HL Deb 23 June 1998 vol 591 cc148-68

64A That this House do disagree with the Commons in their Amendment No. 64 but propose the following amendment in lieu—

64B Page 14, line 31, leave out subsections (6) and (7) and insert— ("( ) The Secretary of State shall ensure that, in any regulations made under this section in relation to any eligible student for any prescribed purpose for any academic year—

  1. (a) the maximum amount of any loan made available to that student is no greater than half the prescribed cost of maintenance for such a student for that purpose for that year, and
  2. (b) provision continues to be made for maintenance grants to be payable to such a student, subject to—
    1. (i) a maximum amount of half the prescribed cost of maintenance, and
    2. (ii) assessment of any contributions applicable in his case.").

Baroness Blatch rose to move, That the House do disagree with the Commons in their Amendment No. 64, but do propose Amendment No. 64B in lieu thereof.

The noble Baroness said: My Lords, the Government, somewhat artfully, linked two issues in one amendment. This House had completely separate debates. They are completely separate issues. One is to do with maintenance and the other is to do with equal treatment throughout the United Kingdom and is related to tuition fees. By linking the two together we have had to burn quite a lot of midnight oil during the course of the week to be advised on how to deal with them technically. We have been successful. Therefore I shall be speaking to the maintenance section of Amendment No. 64.

I invite the House to ask the Government a second time to reconsider their proposals on student finance. The grounds on which I take this very serious step are justice and fairness. Put simply, the Government have introduced proposals which will result in students from lower income families leaving college and/or university with a greater burden of debt than students from more affluent families. There can be no justification whatever for such unfairness.

The Government say in defence of such unfairness that the tuition fees are means tested and that some students will not be required to pay them at all. That argument was put by Ministers both in this House and in another place, and even by the Prime Minister himself. It misses completely the point about student finance. As far as the student is concerned, he or she will have to borrow for tuition fees, where that is appropriate, and for the maintenance grant. For students from low income families the maintenance grant is by far the greater sum. So students from low income families must borrow the whole of their maintenance costs and students from more affluent families are asked to borrow only half.

At no time during debates in this House or in the other place, has a single Minister, including the Prime Minister himself, produced a credible defence for such an injustice to students from low income families.

The response of the Government to the Dearing Committee was issued ahead of the publication of that report; it was leaked in detail the weekend before its publication. Therefore, the Government had made up their mind. It was a Treasury-led decision, and certainly Mr. Brown was in the driving seat at that time. For the purposes of my amendment I should like to refer the Government to paragraphs 103 and 108 of the report: 103. The widespread view in evidence was that an additional contribution from graduates should be sought by converting the existing support for student living costs from 50:50 grants and loans … We [the Dearing Committee] looked carefully at this option". 108. We would be particularly reluctant to see any reduction in public subsidies being concentrated on students from the poorest families and even more reluctant to see the funding released by this, and more, being used to increase the subsidies for others".

The Government have been extremely reluctant to guarantee that moneys raised and/or saved at the expense of higher education students will benefit higher education in particular in real terms; that is, not simply held by the higher education institutions, which we understand will be the case, but that such moneys should not displace funds from the state. That has not been agreed. Any moneys raised at the expense of higher education students and spent on any other part of the education service, even on further education, represents a tax on those students. To place greater financial burden on students from low income families in this way is unfair and unjust. I call upon this House to invite the other place to think about this yet again. I beg to move.

Moved, That the House do disagree with the Commons in their Amendment No. 64, but do propose Amendment No. 64B in lieu thereof.—(Baroness Blatch.)

4.30 p.m.

Baroness Blackstone

My Lords, it may be helpful if I speak straightaway and set out the Government's position. With the leave of the House, I should be grateful for the opportunity to speak again at the end of the debate to respond to any further points that are made. I have listened very carefully to the arguments put forward by the noble Baroness, Lady Blatch. She starts from the position that there should be equal access to higher education for students from all backgrounds, in particular those from lower income groups. That is a position to which the Government are absolutely committed. Indeed, our proposals are built on the principle that access to higher education should not depend upon ability to pay. Moreover, we have announced a range of measures that specifically target support for those students who need the most help. I shall say more about that later.

The noble Baroness seeks to make capital out of the fact that our proposals for student support are different from the preferred option of the Dearing Committee. I am not ashamed to acknowledge that they are different even though they arise from the same objective as securing access and equity. On a number of occasions during earlier debates on the Bill I have spoken about the thinking behind the proposals and why they differ from the preferred option of the Dearing Committee. In particular, I have explained that we believe it is right to provide support in the form of grants for fees to those who need them rather than require all students to pay those fees. I have also explained how this, combined with our system of income-contingent loans, will ensure that the largest public subsidies go to students from the poorest backgrounds. I pointed out that our proposals would generate considerably more resources for reinvestment in further and higher education than the previous government were prepared to put into them.

I could go on. However, rather than engage in a narrow debate about comparative funding options I should like to return to the real issue of how best to secure participation in high quality higher education by students from all socio-economic backgrounds, particularly those groups that are currently under-represented. In doing so, I hope that we can at least agree upon the facts rather than engage in speculation. There is a wealth of evidence to show that participation by lower social groups in higher education remains poor but that, crucially, this cannot be put down to finance. The reasons why students enter higher education are much more diverse and complex than that. I believe that to suggest otherwise does students from low income backgrounds a great disservice.

The facts indicate, nevertheless, that there is one fundamental factor which determines whether young people are likely to enter higher education. Quite simply, they are more likely to go to university if they have the school qualifications that universities demand. Yet survey after survey shows that students from lower income backgrounds either do not get the opportunity to study for those qualifications or are unsuccessful in exploiting them. It is in this respect that students from lower income backgrounds are disadvantaged and why they are not entering higher education in the numbers that we wish to see. We are determined to put that right and we shall do so by developing a school system aimed at securing progression for all who have the ability and by raising standards, expectations and achievements.

We have already brought forward measures in the School Standards and Framework Bill to promote excellence in schools. These measures will give students from lower income backgrounds the chance to get the grades that they need in order to enter a university. We hope that they will also help to create a learning culture in which higher education is not seen as the privilege of the better-off few. Although there are more important factors influencing access to and participation in higher education, I do not deny that student support has its part to play, but it would be helpful if we considered the facts about the impact of grants and loans on access.

Noble Lords opposite are unhappy that we propose to replace maintenance grants with a fair and progressive system of income-contingent loans. I might share their concerns if I thought that grants promoted access or loans hindered it. But, as I have pointed out already, in the five years before loans were introduced, when students still received support from grant alone, participation among students from lower income backgrounds rose by only two percentage points. Between 1990 and 1995—during which time loans were introduced and the proportion of support available through loans increased—the rise was much greater: it was over seven percentage points. This shows that students from less advantaged backgrounds were not deterred from entering higher education by the flawed loan scheme introduced in 1990. There is all the more reason to believe that they will not be put off by the much fairer loans that we shall make available.

Noble Lords opposite may wish to consider the latest figures which show that home applications for places in higher education this autumn from under 21 year-olds are nearly 1 per cent. up on last year. The position in respect of those aged 21 and over is also improving. Overall, home figures are about 2 per cent. down on 1997. This is hardly surprising given the increase in students entering in that year. Nor is there any evidence from the University and Colleges Admission Service (UCAS) that potential applicants from lower income families have been deterred by our proposals. On the contrary, application levels appear to be holding across all social classes. This suggests that students understand that the Government's proposals will give them access to the resources that they need and that they will not be expected to contribute more up front to the cost of their education than they would under the current system. Furthermore, it suggests that they recognise that the income-contingent loan repayment arrangements that we are introducing will be both fair and progressive. The level of repayments that graduates will be expected to make will be directly linked to their incomes. Graduates who earn less than £10,000 will repay nothing at all, and over time the total amount that graduates repay will be no more in real terms than they borrowed as students.

Members of your Lordships' House, in particular the noble Baroness, Lady Blatch, and Members of another place have suggested that the poorer students will end up with the largest debt. As I have sought to make clear on previous occasions, under the new arrangements less well-off students will get the most support towards their fees and living costs. The noble Baroness is laughing; I am not sure why. I cannot believe that any Member of your Lordships' House will take issue with that; it is a fact. No doubt noble Lords will argue that that is fair.

Baroness Blatch

My Lords, I am grateful to the Minister for giving way. I was amused because what is there in the system, what is there in the proposals and what is there in the Bill that makes up for the 50 per cent. maintenance grant that the poorer students have to borrow that the more affluent students do not have to borrow?

Baroness Blackstone

My Lords, I was just about to complete what I was saying about the poorer students ending up with the largest debts. I can make an immediate reply to the noble Baroness as to what does make it up. They will have a loan scheme which is income contingent and fairer and which they can pay back according to their income rather than the loan scheme which existed under the previous government that required them, regardless of income, to pay back all that they owed within five years.

I shall return to one of the basic principles underlying our proposals. It is one that I have heard no noble Lord dispute. It is that graduates, as the clear main beneficiaries of higher education, should make a larger contribution to its costs. That was a Dearing principle that we accepted and to which we are adhering. It is wrong to see the fairness of the student loan arrangements just in terms of the size of the debt. As I have just said, the fairness of the student loan arrangements lies in two things: the availability of support and cash for living costs for those who need it most and whose access to higher education might otherwise be hindered. It is the making of fair terms for the repaying of those loans based on the ability to pay.

As I have just said, students will not repay their support on the basis of their current position but on the basis of their future earnings. Students will repay their loans as earning graduates, not as school-leavers from poor backgrounds. In most cases graduates will repay their loans over a longer period than they would, as I said, under the current arrangements. I am sorry to reiterate this, but it is important that noble Lords understand that. Students from less well off backgrounds who take out the full loan available will be eligible to receive the largest public subsidy over time. That subsidy is of course additional to the support that they will receive towards the cost of their tuition, which is considerable, because that group of students will not be making a contribution towards their tuition.

I hope that I have been able to reassure Members of your Lordships' House of the Government's commitment to securing wider participation in higher education. I hope also that noble Lords will reflect upon the evidence that I cited. I have not yet mentioned the specific steps that we announced to target support on those students experiencing the greatest need.

I should like to take the opportunity to remind noble Lords again that students from lower income backgrounds—that is, about 30 per cent. of the total—whose parental income is to be taken into account will not be required to contribute towards the costs of their tuition. Many students from middle income backgrounds will also receive help towards their fees. We have pumped more money into the access funds. We have broadened the eligibility to include part-time students. That is an important broadening of eligibility. We are also making available an additional £250 loan for those students in particular hardship. We have ended the means testing of the disabled students' allowance. We are retaining supplementary allowances for students with dependants and those who are lone parents.

My right honourable friend the Secretary of State announced in another place on 8th June that we will be extending loans for students aged under 55 at the start of their courses from the academic year 1999–2000. That will help the development of our policy on lifelong learning.

We are not complacent. We shall continue to monitor closely the pattern of applications and entry to higher education among students from different socio-economic backgrounds. That is obviously important. My department has also commissioned regular surveys of student income and expenditure. We shall look carefully at the impact of our proposals on student finances once they have fully taken effect. On the basis of all the evidence available, and taking into account the specific measures that I have outlined, I am confident that our proposals will secure improved access to higher education.

Finally, I should like to remind the House that the replacement of maintenance grants by a system of income-contingent loans was a manifesto commitment. The amendments we are debating overturn amendments made during our earlier debates on the Bill which would prevent the Government from carrying out that commitment. I hope therefore that the House will abide by the Salisbury Convention and will not seek to reinstate the amendments.

4.45 p.m.

Lord Tope

My Lords, I thank the Minister for intervening early in this debate. I am not sure that all noble Lords agreed with what she said, but it was helpful that she said it. Perhaps I may correct her on one point. She referred on a number of occasions to "noble Lords opposite". There are at least two groups of noble Lords opposite. I hope that she and her Front Bench colleagues might distinguish occasionally between the two different groups.

On a more serious point, we are all concerned about the position of students, or potential students, from low income families going to university. I have no doubt that fear, whether real or perceived, of debt is an inhibiting factor. It may be more of an inhibiting factor for students from low income families who may be more used to and more ridden by debt. The real concern—the Minister referred to this—is that many people from low income families never seriously consider becoming university students. They are given no expectations at school. They almost certainly do not obtain the necessary qualifications through the school system even to consider whether to have a student loan or whether to go to university. That is an issue which may be outside the realm of this debate, but it is an issue of greater concern to us all than the worry about debt.

We have debated this issue in your Lordships' House many times during the Bill's progress. I do not need to prolong the matter. I shall merely restate briefly the position of these Opposition Benches on this issue. We are concerned to maintain and increase the numbers in higher education. We are at least as concerned to maintain and improve the quality of higher education.

We are, on principle, opposed to the student payment of tuition fees. I have rehearsed that argument many times in your Lordships' House, and do not need to do so again today. If additional funding has to come into higher education, and it does, then with some degree of reluctance we have had to accept that the maintenance grant must go. It is important therefore that it is replaced by a system of loans with a fair repayment process—an income-contingent repayment system.

Here again I agree with the Minister that the system that we support is one that will be based not on the prospective student's family's income or position but on the earning capacity of that student when he or she becomes a graduate and, it is hoped, will have a higher earning capacity. That is an important difference. We are talking about the income of the family at the start of the process. We are talking about the income of the graduate as he or she progresses in his or her career.

That is our position. It has been our position throughout. The noble Baroness, Lady Blatch, is fully aware of it. She often repeats it for me to audiences that we share, as she did at lunchtime today. For those reasons, we cannot support the noble Baroness's amendment today.

Baroness Lockwood

My Lords, I should like to support my noble friend in resisting these amendments. Not only has this issue been debated many times in the course of the Bill's progress but it has also been debated many times going back to the days before the setting up of the Dearing committee. The whole question of student finance has been a difficult financial and political issue for all the political parties. It was as a result of not having a solution to the problem, or of not being prepared to find a solution to the problem, that noble Lords opposite, when they were in power, set up the Dearing committee.

Even before the establishment of the Dearing committee, there was much discussion about the future of student maintenance and student loans. I remember discussions on that in this House. I remember from this side of the House, when the Conservative Party was in power, references being made to the high cost of higher education in the United Kingdom and to the fact that that resulted largely from the generous maintenance grants which were paid by the British Government and which no other country paid to its students. The debate then was very lively. First, we had the introduction of student loans partly to replace the maintenance grants. That discussion resulted in even the National Union of Students being prepared to accept that maintenance grants would have to go.

Then we had the advent of the Dearing committee. The noble Baroness, Lady Blatch, said that the Government acted too quickly and prior to the publication of the Dearing report. However, the fact is that continual discussions were taking place even while the Dearing committee was meeting. I remember being at meetings and conferences held under the auspices of several organisations which the noble Lord, Lord Dearing, attended and where he discussed the issues with those present. Clearly, both the Labour Party and the Conservative Party should have been considering the issues before the Dearing committee reported, ready to look at that report in the context of all the arguments and ready to come up with their responses.

In responding to the report, the Government accepted the main thrust of it. They accepted the recommendation that students should themselves make a contribution to the costs of higher education because they would be the beneficiaries. It was recommended that the loans system should be income-contingent. Again, the Government accepted that recommendation. Therefore, it seems to me that the main thrust of the report was accepted.

Having said that, the whole question of how to increase the finances available to higher education arose and we saw the introduction of the £1,000 contribution towards tuition fees. That was introduced on the basis of it being an income-contingent scheme. Like many noble Lords, I had reservations about that and about its effect on the higher education participation rate, particularly for those from lower income families. I have two points to make about that.

First, the participation rate from lower income families has never been high. It is growing slowly, but it is much lower than the participation rate of students from other social groups. The reason is exactly that which the noble Lord, Lord Tope, indicated: parents (and children) in low-income families do not think of their children attending a university. They must become part of the learning culture to which my noble friend referred before they will anticipate and expect that their children will have the benefit of higher education. Statistics from universities now seem to suggest that, despite the introduction of the fee, applications from 18 to 20 year-olds are increasing rather than declining. My reservation about the introduction of the fee was that the situation needs to be monitored. At an earlier stage in our proceedings I tabled an amendment to that effect and my noble friend the Minister assured me that there would be a monitoring system to watch what happens to the participation rate.

My second reservation was that the finances raised should go to the institutions concerned. We have had assurances to that effect, but I should like them to be reiterated so that we know that more money will go into the higher education system and to the universities. I accept what my noble friend has said all along, that there will be more money for further education, but we need more money for higher education as well. I should like those assurances to be reiterated because the universities have been starved of finance over the past 20 years or so. The unit of resource per student for universities has declined considerably. If we are to have a university system which is internationally competitive, we need it to be better financed. Therefore, I hope that money from the students' contributions will result in an increase in the funding available for higher education.

In her introduction my noble friend approached the problem much more positively by saying that we need to encourage a culture of learning both at an earlier age and throughout the system so that there is an effect on all sections of society. That would be the best way of moving forward and ensuring that our participation rate in higher education is not only equivalent to those of our colleagues in the rest of Europe and the western world but begins to exceed theirs. I believe that the way in which the present Government have approached the problem is the right one and that returning to student maintenance grants and not proceeding with an income-contingent loan would be a regressive step.

Baroness Park of Monmouth

My Lords, I have always warmly supported income-contingent loans, but I am concerned because the Government seem to be concentrating on getting people to university but they are not thinking about the effect of these changes on students when they are at university. Many students now, because they are increasingly concerned about money—and the poorer their background, the more likely they are to worry about that—are working in term and damaging their academic prospects. They are also removing any prospect of having a good extra-curricular life. We must consider the fact that the Confederation of British Industry and all those who will be employing the graduates—all those who are the source of all these well paid jobs—will ask, "Did this man (or woman) take part in an expedition to the Maldives? Did he act? Was he president of the union?", and they will find that all that that student did was to stack shelves in Sainsbury. Full student CVs will no longer exist.

That sounds cynical but it is a practical fact. Everyone is supposing that all of these unfortunate undergraduates will go out and automatically find well paid jobs. If they have bad academic results, they will not get such jobs. Moreover, I am concerned about the people who do not want such jobs, but who want to serve the community as teachers, social workers or in other such roles. They will be worrying too. It is terrible short-termism to think only of getting people to the starting post and not about how they will run the race.

5 p.m.

Lord Renfrew of Kaimsthorn

My Lords, I am not sure whether the Minister speaks to students any more. If she does, she will find that there is widespread dismay at the financial package with which they are now confronted. I refer to student fees as well as student loans.

The noble Baroness referred to the Salisbury convention. Let us nail that canard at once. I do not recall any statement about student fees in the manifesto. What we on this side of the House and many students firmly object to is the package which will have a disincentive effect on students. When speaking in his report of his preferred option, the noble Lord, Lord Dearing, spoke of maintenance grants. He said that, their withdrawal … [will be] a disincentive to potential students". That is surely right. The Minister implied that if she thought loans hindered access they would not be something she favoured. Of course loans have a negative effect. It may be that we cannot accept the reality of student loans as part of the package, but that is what the amendment is about. It limits the extent of loans. That is all it seeks to do. The amendment provides that the loan that students take out will not be more than one half of the overall maintenance costs.

Many of us are concerned at the cumulative effect, and the burden on students. The noble Baroness, Lady Blatch, referred to the heavy burden that students from low income families will have to bear when they enter the wage-earning world. If one talks now to students, there is no doubt that that is a powerful disincentive. The noble Baroness, Lady Blackstone, spoke of a culture of learning. I was interested to hear the concept. I agree with it. I found the speech of the noble Baroness entirely appropriate as she outlined the need to generate a culture of learning among those who might come to university. We might have heard a great deal more about that in earlier debates on the Bill. However, those perfectly valid points do not justify the extraordinary financial burden that the Bill is likely to put on would-be students and on students at the time of their graduation.

For those reasons I firmly support the amendment of my noble friend Lady Blatch.

Lord Dearing

My Lords, as the villain of the show and one who has not spoken before on the issue, perhaps I may contribute to the debate, although I suspect that we have made up our minds separately.

The committee was appointed because there was a crisis in the funding of higher education. I read what the three main national political parties said, in particular in the run-up to the election. The first priority was education. But the first priority was not higher education; it lay elsewhere. It was clear that there was little prospect of higher education receiving more money from whatever government were elected.

Yet our terms of reference made clear—it was the first item—that society aspired to maximisation of participation in higher education. Where was the money to come from to meet that very desirable aspiration? We were driven reluctantly to the conclusion that we must look to the graduate in work to make an income contingent contribution. To help us judge those issues, we set up a number of working groups. One was to judge the justification for asking the student to make a contribution. The evidence was that on average the benefit to the student from participation in higher education was about twice that to society as a whole. That provided the justification for calling upon the graduate, depending on the income, to make a contribution.

We set up another group to consider on what basis that contribution should be founded. The majority of the group initially was minded to recommend that the contribution come through the conversion of maintenance grants into loans. However, as our work proceeded and we debated the issues, the opinion of the group progressively moved. The considerations that weighed with us were these. Financial issues are not the major cause of the low participation by young people from poorer homes. That was not the main cause of the inverse correlation between social class and participation; it was the earlier experience in life. As the Minister said, it is in response to that that the main answer must lie.

Nevertheless, we were concerned that the one differential advantage for children of the poor might be removed. We concluded that the better course was a tuition fee with an equal contribution from all students. We were concerned that the 25 per cent. contribution to tuition fees would amount to £1,000 whereas the loss of the maintenance grant, with its conversion to a loan, for the poorer student would be £1,500.

There were other considerations too. As an old civil servant, a former Treasury official, one learns to be careful. We were mindful that by drawing from the maintenance grant, as opposed to asking the student to contribute towards tuition, we were in a less strong position to say to the Treasury, "That money is for education." If the contribution came from a tuition fee, people would never forget in three, four or five years' time from where the money came. We were clear in our mind that the justification for asking for this money from the student, or the graduate in work, was the need to discharge our remit to maximise participation in higher education. We saw that as the greatest security.

We believed that over time we should move the funding more to the student so that it was channelled through the individual student—rather than through a funding council such as that I chaired—so that the individual was more responsible for his or her choice. To treat all students the same in relation to a contribution to tuition fees was moving in that direction.

It was not an easy decision. We understood the alternative argument: that the contribution would be out of income after graduation rather than related to parental circumstances. But we felt that there was an overhang of parental backgrounds and attitudes towards debt.

There was also a realisation that the student who came from a well-heeled family might look to the family if circumstances were adverse, whereas a student from a poor home might feel an obligation to contribute to the family budget. Therefore on balance we came down in that direction.

I wish to acknowledge that the Government changed their position from that in the manifesto. Noble Lords asked why the Government were able to move so quickly. The truth is that I went to see the Secretary of State at my own request. I was desperately concerned about the urgency for decisions because of the crisis in the funding of higher education. I outlined the options as I saw them. I told the Government that I believed the option in their manifesto was wrong; it would not work well. I was glad to find that the Government moved a substantial way towards us; they accepted and enlarged our proposals for support for the poorer part-time and full-time student, and moved to help the disabled student. I was delighted when the Government agreed to monitor and publish the implications of participation. But, on balance, being suspicious of my Treasury past and concerned about participation of the poor, I remain with the Committee's original recommendations.

Lord Desai

My Lords, a great attribute of the British middle classes is that they can justify any subsidy for themselves by invoking the working classes in their defence. I have been teaching for 32 years and during much of that time have been grossly subsidised with free tuition and free grants. They have always defended their free education by invoking the working classes.

The working classes never had access. Therefore, as my noble friend cogently explained, we should leave the access of working class students out of the debate. It has nothing to do with it whatever. It will not be improved by cutting all the maintenance grants and tuition fees because we have lived through a golden period when working class access was practically negligible. Money is not the issue.

Let us deal with the equity of the present system of loans. I believe that noble Lords obliquely opposite have almost understood the economics of it—not quite, but almost—and I welcome their education. They are still a little confused about tuition fees, but we will respect them for that.

Noble Lords opposite still have a problem about understanding income contingent loans. The noble Baroness, Lady Park, cogently made the case for the Government. I put it to her that at present many of my students are not given grants by their parents. Many of my students work overtime and at nights because the loan system is not a good system. The loan system is a very bad system. The present system entirely reflects the concerns of the noble Baroness. However, if students had a full loan payable from future income—I will deal with low paid people in a moment—they would not have such anxiety and would not have to work overtime.

What happens if someone wants to become a monk? Why not? The income contingent loan is simple; that person will not have to pay back very much. Therefore, the income contingent loan taken for a whole cohort of students is a very redistributive arrangement where the lower paid people—those who do not want to apply for highly paid jobs—will not pay the full amount. No one will pay more than the full amount, but many people will pay less than the full amount. That progressivity will be decided by the future income of the people who have graduated.

Once we understand that, the equity of the system is clear. Access is a fake argument and we have an equitable system. All the talk about people being burdened with debts and so forth is irrelevant. If the system were like the present student loan system or a mortgage debt I would agree, but it is not like the present system. People will not be burdened with a particular size of debt which they must repay or their house will be repossessed. They will pay from a income stream and when they retire from their jobs the loan will be finished. It will be burnt out even if they have not paid the full amount.

Once one understands that, the beauty of what the Government have done is obvious. One must accept that the way in which the maintenance grant has been constructed presents an equitable system. If people understand that and get parental income or students' present income out of their heads and think in terms of future income—which, in terms of economic theory, is the correct way to think of such things—they will see that we have an equitable system. I urge your Lordships to reject the amendment.

5.15 p.m.

Lord Milverton

My Lords, in this intricate issue my main concern is how fair will it be to students who must pay back loans when they have finished university. The Minister said that those who earn £10,000 or less will pay nothing. It was nice to hear that because, whatever salary the graduate receives, he should not accumulate too many loans. One knows that in life there will be other loans. Indeed, one is being encouraged too often by too many people to borrow money, saying, "Come on, let me help you to get this or to do that with a loan". Some of us know that we must be firm. As a clergyman, I know how firm one must be because only in recent years has a clergyman's salary become reasonable. When I started it was very low.

I am in a difficult position. I understand and see the principle put forward by my noble friend Lady Blatch because it is terrible when people are enticed to take out too many loans. Yet—perhaps some of my noble friends will be surprised to hear me say it—the Minister and the noble Lord, Lord Dearing, have almost persuaded me not to vote for the amendment if there is a Division. I do not think that I would vote in the same lobby as noble Lords opposite. I believe that most probably I would abstain because there is a conflict. I am voting with my thinking, my mind and my spirit and not just on the party Whip. That is how Members on this side sometimes ought to vote. I apologise if my noble friend Lady Blatch is sorry but, although I agree with the principle she put forward, I have been able to see clearer, especially after listening to the noble Lord, Lord Dearing.

Lord Peston

My Lords, I hope that I shall be forgiven for speaking to the amendment, No. 64B. The words "tuition fees" do not appear, although the noble Baroness, Lady Blatch, managed to mention them, as did the noble Lord, Lord Renfrew. But that is up to them because your Lordships are always incredibly nice and do not mind what anyone talks about, whether or not it is concerned with the amendment. The amendment is about the contingent maintenance grant.

Lord Renfrew of Kaimsthorn

My Lords, I thank the noble Lord for giving way. In a general sense, we are debating a Bill which the amendment amends. The remarks must relate to the Bill as well as to the amendment. That is what I was endeavouring to do.

Lord Peston

My Lords, the noble Lord is mistaken. The rules of this House—and I have been here longer than him—are that we try (at least some of us try) to debate the amendment before us. That does not mean that we succeed. I do not criticise the noble Lord—I am sure that if he were to look up my record he would find that I had occasionally drifted from the point. I simply believe that on this occasion we might as well stick to the amendment before us, which is concerned with maintenance grants and alternative ways of financing them.

I have bored your Lordships previously in pointing out that I wrote my first paper on student loans 35 years ago. A long time has passed since then. I have never embarrassed my right honourable and honourable friends in the other place by referring to the way in which they screamed at me for my reactionary views on the subject and of being in favour of loan schemes. They came to them slightly later than I did.

I was not the first person to advocate loan schemes. Two of my teachers had written papers on the subject. One was devoted to the Conservative Party and was an economist at the LSE and the other was absolutely devoted to the Liberal Party as it then was. What staggers me about the current position of the Conservative Opposition—I shall take the admonition and stick to that—is that the person regarded as the world's greatest figure in conservative economics, Milton Friedman, was the original advocate of loan schemes for students as being the right way to go. He was a figure the party opposite used to revere. I have to tell them that he is not yet dead, although he is old and would be astonished to hear the remarks made from the Opposition Front Bench and the Opposition Back Benches, as if it were to do with Conservatism, which amazes me. The noble Baroness may like to reflect on that matter.

The essence of the loan scheme was described by the noble Lord, Lord Milverton, better than any of us have managed on this side; and it is particularly favourable to under-paid clergymen. I think that is part of the point he intended to make, because assuming the Church of England continues with its relatively low remuneration for clergymen, I cannot believe that any vicar would have to repay a loan for his or her higher education. I take it that that is why the noble Lord feels that he has at least to abstain.

Lord Milverton

My Lords, the only loan that I have had from the Church was in connection with getting a car.

Lord Peston

My Lords, I should not be concentrating on the Church of England; I gather that Roman Catholic priests get an even worse deal.

The serious point mentioned by my noble friend Lord Desai is fundamental—that we should not approach student support in terms of the student's present position. The essence of the correct economics in the view of the Government is the prospective view: to say students are always broke today—and those of us who were students were always broke, no matter how much money we had—but that they are part of an affluent section of society and that we should look at people's income prospectively. I do not deny that that represents a major change, but I have been convinced for many years that that is the right way to approach student maintenance. It is to say the Government will invest in you so that you can be a student. But it is different from the Conservative loan scheme because we will essentially buy an equity interest in you rather than operate a fixed interest loan scheme and we will expect to be repaid if, viewed prospectively, your prospects turn out to be as good as we hope they will be. I hope that we can persuade noble Lords opposite of the essential correctness of that approach to student finance. I am absolutely convinced that that is the correct way to do it.

I can foresee technical problems arising. I was much more junior in the Treasury than the noble Lord, Lord Dearing, but I never trust the Treasury. Implicit in a loan scheme is that the size of the loan will rise as GDP rises so that the relative position of students does not deteriorate. I do not trust the Treasury to come through on that, but it will be for us to make points of that kind in due course.

I have no doubt whatsoever that it is the right thing to do. It means that the student will become independent from 18 and beyond and will essentially be the person who takes this decision. Noble Lords opposite may regard this as an extremely Right-wing view, but how well off the parents are is neither here nor there. What matters is that they are 18 years of age and more and grown up; and what matters in determining maintenance is how well off they are.

Again, it is off the point, but the remarks of the noble Baroness, Lady Park, struck home to me. Times have changed and students in most universities earn income. I have been extremely irritated on a number of occasions when I have been told that I cannot teach at a certain hour because no one will be there because they will be in Sainsbury's stacking shelves. The greatest university system in the world, that in the United States, has no difficulty at all with students who earn. When I was at Princeton the rich students were incredibly rich, beyond anything I had ever seen, and the poor students used to serve the rich students in the refectory. I do not think it did the poor students any harm and I am not sure that it did the rich students any harm. I am reactionary about this kind of thing, but I can live with the idea of students earning money.

In regard to what determines whether one goes to university, I believe overwhelmingly that the Minister is right and that the view that it is determined by marginal cost is not right. I also agree that for the kind of person we are trying to attract to higher education the situation is incredibly bewildering, and we have to explain what it is about. It is nothing to do with loan schemes. When I was 16 and thinking of going into the sixth form I remember my father asking why I did not want to go out to earn money, and I said that I wanted to go to university. He asked me: "What is a university?" I had not the faintest idea. I thought with any luck it would be just like school and I could go on without having to do much work and passing exams, which I have managed to stick to for the rest of my life.

The serious point for those who wish to address the issue of participation is that we still have a long way to go and I am appalled at the social class mix in universities. The entrée is in the schools and in education. A proper contingent loan scheme cannot be harmful, and I am absolutely convinced that it is the right way forward. I very much hope that my few words have convinced the noble Baroness opposite to say that is the right way forward and that she will withdraw the amendment.

Baroness Blackstone

My Lords, I asked whether I could pick up on one or two points made earlier in the debate and I hope that the noble Baroness accepts that.

I am grateful to the noble Lord, Lord Tope, because he was quite right to reprimand me for referring to noble Lords opposite without indicating that I meant noble Lords on the Conservative Benches, not those on the Liberal Democrat Benches.

Our plans are in accordance with the principles of the Dearing Report and we have built on those principles, as the noble Lord, Lord Dearing, stated. We endorse the Dearing case for student contribution to tuition fees and share Derek Dearing's concern about targeted support towards living costs. We have acted on Dearing's call for extra provision for students in need. We are implementing contingent loan repayment arrangements as recommended by Dearing, with repayment through the Inland Revenue.

The Government are abolishing grants because they believe that a system of grants no longer has a place in a modern student support system. It is right that students' living costs should be met out of their future earnings and in part by their parents, if they can afford to do so. We stated clearly in our manifesto that we would abolish grants and replace them with income contingent loans, and that was accepted by the National Union of Students. We have no intention of going back on that manifesto commitment. We believe that it would be more acceptable, on balance, to mitigate the fee and not charge poor students for tuition but abolish living cost grants and replace them with a loan to be paid back later.

The noble Baroness, Lady Blatch, stated that we rushed our response to the Dearing Committee's report. But as the noble Lord, Lord Dearing, said, discussion took place between himself and the Secretary of State before his report was published. We had time to think about it. We responded rapidly and decisively. Having inherited a worsening financial crisis in higher education, we could not stand by idly once Dearing had reported. We had to act quickly, and that quick response resulted in an extra £165 million for the higher education sector in this coming financial year. I believe that the HE sector is grateful for that and that it wishes to see the Bill enacted as soon as possible.

Nor did we leave students and their parents in the dark during the summer as important decisions were made. That is why we mobilised our information campaign so quickly. LEAs and institutions have been notified of the details of the new procedures. We have consistently kept them informed of developments and will continue to do so.

When one considers the scale of our information campaign and the positive response we have had to it, it is deeply unconstructive of noble Lords on the Conservative Benches to persist in suggesting, as did the noble Baroness, Lady Blatch, earlier, that students are in the dark. We know from research conducted some time ago that a high proportion of would-be students had read the information and understood what the new arrangements meant to them.

Student awareness of the new arrangements and how they affect them has continued to increase. We have continued to provide information. Most recently, we published and disseminated through appropriate channels advice to disabled students.

I was rather puzzled by what the noble Baroness, Lady Park, said because she implied that students will have less money up-front while they are at university. That is not true. In fact, students who are in some financial difficulty will have more money. They will have access to a £250 hardship fund and we have doubled access grants which are to support such students.

The noble Baroness said also that she thought it was important that we should support students who wish to serve the community. We are doing that. We are having an income-contingent scheme, unlike the present one, so that those graduates who wish to support the community in jobs which are lower paid will not have to pay back so quickly.

The noble Lord, Lord Renfrew, suggested that increased loans will deter less well-off students and those unaccustomed to debt. I can only repeat what I said. Loans have not deterred less well-off students in the past from going to higher education. It seems to me that there is absolutely no reason why they should in the future. By far the most important factor in determining whether a student gets into a university or goes on to higher education is the level of attainment which that student reached at school. Quite simply, if a young person achieves good A-level results, whatever his social background, he is likely to go into higher education. Financial considerations are secondary in making that decision.

Nevertheless, the key point is that providing maintenance support in the form of loans does not act as a disincentive. That is the evidence. We must look at the evidence rather than simply staring it in the face and pretending that it is not there. Perhaps I may express the matter in another way. There is no evidence to suggest that grants help to encourage students from lower socio-economic groups to enter higher education. What matters is that students have access to the funds they need while they are studying.

We must put right the under-representation of lower socio-economic groups in our higher education system which, up until now, the system we have had in place has so lamentably failed to do. We shall do so by creating a level playing field leading up to, and in, sixth forms by developing a school system focused increasingly on progression for all who have the ability; and by raising standards, expectations and achievements. The measures we are introducing to create excellence in schools are all about that. We must try to make sure that talented students from lower social groups have the same opportunities and expectations as their peers from better-off backgrounds to achieve the grades that they need to go on to university.

We are introducing a new and fairer system of loans, accepting the principle that students who benefit greatly from higher education should pay back their living costs as graduates when they can afford to do so. No one will be expected to pay for the cost of their higher education living costs up-front.

5.30 p.m.

Baroness Blatch

My Lords, I am grateful to the noble Baroness for her remarks at the beginning of the debate and for the full response she made at the end of it. But, again, almost everything that the Minister said misses the particular point of my amendment.

At least the noble Lord, Lord Dearing, threw some light on why we had such a precipitate response from the Government in relation to the Dearing Report. It had not emerged at all throughout the whole of the discussions both here and in another place that before the report was published the Government had discussed openly the conclusions of the report and that that was the reason for such a speedy response.

Nor has the £165 million extra money found for higher education this year anything whatever to do with this Bill. It is to do with the rescheduling of payments, and the noble Baroness knows that. Therefore, that money was found irrespective of this Bill and independently of it. It is one-off money which I suspect, over time, will need to be built into the base revenue for higher education.

The noble Baroness referred to a 1 per cent. student increase from school leavers this year. However, she did not refer to the fall of 11.5 per cent. of those aged 21 plus and the fall of 15 per cent. for those aged 25 plus. Nor did she refer to a 15 per cent. fall in the numbers of those entering on a four-year course to become primary school teachers. That is something the country can ill afford.

The noble Baroness and others who support the Government's stand make much of the very generous repayment schemes which will be available to students. That is the same whether the student is affluent or from a poor family. The volume of loan will be twice as great for a student from a poor income family that it will be for a student from an affluent one.

The noble Baroness made much of the Salisbury convention. The manifesto, in relation to maintenance grants, did not mention the package in the context of the introduction of tuition fees. Nor did it mention that those grants would be abolished completely and in the first year of this Government. That was one promise that was not made quite specifically.

The noble Baroness invoked the National Union of Students as being in support of this measure. I have spoken at length to that body and it says that its acquiescence was secured before the election in the context of some phasing-out of maintenance grants but not in the context of the introduction of tuition fees at the same time. A confidence trick was played on those students and they accepted it without knowing the full facts.

I am pleased that it was the noble Lord, Lord Peston, who made the comments that he did about the poor students serving the rich students. The noble Lord said that he saw nothing wrong with that. It was the most patronising comment I have heard as regards students from low-income families.

Lord Peston

My Lords, this is getting preposterous. The noble Baroness has done this throughout the Bill and some of us do not like the suggestions she makes. I was a poor student both here and in America. I have no problems with that in the society in which we live. If I were a waiter in a restaurant, I should probably be serving people who are richer than I am, but I can live with that kind of society. I really wish that the noble Baroness would stop making such interventions which are not only irritating but actually offensive.

Baroness Blatch

My Lords, I found the remarks of the noble Lord offensive when he was talking about poor students from low-income families. The system that we now have in place will disproportionately disadvantage students from low-income families. They will lose the grant they receive now and must make up the difference by taking out a loan. Therefore, they will leave university with a greater burden of debt than students from more affluent families. That is the truth.

The Minister said that survey after survey shows that students from lower income families are disadvantaged. The Government's response to that is to put in place a system that doubly disadvantages students from low income families. I commend my amendment to the House.

5.39 p.m.

On Question, Whether the said amendment (No. 64B) shall be agreed to?

Their Lordships divided: Contents, 105; Not-Contents, 132.

Division No. 1
Aberdare, L. Lauderdale, E.
Allenby of Megiddo, V. Lindsay, E.
Attlee, E. Liverpool, E.
Baker of Dorking, L. McConnell, L.
Beloff, L. Mackay of Ardbrecknish, L.
Bethell, L. MacLaurin of Knebworth, L.
Biddulph, L. Macleod of Borve, B.
Biffen, L. Manton, L.
Blackwell, L. Marlesford, L.
Blaker, L. Marsh, L.
Blatch, B. Mayhew of Twysden, L.
Brabazon of Tara, L. Middleton, L.
Brookeborough, V. Molyneaux of Killead, L.
Bruntisfield, L. Monro of Langholm, L.
Burnham, L. [Teller.] Montagu of Beaulieu, L.
Butterworth, L. Montgomery of Alamein, V.
Byford, B. Mottistone, L.
Carnock, L. Mountevans, L.
Chesham, L. Munster, E.
Clanwilliam, E. Norfolk, D.
Cuckney, L. Northesk, E.
Cumberlege, B. Onslow of Woking, L.
Dartmouth, E. Oxfuird, V.
Davidson, V. Park of Monmouth, B.
Dean of Harptree, L. Pender, L.
Dearing, L. Peyton of Yeovil, L.
Denbigh, E. Pilkington of Oxenford, L.
Denham, L. Prior, L.
Denton of Wakefield, B. Pym, L.
Dixon-Smith, L. Rees, L.
Eden of Winton, L. Renfrew of Kaimsthorn, L.
Rennell, L.
Ellenborough, L. Renton of Mount Harry, L.
Elliott of Morpeth, L. Renwick, L.
Fookes, B. Rotherwick, L.
Gainford, L. Sanderson of Bowden, L.
Geddes, L. Sandwich, E.
Gibson-Watt, L. Seccombe, B. [Teller.]
Gisborough, L. Selborne, E.
Glenarthur, L. Selkirk of Douglas, L.
Gormanston, V. Soulsby of Swaffham Prior, L.
Gray of Contin, L. Strange, B.
Grimston of Westbury, L. Sudeley, L.
Hampton, L. Swinton, E.
Harmsworth, L. Taylor of Warwick, L.
Hayhoe, L. Teviot, L.
Holderness, L. Thomas of Gwydir, L.
HolmPatrick, L. Trenchard, V.
Howe of Aberavon, L. Tugendhat, L.
Hunt of Wirral, L. Waddington, L.
Jopling, L. Weatherill, L.
Kenyon, L. Wynford, L.
Lane of Horsell, L. Young, B.
Acton, L. Calverley, L.
Addington, L. Carmichael of Kelvingrove, L.
Amos, B. Carter. L. [Teller.]
Archer of Sandwell, L. Clinton-Davis, L.
Berkeley, L. Cocks of Hartcliffe, L.
Blackstone, B. Currie of Marylebone, L.
Blease, L. David, B.
Borrie, L. Davies of Oldham, L.
Broadbridge, L. Dean of Beswick, L.
Brooks of Tremorfa, L. Desai, L.
Buchan, E. Dholakia, L.
Burlison, L. Dixon, L.
Dormand of Easington, L. Meston, L.
Dubs, L. Milner of Leeds, L.
Evans of Parkside, L. Monkswell, L.
Ezra, L. Montague of Oxford, L.
Falconer of Thoroton, L. Morris of Manchester, L.
Farrington of Ribbleton, B. Murray of Epping Forest, L.
Gallacher, L. Newby, L.
Gilbert, L. Nicol, B.
Gladwin of Clee, L. Ogmore, L.
Goodhart, L. Orme, L.
Gordon of Strathblane, L. Paul, L.
Gould of Potternewton, B. Peston, L.
Graham of Edmonton, L. Pitkeathley, B.
Gregson, L. Prys-Davies, L.
Hamwee, B. Ramsay of Cartvale, B.
Hanworth, V. Razzall, L.
Hardy of Wath, L. Redesdale, L.
Harris of Greenwich, L. Rendell of Babergh, B.
Haskel, L Richard, L. [Lord Privy Seal.]
Hayman, B. Rochester, L.
Hilton of Eggardon, B. Rodgers of Quarry Bank, L.
Hogg of Cumbernauld, L. Russell, E.
Hollis of Heigham, B. Serota, B.
Holme of Cheltenham, L. Sewel, L.
Howie of Troon, L. Shannon, E.
Hoyle, L. Shepherd, L.
Hughes, L. Shore of Stepney, L.
Hughes of Woodside, L. Simon, V.
Hunt of Kings Heath, L. Simon of Highbury, L.
Irvine of Lairg, L. [Lord Chancellor.] Simpson of Dunkeld, L.
Smith of Gilmorehill, B.
Islwyn, L. Stone of Blackheath, L.
Strabolgi, L.
Jacobs, L. Symons of Vernham Dean, B.
Janner of Braunstone, L. Taylor of Blackburn, L.
Jay of Paddington, B. Thomas of Gresford, L.
Jeger, B. Thomas of Macclesfield, L.
Jenkins of Putney, L. Thomas of Walliswood, B
Kennedy of The Shaws, B. Thomson of Monifieth, L.
Kirkhill, L. Thurso, V.
Levy, L. Tope, L.
Linklater of Butterstone, B. Tordoff, L.
Lockwood, B. Turner of Camden, B.
Lofthouse of Pontefract, L. Varley, L.
Longford, E. Walker of Doncaster, L.
Ludford, B. Wallace of Coslany, L.
McIntosh of Haringey, L. [Teller.] Wallace of Saltaire, L.
Mackie of Benshie, L. Walpole, L.
McNair, L. Watson of Invergowrie, L.
McNally, L. Whitty, L.
Maddock, B. Williams of Crosby, B.
Mallalieu, B. Williams of Elvel, L.
Mar and Kellie, E. Williams of Mostyn, L.
Mason of Barnsley, L. Winchilsea and Nottingham, E.
Merlyn-Rees, L. Young of Old Scone, B.

Resolved in the negative, and amendment disagreed to accordingly.

5.47 p.m.