities.
We can all see that we could provide more places if our public money were more widely spread. The real need, as I see it—I do not want to anticipate tomorrow's debate—is increased funding for the universities. I will say only that I agree with practically everything that the noble Lord, Lord Beloff, said, not least his observations upon the UFC and the way that it is proceeding.
The Committee of Vice-Chancellors and Principals has stated that it is not opposed to the concept of loans but that it is concerned, as many others have been, about the Bill's drafting and the methods of repayment. It may well be, as my noble friend Lord Boyd-Carpenter suggested, that the Committee stage will be the most appropriate time to discuss the details. I would say only that the method must be as simple and certain as possible; that it should provide, as the Government intend I believe, for income-related payments, suitable provision for deferment and, if necessary, ultimate cancellation.
I hope that the Government will also consider the course urged by Sir Philip Goodhart in his article in The Times on 21st February. He made a powerful case for the revival of the scheme which was abolished in 1951 for the progressive write-off of loans in the case of students who enter, for example, the teaching, nursing or medical professions, or perhaps as the noble Lord, Lord Peston, suggested, the Church.
662
If the question of repayment is a matter for later consideration, I am bound to say that I cannot give much credence to the concept of a graduate tax. I share the anxieties expressed by the noble Lord, Lord Glenamara, on that point. As for the concept of collecting loan debts through the national insurance system, I believe that that would be manifestly cumbersome and unworkable for the reasons the Secretary of State for Education and Science has given.
I turn now to the Bill's drafting. It is, as has been explained, merely an enabling Bill. All the details are to be in regulations. The excuse, as always, is the need for flexibility. We can read speeches; we can read pamphlets; we can look at parliamentary Answers; and we can glance at Notes on Clauses. They will show the Government's present intentions, but there is nothing, as has been pointed out on many occasions, on the face of the Bill but a blank cheque to the Executive which is virtually given absolute power to fill in all the details and the figures.
The Bill is less open to objection than, for example, the Courts and Legal Services Bill, large parts of which are also enabling and which takes power to amend, or even repeal, primary legislation, and which also has dangerous constitutional implications. Those who are anxious about the Bill should also be present at debates on the Courts and Legal Services Bill, just as they should have been present at the debates on the Financial Services Bill, the Companies Bill and all the Bills that affect other people, or they will find themselves picked off one by one.
At least this Bill is designed to confer a benefit, which may or may not be exercised at the option of the student. It does not impose a tax, a fee, a rate or a levy and it does not propose to amend or repeal primary legislation. Even so, it cannot be regarded as satisfactory that the only parliamentary control that could be exercised after the Bill's passage would be the use of the negative resolution procedure.
Even if the Government agree, as I am sure they should, that any regulations that are made should at least be subject to the affirmative resolution procedure, that is not by any means a total safeguard. Such regulations cannot be amended, are rarely debated, and, at least in this House, they are not normally voted upon. However, I think it may be wise of your Lordships to review that position and to consider whether or not, in appropriate cases, that is not the right thing to do. Then one can send the regulation back. If it cannot be amended, it must be sent back and changed.
As regards another place, I commend the speech to which the noble Earl, Lord Russell, referred of Mr. Alan Beith on 15th February. I shall add a further quotation to the excellent one mentioned by the noble Earl. Mr. Alan Beith stated in attacking the negative resolution procedure:
"It may not be understood or recognised outside the House that, unless we amend the Bill, we are putting in place today arrangements under which the whole character of the student loans scheme will be precluded from parliamentary debate, amendment and proper consideration".—[Official Report, Commons 15/2/90; col. 508.]
In any event I respectfully suggest to the Minister that he should provide us with a sight of the draft

663
regulations before or during the Committee stage and certainly before Third Reading when, as my noble friend Lord Boyd-Carpenter implied, it might be appropriate to vote, if not tonight.
It is necessary to separate the question of policy from criticisms of the mode and structure of legislation. In the debate which took place in this House on 31st January on the quantity and quality of legislation, my noble and learned friend the Lord Advocate expressed the view that:
"what occasionally happens is that when criticism is made of the drafting of Bills it is not criticism of the way in which the policy is being expressed but of the policy itself.—[Official Report, 31/1/90; col. 406.]
That certainly does not apply to my attitude to this Bill or to many others that I have criticised in the past. However, what the noble and learned Lord the Lord Advocate has said underlines the need for some method of objective scrutiny of drafting before discussion of Bills enters the political arena. That is why I suggested in the debate we had on 14th February, to which the noble Earl, Lord Russell, kindly referred, that we should have a Select Committee to scrutinise all Bills before Second Reading and to report whether such Bills contain insufficiently defined administrative powers or propose any inappropriate delegation of legislative powers. That would not preclude Parliament from its decisions but we would, as I said then, legislate with our eyes open. That procedure would have been useful in regard to a Bill of this kind.
I agree with a great deal of what the noble Earl, Lord Russell, said in his speech. I am quite sure that our present procedures are inadequate but I shall vote with the Government tonight in order to record my support for the policy of the Bill. Support for the amendment might, on the analogy given by the noble and learned Lord the Lord Advocate, imply—in my case wrongly—opposition to the policy. I should make it clear that my continued support will depend on the Government's willingness to flesh out their proposals in Committee and to strengthen parliamentary control over the Executive.
7.13 p.m.
Lord Alport: My Lords, although I sit very close to my noble friend Lord Rippon of Hexham, my line of argument will be rather different from his. As the noble Lord, Lord Butterworth, said earlier, I believe that the whole House agrees that the Government are right in seeking the expansion of the entry of youth into higher education, and that it is important to tap the resources of ability among young men and women from families which have not in the past normally aspired to training at a university or a polytechnic and which have not had the money to assist their children to do so. However, the problem now is how those people can be encouraged and helped. The Observer in its leading article on Sunday stated that:
"The case for student loans is self-evident".
It said that this was self-evident on the grounds that:
"Britain has a shocking record of underachievement for recruiting working class teenagers into higher education".
664
This seems to me to be a non sequitur. I always thought that the maintenance grant system was intended to ensure that no young man or girl who could benefit from higher education by entry to a university or polytechnic would be prevented for financial reasons from doing so. Traditionally the responsibility for meeting the cost of higher education has lain with parents, supplemented where parental resources were inadequate by scholarships or bursaries. Latterly it was, I have always thought, considered to be in the public interest that the level of grant should be sufficient to enable a student to complete a successful period of higher education without hardship, even if parental resources were insufficient to contribute to its cost. Thus no able and ambitious young man or woman would be deprived of educational opportunity and this country would have a continuous flow of qualified recruits into every department of our technological, industrial, professional, intellectual, managerial, academic and cultural life,
But now, so far as I can understand it, it is no longer intended that the grant should be sufficient to see a young man or woman through a course of higher education where parental support or scholarships or bursaries are not forthcoming. They will not be able to enter higher education without ending in debt to the tune of £2,000 or £3,000. I can think of nothing more likely to deter a young man or woman from a working-class family, where "getting into debt" carries with it a special social stigma, from undertaking higher education. It may be of advantage to the middle classes. I was talking recently to a leading academic in my part of the world. He said he had asked his son what he thought about the loans proposal. His son replied, "Oh, Daddy, that is marvellous. I know perfectly well that you will pay for the whole of my university career. I shall take the loan, put it in a building society and I shall pay you back the interest that I get from that at the end of my academic career in order to reimburse you for something you have given me". That whole concept seems to me to reek of the contemporary moneylender culture and of the world of mortgages, credit cards, loans and that kind of thing—the social consequences of which will one day, perhaps in the not too distant future, undermine the fabric of our national life.
If the Government do not believe in investment in higher education by the nation as a whole, and in enabling any qualified young man or woman to undertake it with, where necessary, the nation's support, but feel that they must claw back some of the cost, surely it is worth while taking more seriously and giving more attention to the proposals of the vice chancellors and principals for a graduation tax, despite the difficulties which that would no doubt involve. However, the question is whether the difficulties of the loan system will not be even greater and the anomalies much more serious.
I have nowadays no official connection with any university but in the past I have learnt the practical wisdom of those who are entrusted with the government of our great institutions of learning. The Government must surely listen to their ideas, which seek to achieve what the Government want in a

665
fairer and more effective way. I learn from the press, as other noble Lords have done and because I have no other means of doing so, that the vote tonight is regarded as a matter of confidence. That is ridiculous. I implore the Government not to give the impression of pig-headed obstinacy in forcing through your Lordships' House by a three-line whip a piece of legislation which those who are best qualified to advise and assess are strongly opposed to. After all, we still have the constitutional right to ask Her Majesty's Government to think again. This is not a party issue. It is something which directly concerns Great Britain and Great Britain's long-term prospects of maintaining its economic prosperity and political influence in the turbulent and competitive world which we shall face after 1992. We must take the trouble to ensure that we get the solution right.
7.20 p.m.
Baroness Faithfull: My Lords, I start my remarks by congratulating the noble Earl, Lord Russell, on his speech, which was outstanding. Having said that, I withdraw the "jam" because I cannot support the amendment. I believe that we must discuss and revise the Bill. We must change it through the usual procedures which we have in the House. Like the noble Lord, Lord Dainton, I am not entirely against the Bill. I accept the principle that where parents are in a financial position to pay for the further education of their sons and daughters, they should do so. I also recognise that there needs to be funding for higher education in the country.
However, I agree with my noble friend Lord Beloff, that certainly in Oxford, where I live—and I am sure that the noble Lord, Lord Dainton, and others from Oxford will agree—throughout the university among the heads of colleges, the Vice-Chancellor and the students, there is a feeling of great worry and deep concern about the Bill. I believe that during its passage through the House we must make substantial changes.
First, does my noble friend the Minister not think that, even with help from the access funds, many parents from low income families, probably in areas of high unemployment, will advise their children against embarking on a course of higher education? This point has been mentioned by the noble Lords, Lord Glenamara and Lord Alport. I am quite sure that in the North and the North East parents will take fright if they think that their children will have to repay a loan when they start work. I wonder whether a survey has been carried out among such parents. We have talked to university staff and colleges of further education, but have we talked to parents?
Secondly, the point was brought up by various noble Lords that those in the low paid and yet necessary professions such as social work, teaching, the Church and nursing might feel that they will have to repay a loan. If so, will they go into those professions? What has not been mentioned yet in your Lordships' House is that people go into low paid jobs because they are anxious to do the job and are committed to it. However when they obtain
666
promotion and do well in the job they will not benefit because at that stage they will have to start paying back the loan. The good work will not be rewarded and there will be no incentive. I hesitate to say that for social work, I hope that there will always be an incentive in social work for its own sake. Nevertheless people have to live, they marry and want families. There will be no incentive to continue that work if they have to pay when they achieve promotion.
Students living in areas of unemployment find it difficult to obtain holiday jobs. They are usually away from home in those jobs and therefore they do not make much money because they have to pay for lodgings. Again, the low income families will be at a disadvantage.
The point has been mentioned on several occasions that everything will hit the students at once. I have talked to a number of students at Oxford University and they are absolutely appalled by what will hit them. These points have been mentioned by the noble Lord, Lord Boyd-Carpenter: housing benefit will be withdrawn; social security will be withdrawn; there will be the community charge and rising costs. Then, particularly in places like Oxford and Cambridge, there will be the rising cost of rents. The rent in Oxford now for one nasty little room is £50 per week. If one wants a better room it is more. This will be difficult for students.
I should like to ask the Minister whether it has been proved beyond all reasonable doubt that students have abused their privilege of being at university or not used their training to benefit society. I am sure that the matter has been thought about.
I turn now to administration. I have to admit that I do not understand it very well. In the assessment of students and following up the collection of money, will not a big bureaucracy be built up? Page 2 of the Bill states that there will be no net increase in Civil Service manpower. Of course not, because the scheme will be operated by the student loans company. But where will the student loans company obtain the money? I am not quite clear about that and should be grateful for help from my noble friend the Minister. It seems to me that, as the Bill is worded, we are building up a great bureaucracy.
Other Peers, and in particular the noble Baroness, Lady David, have mentioned the difficulties that will be faced by the blind, the partially sighted, the disabled and the deaf. I speak with deep feeling here because one of the leading lawyers in our country who was at Oxford was blind. He worked at one of the colleges there for many years. Should there not be a fourth access fund for the disabled? That would give them hope and the ability to pursue their course. The Bill needs many amendments. I end on a rather worrying note. Are we wise, when dealing with young people in this country, to institutionalise debt?
7.27 p.m.
The Earl of Longford: My Lords, I am happy to follow the noble Baroness. I have previously described her as a model of compassion and she has done nothing tonight to diminish her reputation. If

667
I were a Conservative Minister—and it is a hundred years since that could ever have been possible—I should be more worried by what the noble Baroness had to say than anybody else on my Benches. I am not sure that at the end of the day the Minister would be happy with what she told us this evening.
My remarks will be briefer, I forecast, than those of any speaker to whom I have listened. I am tempted to mention—I seem to be mentioning it—that I have had seven graduate children without receiving any grant, although a few of them won exhibitions or similar awards. I thought that I might be ahead of other Members of the House in that respect until I discovered that my dear old schoolfriend, the noble Lord, Lord Moyne, has had 11 children and he thought that they were all graduates. I am ready to believe that they were all graduates. If I failed to qualify for the grant on means-test grounds, then the noble Lord, Lord Moyne, failed even more obviously.
I am entirely opposed to the whole idea of student loans. I have received representations, as we all have, from various colleges and organisations. I have had representations, which I think have not been mentioned up until now, from the theological colleges. When I talk of those I do not want noble Lords to assume that they teach people to become nothing but clergy or priests. About 20 per cent, of those who go out from those colleges are clergy or priests. The others go into social work, teaching and such underpaid professions. They are anguished at the thought of what will happen to their graduates who have to pay off the loans. I mention briefly the heads of departments of theology in the universities of Birmingham, Bristol, Manchester, the head of the department of theology at King's College, London, and the principal of Heythrop College, the Jesuit college. Those people are deeply pained at the thought of what is in store and at the burden on young people and the harm that it will do to them. The final words of the noble Baroness support that anxiety.
Speaking more generally, I must return to the debate on the Robbins Report in this House in 1963. I wound up for the Opposition at that time and my noble friend Lord Taylor opened for the Opposition. He said:
"I must confess I was a little surprised at the speed with which the Government accepted [the conclusions of the Robbins Report]".
In case noble Lords do not have every word of the Robbins Report in their minds, perhaps I may summarise by quoting what my noble friend Lord Taylor said about the report over 26 years ago. He said:
"Lord Robbins starts off with the axiom: that courses of higher education should be available for all who are qualified by ability or attainment to pursue them and who wish to do so".—[Official Report, 11/12/63; col. 1212.]
That was the principle of the Robbins Committee set up, if I recollect rightly, by the noble Viscount, Lord Eccles, and approved instantly in principle by a Conservative government. Those were the great days of Conservatism when Harold Macmillan, Rab Butler, the noble and learned Lord, Lord Hailsham
668
of Saint Marylebone, and the noble Viscount, Lord Eccles, were the leaders. That was what was said then. There was no talk of student loans. All the Western countries are now far richer than they were in 1963—it is not any particular government which makes them much richer—yet there is now talk of student loans. I see that as a terrible derogation from the ideals that the country, certainly those most qualified, shared in 1963.
I shall support the amendment of the noble Earl, Lord Russell, but I would go much further. I bear in mind what my noble friend Lord Peston said. That is one aspect, but it is a large aspect of the opposition. If I understood my noble friend rightly, he said that many students from poor families will be severely damaged by the Government's proposals. I shall therefore vote for the noble Earl's amendment and indeed anything that is much stronger.
7.32 p.m.
Baroness Cox: My Lords, noble Lords might have noticed that I have not always been a completely uncritical supporter of the Government, but tonight I rise to support the Government in the strongest possible terms in their commitment to introduce a student loans scheme. I do so on the grounds of social justice and of the potential which loans may have to increase access to higher education for students from all backgrounds, including those from less advantaged backgrounds. I therefore do not have any sympathy for those who resist the basic concept of loans, and I have not been convinced by the arguments of those who wish to delay the implementation of a scheme to provide them. However, I have a number of questions and slight reservations about the Bill before us and I hope that some of those might be answered by my noble friend this evening and/or addressed during the later stages of the passage of the Bill through the House.
First, perhaps I may begin by explaining some of the reasons why I am such a strong supporter of the principle of loans. First and foremost, I regard the opportunity to study at the level of higher education as a great privilege. It is also an expensive privilege, costing the community as a whole a great deal of money for each and every student. That will still be the case even with a loan scheme in operation for students will still be fortunate enough to have their fees paid for them and many will receive substantial maintenance grants, unlike the situation in many other countries.
Furthermore, the majority of students will benefit financially after they leave university or polytechnic as a result of the qualification which they have gained there. Thus, not only do they have a personally rewarding and generally enjoyable time with, I hope, a great deal of fun to which reference was made earlier, but while at college or university they are also likely to obtain qualifications resulting in a considerably higher salary as a result of their time in higher education. Graduates earn on average 25 per cent, more than those who do not have degrees, so I cannot see why the rest of the community should subsidise that personal investment with no repayment whatever in later years by those whose

669
state-funded education has enabled them to enjoy relatively high—sometimes very high—salaries.
Secondly, it is necessary to keep a sense of proportion and to see the issue in an international context. Maintenance costs amount only to about a quarter of the costs of a student's course. The Government will still meet well over 90 per cent, of the costs of each student's education. That is a far more generous system than that operating in many other countries such as the United States where many students or their families have to find full costs, including tuition costs, or a much higher proportion of them than is being proposed here. That is why comparisions with the United States which have been made by a number of Members are not appropriate.
I do not suggest for one moment that we follow the American example. All I am saying is that our students will still be extremely fortunate compared with some of their counterparts in other countries in the generous provision still being made for them under the scheme proposed by the Government. It is also worth noting that, even in countries where students have to pay a higher proportion of the real costs of higher education, the proportions of young people choosing to go on to university and college are still much higher than in Britain.
That leads me into the question of the contribution that loans can make to increasing access to higher education. I must admit that I have been worried in the past by the possibility that loans might be a deterrent and thus have an adverse effect on access. That issue has been discussed by many Members of the House. I particularly take the point made by my noble friend Lady Faithfull, but I am reassured on that point on at least two counts; first, because of the promise of provision for relief from repayment for those whose incomes fall after graduation, for whatever reason, below a certain figure. That should lessen the anxiety for those who fall on hard times.
However, I should also like to see greater flexibility in the requirements for repayment. For example—a suggestion that has been put forward by other speakers—I should very much wish to see exemption for those who choose to enter worthwhile but less well-paid occupations, such as teaching, nursing, speech therapy or social work, and particularly where those occupations now suffer from acute recruitment problems and staff shortages. I hope that consideration will be given to that matter and that my noble friend the Minister will consider a scheme of cancellation of loans for students entering certain categories of socially valuable but relatively poorly remunerated occupations.
The second reason why I am less worried now about the potentially deterrent effect of loans and am indeed reassured about their potential for enhancing access is based on experience in countries where loan schemes have already been in operation. We in this country, without a loans scheme, have a relatively low proportion of young people choosing to study for a degree on leaving school. Our age participation rate in that respect compares unfavourably with other countries in continental Europe, Scandinavia and North America, despite the fact that many of
670
those countries have operated loan schemes for a long time. One may therefore infer that, at the very least, loans have not been a significant deterrent. Instead, the facts suggest that they may enhance access to higher education—a point that has been made by my noble friends Lady Young and the Minister.
Perhaps noble Lords will allow me a brief comment based on personal experience as an illustration. Our son-in-law, a Canadian, who certainly does not come from a background which could be described as remotely financially well-off, has succeeded in studying for a degree which he could never have afforded without support provided by a student loan. Not only he but many Canadian colleagues with whom I have worked have no reservations whatever about the prospect of repaying their loans. They see it as entirely natural that they should pay back the money which enabled them to study and obtain their degrees. The attitude of those young Canadians puts into context some of the emotional arguments which have been raging about student loans in this country. It makes such arguments appear self-indulgent and out of touch with the reality in many other parts of the world. Britain at present is atypical in not having a loan scheme. I can see no good reason for continuing to deny students the potential real benefits of loans—because they are real benefits.
At present many parents for whatever reason do not pay the parental contribution. That often results in real problems for many students. Moreover, many students are worried about placing a burden on their parents and would prefer to be financially independent. To those students what is effectively an interest free loan is a real advantage.
Therefore, given that I believe that a loan scheme could be beneficial for many students and increase opportunities for access to higher education, perhaps I may ask my noble friend whether it will cover students on courses that are now regarded as eligible only for discretionary awards and perhaps proceed into the area of further education as well. If students—and many of them are older students—who wish to embark on these courses want to apply for a loan, it would be a great pity if the proposed scheme were to exclude them.
Like the noble Lords, Lord Annan and Lord Peston, and my noble friend Lady Young, I too regret the fact that at present the scheme does not cover part-time courses. As someone who studied for her own degrees by the part-time method, I am particularly aware of the problems encountered by many of my fellow students who were studying by the part-time route. It is a tough route. Many of those students would have been glad to have had some financial assistance while studying and then to have repaid the money when they benefited from the enhanced salary resulting from their new qualifications. I therefore hope very much that the scheme will be extended, perhaps during the passage of this Bill through the House, to provide opportunities for part-time students.
I conclude by reiterating my strong support for the principles of the Bill. I hope fervently that it will become law and that when it does the

671
vice-chancellors, principals and polytechnic directors will co-operate in its implementation in ways which will most benefit students. It is students' interests which must be paramount.
I am aware, as are all noble Lords, that this is an enabling Bill and lacks detailed provisions. However, that does not make it unique or essentially unacceptable. Perhaps some concern over the lack of detailed provision might be allayed if the Government were to agree that the regulations should be subject to affirmative resolution, as suggested by a number of noble Lords. That would provide an opportunity for further scrutiny and more detailed consideration. However, I do not see the fact that it is an enabling Bill as a reason for delaying the introduction of a scheme which is not only timely but overdue both in terms of justice for the community at large which pays for higher education and, most important, in the enhancement of opportunities for individual students. I therefore hope that your Lordships will give the Bill strong support at this Second Reading.
7.44 p.m.
Lord Hunter of Newington: My Lords, at this stage in the debate one asks oneself what one can contribute to it that has not been discussed before a good many times. I shall be very brief. What I can contribute stems from the fact that because I wanted to clear my own mind on these issues and study the experience of others with long-term loans systems, I got in touch with the Swedish Embassy, which was good enough to let me have a great deal of information. In fact there had been a seminar on the 12th February about this matter.
There have been loans in Sweden for many years. The system that was introduced in 1965 consisted of 25 per cent, grant and 75 per cent. loan. Over the years the percentage of grant steadily fell to 4 per cent. The system worked well for some 10 years, but then problems began to emerge. Although the programme was highly subsidised, that was not very clear to the students. The system was regardless of age, area of study and personal circumstances. The calculations were based on a young, single, childless person.
However, there has been a steady increase in the average age of students—something which has also been occurring in the United Kingdom—and food and housing costs have begun to rise as has happened here. Consequently the purchasing power of the loan gradually declined.
A new system was introduced 18 months ago to try to improve that situation. In that system the grant element has been increased to 30 per cent, and under the new repayment regime students bear a larger share of the true costs. This is beginning to have a familiar ring. Repayments are linked to income and not to the size of the debt.
It must be obvious from what I have said about the Swedish system that it has by no means settled down after over 30 years. Therefore, if it is intended to introduce a similar system here without adequate consideration of repayment systems and with the
672
immediate cessation of welfare benefits, which have increased markedly in the past few years, one can begin to understand some of the anxieties that have been expressed. Seventy-five per cent, of the students in Edinburgh who were in private accommodation receive housing benefit and the average claim is about £296 a year.
Another matter which has to do with funding is that raised by the noble Lord, Lord Butterfield, in respect of medical and dental students. Under the Government's present proposals the debt of a medical graduate who has still to continue training for several further years will be double that of other university graduates.
Those are only brief examples. Tonight we have heard a very eloquent debate on many aspects of this topic. However, I believe that, unless the Government make it very clear that they are prepared to consider these matters and the great body of evidence that has been received on this subject, reluctantly many Members of the House will feel that they should vote for the amendment.
7.48 p.m.
Lord Blake: My Lords, I am in favour of the Bill and I shall vote against the noble Earl's amendment. I believe that the case for some form of student loan scheme is a very powerful one indeed. It cannot be accidental that so many are operating in Northern Europe apparently successfully and with a greater intake of people from the poorer classes of society than we have. That cannot be accidental.
A lot of the alarm about student loans in this country is simply due to unfamiliarity with the concept. I was entirely convinced by the arguments of my right honourable friend the Secretary of State in another place in the letter that he wrote to the noble Lord, Lord Annan. The arguments that he used there and in a previous letter—I shall not detail them at this stage because I want to be as brief as possible—were conclusive against working through the insurance system. That letter was conclusive against doing this in terms of income tax—a graduate tax.
There are many other reasons too: administrative complications, confusion and difficulties. Since some system of loans on very similar lines to those proposed here—the same type of system of loans—is to be found in so many countries, I cannot see why it should not work reasonably well in this country. I am afraid that I have to take issue with those who think that it is good for students to be involved in what I might call the dependency culture. Social benefits were never meant to be considered in that way at all. I believe that it is a good thing to have students discouraged from that attitude.
Although in general I support the Bill, there are two matters that I hope will be changed. I am not happy with the resolutions under the Bill being subject to the negative procedure. Many noble Lords have made that point. I should like to add my voice. I should very much prefer it to be done by the affirmative procedure. It may not make a tremendous difference in your Lordships' House, although it makes some difference, but it makes a

673
difference in another place. In general it would be better to do it by that procedure. I cannot see what real objections there can be to that.
My second doubt—and it has already been expressed but not by many people—concerns the access funds. The access funds will almost certainly not be enough. The point was made by the noble Lord, Lord Annan. I believe he said that they ought to be doubled. The sum of £15 million will not prove to be enough. The figure ought to be seriously reconsidered. My right honourable friend will have the usual battle with the Treasury if he tries to increase it, but I hope that that will not put him off and I wish him all power to his elbow.
Finally, I should like to make a point about the nature of the Bill in connection with the noble Earl's amendment. I am in general on the side of those who dislike too much delegated legislation. In principle I do not like it. I do not like blank cheques, Henry VIII clauses and so on. I agree with my noble friend Lord Rippon of Hexham on that point. However, there are surely matters where it is necessary to leave details to the Minister. I am told that, for example, the regulations governing student grants run to some 37 pages. The student grant measure was originally brought in under delegated legislation. Some subjects are not suitable for primary legislation. I regard this issue as being one of them. I shall therefore vote against the amendment of the noble Earl.
7.53 p.m.
Lord Addington: My Lords, I should like to say, not surprisingly, that I shall be supporting my noble friend's amendment. When I initially read the Bill I thought that I had only half of it as it was so small. I have stated this on previous occasions in your Lordships' House. Since then, it has not put on much weight. We have had more information about what will result from the measure but not very much on the Bill that we have to discuss—a hands on issue. We are discussing the future of this country's knowledge base. Those people will be the basis for all forms of economic activity and social interaction in this country. We are talking about their knowledge and training. We should have more information on the Bill that we can discuss.
Having declared how I shall vote at the end of the debate, and the reasons why, I should like to refer to some areas that do not seem to be well covered by the Bill or the White Paper. First, whether or not one supports the idea of loans there are great grounds for attacking it because the loan of £400 is not enough to bring students up to a realistic standard of living. That is one fault that has not been tackled correctly.
I recently graduated from university. Throughout that period I saw students struggling against the problem of having to survive on about £45 to £50 a week. Student incomes are very low and they face a growing amount of debts as they progress through university. On a previous occasion I referred to it as a snowball of debt, of financial burden. When someone first attends university he invariably goes with glad tidings and material benefits from parents—providing him, for instance, with a full wardrobe, extra pocket money, and presents from
674
relatives. If he attends an establishment which has accommodation, he obtains accommodation in that establishment.
It is probably worth while noting that anyone who goes to a rich well-funded university is much better off than someone who goes to a college or an institution which is developing and has no initial endowments to support it. In the first year, using the accommodation of that establishment, much of one's board will be covered in the rent. One will not only be having effectively cheaper accommodation but the benefits of economies of scale with regard to catering. One also has one's money managed. The average 18 to 19 year-old is not very good at managing finances. If they have come straight from the school system they have never had to do so before. There are dozens of instances of people spending too much in their first two or three weeks because they do not know what they are doing with their money. It is a problem that would be better addressed by people taking a year or two out before going to university. One is then older and has less time to pay back any further loans.
Once out of the first year of subsidised living, one is in the private sector. Then rents begin to hit very hard. Those in the south of the country are hit by rents at the greatest level. The loss of housing benefit will strike very hard at some students. There are no two ways about it. Housing benefit at the moment effectively gives some subsidy on rent of over £20 a week. If one is paying about £32 a week in rent at present, one will receive over £420 in housing benefit. That is the equivalent of the loan for the whole of the year. It will all be wiped out by the loss of housing benefit. If one is paying £33 in cash terms, one will lose under the loan scheme. That factor must be addressed before we do anything effective on the Bill.
We have a picture of students incurring debts. They have housing problems. They also have to replace clothing and to meet other incidental expenses such as more text books. For those who undertake a course at a university or college, the price of text books rises as the books become more complex and bigger. During the course, the students have to buy more since the basic text books which covered a multitude of sins in the first and second year will not be relevant in the third year.
There is also the problem that one has to do more work the further one goes through a course. The idea of a part-time job or holiday employment becomes less relevant because one needs more time to prepare one's work. Students work quite hard. Often the projects that they have to do throughout the course will cut directly into this holiday period. Thus we have more and more financial pressure being applied to the student. When the scheme assumes that people will be able to find work straight away during the long summer vacations, it makes a fundamental error. Anyone who can find work for 14 weeks has done very well. It is worth remembering that in the summer term the student will invariably be facing examinations. He has to swot for them and wait for results. He will be in the worst position to find a job as a result of that summer term's activity. If he is undertaking a dissertation, he has even less time.

675
Therefore he is being squeezed harder with the cycle of debt and financial burdens.
The loans scheme seems almost deliberately designed to increase the problem, especially if one is living in the more expensive areas of the country. With the idea of universities receiving funding relating to the number of students that they attract, one has the spectre of institutes of higher education in the south of England being rapidly stripped of their students when the students realise that if they go, for instance, to the north-west of the country they will be much better off financially. Not only will they face less debt when they leave but they will have a considerably better time while they are at university.
It is total nonsense to say that one can have a good time with no money in one's pocket. Numbers of students arrive in London to live on their grants, and suddenly find that this wonderful, exciting place costs a great deal of money. They see that many exciting things are going on but are unable to join in. The problem of the rolling debt should be addressed.
The situation as regards the Scottish four-year degree course takes all those problems and multiplies them to a horrendous extent. If the four-year degree course is funded in part by the loans system at an inflation rate of 6 per cent., a student beginning such a course now will acquire a debt of £2,830. That compares with a debt of £1,754 acquired after a three-year course started at the same time. There is a difference of 61 per cent.
I hope that the scheme has not been designed to attack the Scottish system because that enhances many of the benefits which the Government are trying to introduce into the English system. The Scottish system of higher education is a less specialised, more flexible idea of pre-university education and an attempt is being made to introduce that into the A-level structure. People do not have to specialise so early because they take five or six subjects as opposed to only two or three.
The Scottish degree system also allows students to try a greater variety of subjects before specialising in their honours options. As we need more specialised skills and a higher level of technical training in most subjects, especially the sciences, I assume that we want more people to take the honours course in Scotland. Therefore, if they are allowed to choose their subject with more care they will be less likely to make mistakes and obtain poor results or fail. It is better that people should be allowed to specialise in a subject for which they are suited and need not make a decision about the type of degree they will take. Under the A-level system that process can start at the age of 16. Surely that greater flexibility is of benefit.
During the past few years students at Aberdeen University, which I attended, have experienced higher house prices and rents. It is a four-year degree course and therefore those higher prices are experienced over a longer period. Do we wish to keep Aberdeen University open? Is there any point in having such an institution there? There will be little incentive for students to go there; they will not wish to do so because of the financial pressure.
676
I have spoken for longer than I intended but I conclude by saying that, unless we address the problem of student funding and the individual level, any scheme will fail no matter how it is funded. There is a disincentive for those from less well-off backgrounds because traditionally and for a variety of historical reasons they do not attend universities. The situation is worse in England than in Scotland. We must ensure that when they arrive they can enjoy a reasonable standard of living. If we expect students to attend university and tolerate not only debt but also incredibly Spartan living conditions we are being totally unrealistic. Today no one from any social environment is prepared to live on bread and water for three or four years. 8.3 p.m.
Earl Haig: My Lords, I feel diffident about speaking in a debate with so many fine speeches delivered by distinguished academics. I am no authority on education. However, I was moved by the speech of the noble Lord, Lord Addington. He spoke interestingly about the realities of student life today. I believe that most Lords will agree with the points he made, particularly in relation to Scotland.
Strong views on the Bill are held by students at Edinburgh University, the college of art and on their behalf by the Education Committee of the Church of Scotland. Their views have my support. Having read some of the literature and listened to my noble friends, Lord Caithness and Lady Young, I am confirmed in my hopes for the Bill and give it qualified support. However, I believe that it will be divisive and favour those who are better off.
I wish to refer to the views of my Scottish friends who form the constituency to which I belong. There are many among the poorer elements of the Scottish people who will not benefit. In Edinburgh young people must now pay a poll tax of £78, even though they will not be compensated by a lowering of their rents to reflect the abolition of rates. Out of 270 landlords in Edinburgh only three have reduced their rents. Those in the lower income group receive £2,855 per year. That is made up of £2,155 grant, £500 housing benefit and £200 income support. Under the proposed scheme they will receive a 5 per cent, increase in grant, together with the loan, which will reduce their income to £2,675. That is £180 less than they now receive.
The number of art school graduates who will be in a position to repay their loans in the short term will be small. Money is not the hallmark of today's artistic profession. Poor prospects mean that the opportunities offered are unlikely to be taken advantage of by poorer people entering art schools. That goes against the intentions of the Bill. Few working-class parents will encourage their children to follow a road which is so unsafe.
Due to inflation the value of grants has been deflated and students have had to find the difference. In Edinburgh the average student has had to go out and earn £827 a year in part-time jobs often carried out in the evening to the detriment of his studies. Nearly all have overdrafts.
I support the noble Lord, Lord Annan, in his request for an undertaking from the Government to

677
make a larger contribution to the Access Fund. I believe that in Edinburgh at present the proceeds from the fund are £10–40 per student.
The Church of Scotland has expressed the concern shared by several speakers about the differences in degree structure north and south of the Border. Longer courses and the consequent creation of larger loans mean that care should be given to considering the special needs of Scotland. The Church's education committee has also urged the introduction of a graduated system of repayment of loans. It is intended to cushion the harsh effects of a sudden transition to repayment liability on what may be only a marginally larger income. Such procedures will help to reduce the adverse effects of insolvency when it comes to gaining credit and the use of other financial services. That will help to mitigate the strain at a time when many are setting up house for the first time.
My hopes for the Bill remain: that it will encourage more students to undertake further education; that taxpayers' money will be well spent and not wasted; and that students will be helped towards an easier way of life. However, it would be irresponsible to encourage students to enter the higher institutions by promising interest free loans without caring for the welfare of those in need.
I have dwelt on the anxieties expressed by members of the Scottish academic circles rather than address the advantages of the Bill, which have been so well described by its supporters. I hope that the Government will reassure them particularly by responding generously to the Access Fund. I support the Government.
8.9 p.m.
Lord Macaulay of Bragar: My Lords, I do not wish to be facetious about a most serious matter. However, the Bill and the interesting debates remind me of the story of an old New Orleans trumpeter who in his later days could not hit the top notes. When an admirer asked what he did when required to do so he said, "If I can't make it I just fake it". I believe that we are seeing a Government who have now reached the stage where they cannot quite reach their top notes and this Bill is, if I may say so, a fake. That point has been very well covered by previous speakers in your Lordships' House.
It is a fake because it hides the reality of what is really going on and the purpose behind this very small Bill. When we look behind the Bill at the documents which have been presented to most of us today and which we have had no time to study before the debate, we find blinding flashes of information. In the document dealing with rules and procedures it is easy to see how the Government have not thought through the question of deferment and eligibility. The document states:
"deferment available for income less than 85 per cent, of the national average".
I ask how and when that national average will be determined because the national average wage will not be known until the year is past and that average is determined. If a person has an average wage in one year and then drops to half that wage the next
678
year, will his payment be calculated in the second year on the basis of the average wage of the year before? That is an example of how the Bill has not been thought out.
What is the purpose of the Bill? A document was handed to us today dated February 1990 which indicates that it is in order to increase economic awareness and self-reliance among students. That will certainly be the effect of the Bill because no one could be more aware of his economic situation and the need for self-reliance than someone who is about to have the economic rug pulled from underneath him, as this Bill sets out to do.
Like so much of the legislation proposed by this Government, various questions require to be asked. First, is it necessary? I do not believe that many Members of your Lordships' House who heard the justification given by the Minister at the outset of the debate will be convinced that it is at all necessary. What is it supposed to achieve? Again, the answer is vague. Thirdly, does it contribute to the bringing about of a fairer society or does it go in the opposite direction? I suggest that it moves us in the opposite direction.
I declare an interest because I speak as the father of a daughter who is currently studying. She receives no maintenance grant so that I have no particular interest in the matter from that point of view. However, students have always been targets for criticism ranging from political involvement, particularly if it is anti-government, to a perceived failure to apply themselves assiduously, beneficially and at every moment in time to the task of achieving a degree or other qualification. They make easy targets for cheap and uninformed criticism.
I have been in touch with the student community through my own family in recent years. As far as I can see, as the noble Lord, Lord Addington, said, the majority of students are aware of why they are studying and the importance of doing so in this competitive world. They take their educational tasks seriously and many achieve outstanding results in their chosen field. Many do so in conditions which are verging on the unacceptable both in terms of accommodation and financial support, as the noble Earl, Lord Haig, has just indicated.
I believe that perhaps it is time that we come down from the rarified atmosphere of your Lordships' House and look at what a student is really faced with. The student from a well-off home with supportive parents has no real economic fear. He or she will be sheltered from the harsh economic realities of student life. The student from a well-off home whose parents do not play their proper part in paying the notional parental contribution can find life as a student very hard indeed as he or she will be presumed to be supported and will be reluctant to admit any financial problems which may reflect adversely on their parents.
The third category is the poorer student with parents who cannot lend financial support and are stretched to the limit. That student must either give up his education if he can no longer afford it or continue with it as best he can and subsidise that education by taking jobs in term time, as the noble

679
Earl, Lord Haig, said, in order to earn extra money when in fact he should be concentrating on his studies and getting an enjoyment and breadth of social contact and friendship which student-times traditionally bring.
To protect those people at the lower end of the financial scale and people in financial need, there have been elements in the national support system such as housing benefit, income benefit and the minimum grant and so on. However, those are now recognised as being substantially eroded and indeed, they will disappear. The financial horizon for the struggling student is that he does not see a sun rising and shining upon him. Each dawn brings another day not of enjoyment of student life but of the stresses and strains of survival on an economic front while attempting to achieve excellence in a chosen sphere of study.
Many overcome the difficulties but others fall by the wayside either financially, medically or physically or in relation to their studies or a combination of those factors. This proposed legislation is being brought into being when the support element in the student grant has been likewise seriously eroded over the years. The maximum grant is now reckoned to be worth 24 per cent, less—and I use the Government's favourite term—in real terms than in 1979. Judging by what the Minister said, it will be even less in the years to come.
The object of this legislative exercise is to achieve a bridging of the economic gap created by those deliberate erosions of the support system for the student community at the expense of the student and his family who will be required to take out this so-called top-up loan. One asks: what is the student topping up? It is the maintenance grant. For those who have to take it, it will top up their indebtedness to the Government and will mean that they will begin life if they use that facility throughout their student years in quite serious and accumulating debt as has already been dealt with.
As we all know the financial problems can have a very serious psychological effect on a student as has often been demonstrated without the addition of this notorious proposal. It may lead to failure where there should have been success and that success in itself would have been an additional asset not only for the student but for the future of the country whether in academic, industrial or other fields. Many potential students coming from a home with few financial resources and no immediate means of paying back any loan, for example, in the event of failure on the course or even with the prospect of success in a job will not readily embark on a course of study for which they were well suited, talented and at the end of which a valuable contribution would have been made to the nation's development.
I know that that suggestion is often scoffed at. However, I assure your Lordships' House that such was the reality of life in Scotland in certain areas in the past that a family could not see itself as affording what was to the family the luxury of a non-earning student. Because of the economic and social pressures involved the person would have to find
680
remunerative work to contribute to the household rather than achieve his ambitions in another direction, so yet another talent went down the drain.
The post-war period of enlightenment in education had to a large extent done away with such an approach on the part of most families. However, there will still be students who, for the very same reason—namely, financial—will not embark on a course because they cannot afford it. The reason they cannot do so will be the Government's short-sighted and mean attitude towards the student body. Their dogmatic devotion to market forces prevailing in all walks of life is epitomised by this scheme.
This Government either cannot or will not recognise that students in whatever sphere are rightly referred to, as the noble Lord, Lord Butterfield, referred to them, as the seedcorn of the nation. Unless that seedcorn is nurtured and fostered there will be no real harvest to reap at the end of the day. Indeed, it will be a negative harvest and the nation will suffer. In saying that I do not suggest that the student body should be pampered. However, it should be reasonably supported and not deliberately and callously undermined in an effort to advance itself.
I pose this question: in what other sector of society does the apprentice have to pay back his employer the money expended on making him a craftsman of value not only to the firm which trained him, but to himself as an individual and an individual who is free to seek employment wherever he goes? One used to have to pay a fee to be taken on as an apprentice but that has now gone.
Let us take a comparison. Who asks a policeman who qualifies at a very high level of salary at the age of 19 to pay back the costs of his training? As I say, he is allowed into the market at a comparatively high salary level and no one says to him, "By the way, you should have taken out a loan for that training and you must pay it back in the next few years". This legislation has all the hallmarks of a cynical and heartless discrimination against the student body as a whole and it is foisted upon them with all kinds of feeble excuses which have already been dealt with.
Perhaps I may deal briefly with the situation in Scotland. The Government should be encouraging equality of opportunity within a society that cares for its student population, which encourages them to achieve and which creates the climate in which they can experience fair weather while they get on with their work, not encumbered by the sight of accumulating clouds of debt to distract them from their studies. That is the reality of student life, whatever may be said elsewhere.
In Scotland, as the noble Lord, Lord Addington, said, there is a special problem which the Government refuse to face and indeed have a deliberately negative attitude towards. In Scotland a four-year course is a normal course. One cannot obtain an honours degree in Scotland in less than four years. That is not something which was introduced last year; it is the Scottish education tradition based on the type of university education we have had for years. It is a broad-based education

681
for two years with specialisation when people have had time to mature and make up their minds in which directions they wish to go.
The Government's reaction so far has paid scant heed to the reality of that and fails to recognise the differences between the two systems. I should add that there is another problem quite apart from the universities, and that is the problem of the graduate teacher. We not only have primary graduate teachers, but graduates who choose to leave university and train for one year as teachers. They will be penalised because they will have to take out a four-year loan in order to achieve the ultimate ambition of entering primary education. The Government say why not do a three-year course? Why not go elsewhere: The answer is, why should they? The Scottish education system has its own well-defined characteristics and traditions honed out of many years' experience and it would be brutal to undermine it—as well as the morale of the universities, colleges and the students—for a perceived economic advantage not to the student, not to the college, not to the university, but to Her Majesty's Government by cutting the cost of education.
I wonder how many Government Ministers or supporters of this iniquitous piece of legislation have ever been in the position of having not very many pounds—not in weight, but in money terms—which may have made the difference between continuing with an educational course, not starting it or dropping out on economic grounds. I suspect very few noble Lords on the other side of the House have had that experience. I speak from personal experience and can say that it is a very agonising and emotional decision.
That is the Scottish education system. I intend to say much more, but most of that has already been said. However, perhaps I may mention the parent who does not contribute the notional parental contribution. Why do the Government not chase the parent instead of the student, thus dropping him into an even deeper financial pit than he is already in? In dealing with the Scottish system—this is not a Scottish moan—I simply put the Scottish position on the record. No doubt it will be covered at a later date.
In closing may I ask what the Government are trying to achieve. We are to enter a competitive market in 1992. We need all the skills and talents we can obtain. What are we to do? We will produce graduates carrying with them the burdens spoken of in your Lordships' House; who feel no sense of loyalty towards the country; no sense of obligation and, as has been pointed out, might be on their way to Canada or America where they can get a job and as a result the investment in that student will be lost for all time.
Finally, perhaps I may say that there is at least this consolation. If the bookmakers are right—and they are said never to be wrong—this miserable little piece of legislation will be consigned to the political waste bin along with Her Majesty's Government in the not too distant future.
8.25 p.m.
Lord Nelson of Stafford: My Lords, the noble Lord, Lord Glenamara, referred earlier in the debate to our excellent education system in this country. I agree with him by and large, but we must accept that there are grave weaknesses in it in that it does not produce an adequate proportion of young people educated up to a satisfactory standard either in higher education or in vocational training. I think we all agree that those are two problems which urgently need our attention.
The Bill only touches one of those problems; namely, the possibility of attracting more students into higher education. Before commenting on that, I must say that I hope my noble friend the Minister will confirm that the Government will continue to take strict and effective measures to increase the number of students taking vocational training especially in areas where there are skill shortages. Skill shortages are a real problem for us all in this country and the Bill does not tackle the problem. I hope that the Government will continue to address themselves to it.
Having said that, I believe that the Bill will attract more people into higher education. It recognises that need and also the need to provide additional funding for such students. I believe the,
"financing of training should be mixed—pait public and part private".
That is a quote from the noble Lord, Lord Peston, in his excellent opening address on the debate on education and training a short time ago. I agree very much with him.
This debate, to which I have listened with great fascination, is not so much about principles—we all seem to be agreed about principles—but about funding and methods of funding. Does the money come from the private purse or does it come from the public purse? Does it come on loan or through taxes? I listened with great interest to what was said by many noble Lords in the excellent speeches we heard.
I am attracted to the idea of introducing loans for a proportion of the money needed to meet a student's maintenance needs. There are a number of excellent arguments for that. I believe—and I disagree here with the noble Lord, Lord Glenamara—that people value things which they pay for themselves. The principle is therefore that they will value education if they have to pay for it themselves.
There is merit in the proposal in that students should be prepared to back themselves. That is an excellent principle which would demonstrate confidence and enterprise. I also believe that the scheme will provide an incentive to higher achievement, and we need all the incentives we can get to raise students up to the highest level of achievement. It leans in that direction and that is good.
It has been said that the scheme will attract students into areas of the highest pay in order for them to pay off their loans as quickly as possible. That is not a bad thing. It is possibly a very good thing, and for this reason. It may lead to the recognition that if we want good people we must pay

683
for them. If we want people to move into areas of shortages we must adjust the terms of employment to attract them. It is wrong to say that they should not move up onto a higher step because they will then not go into teaching or some other vocation. Perhaps the terms of service in those areas are wrong and should be put right.
Finally on that point, I believe that the scheme might force along another change which I believe in many respects inhibits us in a number of professions. I refer to the need to pay differentials where there is a market shortage in the skills involved. Many of us recognise the principle but in some areas I could name it is not yet recognised and I believe that it should be, because only in that way will the shortages be removed.
I can understand the moral reservations about attracting students into debt. I do not often find myself in disagreement with my noble friend Lord Boyd-Carpenter, who is not in his place at the moment. We live in the year 1990. We are catering for the next 20 years or more. We are not going to move backwards. We live in a credit age. Everywhere we go we are encouraged to take credit cards, bank loans, mortgages or hire purchase. That is not going to change. Therefore, if one is to draw on credit, why not do so to improve yourself and enhance your own abilities rather than to buy some useless mechanical or electronic device? Credit is not necessarily a bad thing. It is with us and we must learn to live with it.
I should like to say a few words about the capping of the grant. It is not very clear from the papers which we have received and which have been referred to by many noble Lords what happens when the stage is reached of 50 per cent, grant and parental contribution and 50 per cent. loan. Will the grants from then on continue to be indexed in order to maintain that position or will they go on diminishing at the rate of inflation until they disappear altogether? I know that there are a number of people who believe that this is a device finally to get rid of grants. I hope that is not the case. I believe that we should maintain the 50 per cent, proportion that is envisaged, and I shall be interested to hear anything the Minister may have to say on the views of the Government as to what might happen at that stage, albeit we all know that it is a long way off and governments cannot commit themselves that far ahead.
It is fascinating that the vice-chancellors are so much against the proposal. I read with great interest the views that they put forward, particularly the one that seems to be the front runner. The social security device has finally been dropped and we are faced with the proposal for graduate taxes. I have been searching in my mind as to where we might have seen an hypothecated tax levied on a limited number of people for a specific and defined purpose. I do not think I have ever seen such a tax. Are we to accept hypothecated taxes for specific purposes levied on a specific group of people? I would not advocate such a tax. It is a dangerous precedent. However, if we have an hypothecated tax, I can suggest some better places to put it. What about an hypothecated
684
tax on commercial firms in order to finance vocational training? That would be a much better place to have an hypothecated tax, albeit that I am dead against such a tax.
I also wonder—this proposal has been touched upon by other noble Lords so I shall not dwell on it—whether it is really attractive to students to be saddled with an unknown tax over an unknown period. I should have thought that they would prefer to know where they stood with a specific loan and what they are getting, paying for themselves and not for a lot of other people. Surely that would appeal to students rather than the vice-chancellors' proposals.
The noble Lord, Lord Dainton, referred to the banks—the only occasion on which the banks have been mentioned. It should be put on record that, as is my understanding, the only reason that the banks have withdrawn from the scheme is not that they are against student loans but because it is not a commercial proposition for them. I believe that is the only reason that they have turned it down. That should be said.
I listened with great interest to the contribution from my noble friend Lord Rippon of Hexham in regard to the enabling Bill. His was an extremely interesting contribution. I welcome the flexibility in the Bill. Flexibility is needed. We have heard varying questions raised from all parts of the House on what is to happen on this, that or the other detail. One cannot solve all the problems right at the start. In any case, the problems will change over the next 10 years as life progresses and in my opinion flexibility is a desirable objective. I see nothing wrong with that. The point made by my noble friend Lord Rippon about examining proposed regulations and giving the House an opportunity for their consideration is commendable. I shall certainly listen with interest to what the Government have to say.
This Bill is a small step in the right direction. As I see it, the Bill will enable more people to enter higher education. That must be right. It will put more resources into the hands of students. That must be right. Finally, it will ease the burden on parents and limit the load on the taxpayer. For all those reasons I believe that the Bill is a step in the right direction and I support it. I conclude by saying that it will be a great pity if it is delayed because I hope these loans will be available to students when the new year starts at the end of the autumn.
8.36 p.m.
Lord Blease: My Lords, I endorse the concern expressed by noble Lords from all parts of the House in regard to this legislation. I wish also to mark the considerable public concern and serious misgivings expressed by prominent educationalists and those with major professional responsibilities for the advancement and administration of higher and university education.
Surely it must be a cause of worry to us all that the Bill is so sadly lacking in detail and that there will be no significant savings in public expenditure until well into the next century. That anxiety has

685
been expressed by a number of noble Lords. We must also be uneasy because the banks and the Committee of Vice-Chancellors and Principals have seen cause to withdraw their support from the Bill for whatever reasons. The banks must surely have some feeling for public concern. They did not opt out of the scheme merely because of the limited return on their efforts. Surely they have more to give to our society than that.
I deal specifically with the impact of this legislation on Northern Ireland. The House should be aware that currently Northern Ireland has a greater rate of participation in higher education than other parts of the United Kingdom. Patterns of participation also reflect the wider access of all social groups and sections of the community. Indeed, a vital element in the promotion of mutual understanding and community harmony is that further and higher education is the only form of direct state funded integrated education in the Province, bringing all sections of the Northern Ireland community together in common cause.
The demand for places is such that intake has been increasing steadily to the point where participation rates run at over 18 per cent., compared with the United Kingdom average of 13 per cent. While I admit that there is a need for improvement in education in Northern Ireland, particularly in the higher and university fields, in many ways I applaud the achievements in education in Northern Ireland.
Therefore, our main concern in looking at a future method of funding students must be to ask the Government whether this Bill will improve the quality of life of students and encourage more of them to participate. In the context of Northern Ireland, will the Bill continue to offer opportunities for higher education to students from all social backgrounds? Along with many others, including the elected representatives of Northern Ireland, I cannot see that the scheme as presented will meet these crucial needs.
Extensive research over a number of years has been commissioned by the Department of Education in Northern Ireland through the Policy Research Institute, comprising Queen's University and the University of Ulster. The studies have clearly shown that potential students from families with working class backgrounds will be put off higher education if they are required to take a loan. The research also clearly demonstrates that this student loan system will adversely affect the current high proportion of Roman Catholics who go to college or university. The Bill does nothing to improve the relatively low rate of participation from working class Protestant families. I am sorry to put the matter in those particular terms but they are meaningful in terms of the relationship of this Bill to the Northern Ireland community.
As well as the enhancement of the community's general wellbeing, the future economic growth of the Province is heavily dependent on the intellectual qualities of the human resources available in the Province. That was acknowledged recently in a report of the Northern Ireland Economic Council, which stated that the expansion of a skilled and
686
well-educated workforce was something to which the Government, the community and all of us should be fully committed.
Any new system of student funding must be carefully considered. It must encourage and be seen to support wider access to skills and knowledge and not to threaten and be a disincentive to potential students. The new system must not result in an overall loss to community prosperity as well as bolstering a major extension of the debt-credit system. It is widely recognised that to improve on existing skills shortages there is a need to bring more women and mature students into higher education. Here again, I must raise the expressed Northern Ireland anxieties about the existing participation rates and the impact of loans.
Already the two universities of Northern Ireland have a good record of participation by both women and mature students. Innovation partnerships with further education have already been developed along with foundation programmes. The dangers are that the loan element will steadily increase as the value of means-tested awards falls. With the inevitability of the increasing student debt as each year of the scheme develops, it is certain to be a disincentive for those who may already have family and mortgage commitments. It is certainly an area of considerable worry for existing mature students who have just embarked on university education programmes in Northern Ireland.
I thank the Minister for his correspondence this morning about the Notes on Clauses and rules and procedures. While the correspondence has been helpful, there still remain many questions to be answered. There are questions regarding parliamentary procedures and issues of constitutionality in the application of Clause 2 to Northern Ireland as an integral part of the United Kingdom. There are also issues to be resolved concerning the definition of parity and equity as these are applied in practical terms to the different regions of the United Kingdom.
I believe that these matters can be best dealt with during the Committee stage of the Bill. Schedule 2 to the Bill raises for me serious issues about the procedures and implications concerning certification methods, eligibility, tests regarding evidence of income, forms of verification, the legal accountability of the referees and the scope and equity of the appeals machinery. In addition, there is the matter of legal and other methods of debt collection.
While I am considering this Bill in the context of Northern Ireland, I believe that in ethnic and divided communities we are opening an awful chasm. It will be difficult to provide acceptable and rational community agreements. The fact that one person may be turned down and another found eligible is an issue which must be resolved in reasonable and acceptable terms. Unless that is possible it will lead to great problems not only in Northern Ireland but in many parts of Great Britain.
In this connection I wish to quote from a document supplied to me by the Association of Metropolitan Authorities. It underlines some of the aspects which

687
should be considered and which have not been mentioned in too much detail.
"The Student Loans Scheme will add another separate tier of administration. All administrative costs will be additional costs. No figure has been placed on the number of staff that the Students Loans Company intend to employ. Even if 100 staff were employed—and there must be some doubt about whether such a small number could manage perhaps 500,000 loan applications—the administrative costs would be in the region of £1 to £2 million. The banks were to be paid £12 for processing the loan—at a cost to the DES of £6 to £8 million.
"The system of student support will become extremely complex. Students will not know where to turn for advice and LEAs will still be expected to bear the administrative costs of a grant system which will in real terms have a diminishing financial value year by year".
These are the points which have been put forward after careful thought by bodies which have been working on education matters for quite a number of years. Having listened to the arguments and the cost of this scheme to the taxpayer, I believe that the time and money would be better spent in restoring the value of the present awards as signalled in the Select Committee on student awards in 1986. For these reasons I hope that the Government will exercise their better judgement and think again, as has been said by many noble Lords on the other side, as regards this badly prepared and badly-founded Bill.
8.47 p.m.
The Earl of Bessborough: My Lords, like my noble friends Lady Young, Lady Cox, Lord Blake and Lord Haig, I support this Bill and the principle of making cheap loans available to students. I have done so for very many years especially when they are in addition to a maintenance grant and in no way mean that a student will be liable for his tuition costs. I agree wholeheartedly with my noble friend Lord Caithness that additional sources of funding are needed. In view of the fact that higher education more directly benefits the individual concerned than the general public perhaps, it is right that students should be required to pay a very modest proportion of the costs incurred once their income has risen to a certain level.
I have always greatly respected the vice-chancellors of, I believe, our 49 universities and the principals and directors of our 30 polytechnics, as well as other distinguished academics. When I was an Under-Secretary for Science and Higher Education with my noble and learned friend Lord Hailsham, we both had very good relations with the University Grants Committee, and especially with Lord Wolfenden, with whom I worked closely in various ways, particularly when I was chairman of the Institute for Educational Television, of which Lord Wolfenden was a member. We prepared the way for a university of the air, later to be called the Open University, which was eventually introduced by the noble Lord, Lord Wilson, and the honourable Member, Miss Jenny Lee.
I therefore greatly regret that so many of my friends in academia are opposed to this loan scheme. I do not include the noble Lords, Lord Annan and Lord Dainton, whose speeches I thought were especially interesting, particularly in regard to what
688
they said is being done in other parts of Europe and in North America. My noble friend Lord Butterworth also made sense on this point. But I was distressed by the virulence of the criticism in the letter of Sir Edward Parkes on behalf of the Committee of Vice-Chancellors and Principals which I received on 19th February, and in particular by the higher education leaders' "unanimous" refusal to give support voluntarily to the scheme. That surprised me and disturbed me considerably. Was the decision really unanimous?
Moreover, the idea for a graduate tax would be manifestly unfair to those graduates whose education had not been supported out of public funds or who did not end up with a reasonable income. In my opinion, repayment through national insurance contributions would vastly complicate the arrangements and increase the administrative costs, as other noble Lords have pointed out. The proposed scheme has the benefits of clarity and simplicity. It is also fairer because it does not require graduates to repay their loans until they have the ability to do so. For this reason too the additional sources of funding can only encourage wider access to higher education and help those whom the banks have often encouraged to run up overdrafts at exhorbitant rates of interest. I shall not quote again what the noble Lords, Lord Boyd-Carpenter and Lord Rippon, said on this matter—in the words of Shakespeare "Neither a lender nor a borrower be"—because I do not think that it can be applied in this case. But I regret that the banks have withdrawn from the scheme. We have already heard from other noble Lords that they did so because it was not a commercial proposition. Their withdrawal was not for the benefit of students.
I was also disturbed by the letter and briefing from the president of the National Union of Students who said that the scheme will not solve the problems of the student finance system and would in many ways exacerbate those problems. In contrast to the NUS views, I was reassured by the views of some other students to whom I spoke. I was also glad to read the views of a distinguished feature writer who wrote in one of yesterday's national daily newspapers that most students pay little attention to the NUS and its political extremists and that it was clear that many students were likely to welcome the scheme.
The same writer said that he personally would certainly have welcomed the scheme. Although he could not speak for his children—one of whom went to technical college, one to art school, one to a drama academy and one to university—in speaking as a father he said that such a loan scheme would not have been unwelcome. He added that most parents—and, he suspected, the majority of students—would soon come to appreciate the virtues of student loans, unlike the NUS activists, some of whom seemed to want to be feather-bedded and molly-coddled all the way, with grants in term times and the dole during holidays. I do not wish to exaggerate that point because there may be few cases of that kind. But there are some. On grounds of social equity and the prudent use of public funds, student loans should undoubtedly be of public benefit.

689
I shall not quote the whole of that article, but it concludes that it is a misfortune that the university vice-chancellors, the college principals and the polytechnic directors seem incapable of appreciating the scheme and acting responsibly in this matter. I was certainly very disturbed. As I know as a former Minister, it is only through co-operation between government and the educational establishment that educational reform and the improved standards which all are agreed are necessary can be achieved.
I shall not repeat everything said by my noble friend Lord Caithness in his admirable opening speech. But I should like to emphasise that my right honourable friend John MacGregor has made it clear that grants will not be abolished, that loans apply to maintenance only and that the Government will still be paying 95 per cent, of a student's education costs. As I see it, a loan scheme will mean that more money is available to all students regardless of their circumstances. The loans, as I have said, are very cheap, at a zero real rate of interest, and are not repayable until the borrower has the ability to do so.
For these reasons, I cannot support the amendment of the noble Earl, Lord Russell, when he queries whether the proposals in the Bill are capable of being put into effect. Personally I think that they are so capable. I therefore support the introduction of the Bill even if in Committee there are a few amendments which the Government are happy to accept.
8.58 p.m.
Lord Kirk wood: My Lords, many noble Lords have commented on the fairness or otherwise of the student loan proposal and on the adverse effect on recruiting to polytechnics and universities students from working-class backgrounds. I do not wish to repeat the arguments they have put forward. But if we are to achieve the expansion in higher education which the Government themselves deem necessary for the future economic health of the country, it must mean that more students from a working-class background should be attracted. The prospect of incurring large debts followed by years of repayment in poorly paid but essential occupations like teaching cannot be attractive to such students, especially if, as may happen, the fees become included and the discipline studied is an expensive one such as science. On that point alone I believe that the scheme is a potential disaster for education in this country.
I should like to draw your Lordships' attention to some of the practicalities of the Bill and the problems and costs which they would generate. The first point is the requirement in the Bill for higher education institutions to provide students attending courses with certificates of eligibility for a loan. That was a point raised by my noble friend Lord Russell earlier in the debate. The cost of administering that statutory requirement is apparently to be borne by the higher education institutions. What worries the chief officers of those institutions is the fact that they can be held responsible for wrong information supplied in good faith and presumably taken to court to recover loans granted on misinformation. To protect themselves from this eventuality they will be
690
obliged to check and investigate student activities. That will require more administrative staff and costs, all to be borne again out of their own financial resources. This is not a simple loan scheme to administer and the costs are being placed unfairly on the polytechnics and the universities.
The second point of practicality to which I should like to draw attention concerns the collection of the debt. This has already been referred to by many speakers. With that there is the development of another bureaucracy to deal with the problem of debt collection. Yesterday we heard from the DES of proposed schemes for the recovery of bad debts: the use of two referees known to the student; the use of private debt collecting agencies; blacklisting; attachment of earnings; seizure of goods, and so on. In the context of education, the purpose of which is the purveying of truth and the enlightenment of the individual, that seems to be somewhat fantastic.
As we have heard, the evidence from the United States where the loan scheme has been operating for some years shows a huge number of bad debts which will remain uncollected despite all the endeavours of the heavies. I believe that my noble friend Lord Kilmarnock indicated a 14 per cent, default in that area. What clearly emerges is that this student loans scheme is not simple. By contrast with the graduate tax which the universities and polytechnics have agreed to administer—that is, if it were to be introduced—the student loans scheme promises to bring with it complications and embarrassments for the Government of the kind that we are presently seeing in the implementation of the poll tax.
9.3 p.m.
Baroness Carnegy of Lour: My Lords, the noble Lord, Lord Macaulay, who sadly is not in his place at present, said that he viewed the Bill as a failure. He blamed that on the way it has been drafted. It is often the duty of this House to object to Bills which rely too heavily on secondary legislation. I was very glad, and reassured, to hear the most constructive speech of my noble friend Lord Rippon of Hexham on the subject. I think I understood him to say that he did not feel that this Bill was as guilty as some in that respect.
I cannot see how the Bill could be anything other than an enabling framework. It will require updating and developing as time goes by as students' needs and circumstances change—that applies not only in the detailed facts and figures but also in its scope. I am one of those who hope the one day, perhaps sooner rather than later, part-time students may be included in the students' loans arrangements. It seems to me that the right way to draft a Bill of this kind is as a permissive framework. The details can then be added by regulation. Again, I am one of those who hope that some of that secondary legislation may be carried out by way of affirmative resolution rather than the negative procedure. I think that we need to be selective about that aspect.
As regards the concerns of the vice-chancellors and principals, I know that they do not like being asked to help operate a scheme which the banks have turned down. I agree with them as, I think, did my

691
noble friend Lord Rippon. It is extremely unfortunate that the banks should have done so. In view of how they have benefited from popular capitalism, it seemed reasonable to ask them to contribute some of their expertise and facilities to help the next generation through such a scheme. However, what really surprises me is the fact that the vice-chancellors and principals have seen fit to announce publicly that they will only do that which the law requires, no more and no less. Is it a good example to the nation's future professions when the heads of higher institutions say that they will work to rule? I regret that development, especially since the role which is being required of them does not seem to be unreasonable as it appears now in the outline of procedures.
The certification of the eligibility of students for grants, and an appeal system connected with it, can only be done by the institutions. As I read the proposed rules, the question of who will do the subsequent processing is not yet settled. It may be carried out by the institutions themselves or by post. It seems to me that that should be a pragmatic decision and, above all, it should be that which is most convenient for students.
The graduate tax which the vice-chancellors and principals have espoused does not seem to me to be as attractive, or as likely to be as attractive, to students as the loans scheme. One of the criteria which the vice-chancellors feel is necessary for the scheme is certainty for the students. It does not seem to me that an unknown additional amount of tax in the future would be as certain as a clear system for repayment of a loan.
The question of whether loans will put students off, which your Lordships have been debating fully this evening, is at this moment to an extent a matter of opinion. Of course given the choice between the living costs being met in full by taxpayer and parents, and part by them by loans, many students would find the former more attractive.
That is borne out by the Edinburgh University Students' Association poll. Of 587 respondents to the poll they sent out, only 5–3 per cent, said that they would like to move to a loan scheme. But that poll shows something else. The 587 who responded are only 6 per cent.—6 per cent!—of all the students at Edinburgh University. I do not know what proportion are not members of the association, but presumably all the other members—and there are many thousands of students at Edinburgh University beyond the 587—did not feel strongly enough to respond.
That is interesting. It is interesting too that even the communication from the National Union of Students accepts that the status quo cannot be there to stay. Although it expresses many views about sums of money that students will, or will not, have and questions the computations in the proposals, it does not come down against a loan scheme.
On the question of students in Scotland, a number of noble Lords—the noble Lords, Lord Butterfield, Lord Annan, Lord Addington and Lord Macaulay—suggested that in Scotland students are
692
differently placed and may need different arrangements. I personally feel that in this respect we should not talk just about Scotland. We should talk about all courses anywhere that last over three years. I certainly would not go along with the suggestion—and I think the Church of Scotland has it in mind—that Scottish universities and colleges should be excluded from this Bill.
Indeed there are thoughts in Scotland that the four-year courses are not necessarily always the best way. I think that the noble Lord, Lord Grimond, hinted at that. I look forward to exploring this matter at Committee stage. It is important but it is not a simple matter, and it is certainly not a purely Scottish issue. Judging by a number of students with whom I have discussed this matter I believe that it may be that many students, understanding that the status quo cannot be maintained, are not all that averse to the scheme, and that that especially applies to those whose parents do not pay up the full amount they are asked for.
As for young people from less well off homes, it may, or may not, be what your Lordships feel is desirable, but there are those for whom the chance of standing on their own feet will mean a great deal. It is condescending and out of date to think otherwise. If one looks at the figures of what the maintenance grant will be, what the loan can raise, and remembers the scope that there is to earn in the holidays, the proposition for some is challenging but not unrealistic.
It is interesting that in Sweden, where in 1987 something like 90 per cent, of what students received was in loans and only 10 per cent, in grant, they were finding that working-class students were not coming as readily as they had in the past. They are in fact altering the scheme. However, they are not developing it so that students receive a smaller amount in loan. I quote from the scheme:
"The grant portion of study assistance will be substantially increased. The rules of repayment have been tightened up, and under the new scheme students are expected to bear a larger share of the true cost of their loans."
They are doing it differently, but they are going to bear a larger share. In Sweden they do not think that that will discourage working-class students.
This Bill has to be an enabling Bill. The information about the scheme is now available. The reasoned amendment, now that we have so much information, is entirely out of date. We shall need to look carefully at the details of the scheme in Committee. There are a number of aspects that I look forward to examining closely. The Bill may need to be amended, but it should certainly have a Second Reading tonight.
9.13 p.m.
Lord Taylor of Blackburn: My Lords, after six hours and seven minutes, and 32 speakers, and after writing three speeches during the course of the debate, I shall take two or three minutes at the most because I have just torn up my last speech. If I spoke for longer I should be repeating many of the things that have already been said, and I do not believe in repetition. We have a great deal of repetition in the House and I do not believe in it.

693
One thing worries me. I wonder whether I live in the same world as many of those who have made speeches. I find that I am completely opposed to some of the things that have been said. I have been working in education now for 36 years, and many people do not seem to have grasped what I have learnt. We are still poles apart.
When my noble friend Lord Peston started speaking for the Opposition he said that it would have been good if we could have had an all-party debate on the subject to see how we could work together. Apparently we shall be unable to do that. We can only wait until we reach the Committee stage and hope that we can get straightened out those matters that we want straightened out. For example, I am morally opposed to loans of any sort. When we start talking about grants for those who receive less financially out of the community we must look again—as I am sure we can—at those involved with the social services and the churches. I have had my two minutes. I shall wait until the Committee stage and then speak again.
9.15 p.m.
Lord Harmar-Nicholls: My Lords, the noble Lord, Lord Taylor, has, as usual, been succinct. We have his point. He has been correct, as many who have contributed to the Second Reading debate have not. I do not believe that I have listened to a Second Reading debate in which more Committee stage speeches have been made. A good example was the noble Lord, Lord Peston. He stitched together six or seven Committee points and presented them most adeptly as a Second Reading speech. I believe that I know why he did that. He did it because, had he followed the rule of discussing the principle behind the Bill, he would have found it difficult to oppose the Second Reading, especially in the light of his speech on his Bill a few weeks ago when he made it clear that he believed that we had reached a stage with regard to government and finance where everyone (recipients, employers and the Government) should contribute. That is what the Bill achieves.
I well understand the noble Lord. I did not find a great deal of difference between his approach and that of my noble friend Lady Faithfull. She made it clear that there are many points in the Bill that she would want to examine when it reaches Committee. She wants to use her influence to have those points altered. The only difference was that although they both made the same speech, my noble friend said that she would vote for the Second Reading whereas I gathered that the noble Lord may not.
Lord Peston: My Lords, I am shocked that the noble Lord did not appreciate how principled my speech was. There is some confusion. There is no question of us voting on the Second Reading. What we have is an amendment to the Second Reading. The issue of voting on the Second Reading is not before us. Noble Lords should not allow themselves to be confused on that point.
Lord Harmar-Nicholls: My Lords, what a delightful cover-up that is. Is the poor innocent in any doubt as to what the amendment is? There is no doubt that the amendment is a type of wrecking amendment.
Lord Peston: My Lords, perhaps I may intervene again because I believe the point is important. I am speaking not merely for myself but I think also for my noble friends. I, as a matter of principle, would not vote against the Government on the Second Reading of the Bill. I must say that in terms. I regard it as an important point for the noble Lord to understand. The Government may have chosen this as a matter of confidence; we did not choose anything. I should like the noble Lord to know that I take the traditions of the House seriously. I do not accept that voting for the amendment is a vote against Second Reading.
Lord Harmar-Nicholls: My Lords, the noble Lord rose to the charge without being serious about it. If the amendment were carried, there is no doubt that it would have the same effect as voting against Second Reading. Although technically the noble Lord would not be voting against Second Reading, it would be the equivalent. I hope that my noble friends will take that point into account because, should we lose the vote on this measure, the effect will be to damage the Government's general standing at a time when it is important that it should be maintained. I do not expect that to make any impression on noble Lords opposite but I hope that what I say may make some impression on my noble friends on this side of the House. Let us make no bones about it, that would be the effect of the amendment.
Lord Cledwyn of Penrhos: My Lords, the noble Lord is misleading the House and the country by what he has said. It is perfectly plain to anyone with intelligence and experience that this is not a wrecking amendment. It is an amendment moved by the noble Earl, Lord Russell, which regrets certain matters in the Bill. As my noble friend Lord Peston has said, we shall not vote against the Bill. The noble Lord, Lord Harmar-Nicholls, must be careful what he says at this stage.
Lord Harmar-Nicholls: My Lords, I refuse to be pushed off this point. Like the noble Lord, I have gone through the parliamentary procedures for 40 years and I can recognise a manoeuvre when I see one. I am able to recognise the effects that can flow from such a measure. The noble Lord knows perfectly well that, while this is not a Second Reading vote, the effect that would flow if the amendment were successful would be equivalent to that. I maintain that that would be very damaging.
The other point I wish to make flows from what my noble friend Lord Glenamara said when he made the claim—
Lord Cledwyn of Penrhos: My Lords, in the light of what the noble Lord has persisted in saying, I should direct his attention and the attention of the

695
House to the Companion to the Standing Orders. It is made plain on page 94 that:
"In addition to reasoned amendments in opposition to the Second Reading of a Bill, it is in order to move amendments in support of, or without seeking to negative, the Second Reading, where it is desired to invite the House to put on record a particular point of view in assenting to the Bill".
That is within the rules of order of this House.
Lord Harmar-Nicholls: My Lords, I have not suggested for one moment that anything is out of order. We would not have reached the stage that we have if that were the case. However, what I am interpreting for my noble friends is the fact that, although the amendment is in order in technical terms, its effect would be equivalent to a vote on Second Reading from this House.
Noble Lords: No!
Lord Harmar-Nicholls: When the noble Lord examines what I have said he will perhaps recognise that effect because he is an experienced politician.
Baroness Seear: My Lords, does not the noble Lord agree that if the amendment moved by my noble friend were carried, we would nonetheless proceed to Committee stage in the ordinary way and that would probably mean that the Bill would pass? Therefore, the measure cannot be the same thing as a defeat on Second Reading.
Lord Harmar-Nicholls: My Lords, the noble Baroness is, or at least was, the leader of a group in this House. Which issue does she think would hit the headlines tomorrow? Will it be the second vote on Second Reading, which is just a straightforward procedural matter, or will it be the defeat on the amendment? Which issue does the noble Baroness think would hit the headlines? Which would have the greater effect on the country? I have no doubt in my own mind on that matter.
However, I wish to return to the point made by my noble friend Lord Glenamara, who is a friend of mine of many years' standing. I was interested to hear the point made by the noble Lord when he wished to influence the House—it was a Second Reading point—against accepting the Bill. He claimed that he was perhaps one of the last people to be subject to a system whereby he received a loan. He recounted how difficult he found that system and the problems that arose from it.
However, I can think of no better example to support having a student loan system than the noble Lord himself. I cannot imagine any parent or any student saying, "We must not accept the loan system. Look what it did to Lord Glenamara". What it did to the noble Lord, Lord Glenamara, was make him a successful and eminent headmaster. It also brought him to Parliament where he sat in the Cabinet and held the highest positions of state. I do not think his example is a good one if one is giving reasons to prevent the take-up of student loans.
The Second Reading speech which I commend to the House, and particularly to my noble friend the
696
Minister although I do not think he was present to hear it, was that made by my noble friend Lord Nelson of Stafford. He expressed in a concise way precisely what I should have liked to express had my speech come at an earlier hour when I could have extended the excellent recommendations that he made. The feature that is most clearly in support of this Bill is that it will be a means of attracting new money into education. It is not a lot but it is new money. I am convinced that with all the legitimate demands made upon the nation's purse from all quarters, unless we find some way of obtaining new money in addition to that which comes from tax—which is a disincentive to those who have to earn money and look after their families—we shall not be able to meet the demands.
The advantage of the loan system is that it will enable more money to be put into education. The need for that is clear if we remember the figures. In 1962 when the matters of education that we are discussing today were being dealt with the cost was £236 million. Only seven years later, in 1989, it has increased to £600 million. At the rate things are going one can imagine what the figures will be in another seven years. Unless we can find some way of bringing in new money as distinct from the tax money we shall not be able to meet the demands that all of us would like to meet for the many deserving causes that have to go through our procedures from time to time.
The last point which I wish to make, since most of the arguments have already been presented, is that this is an enabling Bill. It is right that it should be such a Bill. It will have to be amended on many occasions and I have no doubt that the reasons for amendment will be brought out when we reach the Committee stage. If this was primary legislation, if it was a statute, then there would be delay and difficulty in bringing about the innumerable alterations that will inevitably have to be made. For that reason I do not agree with my noble friend Lord Rippon, who is experienced in these matters. He has had the same experience as I, but we ought not always to expect affirmative regulations. The negative procedure has many advantages these days. The one lesson that I and others who have seen how the Bill has been dealt with both in another place and here have learnt is that Parliament takes up time that is not available. We must find some way of cutting our time-wasting tactics which on the face of it may seem good at the time but which have the effect of delaying good legislation.
Lord Donaldson of Kingsbridge: My Lords, will the noble Lord consider what he has just said: that Parliament takes up time that is not available? Parliament does not take up time that is not available. I do not understand.
Lord Harmar-Nicholls: My Lords, the noble Lord has sat in this House for many years and seen the changes that I have seen. In this House it used to be the case that when a point was made it was rarely repeated; it was on the record. Debates were over in two or three hours, whereas now, as the noble Lord, Lord Taylor, has said, because of repetition the debate has lasted seven or eight hours. That tendency

697
exists because one weapon used in order to delay a government is that of time. The negative resolution makes it more difficult for that time-wasting to take place.
That is why I believe that this is right as an enabling Bill. I urge my noble friend not to be swayed too much into believing that every change that has to be made should be made only by affirmative resolution. I commend to the House the speech of my noble friend Lord Nelson. It is the speech that I should have liked to have made and I hope that my noble friend the Minister will take the message it gave fully into account for the future stages of this Bill.
9.29 p.m.
Lord Swann: My Lords, I wish to say a word or two about what I conceive to be the real justification in the Government's mind for the Bill before us. They spell out a number of times in the White Paper of 1988 that they claim—and I shall in some degree dispute this—that the social return, that is to say the financial advantage, that a graduate receives in terms of his increased earnings is far higher than the financial return that a university receives on producing a graduate. There is an appendix and an annex devoted to that.
Perhaps I may explain briefly what the Government call the social rate of return; namely, the extra earnings of graduates over and above what they would earn if they merely had A-levels. That is expressed as a percentage of what is needed to produce a graduate. If noble Lords have not read it, they might be interested in what the Government think are the social returns on different subjects at university. Top of the list with 10 per cent, come the social sciences, which must be something of a shock to a Conservative Government. Bottom of the list, which may be even more of a shock to them, are arts—not fine arts, but arts in general—on which the Government claim that the social return varies from minus zero to half a per cent. That seems rather peculiar. Engineering and sciences are scattered somewhere in the middle.
On the question of personal rates of return—the extra earnings that a graduate receives over and above the money that has been spent by him in terms of a grant or earnings forgone while he was at university—the figures look rather different. The Government appear to have shuffled them around in a rather curious way. They work on the same data, but social sciences have slipped into second place, engineers have attained first place and arts have jumped to 10 per cent. That must be bogus because one would expect to have to multiply the figures that I quoted by four. If one adds up all the money that students have to spend as a fraction of what it costs a university to produce a graduate, one has a factor of about four. The Government appear to be unaware that, if one multiplies zero by four, the answer is still zero. Even if one multiplies zero by a million, the answer is still zero. One way or another, there seems to have been what is called in business circles creative accounting. In the scientific world we call it bench corrections, but it comes to the same thing.
698
I am rather worried about all that. It is claimed that the social return—the return to society—on a university can be properly calculated on the extra earnings of its graduates, which is quite a small amount if one works it out. Although the costs of research are included, no attempt is made to work out the advantages from research. In many cases they are known to be substantial, but they have not been included in the percentages. Nor have any of what economists call the intangibles been included.
I shall not go into the trouble of defining intangibles and the value of culture to society, but one example interests me. I doubt whether any noble Lords think that the value of a legal system is properly calculated on the salaries, substantial as they are, of judges or barristers. If we did not have judges and barristers, our society would collapse in a heap and I cannot imagine how many billions that would cost us. Once again, the Government have left out an important factor in what they claim to be the social return on universities. I have mentioned the research factor, the intangibles factor and, probably the least important of the lot, the extra earnings of a graduate. The Government have perhaps been incompetent here. Perhaps, if one had all day to explain, one could justify their figures, but I very much doubt that and I challenge them to prove that I am totally wrong.
Finally, the return on a university is far higher than the Government give credit for. They could certainly absorb with no trouble at all the costs about which they are making such a fuss when they say that they must have loans to straighten things up. I do not believe that. Financially and intangibly, the universities produce things on a scale which means that there is no problem. I do not know why the Government are in such a twist about introducing loans.
9.35 p.m.
Baroness Elles: My Lords, it appears that some of my noble friends have informed your Lordships that on this side of the House we have had applied a three-line Whip. I should like to assure noble Lords on all sides of the House that we do not need a three-line Whip to come here and vote on behalf of the Government so as to support them on this Bill on student loans.
I should just say that the noble Earl, Lord Russell, introduced his amendment quite brilliantly. Again, I think that all sides of the House would agree that it was a remarkable speech. However I regret profoundly his tabling of the amendment as he regretted that it was only to seek information. If this debate had been a real Second Reading debate addressed to the Minister and asking for information, we might have been able to have a slightly more constructive discussion than the one we had this evening.
If my noble friend the Minister does not cover all the points when he winds up the debate later on, I very much hope that he will be ready to discuss all those points very fully at Committee stage. Clearly

699
there are issues which are of concern to noble Lords. We want to know the full thinking of the Government on certain issues. I know that at Committee stage we shall have the full support of my noble friend Lord Caithness in answering those questions.
Aside from that, with regard to regulations being tabled under what would be called an enabling Bill, I should like to ask my noble friend (as indeed many of my noble friends have done) whether the Government will consider tabling regulations under the affirmative resolution rather than the negative procedure. That gives a very much greater opportunity for Parliament—both this House and another place—to give proper scrutiny and time to the regulations which will be tabled from time to time by the Government. I believe that if we were to have some assurance along those lines, there would be absolutely no justification whatsoever for voting in favour of the amendment tabled tonight by the noble Earl, Lord Russell.
There are one or two points that I should like to make. Clearly all sides of the House are totally at one in wanting to see a far greater number of students in this country benefiting from higher education. I am sure that all noble Lords will join with the noble Lord, Lord Swann, in recognising the very full benefit that students receive from universities in this country. We know that that is true because of the great number of overseas students who come here to benefit from an education in the United Kingdom. In my view there is no doubt that the value obtained from the universities is incalculable. It cannot be calculated in terms of pounds—I was going to say pounds, shillings and pence but that is a little out of date so I shall restrict it to pounds.
Nevertheless if that is our objective, we have to ask ourselves whether this scheme will help in bringing forward young people to enter higher education who so far have not been coming. We have all talked ad infinitum about skill shortages and loss of revenue to the universities. We realise that educating more students will not only bring those students a better quality of life and greater opportunities for the future but will also help to resolve those two problems.
What is the position at the moment? I must confess that, although I have not listened to the speeches of every noble Lord, I do not think that anybody has stressed the present position with regard to students. A college with which I am closely connected conducted a survey about two years ago and found that 75 per cent, of all students in the third year had overdrafts at the bank of anything from £1,000 to £1,500. The banks confess that they have targeted students not only as clients of today but, even more importantly, as clients of tomorrow. They encourage students and allow them to build up overdrafts.
On Sunday I had two people to lunch who are parents of two children, one at a polytechnic and one at a university. The one factor that those two children had in common was that they both had overdrafts at the bank. One of them had overdrafts at three banks. The mother, who was turning out the
700
room of her daughter, was surprised to see a Lloyds Bank account, and expressed surprise as she did not know that her daughter had such an account. But, sure enough, that child had an account at Lloyds and accounts at two other banks and overdrafts also at those two other banks. I must confess that those two families were not on the poorest income scale. However, that is what is happening to students today.
That is why I so much welcome this scheme of student loans, which I believe will overcome some of the problems in relation in particular to maintenance. I repeat the point about maintenance because I understand that that is the purpose of the loan. It is for no other purpose and can help to resolve that problem, which is in fact a disgrace.
The way in which the scheme has built in a deferred payment is a guarantee to those young people who have had overdrafts that they will not be clobbered by the banks to pay rates of 14 per cent, and 15 per cent., which terrify them, knowing what will happen if they cannot pay. It will be a regulated scheme. They will pay when they have completed their education, and only when they are in a position to pay, in accordance with the regulations that are being laid down. I can see nothing but benefit in that, in particular in view of the current situation of the amount of indebtedness of students, which is something people do not seem to be aware of.
I have the greatest respect and admiration for my noble friend Lord Boyd-Carpenter, but it is no good saying, as he did, that we must stop living in a credit society. We are living in a credit society. These young people have built up great debts under the system. Some parents have not been allowed credit cards because the debt has come back to them from the bank. They have found that they will not be given a credit card because the bank has stopped their names going forward. We should realise the many problems of this nature when we are discussing the Bill.
I very much welcome the fact that, as I understand it, parents' contributions will go down. That means far greater equity among people of differing income levels and should be of encouragement to those on lower incomes who may not have had the encouragement to send their children on to higher education.
Much has been said about the numbers of students in other parts of the world. The OECD published a very interesting book quite recently called Pathways for Learning: Education and Training from 16–19. A graph shows that in the Federal Republic of Germany 78 per cent, of all 18 year-olds go on to higher education; state assistance is 33 per cent. In Japan 75 per cent, of 18 year-olds go on to higher education; state assistance is 12 per cent. France has 51 per cent, of 18 year-olds going on to higher education and only 12 per cent, of state assistance. The United Kingdom has 35 per cent, to 38 per cent, of 18 year-olds going on to higher education; yet state assistance is 82 per cent.
I cannot help believing that there must be some correlation between the figures. I cannot put my finger on what it is. It may be the fact that parents

701
in these other countries are determined that their children should have a better education and that they do all they can to send them to universities, polytechnics or training colleges. Perhaps we do not have that ethos in this country. It is something that we should be pressing for. The system of student loans is one way of dealing with it. I do not believe that however good the system is it will be the total answer to encouraging young people to go on to higher education and to benefit from the opportunities that our academic system offers them. I say that regardless of subject—engineering, Sanskrit, geography or whatever it may be. These young people must have the opportunity for a wider vision and better mental training.
I should like to pick up one point on social security benefits. I understand why the Government are now saying that social security benefits should not be given in certain cases. However, I hope that the House will be given absolute assurance on how the access funds will work. It is a matter that I hope will be raised in Committee. Who will be responsible for the funds? On what criteria will young students be assessed? How easy will it be for them to apply? Will there be means tests? Under what procedures will these young people receive help from the funding? What will be the size of the funding?
Many noble Lords have spoken about rent and the difficulties of expenditure for young students. As many people have said, the minute the poll tax—on this side of the House I should call it the community charge—comes in, every university and college responsible for the housing of their students should make absolutely certain that rates are deducted from their present rents. The number of landlords who have made no offer to reduce their rents is absolutely scandalous. It is quite clear that 10 per cent., 15 per cent, or over 20 per cent, of some of the rents for students in student lodgings—where I know as well as other noble Lords that some people are receiving about £1,000 a week from renting out rooms to students—may be attributed to rates. I hope that noble Lords who have spoken against the Bill and who have expressed concern about social security will ensure through the services in their colleges and universities that there is a strict clampdown on landlords who provide accommodation for students but who do not deduct the rates.
We are reaching the end of the debate. While listening to previous speakers I was reminded of my education and of Voltaire, who said that all change is an enemy. I believe that some noble Lords feel that this new change is also an enemy. Let us be a little forward thinking and try to provide a good, sound education at the highest level for our young people not only in the 1990s but into the next century.
9.45 p.m.
Baroness Lockwood: My Lords, I support the amendment tabled by the noble Earl, Lord Russell, for reasons already expressed by many noble Lords. As was said by the noble Lord, Lord Rippon, while we appreciate the thoughtfulness of the Minister
702
in sending us this morning notes on clauses and procedures, it is not the same as having those details in the Bill.
There are three important areas of agreement among your Lordships. First, we are agreed upon the need to expand student numbers in this country. Whether it remains government policy to double student numbers in 25 years is open to question. Nevertheless, in their 1987 White Paper the Government clearly stated that they sought the expansion of higher education.
Secondly, we agree that if we are to reach that expansion we must widen the participation rate among the lower social classes and the groups now under-represented in higher education. Thirdly, it is realistic to assume that, with a considerable expansion of higher education, plus greater provision for 16 to 19 year-olds who might not reach higher education but whose skills must be maximised through better training, a re-organisation of the student grant system is required. The House is largely agreed on those three objectives.
The differences arise in how they are to be achieved. I had expected government policy to be directed towards that difficult problem. However, having heard the comments that have been made in this House and also those from the four major authorities concerned in higher education, it appears that there is a great deal of hesitation in accepting that the scheme is the right way of approaching the problem.
The opposition put forward was based not so much on the principle of imposing on students a system of repayment for the benefits that they have received but on the particular system put forward in the Bill. There are two areas in which I have a great deal of sympathy with the opposition. It has been said that the administration of the scheme is a nightmare. I agree with the Committee of Vice-Chancellors and Principals that the scheme is likely to impose a greater degree of administrative work on the universities and polytechnics. I add my name to the list of noble Lords who asked whether those institutions would be recompensed for that.
I cannot understand why, when we have such an efficient tax system, it is necessary to have a system not only for collecting the repayment of student loans but for chasing up those who might default. I should have thought that as our tax system is so efficient that would be the best administrative means of dealing with the matter. Therefore, I believe that the Government have a great deal to answer for if they are to satisfy criticism on that ground.
I very much sympathise with the criticism that, far from helping to widen access to higher education, the scheme will impede it. We cannot turn to government information on this matter because the Government have not thought it necessary to undertake research to find out whether student loans, or indeed what kind of student loans, would help or deter wider participation. However, those organisations which have been involved in some research on the subject—for example, the Institute of Manpower Studies—think that the scheme will be a deterrent.

703
The research shows that if we were to have the same participation rate of social groups 3, 4 and 5 as we have of social groups 1 and 2, the numbers in higher education could be doubled.
The survey by the National Union of Students indicates that 24 per cent, of pupils whose parents were semi-skilled would drop their higher education plans. Among mature students the survey showed that 26 per cent, would drop their higher education plans. I think that women would be particularly at risk among those numbers.
In his opening remarks the Minister said that the scheme would mean more money for students by the autumn. Again that is contested by the student unions, and one wonders whether he has taken into account in his assessment the cost of the poll tax and the loss of social benefits. The students at Leeds University have made some calculations on that. They reckon that the loss of housing benefits and income support, which amounts to £804, will be replaced by the student loan of about £420. That is in Leeds where housing costs are lower than in many university towns. On average the rent is £23 per week, and, as other noble Lords have indicated, in other universities it can be much higher than that.
A number of your Lordships have mentioned the position of women. Historically there has been a lower participation rate of women in those social classes which already take up their share of higher education. Currently about 43 per cent, of students are women. If it is difficult to get parity between male and female students in social classes 1 and 2, it will be even more difficult in social classes 3, 4 and 5. The position of women is difficult. Their earnings are still much lower than the earnings of men. They have a career break to raise a family. All those factors mean that their earning ability is not as great as that of men. We have a long way to go
704
before we reach parity in that area. Therefore, there is a very real problem as regards the participation of women.
The next area of concern is that the scheme is not comprehensive. It does not include access courses, many of which currently receive a discretionary grant. What will happen to the discretionary grants under the scheme? Access courses will be very important if we are to increase access. It does not include people over 50, and all the evidence again is that an age bar affects women more adversely than it does men. Also it does not include part-time students. I certainly hoped that any new scheme would include part-time students.
When we debated this matter in your Lordships' House some time ago in relation to Birkbeck College, it was pointed out that part-time education is the most economic form of higher education. Many students remain in employment; they continue to earn and continue to pay taxes. In addition, they pay their own fees as well as meeting their own maintenance.
For married women the position can be somewhat different because if they have given up work in order to look after a family, they might have taken that period as an opportunity to enter higher education. However, they have no funds and no money in their own right; they have to pinch and scrape from the housekeeping in order to meet their expenses, not only their fees, but travelling expenses and additional maintenance. I hoped that they would be included and, like other noble Lords, I hope we can return to this at the Committee stage.
It seems to me that if this is to be an effective and comprehensive scheme, covering and meeting the needs to increase access, then all the various groups that I mentioned should be included in the scheme and we should take account of their particular problems.
9.56 p.m.
Baroness Seear: My Lords, this afternoon we discussed two themes; the minor theme, in a sense, of the amendment moved by my noble friend Lord Russell, and the major theme of the Bill—this skimpy little Bill which is all that the Government have given us to discuss on this very important matter of student loans.
The real question before your Lordships' House, as everybody said, is how we double the number of people in this country coming forward for some kind of higher education. There is no doubt that we urgently need to do that. That comes not only from all sides of your Lordships' House, but also from outside in the wider community. For instance, the Council for Industry and Higher Education, which contains many leading industrial figures who would be greatly venerated on the other side of the House, strongly urged a big expansion of higher education. The fact is that unless we get that expansion from the very low level we have at present—an appallingly low level in comparison with people with whom we compete in the developed world—we shall be economically down the drain and will not get the money to support any kind of scheme either by grant or loans.
It is an urgent economic necessity that we get that expansion. It is more than that, important and urgent though the economic issue is. In this rapidly changing, exciting, alarming, challenging world in which we live, with a rate of change at the present time that bewilders us all, unless we have a well educated electorate we shall find it extraordinarily difficult correctly to make the kinds of decisions that we ought to make.
Perhaps I may give one small example away from the technical area about which we have been speaking today. Unless one knows something about modern and pre-modern history, how does one understand what the Poles feel about the unification of Germany? It is these wider cultural issues, these wider educational issues, which need to be addressed by far more people in this country if, as a democratic country, we are to make good decisions.
We are nowhere near the level of education we need. We are wasting people day in and day out. We must all know that among the social classes not represented at universities there are people of real talent. We come across them in our daily lives in a whole variety of ways. Very often they have little idea of how much talent they have until they are given the opportunity to develop it. We all know examples of that kind.
If the Government had really meant what they said about recognising the need for doubling the number of people in higher education, what would they have done? They would not have produced this pathetic little Bill. Months ago they would have got together representatives of the various groups concerned with higher education. Through some kind of commission or inquiry, containing people whose names were known so that their reputations
706
would be at stake if they signed foolish recommendations, they would have thrashed out the problems in advance and come up with the kind of proposals which could then have been embodied in acceptable legislation.
The Government did not do that. Again and again we have had Green Papers written by anonymous groups of people. One deeply suspects that the groups consist of hand-picked civil servants who can be relied upon to produce the kind of Green Paper that the Government want them to produce. We do not know who these people are. We do not know who they have approached to obtain their opinions. We are then presented with a Green Paper. The people who produce such Green Papers are like those who prepare an agenda; and we all know that if you want to get your own way you take good care to ensure that you prepare the agenda.
We have started the wrong way in approaching this central and vitally important problem of how to increase the percentage of people entering higher education. Although lip service has been paid to that need this evening, I have felt all the time that we are putting the cart before the horse. We are talking about the methods by which we increase the numbers and not how we are to implement them. That has not been the centre of the discussion.
Given that we have the Bill, we on these Benches recognise that if we are to have the big expansion we need there has to be a different way of financing undergraduates. We are not saying that the grant system as it stands should be used simply without any change in order to attract the greater numbers. We are fully aware that the money has to come from somewhere. However, we are not saying that this scheme as it stands in the Bill is the right way of doing that.
People have said that loans will be acceptable and will increase the number of people coming forward. I have not been able to follow the logic of that argument. If people will not come forward from social classes 3, 4 and 5 when they do not have to pay, why on earth should we expect them to come forward when they do have to pay? That is the simple and logical conclusion. I see nothing to attract people from those social classes into higher education any more than the system we have at present. We are not getting them now and that is the question to which we should be addressing our attention.
Noble Lords have said that they have loans in Japan, Germany and Sweden. I do not wish to sound racist, but we are not Japs, Swedes or Germans. There must be something different in the way that the youngsters in those countries respond to the opportunities of higher education. It may be, of course, the deep-seated anti-intellectualism of the English. I have had it on good authority—no names, no pack drill—that among the party opposite no criticism is stronger than to say "You are too clever by half. It may be that it is the feeling that study and learning is for someone else and not, in this country, something to be involved in yourself. That attitude has to be overcome.

707
I suggest that a system of loans is not likely to overcome it. The evidence that we have so far—it is not good enough evidence because the work has not been done as it should have been done—from the vice-chancellors, the NUS, and student bodies throughout the country, is that the students in this country (whatever happens in Japan or Germany) do not like the idea of loans and will not respond to it. Maybe they are wrong and they should respond. The evidence so far is incomplete and I blame the Government for not having done this kind of study. We have not sufficient evidence on which to have this argument. We should have such an argument before we launch this new scheme. The vice-chancellors admit that new money has to be brought forward and they have put forward the proposal for a graduate tax. My former colleague, Dr. Barre, of the London School of Economics, put forward his scheme. The Secretary of State has repudiated the two schemes saying that they are not satisfactory.
Without wishing to be offensive—perhaps I do wish to be rather offensive—I suggest that if Dr. Barre, who has been working on this scheme for several years, and the people who have been advising the vice-chancellors (who are not stupid men) say that they have worked out a scheme that satisfies them, I need more evidence than just a repudiation by the Secretary of State, which means a repudiation by officials in the Department of Education and Science, that the scheme will not work. We have simply been told that these officials do not believe that the scheme will work. I protest that it is more likely that the vice-chancellors and Dr. Barre are correct rather than the civil servants in the DES.
The Government have made such an unholy mess of the poll tax—and on this side of the House we are able to call it by its right name—and of nuclear energy, that they must allow us to say that we do not always believe them when they say that they know they are right. There has to be more money, but we do not believe that this way of providing it is right. This legislation should go back into the oven and be cooked again.
We need better people who go through the higher education system. We are not likely to get them through this scheme. Many people have spoken about the various groups that will be affected and I am not going over that ground again because it is now getting very late. There are the working-class children and particularly older and mature women returning to education among whom there is a great deal of untapped ability which many of them do not recognise they have until there is the opportunity to test themselves through the education process. They under-value their own work in a great many instances.
There is one group that has not been mentioned this evening and to which I wish to draw particular attention. I refer to the graduate students who, by definition, are the ablest and most successful. That does not apply to all of them because many of the ablest students go directly from graduation into
708
various kinds of employment. Among the graduate students there is a high proportion of the cream of the students. By taking away the social security and housing benefits it will be extremely difficult for those students to continue with their graduate studies. Yet it is from these people that we shall get the leaders in the universities, research, creative intellectual work and in other fields.
I beg noble Lords to think again about the way in which graduate students are being treated. By definition, many of them are older and have family responsibilities. They will be driven away from higher academic work simply because of financial necessity. The scheme is not likely to produce the results for which the Government are looking. For that reason I ask for it to be rejected.
There is then the question of the amendment tabled by my noble friend Lord Russell. It is impossible to say that in this little Bill we have all the information that we need to make a decision about a change as important as this. Only three months ago it was a completely different scheme. The banks were handling it. What has happened? The banks turned it down. I see that the noble Earl, Lord Caithness, shakes his head. Was it four months ago? Time passes. It is very little time. So the Government have had to come up with an alternative scheme. We have none of the information about how the scheme will work, what it will cost, and how it will operate. There are all manner of gaps in the information that we need before we can make an intelligent judgment on whether the scheme, flawed in concept as it is, is not also flawed in its method of operation. As an amending House we have an obligation to make certain that we know what it is we are talking about before we start talking about it. That is what we do not know at the present time.
There is also the point put forward by the noble Lord, Lord Rippon, and others, which I wish to support with all the force that I have. Again and again in your Lordships' House we have complained about the way in which the Government produce legislation in a form and with a timing that makes it impossible for Parliament do do its proper job. It is treating Parliament and this House with contempt to say that so much will be put into regulations. I agree with those who have said that if it has to be done by regulation at least let it be the affirmative regulation procedure. Social security legislation requires constant updating but that did not prevent the Government putting into the Social Security Act a great deal on the methods that would be used and the principles which lay behind the benefits being given. Of course the actual figures have to be updated—no one challenges that—but we are entitled to demand the opportunity to do our job in this House properly. That is why I support the amendment of my noble friend Lord Russell.
10.13 p.m.
Baroness Blackstone: My Lords, few Bills recently coming to this House have provoked such

709
widespread criticism and concern from all sides as this Bill on student loans. In the world of higher education it is hard to find anyone who has a good word to say for it. The Committee of Vice-Chancellors and Principals, the Committee of Polytechnic Directors, the National Union of Students, those who represent the interests of medical and dental education, the organisations that represent disabled students, and the local authority associations, have all been vociferous in their criticisms. This does not mean that they are unwilling to contemplate changes to the way that student maintenance is organised and financed. It is simply that there is universal dislike of the alternative that the Government have come up with. This has been reflected in many of the contributions today.
With so many speeches, I cannot pick up all the points that have been made. There are five main respects in which the Bill is unacceptable. I shall focus on them. It is an insult to Parliament with respect to its vagueness and lack of detail, and it is another example of the Government's arrogance. Its effect on access to higher education could be damaging at a time when there is broad agreement that there is a desperate need to increase the number of highly educated and trained people. Many noble Lords have referred to this point this afternoon and this evening. The cost of running the scheme will be considerable. The impact is grossly unfair in that it benefits the better off and hits the worst off hardest. It will make recruitment to certain crucial but low paid graduate professions even more difficult than at present. I shall deal with each of those points in turn.
The Government have presented Parliament with a Bill about as empty and devoid of content as it possibly could be. In addition to its four miserable little clauses which are about powers and definitions, two schedules are included in the Bill, the first of which defines the courses which confer eligibility for loans, and the second of which gives the Secretary of State powers to make regulations. We are being asked to consider a Bill in which all the detail has been left out. Instead, the Secretary of State can decide through regulations the shape of the scheme. As many noble Lords have said, proper scrutiny is not possible unless the facts about how the scheme will operate are written on the face of the Bill, allowing us to make suitable amendments.
We are not talking about trivial details that are omitted; we are talking about the very essence of the scheme. That is why we shall support the amendment of the noble Earl which, contrary to what was said by the Minister and by the noble Lord, Lord Harmar-Nicholls, we see as neither a matter of confidence nor as wrecking.
We are being asked to consider legislation which allows the Secretary of State to bring forward any scheme he wishes and to alter it as he thinks fit. For example, he currently says that he proposes to go no further than 50 per cent, of maintenance being covered by loans. If he means that, why cannot it be incorporated into the Bill? While I do not doubt that he is telling us what he personally presently intends, frankly, I believe that the long-term aim of the
710
Government is to rely to a much greater extent on loans. As my noble friends Lord Peston and Lord Glenamara said, we shall see the 50 per cent, loan 50 per cent, grant target exceeded eventually. Perhaps the Minister will indicate whether the draft regulations could at least be made available, as suggested by the noble Lord, Lord Rippon, at Committee stage.
Perhaps I may turn now to the question of access. I should like to add a few points to those which have already been made by my noble friends Lady David and Lady Lockwood. The number of young people staying on in full-time education after the age of 16 and proceeding to higher education is far too low. We have said it on this side of the House before and we shall keep repeating it until the Government come forward with some convincing policies to do something about the matter. Student loans are not convincing policies in that respect.
Similarly, in a context where the past proportions of young people entering higher education have been so low, we shall continue pressing for increases in opportunities for mature students to obtain higher education qualifications. It is especially regrettable that mature students who want to study part-time and who are excluded from any support at present are yet again excluded from the provisions of the Bill. I was glad to hear the noble Baroness, Lady Young, voice her concern on that matter. One reason for the number of people in higher education being so low in this country is the low demand from young people from homes where their parents are in manual occupations. The figures have been given by my noble friend Lady David and by other noble Lords so I shall not repeat them.
It would be foolish to pretend that the only factor determining decisions to remain in education is the nature of student maintenance. Of course, there are many other influences. Moreover, the availability of grants has led only to a small increase in the proportion of students from working class backgrounds. But, as the noble Baroness, Lady Seear, said—and I am rather sorry to say that she has rather stolen my line on this aspect—without grants the record would be considerably worse.
The great merit of the Anderson system introduced in 1962 was that young people wishing to follow full-time undergraduate courses would not be prevented from doing so because their parents could not afford to support them. While our need for better educated and qualified people is so acute, it would be disastrous if the introduction of the loans scheme which the Government propose were to deter some young people from entering higher education.
Having to take on a debt—and here I must agree with what the noble Lord, Lord Boyd-Carpenter, said about the undesirability of debt becoming institutionalised—at the outset of undergraduate education does not seem likely to encourage more students from under-represented groups. On the contrary, as many speakers have said, some young people will be deterred. Their parents may feel that higher education is not worthwhile since, after all, three A-levels will be enough to secure their children a better job with higher pay than they themselves have.

711
As the noble Lord, Lord Beloff, mentioned, it is worth noting that there is now concern in both Sweden and in West Germany, reinforced by research evidence, that loans are a disincentive for certain groups of potential students, though I realise that loans make up a higher proportion of student maintenance in both those countries than is currently intended here. If we are to go down the loans route the very least we must do is to monitor their impact on the participation of students from ethnic minorities, of women, of mature students, of the disabled and, above all, of students from the manual working classes.
All those groups are more likely than those more privileged to be on courses which, in the past, have not been eligible for a mandatory grant. The Government have stated that they will widen the network to include more courses to which the loan regulations will therefore apply. I welcome this because of the inbuilt discrimination against students following perfectly reputable, recognised courses which only qualify for a discretionary award. However, it would help if the Minister could give some clarification as to what is to happen to students on courses which will continue to be the subject of discretionary awards. Apparently they, too, will lose any entitlement to benefits, but they will not have the compensation of a loan. Presumably their grants will not be frozen. How could they be if they are not eligible for a loan? But will they be increased to make up for the loss of benefits?
My third concern relates to the costs of running the Government's proposed scheme. Since the banks have opted out, the burden of administering the scheme will fall on the proposed Student Loans Company and the higher education institutions themselves. The Government claim that the administration costs will be of the order of £10 million to £20 million. This claim is not credible, and I should like to say to the noble Lord, Lord Annan, that Dr. Barre's estimates look much more accurate.
If I understand it aright, the government estimates take no account of overheads from the cost of debt collection. They cover only the period up to 1995, during which time the great majority of those involved in the scheme would be receiving loans, with much smaller numbers actually repaying the loans. If there are substantial numbers of defaulters later, the administrative costs could greatly increase because of the time and effort involved in chasing them up. As the noble Lord, Lord Beloff, and many others have said, the American experience has been that tracking down defaulters is both difficult and costly. The Government's estimates are based on a period when administrative costs are likely to be at their lowest.
We were told initially that it would not cost much to administer the community charge. We now know that it will cost councils an extra £235 million to collect it. One must conclude from the details that we received yesterday that the Government are going to create yet more costly bureaucracy with respect to collecting student loans.
712
In the case of the poll tax one scheme is replacing another. With respect to student loans this is not the case because they will run alongside grants. Local education authorities will be expected to go on bearing the administrative costs of grants. There are to be three Access Funds set up by the Government to be administered by the individual institutions, which are also now expected to certify students for the purposes of loans. This will place further strain on hard-pressed registrars and their staffs, who at the same time are being asked to become involved in a totally new bidding system for funds from the funding councils.
Speaking from my own experience, I cannot see how the institutions can be expected to take on the extra work involved in the loan scheme without recruiting more staff. Much of the work will have to be done during September when registries are at their busiest after the A-level results have come out. Now we are told that the Secretary of State intends to compel universities and polytechnics by law to help run the scheme. Could the Minister indicate whether there is to be some compensation for the administrative costs entailed? Higher education is frankly fed up with being asked by the Government to do more and more for less and less.
I shall not repeat what has already been said about the cost of the scheme itself. What is apparent however is that we have the extraordinary paradox of a scheme costing taxpayers a considerable amount of extra money for many years while at the same time many students will be worse off because of the substitution of a loan for a grant.
The noble Earl, Lord Bessborough, is wrong. Some students who are heavily dependent upon housing and social security benefits will end up with less money to support themselves because of the loss of grant and benefit which will not be compensated for by the loan. Incidentally, I deplore his attack on the NUS. Loss of benefit is one way in which the worst off students are likely to be hit hardest. There is however a more serious sense in which that is true and which makes the scheme fundamentally flawed.
Those students who come from low income families will lose because they will be substituting a loan for a grant; but those who come from well off families, who are currently not eligible for a grant because parental income is too high, will gain. They will be able to take out an interest free loan, thus eventually either saving already well off parents 50 per cent, of the maintenance costs or, if such parents continue to support their children, they will benefit by whatever are the current interest rates offered by banks and building societies. Is that a sensible use of taxpayers' money?
Another facet of the scheme which has gone virtually unremarked is the regressive intragenerational transfer that is entailed. By transferring costs of maintenance from parents to students, and expecting students to start repaying immediately they reach 85 per cent, of average earnings, the Government are shifting the burden from relatively well-off middle aged people with established housing and peak earnings to younger people when their earnings are lower and when they

713
face the high cost of buying houses for the first time and, in some cases, of starting families. Where is the social justice in all that to which the Minister referred?
I shall now turn to the possible effects of loans on career choice. There are a number of graduate professions which are not well paid. The best example is teaching. We face severe teacher shortages in certain subjects and in certain parts of the country. If a graduate has a large loan to pay back at the end of a course, his or her decision about future occupations will be affected much more than previously by the level of remuneration. If the current increase in teacher shortages continues, we shall reach a crisis point in our schools. Nursing is another example. It is set to increase the number of graduates in the profession. It is an example of where recruitment is difficult and where loans would make it more so.
As the noble Lord, Lord Butterfield, said, students may also be discouraged from entering vocational courses, such as medicine, dentistry and architecture, all of which are longer than average and which often have relatively low salaries in the years immediately after qualification. Yet they will have incurred an additional debt because of the length of their courses.
In conclusion, we are faced with a scheme which is complex and full of flaws and pitfalls and does not have the merit of simplicity that the Minister was claiming for it. I must endorse what my noble friend Lord Peston said about the weaknesses of the present system of student maintenance. I am on record as being a critic of certain aspects of it. But I must also agree with him that to replace a scheme with some inadequacies by one as stupid as that which the Government are now proposing is absurd. The gestation period for this scheme has been at least two-and-a-half years. The Government have spent nearly £-5 million on the consultants' fees alone. In spite of the time and the expense of all this cogitating, there are still many uncertainties about whether it will work. Operating details which were revealed yesterday look horribly like a snooper's charter with the Student Loans Company having all the trappings of Big Brother. It is no wonder that the banks opted out. What we have been told about the scheme does not make us confident that higher education will be either more accessible or more cost effective.
Many commentators have suggested fairer and more efficient alternatives; but the Government, as in so many other spheres, have been quite unwilling to listen. There is nothing wrong with considering new ways of maintaining students in higher education. We all know that it will be important to try to keep these costs down if we are to double the numbers in higher education. However, to refuse to consider a grants scheme with some form of graduate tax is incomprehensible. I have seen yesterday's letter from the Secretary of State to the noble Lord, Lord Annan, in which he says that he does not like the idea of a graduate tax because he wants to adhere to the principle of taxation according to means. I find that a bit rich from a Government who have just introduced a poll tax. This letter is so riddled
714
with false assumptions that we shall certainly come back to it in Committee. I cannot believe that it represents a rational or considered view by the Government. It reads like something that has been concocted for "Yes, Minister".
I fear that the real reason for rejecting the approach of a graduate tax is that the Prime Minister and her colleagues, aided and abetted in particular by the Parliamentary Under-Secretary for higher education, are indulging in a certain amount of ideological clap-trap about students being victims of a culture of dependence. According to them, the only way they can be rescued from that culture and become more self-reliant is to insist that they take out a loan and incur a debt which they must repay in some visible way. Only then will they realise the value of what they are receiving. We all know this is arrant nonsense. It is based on a crude market view of the world in which one can only appreciate what one pays for.
Contrary to what the noble Lord, Lord Nelson of Stafford, said, I can assure noble Lords that on this side of the House we appreciate and value highly a number of things that we do not pay for. All of us who have been students and have benefited from grants were fully aware of the advantages that we were receiving. Nor did we work less hard because we had grants. The suggestion that the current system of maintenance gives rise to a culture of dependence is as insulting as it is silly, as is the notion that only loans would remove it if it did exist.
This Bill fails on two crucial tests. First, it fails the test of no deterrence to students who want to enter higher education; and, secondly, it fails the test of efficiency and cost effectiveness in recouping some of the costs of higher education from those who benefit from it. I hope that the Minister will relay to his right honourable friend how much concern there is in this House about these proposals. I also hope that the Government will be persuaded to think again.
10.34 p.m.
The Earl of Caithness: My Lords, we have had a full, wide-ranging and most interesting debate covering the Bill, the regulations to be laid under the Bill and indeed matters beyond their scope. There has been a certain amount of disagreement with the Government's proposals. I make no complaint about that. But I should like to start by setting out as straightforwardly as I can what the Government are about in introducing top-up loans for students.
The first point is that loans will provide more money for students while they are studying. In the academic year beginning in the autumn students on average will have 25 per cent, more money at their disposal than they have in the present academic year because the grant will be uprated and the loans will be available on top of that.
This is the response to those who are worried that the introduction of loans will deter some people from entering higher education; that they will deter particularly those whose families do not have the habit or tradition of going to higher education. The Government take such concerns seriously. We are

715
keen to encourage students from families which do not have that habit or tradition to go to higher education. My right honourable friend the Secretary of State has frequently said that we wish to see an expansion of higher education over the next 25 years. This expansion could not happen unless students came from a wider range of backgrounds than is the case by and large at present.
The Government do not believe that loans will deter students from going to higher education. The essential reason why they will help is that which I gave earlier: that the introduction of loans means more money for students while they are studying.
Naturally a loan has to be paid back. The Government's scheme includes two features designed to allay worries about paying the loan back. First, the loans will carry a zero real rate of interest: the amount outstanding will be indexed in line with the retail prices index but will not be higher than that and this provision is written into Schedule 2 to the Bill. Secondly, repayments can be deferred if a graduate's income is low for any reason. If a former student's earnings in a year fall below 85 per cent. of national average earnings—£11,500 at today's levels—he or she will be able to defer repayments for that year. That takes care of the first-year student the noble Lord, Lord Glenamara, brought to our attention. It also takes care of the graduate wife who does not earn and whom the noble Lord, Lord Annan, brought to our attention. They will both be able to defer repayment of their scheme.
My noble friend Lord Bessborough said that £11,500 was a reasonable sum at which ex-students—that is, graduates—can afford to begin repayments. The noble Lord, Lord Cocks of Hartcliffe, in a very well focused speech said that there is potential earning for graduate students. It might interest the House to know that graduates on average earn about 30 per cent. more than the average non-graduate. So there is great scope there.
I sense, however, as my noble friend Lord Butterworth said, that most people agree that it is reasonable that graduates, whose earnings are in the great majority of cases well above the national average, should make some contribution to the cost of their support while they are studying. The focus of the debate has moved to the mechanism particularly for the repayments.
My right honourable friend the Secretary of State has set out very clearly the Government's reasons for rejecting a mechanism which relies for repayments on the national insurance system and for rejecting a mechanism which relies on income tax. I sought to summarise his reasons in my opening speech. From the point of view of the students the scheme proposed by the Government is a simple one. Students will be able to choose how much to borrow; they will then know how much they have to repay in real terms. They will borrow from and repay their loans to a single point: the student loans company. I wonder whether there could be a more straightforward system than that.
We have heard concern expressed over the amount of information available at this stage about the detail
716
of the scheme. But the key features—the value of the loan, the zero real interest rate, the deferment protection—were set out in the White Paper of November 1988. As for the administrative procedures, a wealth of detail is already available and more is being added all the time as they are developed. We shall continue to keep the House informed as further administrative details are settled. Parliament will have the opportunity to scrutinise the main features again when the regulations are made and put into effect.
Serious concern was expressed by a number of your Lordships on the question of default. In particular the noble Lord, Lord Peston, picked up this point, together with the noble Earl, Lord Russell, and the noble Lords, Lord Butterfield, Lord Kilmarnock and Lord Annan, and my noble friends Lord Boyd-Carpenter and Lord Beloff. It is right that defaulters will be pursued vigorously. They can be traced through public documents such as electoral registers. There are also agencies that specialise in this field. In addition, students will be asked on taking out the loan to nominate referees who will be able to provide their addresses if they seek to evade repayments. Those who fail to repay may also have their names given to credit reference agencies.
There is no need to be apologetic about that. Regardless of the system introduced, graduates who fail to repay their debt to the taxpayer deserve no one's sympathy. For that reason the Student Loans Company will have available a full range of options used by commercial lenders for recovering debts and it will use them vigorously.
My noble friend Lord Boyd-Carpenter highlighted many of the difficulties that ordinary credit organisations face, but he underestimated the benefits of the deferment scheme that we have built into our proposals. It might interest the House to know that the default rate on a loan scheme in Sweden is as low as 2 per cent, and there is no reason why the rate should be any higher for graduates in this country.
My noble friend Lord Beloff said that Germany was changing to a grant-only system, but I must correct him. Germany is changing to a mixed scheme very much like ours. His comparison with the United States of America on the question of default relates to features of a scheme that are not part of the scheme that we propose, and it would not be fair to compare our scheme with that in the United States.
We are concerned about those students who will find themselves living in areas of high rent and who will face some of the effects of losing the benefits to which they are entitled. A number of noble Lords raised that point. It is impossible to arrive at a satisfactory estimate of how many students will be affected. Variations in the take-up of employment, the costs faced by students, the availability of income from other sources and the constraints on behaviour imposed by students' financial and personal circumstances would all affect to an unquantifiable extent the amount of benefit claimed. However, we have undertaken to keep the operation of the access funds under review. The position of students in high-rent areas will be taken into account in that process. Perhaps I may reassure my noble friend

717
Lord Haig and the noble Lord, Lord Annan, that we shall consider the value of access funds and I shall be happy to explain the system in more detail at a later stage.
Concern has been expressed about some of our proposals, particularly the four-year schemes in Scotland. The noble Lords, Lord Butterfield, Lord Grimond, Lord Addington and Lord Macaulay of Bragar, and my noble friends Lady Carnegy of Lour and Lord Haig raised that point. The noble Lord, Lord Macaulay, said that his long speech was not a Scottish moan. I give him credit; it was a very good attempt at a lament.
A more potent argument was used by my noble friends Lady Young and Lord Hunter of Newington on the question of medical students and others on courses longer than four years, because they will face a larger debt. Notwithstanding the fact that those long professional courses generally lead to high earnings, I can reassure particularly the noble Lord, Lord Hunter of Newington, who asked whether the Government are considering whether special repayment terms are needed for students whose courses lead to a larger debt. However, it is worth reminding the House that special arrangements for medical students to receive extra grant allowances for their extra weeks of study in the year will continue unaffected.
I turn now to one point on which many noble Lords commented. It was taken up particularly by my noble friend Lord Boyd-Carpenter. I defer to his great experience. Not only was he Chief Secretary to the Treasury in 1962, when the present scheme was introduced; he was also Minister for the universitites, a post that went with that job. He expressed concern that the consequence of introducing top-up loans would be to saddle young people with a burden of debt.
One objection to the Government's proposals has been on the grounds of the principle that young people should not leave higher education with an indefinable debt. I do not share that concern. First, as my noble friends Lord Rippon of Hexham and Lady Elles said, many young people already leave higher education with overdrafts on which they will have to pay a commercial rate of interest. Secondly, as I tried to explain in my opening speech, one way in which the present system is breaking down is the failure or inability of many parents to pay the full contribution for which they are assessed. Some 40 per cent, of students do not receive the parental contribution in full.
At this point it is also worth considering what happens overseas, because loans are entirely standard elsewhere. The United Kingdom is the odd one out. Because we rely on grant only, our public expenditure per student is uniquely high, more than double that in the next highest country, which is Holland. The noble Lord, Lord Annan, referred to it as a Rolls-Royce higher education system.
Support for living expenses costs the British taxpayer £750 per student on average. In comparison, Japan spends £30, Italy £40, West Germany £70, France £160 and the USA £270. Yet the resources available to the individual students in
718
the other countries in many cases are greater than those available here. They have more money yet at less cost to the taxpayer. In the other countries the support includes a loan element. That is what makes it possible for their students to receive more and for those countries to support a larger proportion of their students. The loan makes a high level of student support more affordable from the taxpayers' point of view.
I was therefore interested that the noble Baroness, Lady Seear, who so often berates us for not being more European, on this occasion asked us to remain unique. The noble Baroness wants some sort of glorified committee to look at the whole problem. I ask her to look again at the evidence from Europe. I think that she will find that there is no sign that loans have deterred people from less prosperous backgrounds or from ethnic minorities from going into higher education. In the United States, which has the greatest reliance on loans, over 50 per cent, of entrants to higher education are female. I know that that will please the noble Lord, Lord Glenamara, who raised that point particularly. That is a performance that we have yet to emulate with our old grant system. It is of special note that the terms of their loans are in general less favourable than those which we intend.
It surprised me therefore that in the face of all this evidence so many of your Lordships who criticised our scheme ignored the evidence from abroad. I have to say that the evidence which my noble friend Lord Nugent of Guildford gave us with regard to Germany points the other way. My noble friend Lady Cox, with her great experience both in the field of education and in Europe, reminded the House how generous our scheme was and that the loans were not the bogey of which some complained.
My noble friend Lord Nelson of Stafford, in a most interesting speech, asked how the relationship between grant and loan will develop. This will need to be settled nearer the time. The Government's present thinking is that the parity between grant and loan should then be maintained. However, I shall be glad to take up the point suggested by the noble Baroness, Lady Blackstone, with my right honourable friend in the very near future.
I turn next to the important point of consultations with the vice-chancellors. The noble Earl, Lord Russell, suggested that there should have been consultations with the Committee of Vice-Chancellors and Principals earlier than 19th February. He was quite right, and indeed there were consultations last year. My right honourable friend's department consulted the Committee of Vice-Chancellors and others about certifying students' eligibility for loans. There was another meeting in the recent past, some 10 days or so ago, to finalise the details of that, but unfortunately the vice-chancellors would not discuss that matter.
I want now to set the record completely right, because there is some suggestion that the Committee of Vice-Chancellors and Principals has recently come forward with proposals for increasing the grant, for a graduate tax and for the abolition of the parental contribution after the Bill indeed had

719
passed through another place. Let me set that record straight, because such proposals have not been presented to my right honourable friend the Secretary of State.
I am aware that four paragraphs out of the 13 that were its response to the White Paper mentioned that fact and there was a short comment in the press statement on 19th February. I briefly outlined in my opening speech the Government's reasons for rejecting graduate tax and my right honourable friend set out those reasons more fully in a letter to the noble Lord, Lord Annan, which has been circulated widely at my request. A copy is in the Library.
As for increasing the grant and abolishing the parental contribution, I have to say that I have some concern at the vice-chancellors' willingness to be so free with taxpayers' money. Abolishing the parental contribution alone would cost some £390 million a year at current prices. I explained earlier the reason for not providing the additional resource as a grant. I was saddened by the tone of the speech of my noble friend Lord Beloff, but I was astonished that he said it did not matter if graduates were to be taxed for benefits that they did not receive. He said that tuition fees could act as a surrogate for maintenance. I was not surprised that he received some support on that from the Opposition.
I hope that the Committee of Vice-Chancellors will seek an early meeting with my right honourable friend to iron out the details, as I know that they would be received by my right honourable friend.
The noble Lord, Lord Peston, said that proposals for repayment of loans through national insurance contributions, or a graduate tax, had been studied "by people of great experience". To him and to the noble Baroness, Lady Seear, I say that they have not been studied by those who are responsible for running the national insurance scheme and the income tax arrangements. The argument set out in my right honourable friend's letter, as I have already summarised, covers those points.
Time, alas, has run out. I know that there is much more that I should like to deal with. I shall write to those noble Lords whom I have not answered, in particular the noble Baroness, Lady David, and my noble friend Lady Faithfull, who mentioned the question of the disabled and those in part-time education, a matter which my noble friend Lady Cox raised. On the latter question, it struck me that, although many noble Lords spoke passionately against the loan system, they wanted to extend it to part-time students.
There was a comment by the noble Lord, Lord Macaulay of Bragar, which really struck home to me. He asked: is the proposal necessary? To that he gave his own answer, which was, no, the present system is all right. The system of allowing the cost to fall exclusively upon the taxpayer and parents just cannot continue. A fairer system involving the students and spreading the burden more fairly is an urgent requirement, and our scheme does just that. It is wholly reasonable in principle that young people should make some contribution out of their future
720
high earnings towards their living costs in their student years.
On the question of regulations—which again so many of your Lordships have raised—I shall be happy to discuss that matter with my right honourable friend.
Let me conclude, my Lords. Top-up loans will mean more money for students while they are studying. This means an initial investment, but over time the burdens on taxpayers will be reduced and this will help to make room for funding the large expansion of higher education which we all want to see. It will also result in a steady reduction of the burden on the parents of students. This too will encourage families to look with approval on their children's aspirations for higher education. I commend the Bill to your Lordships.
10.53 p.m.
Earl Russell: My Lords, I shall not detain the House long. I share the concern that has been expressed about student poverty. Only at lunchtime today I was asking myself why the proportion of overseas students in the college refectory is three times as high as in the college as a whole. The Minister said that there is an increase of 25 per cent., which sounds generous until one reflects that it falls short of returning to the 1982 figure. We could pursue these matters much more effectively if the size of the loan were specified in the Bill and it were properly appropriate to put down an amendment.
I am grateful to my noble friend Lord Grimond for arguing that the White Paper has miscalculated the social return to the taxpayer from students.
The noble Baroness, Lady Cox, asked why we should subsidise this personal investment. Perhaps I may reply to her in words used by the noble Lord, Lord Carrington, on Connecticut public radio in 1982. He was asked why the US taxpayer should carry the burden of the defence of Europe. The noble Lord replied, "If it weren't in your own interests you wouldn't do it, you know."
However, I hope other noble Lords will forgive me for saying that for me the high point of the debate was the speech of the noble Lord, Lord Boyd-Carpenter. It was the voice of plain common sense. I very much hope that the Government will listen to it.
It appears to me that the Government are on a fork: either they know what they are doing or they do not. If they do, they are guilty of even more concealment of information from the House than I have ever accused them of. If they do not, they ought to pause until they do.
Today we have been given a great deal of information and that alone would justify tabling the amendment. The Government are on another fork: did they have that information before yesterday or did they not? If they did, why did they not disclose it? If they did not, they pushed the Bill through another place before they knew what they were doing.
I shall leave your Lordships with a final thought from the meeting for the briefing by the

721
vice-chancellors last Wednesday. One noble Lord present said, "We all want the scheme which is best for the students". One of the vice-chancellors instantly replied, "That means a scheme which is not in place in September 1990". I commend the amendment to the House.
10.56 p.m.
On Question, Whether the amendment (moved by the Earl Russell) to the Motion shall be agreed to?
Their Lordships divided: Contents, 124; Not-Contents, 174.

DIVISION NO. 1

CONTENTS

Addington, L.

Jenkins of Hillhead, L.

Adrian, L.

Kagan, L.

Alport, L.

Kearton, L.

Ampthill, L.

Rennet, L.

Ardwick, L.

Kilmarnock, L.

Avebury, L.

Kinloss, Ly.

Beaumont of Whitley, L.

Kirkhill, L.

Beloff, L.

Lawrence, L.

Blackstone, B.

Lewis of Newnham, L.

Blease, L.

Listowel, E.

Bonham-Carter, L.

Lloyd of Kilgerran, L.

Boston of Faversham, L.

Lockwood, B.

Brain, L.

Longford, E.

Bridges, L.

Lovell-Davis, L.

Briggs, L.

Macaulay of Bragar, L.

Brooks of Tremorfa, L.

McGregor of Durris, L.

Bruce of Donington, L.

Mackie of Benshie, L.

Butterfield, L.

Masham of Ilton, B.

Callaghan of Cardiff, L.

Mayhew, L.

Carmichael of Kelvingrove, L.

Meston, L.

Mishcon, L.

Cledwyn of Penrhos, L.

Murray of Epping Forest, L.

Cobbold, L.

Nicol, B.

Cocks of Hartcliffe, L.

Northfield, L.

Craigavon, V.

Ogmore, L.

Dainton, L.

O'Neill of the Maine, L.

David, B.

Oram, L.

Davies of Penrhys, L.

Parry, L.

Dean of Beswick, L.

Perry of Walton, L.

Donaldson of Kingsbridge, L.

Peston, L.

Donoughue, L.

Pitt of Hampstead, L.

Dormand of Easington, L.

Ponsonby of Shulbrede, L.

Dunleath, L.

Prys-Davies, L.

Ennals, L.

Raglan, L.

Ewart-Biggs, B.

Rea, L.

Ezra, L.

Robson of Kiddington, B.

Falkender, B.

Rochester, L.

Falkland, V.

Roskill, L.

Fitt, L.

Russell, E.

Flowers, L.

Seear, B.

Foot, L.

Seebohm, L.

Gallacher, L.

Sefton of Garston, L.

Galpern, L.

Serota, B.

Gladwyn, L.

Shackleton, L.

Glenamara, L.

Shaughnessy, L.

Graham of Edmonton, L. [Teller.]

Stallard, L.

Stedman, B.

Greenway, L.

Stoddart of Swindon, L.

Grimond, L.

Swann, L.

Hacking, L.

Taylor of Blackburn, L.

Halsbury, E.

Taylor of Gryfe, L.

Hanworth, V.

Thomson of Monifieth, L.

Harris of Greenwich, L.

Tordoff, L. [Teller.]

Hatch of Lusby, L.

Turner of Camden, B.

Howie of Troon, L.

Underhill, L.

Hunt, L.

Walpole, L.

Hunter of Newington, L.

Warnock, B.

Hylton-Foster, B.

Wedderburn of Charlton, L.

Jay, L.

Whaddon, L.

Jeger, B.

White, B.

722

Wigoder, L.

Winchilsea and Nottingham, E.

Wilberforce, L.

Williams of Elvel, L.

Winstanley, L.

Wilson of Rievaulx, L.

NOT-CONTENTS

Abinger, L.

Harvington, L.

Albemarle, E.

Henley, L.

Allerton, L.

Hertford, M.

Arran, E.

Hesketh, L

Ashbourne, L.

Hirshfield, L.

Barber, L.

Hives, L.

Bathurst, E.

Home of the Hirsel, L.

Bauer, L.

Hood, V.

Bellwin, L.

Hooper, B.

Belstead, L.

Ironside, L.

Bessborough, E.

Jenkin of Roding, L.

Birdwood, L.

Johnston of Rockport, L.

Blake, L.

Kemsley, V.

Blatch, B.

Kimball, L.

Blyth, L.

Kinnaird, L.

Boardman, L.

Kinnoull, E.

Borthwick, L.

Lauderdale, E.

Boyd-Carpenter, L.

Lindsey and Abingdon, E.

Brabazon of Tara, L.

Long, V.

Bridgeman, V.

Lothian, M.

Brougham and Vaux, L.

Lucas of Chilworth, L.

Bruce-Gardyne, L.

Luke, L.

Butterworth, L.

Lyell, L.

Caithness, E.

McAlpine of West Green, L

Campbell of Croy, L.

McColl of Dulwich, L.

Carlisle of Bucklow, L.

Mackay of Clashfern, L.

Carnegy of Lour, B.

Mackintosh of Halifax, V.

Carnock, L.

Macleod of Borve, B.

Carr of Hadley, L.

Margadale, L.

Cayzer, L.

Marshall of Leeds, L.

Clanwilliam, E.

Merrivale, L.

Coleraine, L.

Mersey, V.

Colnbrook, L.

Mills, V.

Colwyn, L.

Monk Brefton, L.

Cox, B.

Montgomery of Alamein, V

Craigmyle, L.

Mottistone, L.

Crathorne, L.

Mountevans, L.

Crickhowell, L.

Mountgarret, V.

Cullen of Ashbourne, L.

Mowbray and Stourton, L.

Davidson, V. [Teller.]

Moyne, L.

Deedes, L.

Murton of Lindisfarne, L.

Denham, L. [Teller.]

Nelson of Stafford, L.

Denman, L.

Newall, L.

Dilhorne, V.

Norrie, L.

Dormer, L.

Northesk, E.

Downshire, M.

Nugent of Guildford, L

Dudley, E.

Onslow, E.

Dundee, E.

Orkney, E.

Eccles, V.

Pender, L.

Eden of Winton, L.

Pennock, L.

Elibank, L.

Platt of Writtle, B.

Ellenborough, L.

Plummer of St. Marylebone, L.

Elles, B.

Elliot of Harwood, B.

Quinton, L.

Elliott of Morpeth, L.

Rawlinson of Ewell, L.

Elphinstone, L.

Reay, L.

Elton, L.

Rees, L.

Faithfull, B.

Rees-Mogg, L.

Ferrers, E.

Renton, L.

Fortescue, E.

Renwick, L.

Fraser of Carmyllie, L.

Rippon of Hexham, L.

Gainford, L.

Rochdale, V.

Gibson-Watt, L.

Rockley, L.

Gisborough, L.

Rollo, L.

Glenarthur, L.

Romney, E.

Goold, L.

Rotherwick, L.

Gray of Contin, L.

Roxburghe, D.

Grimston of Westbury, L.

St. Germans, E.

Haig, E.

Sanderson of Bowden, L.

Hailsham of Saint

Sandys, L.

Marylebone, L.

Savile, L.

Hanson, L.

Selborne, E.

Hardinge of Penshurst, L.

Selkirk, E.

Harmar-Nicholls, L.

Selsdon, L.

723

Sharp of Grimsdyke, L.

Torrington, V.

Skelmersdale, L.

Tranmire, L.

Stevens of Ludgate, L.

Trumpington, B.

Stockton, E.

Ullswater, V.

Strathcarron, L.

Vaux of Harrowden, L.

Strathclyde, L.

Vinson, L.

Strathmore and Kinghorne, E.

Waidegrave, E.

Suffield, L.

Weir,V.

Swansea, L.

Wigram, L.

Swinton, E.

Willoughby de Broke, L.

Teviot, L.

Wyatt of Weeford, L.

Thomas of Gwydir, L.

Wynford, L.

Thorneycroft, L.

Young, B.

Torphichen, L.

Young of Graffham, L.

Resolved in the negative, and amendment to the Motion disagreed to accordingly.
On Question, Bill read a second time, and committed to a Committee of the Whole House.
House adjourned at eight minutes past eleven o'clock.