Tuition Fees (Cornwall) (Hansard, 7 January 2004)

§ Matthew Taylor (Truro and St. Austell)(LD)

I welcome the opportunity to have this debate, as we await the publication of the final details of the Government's proposals, and I welcome the Minister.

It may be worth touching on the background to the Government's position. On 23 July 1997, announcing the introduction of university tuition fees, the then Secretary of State for Education and Employment, the right hon. Member for Sheffield, Brightside (Mr. Blunkett), said that the entire objective in taking our difficult decisions has been to put higher education on a firm footing for the next two decades."—[Official Report, 23 July 1997; Vol. 298, c. 958.] What happened? Asked that question by the Public Accounts Committee on 28 January 2002, the chief executive of the Higher Education Funding Council for England replied: The grant to institutions was reduced by exactly the amount that was coming through in tuition fees". So the level of public funding per student in Labour's first term was cut by 7 per cent., and the gap in funding was plugged by the introduction of tuition fees. That did not mean more money for universities, just a different form of funding, which has resulted not in the financing of higher education being on a firm footing for two decades, but, after five years, in the universities being in an even worse position. Tuition fees have not put a single penny of extra money into higher education, despite that being their original justification. They are used simply to cut the Department for Education and Skills' annual spend, yet we are presented with the same arguments for top-up fees.

On 8 February 2001, the same Secretary of State said: We introduced the new funding arrangements for students … precisely to avoid the universities levying additional charges … I have made my position clear during the past two years: I am against the levying of top-up fees."—[Official Report, 8 February 2001; Vol. 362, c. 1061.] That is a position that has changed just a couple of years or so later. It is not surprising that the right hon. Gentleman made that error, because the Labour manifesto that was published only a little later that year—the manifesto on which current Labour Members, including the Minister, were elected—stated clearly that we will not introduce top-up fees and have legislated to prevent them. I might be under some misapprehension—if I am, the Minister can correct me and we can draw the debate to an early finish, as I am sure you would like, Mr. Cook—but it seems that the Government are now proposing to introduce top-up fees and have presumably not legislated to prevent them. Both promises were broken.

If we fast-forward to the White Paper on higher education in January 2003, we again find the Government talking of a need to ensure stable and sustainable funding in the long term—a case of déjà vu. To achieve that aim the Government are proposing variable top-up fees levied on students of up to £3,000 from September 2006. Is not putting in place stable and sustainable funding for the long term exactly what the 143WH Government said that they were doing in 1997? Why on earth should we believe the Government when they say it now, when they so clearly did not mean it then?

I have raised the debate to focus on the impact on Cornish students, particularly in relation to debts and disincentives. The Government set the goal of widening participation in higher education. As a Liberal Democrat, and unlike the Conservatives, I welcome that commitment, even though I am not sure that an arbitrary 50 per cent. target meets the point. All students who are able and keen to benefit from the opportunities of higher education should have the chance to do so.

How do the Government reconcile that goal with a top-up fees policy that will increase student debt and deter school leavers from university? The figures are plain: independent studies estimate that average student debt is about £12,000, although the Government acknowledge only a figure of about £8,600—either way, it is a substantial sum. The Government acknowledge that debt will almost double to—on their figures—about £15,000 if top-up fees are introduced. By my calculation, over three years a student pays three times £3,000 in top-up fees—setting aside any issues of inflation. Assuming three full student loans of £4,000 each, which is not unlikely except for those in the tiny minority from such wealthy backgrounds that their parents can cover the full costs, a student will be left with a debt of at least £21,000. That does not even take into account those who must borrow more to meet their living costs, which is a typical student experience.

A more independent study, by Barclays bank, concluded that by 2010, the year in which the first full cohort of top-up fees students will graduate, average student debt could top £30,000. Those figures are important because top-up fees make the problem of student debt even worse, debt deters children from going to university, and young people from low-income families are deterred most of all. In other words, top-up fees will deter the very people whom we are trying to encourage into higher education. For example, according to research commissioned by Universities UK and the HEFCE: one of the most significant findings … is that debt aversion deters entry into higher education … Debt aversion had the greatest impact on the participation of the very groups the government most wants to attract into higher education. However, the Department for Education and Skills student income and expenditure survey 2002—03 states: Top-up fees of £3,000 will put even more poor students off university".

Other research on the DFES website demonstrates that the students most dependent on paid work while at university are those from the poorest families. We can see the impact of student tuition fees: in 1998–99, 47 per cent. of students took paid work in term time, at a cost to their studies; by 2002–03, that figure had increased to 58 per cent. Therefore, a disadvantage is built into the system for the very families about whom the Government care. Such students are not only from a poorer background and building up debt, but have to work and take time away from their studies, which students from wealthier backgrounds do not need to do.

The Government argue that, on their current plans, 30 to 35 per cent. of the poorest students will be exempt from fees. That assumes that such students will use their 144WH grants to pay off fees, but they will still have to cover their maintenance costs, and so on. They will be robbing Peter to pay Paul; they will still have to empty the piggy bank and build up debt. Under Liberal Democrat plans, however. there would be no top-up or tuition fees and an introduction of grants for poorer students to meet their living and study costs.

If we put that in the context of Cornwall and remember the three basic principles, we realise the problem. First, as the Department's research shows, the prospect of debt deters students from going to university; secondly, the prospect of debt acts as the strongest deterrent for children from low-income families, as the Department's research also shows; and, thirdly, as even the Government acknowledge, debt will increase significantly to an average of at least £15,000 once top-up fees are introduced. That raises very serious concerns for students in Cornwall, which is a relatively low-income county that, as a result of tuition fees, has not shared in the national expansion of student participation rates in higher education experienced in other parts of the country. Tuition fees have already had a relative detrimental effect, and top-up fees will make that even worse.

For the Minister's information, in 1997, 21.79 per cent. of school leavers in Cornwall entered higher education; in 2001, the figure was lower, at 21.77 per cent. That follows from the basic principle that debt deters children from relatively low-income families from going to university, and the fact that Cornwall is a county with below-average income levels. By contrast, in higher-income earning areas, there has been a consistent expansion in HE participation, especially in the wealthiest area, London and the south-east.

Relatively low wages in Cornwall mean that the impact of those increased debts that the Government are introducing on those looking to work in Cornwall will on average be three years more hard labour. There is evidence that graduates in Cornwall are hit harder by lower wages than comparable individuals entering work in other parts of the country. If we assume that lower income in Cornwall spreads across the spectrum fairly equally, we can conclude that it will take graduates returning to work in the county approximately three more years to pay off their student debt. It will take a female Cornish graduate returning to work in the county approximately 20 years on average Cornish wages to pay off the debts incurred as a student, and 17 years for a male graduate to do so. The Government entirely ignore that in their figures on the so-called graduate premium—the extra money a graduate is expected to earn. Women do not get that premium as men do.

Although we have low wages, our county has among the highest property prices in the country because of people moving to the county later in life or for retirement. A graduate couple starting their life together in the county and looking to buy a first home will, already be saddled with £30,000 of debt, according to the Government's figures, and with debt of £60,000 or more according to the Barclays bank figures. We might 145WH rationally assume a figure in between, but either way, that is the size of a small mortgage—indeed, quite a large mortgage for most adults—and that is before the couple have even started their first job, let alone bought their first home or had their first child.

The latest speculation is that former students will not have to repay until they are earning more than £15,000, but that is still lower than the average wage in Cornwall, let alone the average graduate wage. On the Government's figures, top-up fees of £3,000 will increase student debts on graduation from an average of £8,600 to at least £15,000—and more likely from £12,000 to in excess of £20,000. We already know that a smaller proportion of Cornish 18-year-olds are enrolling in higher education now than in 1997, when tuition fees were introduced. Before then, numbers had been rising, as they had in other parts of the country.

Almost half—46 per cent.—of the 18-year-olds whom I surveyed in the county and who responded said that tuition fees, let alone top-up fees, made them less likely to go to university. That finding has been consistent in all surveys of 18-year-olds in my constituency over the past seven or eight years. Of the 18-year-olds surveyed, 58 per cent. believed that because of low wages and poor job prospects—and even without the threat of top-up fees—they would have to leave Cornwall within five years to seek better employment. Not only is there a disincentive for Cornish students to go to university in the first place, there is a built-in disincentive for them to return to the county. That is made worse by large debts. We already know that when people have a large debt it is difficult for them to take on the prospect of lower wages than they might get elsewhere. The draw of London and the south-east for graduates will therefore increase, while the disincentive to go to parts of the country that need skills most, such as Cornwall, will increase.

The so-called premium of £400,000 that the Government claim a graduate can expect to earn over a lifetime is nonsense. I do not believe that the Minister can defend that claim in any way today. It is based on an unweighted 2001 sample—it is not statistically accurate—and most of those in it graduated when only 15 per cent. of the population went to university. At that time, a substantial earnings premium was expected over a lifetime, but given that the Government now want half the population to go to university, it cannot by definition be true that the same premium will apply. In any case, as I said, the premium does not apply to women, and it certainly does not apply to people in Cornwall.

One hundred and fifty-nine Labour MPs share the Liberal Democrats' concern and have signed an early-day motion opposing variable top-up fees, although, regrettably, none of the Labour MPs representing Cornwall or Devon has had the courage to do so. Only Liberal Democrats have proposals to abolish all student top-up and tuition fees without cutting higher education. Recent Conservative proposals to abolish tuition fees would cost more than 200,000 university places, let alone any planned expansion. So, the Conservative option is that there will be no fees for those lucky enough to go to university, but that many, many more students will not have the chance to go in the first place. Those students from Cornwall who find it difficult 146WH to get a place at the moment will find it even more difficult in future.

Indeed, the implication is no combined universities in Cornwall. The university education project that the Labour Government have implemented, which we welcome and for which I have campaigned from the day that I was elected—as have many others across the parties—is ruled out by Conservative plans. Inevitably, places such as Exeter and Plymouth, where student numbers are contracting, will not be willing to provide the extra investment or the extra places that are needed for the combined universities in Cornwall project.

While the Conservatives might be voting in the same way as many Labour Back Benchers, they are doing so on a different, narrow-minded and restrictive basis. By contrast, Liberal Democrats have consistently opposed all tuition and top-up fees since 1997, which the Conservatives have not, and are calling on the combined universities in Cornwall to rule out any use of top-up fees if Labour introduces them, in order to guarantee an affordable higher education opportunity for Cornish students. Of course, the combined universities say that they cannot afford to do that because the per-student funding that the Government say is necessary to see students through is based on the assumption that the charges will be levied. Were they to do so, the combined universities in Cornwall would have to offer a second-class education because they would not be able to afford to do things properly. Understandably, and regrettably, they are not able to rule out the levying of fees in the county.

Unlike that of the Government, our policy is crystal clear. Unlike that of the Conservatives, it is based on principle—the principle that all who can benefit from higher education should have the opportunity to do so without saddling themselves with unsustainable debt. As the Prime Minister keeps quoting entirely inaccurate evidence, I shall finish by explaining our point. The richest 1 per cent. of the population—those earning over £100,000—would pay 50 per cent. tax on their earnings above £100,000, compared with the normal higher rate of 40 per cent. is comparable with top rates across Europe and in parts of America, such as New York. That would raise £4.5 billion, according to the Government's figures. Of that, £2 billion would be used to abolish all university fees, including tuition fees, as well as top-up fees. We would also free up £350 million to cover the reintroduction of student grants—not to pay the top-up fees, which the Government plan, but to help students with the basic costs of getting to university and studying, so that the poorest students could, once again, afford to do so. Would we expect students to make any contribution to their higher education? Of course. They would—except for those very poor students who could not afford it—be responsible for maintaining themselves, funded by student loans. However, they would not have to pay for the basic costs of the education itself.

The Government have already stepped the wrong side of that principle with the introduction of tuition fees, but with top-up fees they are going many thousands of pounds further in the wrong direction. It is clear that, although under the Government's plans some Cornish students would not have to pay the top-up fees because their families had such low incomes that they did not need to, many—including those on relatively low 147WH incomes—would have to pay. We know the impact that tuition fees have had, and the impact of top-up fees is staring us in the face. The principle is wrong. Students' only chance of getting out of them will be if some universities—and it does not look as though that will include the combined universities in Cornwall—offer not to charge them, but those universities will then provide a second-class education.

I welcome the fact that so many Labour Back Benchers have decided to stand by their manifesto pledges of 2001 and the promises made during the 1997 to 2001 Parliament, and I regret that the Government seem determined to press ahead. We shall see what they say when the Bill is finally published, but I hope that enough Labour MPs will stand together to defeat the measure and that, at long last, that might include some from my part of the world.

§ The Minister for Lifelong Learning, Further and Higher Education (Alan Johnson)

I congratulate the hon. Member for Truro and St. Austell (Matthew Taylor) on having initiated this debate at a time when the subject is topical. I was hoping that we would avoid the party political Punch and Judy show in which we shall, I am sure, have plenty of opportunities to engage in the coming weeks, and that the debate would provide me with a further opportunity to set out the Government's thinking.

However, I should start on a point of agreement—probably the only one that we have—which is that the policy of Her Majesty's official Opposition would have a detrimental effect on university education and, in particular, on the combined universities in Cornwall. I know about that issue because I was dealing with it as the Minister responsible for regional development agencies when the proposal was first mooted, and consider it vital to the future of Cornwall and the south-west.

Having outlined that point of agreement, I will calmly set out the rationale behind the Government's proposals. The need for reform, investment and expansion is compelling. The hon. Gentleman mentioned the figure of 50 per cent. If a target of 50 per cent. causes a hang up, forget it. We need expansion and we think that setting a 50 per cent. target is the way to move towards that expansion. However—this is a point for Her Majesty's official Opposition, who are not present—even people who disagree with all the arguments for expansion must still agree with the need for increased investment, not least because if we want to keep the participation rate at the current level of 43.5 per cent., we will need to provide places for about another 124,000 students, because of the demographic blip that will affect the system. So, even to maintain the current figure, more university places are needed.

The need for reform is compelling and we have an opportunity to create a well-funded university sector that is able to maintain its position in the world. In the short time available, I will not go into the points made about 1997, 2001 and now. The only point I will make is that, in the countries responsible for 40 per cent. of the world's population, there has been a dramatic change 148WH even since June 2001. When we were all marching around the doorsteps during the election campaign, there were 5 million higher education students in China. Two years later, there were 15 million, which is an incredible expansion. That is mirrored—although not to the same degree—by a huge expansion in India. In Canada, Australia and America, the whole thrust is towards increasing the number of graduates so that they can take advantage of opportunities that are available in the knowledge-driven economy. That is why the position of Her Majesty's official Opposition is so questionable. Even in 2001, that momentum and competition were not around.

The number of people in higher education is continuing to rise year by year, and, according to my statistics, it is continuing to rise in Cornwall. The hon. Gentleman mentioned 18-year-olds. I have figures for 18 to 20-year-olds entering higher education, which is fair because that takes into account gap years and other things. They are the figures that are generally used and they show that in 1997, 33.7 per cent. of 18 to 20-year-olds in Cornwall went into higher education, as opposed to 32.4 per cent. in England as a whole. So, the numbers in Cornwall were higher than the English average. In 2001, the figure for Cornwall had risen to 35.4 per cent. and was still above the English national average of 35.2 per cent.—we are talking only about England, and Cornwall, in this debate. [Interruption.] I realise that there are those who argue that Cornwall is not part of England. There are those who argue that Hull is not part of England. My figures suggest that numbers are expanding in Cornwall, and in England, and it is important that they continue to do so for reasons that we agree on and that relate to the number of jobs there will be by the end of the decade that will require graduate qualifications.

Our White Paper makes it clear that institutions need greater levels of funding to be able to compete. There is a big area of difference—an area about which Liberal Democrat Members would disagree even with the 159 signatories to the early-day motion. The real difference is that for Labour Members the debate is not about whether graduates should make a contribution, but about how that contribution should be made. That is where the Liberal Democrat policy is wrong. I agree with them completely on the need for expansion and investment, and on many of the other issues of widening participation, but I disagree fundamentally with their opposition in principle to graduates making a contribution.

That has to be the nub of the debate because until we cross that rubicon we cannot have a genuine debate about where we go. I say that not in a party political sense but because every proper analysis of the problem, from the Dearing national committee of inquiry to the Cubie commission and the Rees commission post-devolution—all set up to consider the question of student funding—rejected the argument that graduates should not make any contribution whatever. Cubie rejected it in far starker and sterner terms than Dearing. All those commissions argued that graduates should make a contribution, as has the Select Committee on Education and Skills in four reports—although I know 149WH that that Committee has the famous "Lib-Dem one" who stands against it.

The Conservatives on that Select Committee should be applauded because going against party policy, and having considered all the evidence, they have decided that graduates should make a contribution. I will say one thing for the Liberal Democrats: their policy has been consistent since 1997, whereas Her Majesty's official Opposition, having set up the Dearing commission and walked through the Lobby to support it, now claim that they oppose the whole principle of graduate contribution.

The important point for students in Cornwall, East Yorkshire, Worcester, the north-west and throughout the country is how they should make that contribution. Our proposals are to abandon the up-front fee, which may well have an effect on poorer students in Cornwall. However, there were those who said that introducing a fee would put students off higher education, but the figures show no evidence of that. There were those who said that moving from grants to loans would put students off higher education. It has not; student numbers have expanded. It is fair to say that even among students from poor backgrounds who would not have to pay a penny of that up-front fee, something in their minds suggested that they would have to ask their parents to pay for it; it was an entry fee to higher education.

We shall abolish the up-front fee, and introduce the ability for universities to set a fee between zero and £3,000. I could argue that that is not a top-up fee as we understand it. I will not, but I am tempted to because there is a Scottish graduate endowment scheme that leads many people to think that students in Scotland do 150WH not pay a penny towards their university education. Of course they do, but I will not engage in any sophistry on the matter.

On the level of fees, at the moment no university can charge more, or less, than £1,125. We are saying that it is for the universities to decide where to set that fee, between zero and £3,000. The graduates make their contribution rolled up with their loan repayments after they have graduated. We have increased the earnings threshold for when they commence their contribution from £10,000 to £15,000 a year, and graduates will pay their contribution on an income-contingent basis when they are earning more than £15,000 a year. That is very important because it means graduates will make a lower contribution than they are at the moment. A total of 83 per cent. of students take out loans. As far as I am aware, Liberal Democrat policy is not to return to grants instead of loans—I might be wrong about that. [Interruption.] That is their policy. At the moment, the contribution for someone earning £18,000 a year—the average starting pay of a graduate—is £13.85 a week. That would drop to £5.19 under our proposals.

For those and many other reasons—the reintroduction of the maintenance grant, the introduction of the regulator and the other facilities that we have put in place—we sincerely believe that the policy is not good just for widening participation in higher education, but for our economy and for the whole of the HE sector, which is why Universities UK agrees with our policy.