HL Deb 15 March 2001 vol 623 cc1057-72

7.50 p m.

Baroness Walmsley rose to ask Her Majesty's Government what action they propose to take to alleviate student poverty, and to address the anomalies arising between support systems in Scotland, Wales, Northern Ireland and England.

The noble Baroness said: My Lords, when I left university, far more years ago than I care to reveal, the only things hanging around my neck were a string of beads and a guitar. Today, students graduating from university have an enormous burden of debt hanging around their necks. Some calculate an average total of £12,000 worth of debt for each graduate. For most graduates, this is a major concern. It affects their ability to establish themselves in the world of work and home ownership, and it deters their younger brothers and sisters from joining them in the ranks of those who benefit from higher education.

Moreover, for those that do take up university places, financial problems often cause them to leave before the end of their course and, in many cases, affect the quality of their studies. What a terrible waste. It is clear that the Government's failure adequately to address the issue of student funding affects both the quality of and the access to higher education—and what is most ironic, access by the groups the Government most want to encourage: the lower demographic groups, older students and certain racial groups. For example, in a survey of 2,000 working class pupils in Hull schools, more than half said that they were less likely to apply to university because of the introduction of fees and the replacement of student grants with loans.

Student debt is a ticking time bomb whose effects on individuals and on the economy have so far been only hinted at. The introduction of tuition fees, the abolition of the right to claim housing and other benefits, along with the removal of maintenance grants—all within a couple of years of each other—is a triple whammy. Already there is evidence of the damage that this has caused. Comparisons between applications in England and Scotland where, thanks to the Liberal Democrats, the funding system is now different, show what can happen when one government take a short-sighted view of student support and the other take a more visionary attitude.

Where is the evidence for all this damage? First, are students hard up? The answer is "yes", according to the NUS Student Hardship Survey conducted in December 1999. The survey showed a wide gap between the amount of money that students need to live on and the total package available through loans and, at that time, grants in some cases. It was demonstrated that students needed £5,641 to live on, but only £3,545 was available—a gap of £2,096. One-quarter of all students said that they were always short of cash and one-fifth of undergraduates said that they missed meals because of cash shortages. After accommodation costs had been taken care of, students were left with £23.10 per week to pay for bills, food, clothes, books, travel and so forth. In the same year, the jobseeker's allowance paid £39.85 per week, plus housing benefit where appropriate. It is not surprising, therefore, that around half of those surveyed said that money difficulties hampered their studies.

Many students take up employment in order to make up the shortage. This is not necessarily a bad thing in principle, as long as it does not interfere with their studies and as long as they are employed at fair wages and under decent conditions. It seems, however, that the studies of many students are affected by their jobs. The survey showed that nine out of 10 students work at some time during the year, with four out of 10 working during term time. The average time worked per week is 13 hours in term time, rising to 26 during vacations. Around half of the students who worked felt that it was detrimental to their studies. Three out of 10 said that they had missed lectures, while two out of 10 said that they had failed to submit work because of their paid jobs. These findings illustrate a picture of growing hardship where employment has become a substitute for proper student maintenance funding and where hardship is detracting from effective study.

The evidence does not come only from the NUS. The Student Income and Expenditure Survey 2000, known as the Callender report, although completed before the withdrawal of grants, points to a worrying degree of student debt. Almost nine out of 10 students in the survey reported financial difficulties. The costs of housing, travel and course expenses are rising and, when combined with the burden of paying tuition fees, it was found that student debt had trebled in the three years between 1995–96 and 1998–99. Goodness knows what it is now.

The Government may say that it is wrong to include tuition fees when calculating the cost of taking a degree because it is the parents who are supposed to pay them. However, it is often the student him or herself who bears the cost of tuition fees. The Callender report showed that 30 per cent of students paid the majority of it themselves.

It might be expected that some of those beset by financial problems might give up and go and get a job instead of ploughing on towards graduation. I think that all of us know someone who has done that. The survey backs up that theory. It found that over half of all students have thought about giving up their course at some time, with finance being the strongest factor for around one-third of students.

Clearly, students are reluctant to borrow as much as they need to live and even the maximum amount they are able to borrow from the Student Loans Company is not enough. Many students, in particular from poorer families, are reluctant to take on a large burden of debt. The impact of this is worst on those very same under-represented groups whom the Government are seeking to encourage. NUS research shows that between 1997 and 1999, male applicants from social groups 4 and 5 had fallen by 7.8 per cent; applications from black Afro-Caribbean males had fallen by 10 per cent; and from women over 25, they had fallen by 14.5 per cent. Applications from mature students taking degree courses have also fallen sharply since 1997, and that is almost certainly linked to the funding arrangements. The phasing out of grants that is now under way will sharply escalate the financial burden on the poorest students and Gordon Brown's small pot of money for non-repayable bursaries will not solve the problem.

So how are things different in Scotland, Wales and Northern Ireland? Scotland is the furthest ahead. The Labour and Liberal Democrat administration in Scotland had the benefit of the Cubie report into student funding and has implemented the vast majority of its recommendations. The principle is that students make a contribution to the cost of their education, but they do not do it up front, where it would prove to have the most deterrent effect. They do it after they graduate by paying £2,000 into a graduate endowment fund. They can pay this either as a lump sum or borrow from the Student Loans Company, just as they do with their student maintenance loan. This means that the universities have the benefit of getting the money much sooner and the graduate pays only when he or she is earning. Non-repayable student bursaries similar to the old grants have also been introduced in a student funding package containing over £50 million of new money. The sharpest funding differences in the UK are shown in the unit of funding resource of each full-time student. Next year the figures will be £5,360 for England and £6,744 for Scotland—more than a quarter higher. Next year, Scotland will be spending around 2 per cent above inflation on each student, with England spending only 0.4 per cent above inflation.

The effect of this has been dramatic. Figures released by UCAS in January indicated that the increase in university applications in Scotland, at 4.5 per cent, was three times higher than the increase across the UK. There has been a 7.8 per cent increase over the previous year in the number of Scottish students attending Scottish universities. The increase clearly shows that the abolition of tuition fees and the introduction of student bursaries have already made a major impact.

In Wales, where the joint Labour/Liberal Democrat administration in the Welsh Assembly has declared its intent to have its own Cubie-style report, there has been an increase of 6.5 per cent in the numbers of Welsh students going to institutions in Wales. In Northern Ireland, where the devolved Assembly supports a similar package, although the Minister does not intend to implement all of it, there was an increase of 8.6 per cent.

Before concluding my remarks, I should like to consider the proposals for tackling this issue that we have been hearing from Mr Hague's Conservative Party in these recent pre-election weeks. The Conservatives have promised to privatise the universities and privatise and commercialise student loans, thereby costing graduates a great deal more even than they pay now. In fact, their proposal would increase the total liability of the student body by a monumental 78 per cent. They propose to raise £700 million a year by increasing the interest paid on student loans to the commercial rate. A student who takes out three loans would therefore pay an additional £2,815 under the Tory proposals than he or she does at present.

The Tories try to sell this idea to students by proposing to increase the threshold below which repayments need not be made to a salary of £20,000 a year. But what they do not tell you is that, while you are deferring paying off your loan, the interest is accruing at commercial rates and vastly inflating the amount that you will have to pay off in the end. What a con! I think that those who believe themselves capable of gaining a degree are by definition not stupid and they and their parents will see through this cynical ploy and will not vote for it.

What poor students need is not a Tory privatised loans system but the abolition of the tuition fees introduced by the Labour Government and the restoration of the maintenance grant, as the Liberal Democrats have done in Scotland and propose to do in Wales.

8.3 p.m.

Baroness McIntosh of Hudnall

My Lords, perhaps I may begin by thanking the noble Baroness, Lady Walmsley, for introducing the debate. It is one in which probably a significant number of noble Lords either had, or now have, a personal interest. My contribution will be brief.

First, I want to say that I have no quarrel with the Government's drive to increase access to higher education. I do not suppose that many Members of this House would quarrel with that. I also have no quarrel in principle with the possibility that those who can afford to might make a contribution to the cost of higher education. But the issue is: "those who can afford to pay".

I want to focus in particular on the difference between some groups of students and other groups. I shall refer briefly to the particular problems faced by students who undertake vocational training. My particular interest is in those undertaking training in the performing arts, because that is the world to which I belong; but my remarks may apply equally to others—for instance, architects or doctors, who have a particularly long training to undertake.

The point about vocational training, in whatever field, is that it is frequently long, it is often demanding, and it is usually heavily programmed. By way of example, perhaps I may draw your Lordships' attention to the experience of my son, who, I am afraid, trained as an actor. Before he did so, he went to university. While he was there the average number of hours that were programmed for him per week was around six. As a trainee actor, his programme was for up 12 hours a day, and there were often six days in a working week.

It is clear that, if students work programmed hours of that order, it is unlikely that they will be able to undertake paid work. If they were to do so, the likelihood is that it would be in hours that should properly be spent in sleep, or at the very least in study. Therefore, students who undertake vocational training often have to take up loans simply because they have no other way to acquire the money they need to support themselves. Alternatively, their parents have to help out to a greater extent than perhaps is the case with other students.

Those who are dependent on student loans for long training are therfore often at a significantly greater disadvantage than those who simply undertake an ordinary three-year undergraduate course. My daughter is currently training at music college on a four-year undergraduate programme and will almost certainly have to undertake at least one and possibly two years of postgraduate training in order to complete the work that she needs to do in order to take up her profession. At the end of that time, she and her colleagues will have acquired an even greater burden of debt than those who have taken a three-year undergraduate course of the conventional kind.

That might not be so bad if we were talking about students who were going out into the world and straight into highly paid occupations. In the main, though, students who undertake vocational training of that kind are not doing so. Certainly, those in the performing arts are going out into what is broadly a rather underpaid profession. Therefore, the extent to which they are able to begin paying off the loans that they have undertaken is significantly less than is the case with their more fortunate colleagues who are able to take well-paid jobs in the City—to join a law firm, for instance. They emerge into an uncertain and, as I say, often low-paid, occupation for which they have trained very hard and often for many years.

When my noble friend the Minister replies to the debate, will he comment on what the Government might be able to do in future to provide additional support for students whose commitment to a particular vocation puts them at a financial disadvantage? I suspect that there are many such students. It would be helpful if their plight could be taken into account in considering this issue in future.

8.7 p.m.

Earl Russell

My Lords, I declare an interest: first, as the parent of two recent graduates, one of whom is still living at home at the age of 30 while he pays off his loans and, secondly, as a university teacher. It is in the second capacity that I should like to speak.

We in this country, south of the Border, attempt to do in three years what the Americans do in four. They are used to students working their way through college. With a four-year course, that can be done; with a three-year course, it cannot be done without a grave sacrifice of academic standards.

The words "poverty" and "student" have been associated for a long time. But I speak for my party on social security matters and when I use the word "poverty" I endeavour, whether with success or not, to use it with precision. The sort of poverty I have seen among students in the past 10 years is totally unlike anything I had seen in my previous 30 years of academic experience.

There have been two crucial points of calamity. One was the withdrawal of social security benefits in 1990; the other—especially for those in London—was the Housing Act 1988, which required university halls of residence to charge market rents. The effect of that in London is catastrophic. The tuition fees were only the arsenic on the cake. But arsenic, of course, has a cumulative effect as it works through the body.

My noble friend Lady Walmsley quoted a figure of four out of 10 students doing work during term time. That may be the figure that is known to the authorities, but in my experience it is a great deal too low. In fact, I believe that it should be just about doubled. As a college, we try to limit students to 12 hours' work a week, which does harm but does not necessarily do catastrophic harm. We are by no means always able to achieve that aim. Very often the choice is between doing a great deal more and withdrawing from college altogether.

In my experience since I returned from the United States in 1984, the amount of academic work carried out by students has halved. If I do not say that that amounts to a decline in the standard of the degree, it is because there has, at the same time, been a rise in the potential intellectual ability of those whom I teach. I believe that the one thing almost exactly cancels out the other.

To go through the immense cost of sending students to university in order that they should learn more about Burger King than about King John, strikes me as a rather wasteful process. It is also discriminatory by parental income. I know some pupils whose parents buy them houses for the period while they are undergraduates. They sell them after three years and make an immense profit: nice work if you can get it! However, it is a very different picture for other students.

I mentioned the fact that my son is living at home while paying off his loans. Other students cannot do so. There is also a severe distorting effect on the jobs that graduates take after they have completed their degrees. When we debated the student loans Bill in 1990, I can remember saying that the legislation would lead to the necessity of offering to repay loans in order to entice people into the teaching profession. I am sorry that that was a true prophecy.

There are also certain categories of people who suffer quite exceptional hardship. In my experience, the worst examples are the students who are estranged from their parents. The money that they receive simply does not cover the vacations; and they have nowhere to go where they can get a roof over their heads during that time. That is a torture of Tantalus. Two of my students are in that position at present. I had lunch with one of them earlier today. He has advised me very strongly never again to admit to the college anyone in his position. I cannot tell him that he is exaggerating; I wish I could.

The Minister will no doubt mention access funds. The college access fund has been extremely generous in the case that I just mentioned. However, there are many calls upon it. Each time it has brought that student just to the point where, when he jumped, he hit the top of the fence. Then we had to start all over again. When Ministers invoke access funds, I am reminded of when I tried to feed a hippopotamus at the Philadelphia zoo when I was five. I threw a peanut which, to my intense pride, landed on the middle of his tongue. But the hippopotamus simply kept his mouth open waiting to be fed. The access funds are nowhere near meeting the need.

I am extremely glad that the noble Baroness, Lady McIntosh, mentioned the case of those seeking vocational education. I have a student at the moment in that position who decided that he would like to go to the Bar. He would have been quite brilliant. However, both his parents were made redundant within a few weeks of his taking that decision. It is the Bar's loss; and it is justice's loss.

We are told about access, but if the Government complain of lack of access for applicants from underprivileged backgrounds, they are showing what John Stuart Mill described as, the inability of the unanalytic mind to recognise its own handiwork".

8.14 p.m

The Lord Bishop of Hereford

My Lords, I, too, thank the noble Baroness, Lady Walmsley, for introducing this debate. It is subject that causes a very great deal of anxiety to many people—above all, and in particular, to impoverished students, but also to their parents, even willing parents, who find themselves trying to meet burdensome or even impossible financial demands to help their student children. That is a factor that can often lead to tension and breakdown within families. The staff of universities and colleges know only too well about the privation suffered by their students, as the noble Earl, Lord Russell, so eloquently outlined. There are also the hard choices that many students face between concentrating on academic work and taking the available jobs in order to make ends meet.

The Church of England has chaplaincies in virtually every university and college. What I say derives mainly from information provided by those chaplains and known only too well to the staff of our Board of Education at Church House. Scottish students are indeed fortunate. I hope that their English counterparts may soon enjoy similar levels of financial support.

Perhaps I may briefly make some specific points. First, the experience of chaplains in higher education is that disparities in income between students are greater now than they have ever been in the past 50 years. Some are generously, lavishly supported by their parents and lead very comfortable lives. But others struggle desperately, even after taking the maximum available loan, which is swallowed up in accommodation and travel costs thus leaving pitifully little for food; and nothing at all for the legitimate, occasional pleasures of student life, let alone necessary books and the kind of cultural activities in which students should be able to take part.

Secondly, I have this figure of 40 per cent in respect of students, although I accept that it may be more, undertaking 12 hours' work a week on average. But the kind of work that they do is either in bars or nightclubs, which obliges them to work far into the night and leaves them exhausted the next morning, or it is day-time work that prevents them attending lectures, seminars, and so on.

Thirdly, a large percentage of those who drop out of courses or fail exams come from among those who take such jobs. The real high-flyers can cope with that kind of stressful life, but the less able students find it very tough indeed. As has already been mentioned, this is a time of increasing access to higher education. It is those people who are, shall we say, on the border line of suitability as regards being able to benefit from higher education who become discouraged or defeated by such financial burdens and anxieties.

Fourthly, the expansion of student numbers has meant that fewer and fewer students can enjoy their first year at university or college on the campus. There is just not enough accommodation for the increasing numbers. We are talking about a supportive residential environment where they could find advice and help from fellow students. So many first-year students are now living out in lonely, isolated places with high travel costs. That isolation means more risk of emotional and academic breakdown.

Fifthly, there are some higher education institutions in which students are receiving food parcels through the agency of chaplains, local Church congregations, or branches of the Mother's Union. Such is the measure of destitution faced by the most hard-pressed students. Should we be content with, let alone proud of, a system that requires that kind of emergency charitable support? It might be necessary, and perhaps understandable, in an impoverished developing country. But food parcels for students in the United Kingdom in the 21st century? It is a disgrace.

Finally, one particular point about which I have some knowledge concerns candidates for ordination, of whom, I am glad to say, there are increasing numbers. They face some of the same problems encountered by students of the performing arts. There are increasing numbers, not least of academically distinguished young people, who will become the clergy and, in particular, the theological educators of the future. We need them badly. But the financial path to ordination is a very hard one. The Church will provide the full cost of training and adequate grants for accommodation during ordination training. However, the bright students will have undergone three years of undergraduate study and probably three years of postgraduate study. During that time they will have built up an intolerable burden of debt. Students are entering theological college burdened with this debt and are quite unable to face the prospect of repaying it out of the modest stipend which is all that they are likely to receive during their ministerial life.

Student poverty is a deeply serious problem. I beg the Government to find a sensible and generous solution to it. Students do not have the appetites of hippopotami; but they do need help.

8.19 p.m.

Lord Thomas of Gresford

My Lords, new Labour hit students in this country with a tripple whammy: the imposition of tuition fees; the abolition of maintenance grants; and the reduction of the repayment threshold on student loans from £16,000 to £10,000.

I shall begin with tuition fees. There are really two considerations that one must bear in mind. First, what effect do they have upon the level of participation in higher education? Secondly, what effect do they have on the social mix of the student population? My noble friend Lady Walmsley referred to the figures for 2001, which show how much the take-up of higher education places in Scotland has increased as compared with the rest of the United Kingdom. It is up 9 per cent, as compared with 1 per cent in England and 2.6 per cent in Wales.

If one looks at the applications for places in degree courses at higher education institutions in Wales over the past five years, one sees that there has been a dramatic fall due to the introduction of tuition fees. At the University College of Wales Aberystwyth there were 12,966 applications in 1994. In 1997, following the introduction of tuition fees, that figure dropped to 8,264—down 36 per cent. Last year the figure was 8,343. At the University College of Wales Bangor there was a drop of 23 per cent over the same period. At the University of Wales Cardiff there was a drop of 12 per cent and, worst of all, at the University of Wales Swansea—where one of my sons was a student—applications have dropped by 43 per cent as a result of the introduction of tuition fees.

I turn to mature students. Research carried out by the Liberal Democrats shows that in Scotland mature student applications have risen by some 5.5 per cent. In the rest of the United Kingdom they have dropped by 1.7 per cent in the same month in 1999. The rise in Scotland occurred exactly when tuition fees were abolished and maintenance grants or bursaries were reintroduced. Before that time applications from Scottish mature students were down by 14 per cent overall and by 11.3 per cent as a proportion of the population. Tuition fees have denied access to higher education, particularly in Wales.

As for the student mix, the noble Baroness, Lady Blackstone, acknowledged in the fourth report of the House of Commons Education Select Committee that currently around 80 per cent of children of professional and managerial groups enter higher education, compared with only about 17 per cent of the children of lower socio-economic groups. Scotland's Cubie inquiry concluded that, the perception of the up-front tuition fee represents an impediment to access … although the majority of students do not pay full tuition fees, their very existence was considered a deterrent". The Cubie inquiry also pointed out, There is ample evidence that young adults from low income backgrounds are under-represented in higher education … Given the debt aversion of the families from which these students come, a support package which is made up exclusively of loans would not meet wider access objectives for participation by this grouping". In Wales the new partnership between the Liberal Democrats and Labour has tried to do something about the peanut on the hippo's tongue. The Partnership Agreement, Putting Wales First, commits the Welsh Assembly to, a further increase in funding to tackle student poverty in Wales. As a first step we will increase the amount of money available for access funds to at least £11.5 million in the coming year". That increase of 15 per cent is immediately available as a result of the partnership that we entered into. In the next three years that will have a considerable impact on those who can gain access to higher education.

There have been some criticisms of access funds, not just by my noble friend Lord Russell. Access funds are available only once hardship has become evident. They do not pre-empt or prevent hardship. They do not seem to be used to promote access to education but to promote the retention of students who have got into financial difficulties. The NUS Wales stated with some firmness that access funds cannot be relied upon by students in planning their finances as they are not available at the start of courses; there is no way of predicting how much students will get from any fund and resources and procedures vary.

We have tried in Wales to do something about the way in which this Government have squeezed students and have created a degree of student poverty. We can only hope that the Liberal Democrats in England in this Chamber and outside will have a similar impact here.

8.25 p.m.

Broness Sharp of Guildford

My Lords, I join others in thanking my noble friend Lady Walmsley for introducing a timely debate on an important issue. The issue does not just concern tuition fees. It also concerns, perhaps mainly, the new loan-financed system of maintenance for students.

Under the new system, students outside London can obtain loans of £3,725 a year, or just over £70 a week. Those in London can obtain loans of £4,590 a year, or just over £88 a week. At the meeting of the parliamentary university group on Monday, Chris Llewellyn-Smith, the Provost of University College London protested to the noble Baroness, Lady Blackstone, about student poverty. He said that it is a very real issue and that students in London pay £80 a week in rent out of their loans of £88 a week. How can a student survive if nearly all of their income is devoted to rent?

Of course, some students work. Many noble Lords have mentioned that. At present the average student debt is £4,000 but in future that will rise to £12,000 to £16,000 and possibly more if students take further vocational courses. However, there are problems associated with students working, as my noble friend Lord Russell and the right reverend Prelate have mentioned. Some students live in sub-standard accommodation and do not eat properly. I speak from my experience at Sussex University where many students get by on one meal a day. People pay more for meals at Sussex University than I pay at the House of Commons cafeteria. Student meals are not necessarily a cheap option.

One may ask whether this matters. I have little doubt that the Minister will tell me that traditionally students live on low incomes and waste too much of their income on beer and other pleasures; that they will benefit from their studies and therefore they should pay something towards them and that loans are therefore an appropriate way to do so. Like the noble Baroness, Lady McIntosh of Hudnall, I agree that those who benefit from such studies should pay for that. However, the key issue is that of debt and debt aversion at a time when we are trying to encourage more students from lower income groups to enter higher education. There is much evidence on this matter in the Callender report that was mentioned by my noble friend Lady Walmsley, and in student surveys and in the Cubie report itself which examined in detail student debt and student poverty. Both the Cubie report and the earlier report of the noble Lord, Lord Dearing, came to the conclusion that maintenance grants were fairer than loans.

I have been struck by two groups who have been hit hard by the introduction of loans and their repayment. One group comprises student nurses about whom the Royal College of Nursing has produced a report. That is an example of vocational education. Nurses are required to spend time on the wards, undertaking shift work at weekends and during the summer vacations. They do not have time to take outside work.

The other group about which I am concerned are mature students. When I went on a course I picked up a useful pamphlet on financial matters for students. The example of a single parent with two children is mentioned who receives—f one includes the tuition fees paid—a total of £7,500 from the state towards her costs. It came through from the discussion we had with a highly competent lady in charge of students and student finance at a university that many lone parents find it difficult to juggle everything—child care and all the rest. They drop out of universities. From the survey on nurses, 67 per cent of the students said they had considered dropping out. Of those who dropped out 76 per cent blamed finance. The difficulty is in juggling everything. Many students said they wanted to go part time. All that a part time student gets is the £500 loan and nothing else. Do they continue to receive access to benefits if they are students? They did not used to. I am not clear whether this has been changed by the Government.

How far is the debt of £12,000 to £16,000 offputting to students? There is a good deal of evidence that students are debt averse. The Liberal Democrats, in looking at this issue, came to the conclusion that the answer was to use the Cubie solution in this country not only to abolish tuition fees but also to re-introduce means tested grants for part of the maintenance grant, topped up by loans, and to ask the student to pay an endowment which would bring it back. Two thousand pounds per student may not sound very much in relation to the total debt. If one considers that there are now 500,000 full time students, it is rapidly bringing in £1 billion a year. Therefore, it becomes to some extent self-financing.

The problem of student debt is not a trivial issue. It is a very real one. If we want to widen access to our universities it is a problem we have to address properly. The Government's bursary scheme introduced last year is not good enough. It was an ad hoc, knee-jerk reaction to the new post-Cubie arrangements being introduced in Scotland. From these benches we think the answer is clear—it is to return to the means tested maintenance grants for the poorest students. It has been done in Scotland and Wales. We have done it in Northern Ireland. As the Times Educational Supplement said last week, the proposals by the Liberal Democrats to restore means tested grants are the most coherent solution to student poverty and are a pre-requisite for expansion.

8.32 p.m.

Baroness Blatch

My Lords, I thank the noble Baroness, Lady Walmsley, for this debate. Much has been said by the Minister this evening about the funding of higher education and, in particular, of students. It is a matter of record that funding for a higher education student per full time equivalent fell between 1989 and 1997. It is true to say that the period coincided with a considerable expansion of the number of students admitted to higher education. That is why the Dearing report was commissioned with Labour Party support to consider funding and expansion.

The Government have lost no opportunity to make this point. They have been in office over the past four years and have presided over a declining unit of funding to date. From a written parlimentary Answer, the planned increase over the next three years is in year 1, 0.7 per cent; in year 2, zero per cent and in year 3, 0.4 per cent. It would be helpful to know from the Minister whether that increase will be more than absorbed by additional students planned for over the next three years and whether funding per student is planned to rise in line with the target of 50 per cent of the young cohort.

Average student debt has risen dramatically since 1997. In 1995–1996 it was £840; in 1999 £2,530; in 1999–2000 it was £3,210. It is estimated by the Department for Education and Employment that the average debt will rise to £13,000 by 2003. Ministers frequently say that graduates can expect to earn on average 20 per cent more than non-graduates. That is no longer true. Certainly, it is not true of those graduates and post-doctorates who remain in academe.

The number of applicants from varied social backgrounds to full-time undergraduate course through UCAS has fallen since 1997. The worrying trend for accepted applicants highlights the greatest decline for those from disadvantaged backgrounds, both those from a skilled manual background and those from an unskilled background. Educational commentators have highlighted the stark choices facing those from poorer backgrounds. They either do not apply for fear of debt or if they apply their choice of universities and colleges is restricted by fears about the costs of leaving home and commuting. They also feel they must rule out some subjects because they are worried about finding jobs at the end of their courses.

A recent report on student finance reported that three out of five students questioned knew a friend who had been deterred from applying to university because of changes to student funding. One in seven students said they had come near to deciding against university because of their concerns over the debt they would incur. As the debt burden rises I am sure it will impact on drop out rates. Peter Knight, Vice-Chancellor of the University of Central England, told a conference of university heads earlier this year that an increasing number of students were dropping out of their courses because of mounting debt. It is not just the application of tuition fees but, more importantly, the loss of maintenance grants which has exacerbated the problem. The Education Select Committee was also warned of this during a meeting at the beginning of February with the Professor of Social Policy at South Bank University, Claire Callender, who said: It is because of the move from grants to loans that students have built up that substantial debt. Thoughts about debt before going to university may deter some people I am on record as saying that the real issue for students was the loss of maintenance grants without even a taper. This Government came to office saying that they had no plans to introduce tuition fees and certainly said nothing about the abolition of maintenance grants. Within weeks of coming to office a Bill was introduced to do both. Students were betrayed.

There then came the Scottish anomaly. Devolution to Scotland and to Wales will mean different policies in different parts of the United Kingdom, and I understand that. The United Kingdom is a member of the European Union as one country. Therefore, students can be forgiven for believing that they are citizens of the United Kingdom and should expect parity of treatment within the European Union. We know that our English, Welsh and Northern Ireland students can be discriminated against but not southern Ireland, France, Germany, Italy and other EU countries and the Government remain unconcerned about that. That is the politics of the madhouse.

Time does not allow me to respond to the distorted description of the policies of the Conservative Party by the noble Baroness, Lady Walmsley. Suffice it to say that the present system of tuition fees and loans which results in students from the poorest families leaving university with the greatest burden of debt is causing much distress. The levels of debt and the pay-back threshold of only £10,000 is certainly acting as a deterrent for many young people. To say otherwise would display an indifference to what I believe is a very real issue.

8.39 p.m.

Lord Davies of Oldham

My Lords, I am grateful to the noble Lady, Baroness Walmsley, for introducing this debate on this important subject and for the participation of all noble Lords who have contributed to what has been a very lively debate. It is important that we keep a sense of proportion when discussing the subject of student finances. The recent Callender report on student income and expenditure, to which reference has been made, shows that the majority of students on degree courses are not in serious difficulties. They have systems of support which enable them to sustain themselves although not in a lavish lifestyle. No one ever thought students would be wealthy. For instance 59 per cent of students have a computer and 27 per cent have a car. A certain number of students still follow the old tradition of drinking above average levels of alcohol.

We should not be complacent about students. We know that if our widening participation strategy is to succeed we must attract into higher education more mature students and students from poorer backgrounds. We recognise that financial issues weigh more heavily on them. We need specific measures— I shall describe them briefly—to persuade them to take that step.

I turn to points raised in the debate. Are more students leaving their courses because of the new financial arrangements than in the past? It does not appear to be so. The present drop-out rate of just over 17 per cent has been the same over a decade. Over the past 10 years, the drop-out rate has been between 16 and 18 per cent. I understand that every drop-out is a casualty. Every teacher, like the noble Earl, who loses a student is bound to feel that keenly. Nevertheless, we must not over-dramatise the position.

Earl Russell

My Lords, has the Minister considered the figures for intermissions together with the figures for drop-outs?

Lord Davies of Oldham

My Lords, I quoted the drop-out figures. That was the cardinal figure described earlier. I stand by what I said.

The Government's vision of higher education is clear. We are committed to maintaining a world-class higher education system. We recognise that that takes money. We have to address that with the fairest funding arrangement for universities and students. We are investing £1.7 billion in higher education in the six years to 2003–04, a real-terms increase of 18 per cent. That includes significant new capital resources. There is extra on top for research.

For the first time in 15 years funding for students will rise in 2001–02 and the expansion of places will be fully funded thereafter. This is a considerable investment. It answers the important question raised by the noble Baroness about funding for higher education. It contrasts somewhat sharply with the record of the previous government.

A number of points were raised about student hardship. The noble Baroness, Lady McIntosh, will recognise that we addressed specifically the issue of dance and drama students. We knew that prior to our arrival in office in 1997 the country was in crisis in that area. The noble Baroness will recognise that our award scheme has produced guaranteed funding for up to 820 of our most talented students. We know that the rich seam of talent in our community goes far beyond that figure. The film "Billy Elliot" helped to illustrate that in a graphic way. It is important that we tap into that talent. But that scheme is real evidence that the Government are addressing themselves to the issue raised by my noble friend.

I turn to the differences in student support systems and the Scottish dimension. The Liberal Democrats have been fast learners with regard to the Scottish dimension. Five years ago the Liberal Democrats were emphasising their commitment to the maintenance grant. Three years ago their spokesman in another place commented favourably on the Government's proposals in the Teaching and Higher Education Act and supported our proposals on tuition fees and the loan system. The Liberal Democrat Party is now waxing strong on the advantages of the Scottish system.

We recognise that devolution will give other parts of the United Kingdom the opportunity to make their own decisions on funding. However, we recognise that there is a deficiency with regard to dedicated support for mature and, increasingly, part-time English students. It is important that we improve participation rates. Such resources, dedicated to those areas, would be difficult to raise if we followed the Scottish model. While it uses its resources for one particular area, it is without the resources that we intend to deploy for a specific range of support systems.

Since 1997 the hardship funds have quadrupled to £93 million a year. As the noble Earl indicated, students present needs. Every teacher in higher education is all too aware of the demands on hardship funds. But I maintain the obvious point: the funds represent a significant record of the Government. Those hardship funds are now available to higher education institutions at the beginning of the academic year. Therefore, they are able to plan more effectively to meet specific needs.

Earl Russell

My Lords, the increase mentioned by the Minister is genuine and welcome. The point I made was that the need applies to every single student. That was not recognised when the funds were set up.

Lord Davies of Oldham

My Lords, I am limited by time in dealing with these issues. I do not accept that every student attending higher education in England and Wales is suffering hardship. That is not the basis of the Callender report, much quoted today. It is not the basis of any serious analysis of student finance that I recall over the past two decades. Of course, students are poor; and some students suffer hardship and need. That is why we seek to target such students. That is why, for instance, mature student bursaries for childcare have been available this year; and from next September there will be increased help for student parents, in particular with the new childcare grant. Students facing real hardship are more prone to drop out of their courses.

Opportunity bursaries of £2,000 are being introduced for bright students from less-well-off families. By 2002–03, 25,000 students will be able to benefit from those bursaries.

The concept of the Excellence Challenge requires real resources. The Excellence Challenge is providing £190 million over the next three years. This is dedicated to tackling the problem of attracting students from those backgrounds which are underrepresented in higher education to enable schools, further education colleges and higher education institutions to encourage those students to present themselves for their higher education opportunity.

So the Government are active in those pressing areas which have been identified today. I recognise that there will never been enough resources to meet the needs of every student. However, I assure the House that the Government's student support arrangements are working well. Drop-out rates are not rocketing in the way suggested. There will always be worries over finance, but such worries should not be a barrier to higher education. There is no evidence that that is so at present. More students are going into higher education than ever before. The Government are making sure that extra financial help is available for a vulnerable group of students. Students in hardship can obtain help from the hardship funds. We intend our high ambitions to be fair and progressive. I commend them to the House.