Select Committee on Education and Skills Minutes of Evidence

Examination of Witness(Questions 460-479)

MARGARET HODGE MBE, a Member of the House of Commons, Minister of State for Lifelong Learning and Higher Education, Department for Education and Skills, was examined.

Wednesday 12 December 2001

  460. You yourself admitted that the present system is extremely complex and difficult to understand. When HEFCE were with us they said it was, in part, a matter of communications; that students did not understand the present system, let alone potentially any future changes. So are there aspects of the present system which you will specifically want to retain, and are there flaws with it that you are looking at specifically?
  (Margaret Hodge) I am not in a position to say what we are going to retain or not going to retain. Nothing is ruled in, nothing is ruled out. It is that sort of a situation. On the simplification issue, it is an incredibly complex issue and means-testing works in different ways for different pots of money. I think it is the result of trying to target resources very finely, which is a good principle to underpin your approach, but if you become too sophisticated in that it becomes too complicated for the individual to understand. So there are huge complexities around how you get this bit of money, that bit of money to support students with a family, for example, or even disabled students—all those allowances. We are going to look at trying to make it an easier system to comprehend. I do also think there are communications issues. We have got to make that better.

  461. Despite the targeting, would you agree that because of the minimal interest on loans, in fact, it is still the middle and wealthier classes who have done better by the present system?
  (Margaret Hodge) I think they would not think that, because they are all being asked to pay fees.

  Valerie Davey: A relatively low level of fee, when you take into account the fact that the Government is still funding 90 per cent of it. That is a communications issue as well, is it not? I have come across students who think they are paying the fee. There is a huge area of misunderstanding. Parents - I am sorry, I should be questioning you, not discussing my views.

  Chairman: We are all enjoying this.

Valerie Davey

  462. Let me put it bluntly: parents who have paid independent school fees think paying the fee for higher education is wonderful. Let us be quite clear. To move on from there, however, the universities themselves need to have students. Everyone on this Committee—certainly the membership this morning—agrees that the target of the review is to ensure that a future system enables more youngsters from lower socio-economic groups. Is that an ultimate criterion for this review?
  (Margaret Hodge) That is a key criterion, yes.

  463. That is exactly where we are focussing.
  (Margaret Hodge) Yes.

  Valerie Davey: Thank you.


  464. We have some slight concerns. EMAs have become something of a totem, and I think it is the role of this Committee to look at things that become a fashion and a fad. We do hope the pilots are very closely looked at because HEFCE, who we interviewed on Monday, said they were very concerned. So we had one view coming out of the department saying there has been a 5 per cent increase in participation rates in EMA pilot areas, with HEFCE saying "Patchy, not sure, more difficult than that." The Committee would be very concerned. This is a large amount of Government expenditure, and will get much larger if it is rolled out as a national programme. We are very keen that we get it right. As you know, Minister, increasingly, the focus is shifting to 14-18. That is where we are losing so many talented young people. We hope EMAs are not going to be looked at in too rosier a glow; they have got to be part of a systematic evaluation of what really works for these people.
  (Margaret Hodge) I completely concur with that view. The only thing I would say to you is that looking at them they appear to be the most effective intervention we have discovered so far, not just to increase participation but, more importantly, to increase retention and attainment levels. We have got to wait for the research to come out, and they are expensive (and there is some dead-weight expenditure around them, so HEFCE is right and I think we would agree with that) but it is also very difficult to think of another tool that has been as effective.

  465. This Committee suggested one, Minister, as you know. We suggested very strongly in our Access report, earlier this year, that if it was linked with a much higher premium to universities who attracted young people from poorer postal code areas, that would have been (and I see your PPS smiling at this because he was part of the Committee) beneficial. A lot of the evidence we took said that if you moved it up to 20 per cent in real money, with EMAs on the one hand and the ability for universities to go down this supply chain on the other, that could be a much more effective tool in returns of getting a return on your investment.
  (Margaret Hodge) You need to incentivise universities to reach out in the way that they do in America and, traditionally, have not done in the UK, so that they actively go out and recruit and attract students from non-traditional backgrounds. You need incentives in schools for them to raise standards and aspirations, and you need incentives for individuals to keep them in full-time education and training.

  466. So you will be looking at our suggestions that came out of that report?
  (Margaret Hodge) I always look at all of your suggestions.

Mr Shaw

  467. Minister, would it not be sensible to complete the review of the Educational Maintenance Allowance, understand that information, and then look at student support in higher education? Surely, the two should go together rather than being done separately. If you are going to achieve this 50 per cent target, I think this Committee has heard evidence it is going to come via FE. It seems to me that that, clearly, is where we need to target our resources. We have heard from HEFCE that once students get the necessary qualifications to get into university, then get into university they do. So surely these should be together. Are FE students, or kids at secondary modern schools in my constituency, going to get the crumbs after middle-class students have got a bit of extra money? Why not do it all together? If we are looking at 50 per cent then, surely, we need to look across the whole picture and identify where help is needed most in order to reach that target.
  (Margaret Hodge) The first thing to say is that prior attainment is crucial, but we think that among the lower socio-economic groups there is fear of debt. So it is not just the prior attainment. The second thing is that we are looking, in the round, as part of the Comprehensive Spending Review. Every review has implications for other bits of the system, but we are clearly having regard to the funding for students in FE—as, indeed, we are for adult students, who we have not talked about—as we think about the general support for students. The third thing to say is 16-19 year-olds and the support they get is different. You cannot say it is the same thing. The EMA is £900 a year. As the Chairman and a number of us would know, that would not pay the accommodation costs in many universities. The other thing is that the EMA comes weekly, whereas the HE student has a lot of up-front payments. It is easy to say it should be 16 right through, but of course the 16-19 year-old still gets access to things like free prescriptions, which when you come to the student funding regime they are not eligible for except in very particular circumstances.

  468. But it is all money that you have got to argue with the Treasury over.
  (Margaret Hodge) Of course.

  469. What is going to best enable the department to meet its target? What is the best way to use the money that it gets from Treasury to reach that target?
  (Margaret Hodge) Not just in one pot. You are going to have to put in lots of pots. The balance between the pots will be reflected in the CSR bid and, we hope, in the final allocation.

Valerie Davey

  470. Will this review also be cross-departmental, so that indeed the elements of social security are taken into account?
  (Margaret Hodge) Yes.


  471. What will you be saying to the Chancellor, or your other colleagues, about child allowance at 16-18?
  (Margaret Hodge) I think my view on that is the incentive has to go to the individual student. Why do a lot of working-class kids choose not to stay on? They want money in their pocket, they want to earn. They cannot wait to earn. Maybe their aspirations around jobs means that they do not need the qualifications, and they are scared of debt. I think there is a debt aversion issue around there. I think part of the incentives that you must have for 16-19 year-olds is money in the pocket of the student.

  472. Can I ask you one more thing in terms of where we are going? It does seem a bit odd that there has been a bit of a sea-change in the argument (I hope you can see this from the departmental perspective) but from where we are sitting there has been a distinct shift in the kind of level of discussion over this past short period since the Prime Minister's speech to the Labour Party Conference, where he emphasised this review into student finance. There has been much more emphasis and people are talking much more intensively about this FE sector. I have got a campaign in my own constituency at the moment, from the Huddersfield Technical College, that really does leap off the page when you look at the troubles that the FE sector is under in terms of much lower pay than comparable jobs in regular education establishments, such as comprehensive schools. There is real under-investment in terms of core funding in FE. Here is FE struggling—and it is the very sector you are going to be looking to to help you with your 50 per cent target. As Jonathan said, you are excluding that from the review, which is probably the most sensitive part of your overall package.
  (Margaret Hodge) We are not excluding the needs of the FE sector from our preparation for the Comprehensive Spending Review. We are not. What we are doing in the two reviews is we are having a fundamental look at what we want HE to look like. We had a fundamental review of FE in setting up the LSC. That has resulted in that structure. The student funding issue—and I have been over it before—is there because we think it is important to do it for 2010 and we think it is important to get it right having taken this very dramatic and very brave step of saying that we want—

  473. What we are saying, Minister, is that probably it is your FE sector which is going to deliver on that, and you are obsessing a bit, in the department, about post-18 funding.
  (Margaret Hodge) No. Both the FE sector and the secondary school sector are going to play absolutely crucial roles in providing the young people with Level 3 qualifications to meet our target. Absolutely key. If you look at how we are plotting how we can get to the 2010 target, it does not start at 18, it does not start at 16, it goes back to 14.

  474. Minister, with great respect, you are giving us the impression of water-tight inquiries. One on student finance post-18, a water-tight one in terms of the broader review of higher education, and another one which is the spending review application. The worry is, if we have a review of student finance post-18 which takes a lot of resources, you will not have those to spend on FE which some of us think is emerging as the crucial area for government action.
  (Margaret Hodge) We have to get the balance right, Chairman. If I can say so, FE has, this year, had a 12 per cent increase in funding. Next year it is getting a 3 per cent increase. This is after an endless cut in funding in a Cinderella service under the previous government. Indeed, (and Val is the only one, I think, who was part of a Committee with me at the time) our very first study when I was in your position was to take a fundamental look at the FE sector, because it was so badly resourced and so badly funded. The evolution of the Learning and Skills Council and all we are doing about inspection and quality raising in the FE sector, I hope, will give you some assurance that FE is very much at the centre of our concerns in a way it has never been before. FE has always been the Cinderella service of education. What we are trying to do is lift it out of that to fulfil its proper role. You inevitably have to look at things in a discrete way and then you have to look at the relationship between them. What I can assure you of is that the team and the department is not losing sight of the relationship between these discrete reviews and the overall budget direction of where we want to get to. Honestly, we are not.

Paul Holmes

  475. Is there a target date for when your review is going to be complete on student support?
  (Margaret Hodge) No, but we hope as soon as possible.

  476. In one sense I am a bit puzzled as to why you need to undertake an extensive review because there have been two very good reviews already in a quite recent period. Professor Rees gave us evidence on Monday afternoon about the review she has done for the Welsh Assembly and, of course, there is the review which has been implemented in Scotland. Both of those reviews, separately, have come up with more or less the same conclusions, that the present system of fees and loans is not working very well, it is a disincentive to poorer students and that it should be replaced in various ways, including students paying after they have begun work rather than while they are still students. Why do you need to undertake an extensive review when you have those two bodies of evidence already?
  (Margaret Hodge) I may be wrong on this but my feeling is that the Welsh review did not actually come out with a recommendation about how fees should be paid. What they did say was that it is right to have a contribution from the individual towards the cost of their higher education. So, I think what the Welsh review did more was to define what they saw as the problem rather than to come forward with real policy specifics.

  477. On Monday there was a clear recommendation that, in principle, it was better for students to pay when they are working. Indeed, Professor Rees went into the detail of saying they should not start repaying until they are earning £25,000 rather than 80 per cent of average earnings, which is the present level. That way you will be excluding the students who go into the lower-paid public professions but you would be getting the payment back from the more affluent students who go on into the more well-paid professions. One of the arguments behind the fees and loans system was that students who tend to benefit from being graduates and get better-paid jobs should, therefore, pay it back, which is fair enough, but surely it should be the students who do go into better-paid professions rather than ones in the public services.
  (Margaret Hodge) We are obviously looking at the Welsh review. I have not been to it for a few months but I saw it more as an analysis of what they saw was wrong rather than a detailed prescription of what we should put in its place. We are looking at that and the Scottish experience, although it is early days there.

  478. Will you be calling people like Professor Rees to talk to you about the research?
  (Margaret Hodge) No, we are not reviewing in that way; what we eventually hope to produce is a paper for consultation. I hope the Committee will have some input into our deliberations before we come to a final decision.


  479. The real argument, surely, is that the Labour Government in 1997 acted in haste in terms of the findings of the Dearing Report and got it rather wrong.
  (Margaret Hodge) It is always easy to be wise after the event. I think the brave action was to expect that students should make a contribution. What is so interesting is that that was 1998 and here we are, three years on, and nobody now challenges that principle. That was a pretty radical principle. Beyond that, whether the details were right, is what we are looking at in our review.

  Chairman: I am going to switch tack now, for a moment, because I want to make sure that my colleagues do not get discontented. David Chaytor is looking at the cost of the Learning and Skills Council administration.

Mr Chaytor

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