Select Committee on Education and Skills Minutes of Evidence


Examination of Witnesses (Questions 361 - 379)

WEDNESDAY 22 MAY 2002

PROFESSOR CLAIRE CALLENDER AND DR WENDY PIATT

Chairman

  361. Thank you very much for coming. You are becoming like old friends to us in terms of the number of times we have seen you in various guises, either in the Parliamentary University Group, I think, Professor Callender, the Government seminar recently and, Wendy Piatt, similarly, but we want to get the most we possibly can out of this session, so I am going to ask a small introductory question by saying if you were looking at the costs with the three key people in the Treasury and the Department of Education and Skills, the three key people who were going to make the decision, Wendy, what would you say? What should they put into the changes that they are going to bring into the system?

  (Dr Piatt) I think the allocation of funds for post-16 education should be distributed more fairly across the sector and within higher education. The Government did inherit a regressive system and they have made significant changes to make it fairer, but still there is much more to do so that higher education institutions and students still receive disproportionately more than their FE equivalents and this is despite the fact that HE students are predominantly middle class and then of course they go on to earn a lot more than their FE equivalents, so I think just a fairer and more efficient distribution of funds would be the principle from which I would start.

  362. Claire Callender, the same question to you.
  (Professor Callender) I think in many ways I would agree with Wendy in terms of the thrust of her argument, but I think then we have to be very careful that we do not see funding for FE into some funding for HE as a zero-sum gain. There are good arguments for additional funding—

  363. Other people would describe that as robbing Peter to pay Paul, would they?
  (Professor Callender) Absolutely, and I do not think that we should give more money to 16 and 18-year-olds at the expense of 18-year-olds, so it is a mistake to assume implicitly that the size of the cake is fixed.

  364. You are leading researchers in this field and what we got from the higher education witnesses, from Universities UK just now is that, quite honestly, this system has not even bedded down. Even your research, as you said I think the last time we interviewed you, Professor Callender, was tentative because the hard facts of what really is happening out there in terms of student debt, student debt aversion, people either coming in or not coming in from more socially deprived groups, really there was not the hard data there.
  (Professor Callender) There is no question about it and that has not changed. There is no hard data showing us the extent to which the system either has a neutral effect or a disincentive effect. We do not know the definitive figures because the research has not been done. I am currently doing some work looking at the disincentive effects of funding amongst prospective students for Universities UK, but there are some things which are very firm and that we know from our previous study and other research, which is that there have been some interesting and significant changes as a result of the system bedding down. One of the results is that, for example, students' choices in terms of what university they go to and where they go to university is changing and is being constrained by the changes to student funding, so for that actually now there is mounting evidence. There is mounting evidence about the impact of paid employment on academic achievements of students, but again I am doing more research on that. We know certain things and perhaps I may correct some folklore things which I have been hearing while I have been sitting at the back. We do know roughly, for example, what proportion of student debt consists of credit card debt and the idea that it is 50 per cent is ridiculous. It is more likely to be 75 per cent. In my study it was 75 per cent, but 75 per of all student debt consists of money owed to the Student Loans Company, so I think we have to be terribly careful and when we are talking about debt amongst students, we are primarily talking about debt owed to the Student Loans Company, student loans, and to take us off down a different avenue, saying that the majority of student debt or 50 per cent, as has been bandied about, is credit card debt is just not the case. I think that is an important sort of folklore thing which has been coming around and I think there are a few other bits of folklore which seem to have been established around the place.

Ms Munn

  365. I was not particularly saying 50 per cent or whatever. That is not something that I have taken on as necessarily being the case. I think my concern has been that if we are talking about debt aversion, people's concerns about it, the amount of debt that is being talked about almost gets ratcheted up every time you hear about it and yes, sitting where you were sitting, effectively we were doing exactly that. What seems to be happening is not people saying, "This is a known fact that there is 50 per cent which is credit card", or whatever, but they are almost, like, doubling the current known debt to the Student Loans Company and saying, "Well, actually, in reality, there is more debt than this", so I think actually having more information about what the debt is, what the amount is going to be when people leave and what those proportions are is enormously important because actually it is that figure of saying, "Well, you are going to end up with £12,000 debt", which is more likely to put people off.
  (Professor Callender) One of the other things is that we now have for the first time information on some of the effects of the change in student funding. Particularly the Mori/Unite study, that was the sort of first major study done whereby the cohort of all the students surveyed were then affected by all the changes. You may reflect in my report, it was conducted in 1999 and, therefore, for lots of students we were not seeing the full impact of the change from maintenance grants to loans. One of the most startling and I think the most shameful findings in the Mori/Unite study, which was conducted earlier this year, was that whilst student debt amongst students in social classes 1 and 2 had increased by 14 per cent, for students in social classes 4 and 5 it had increased by 49 per cent. In other words, the gap in the level of debt between low and high-income students, that in one year alone has increased three-fold, so that is the issue I was trying to explain previously, namely that the gap and the level of the debt between high-income and low-income students is widening whereby debt ends up becoming a class issue.

Chairman

  366. There is a distinct difference between serious academic research and a Mori poll, is there not? Sometimes this Committee gets a little worried about what is seen as distinguishing from serious long-term research where we do get some fundamental, respected academic opinions, but as you said earlier, the first cohort has not yet even graduated and yet you are extrapolating and saying, "We know about what the effect is on debt, choice of occupation", and much else. How can that be serious research if you are extrapolating from a situation where you do not even have any graduates yet?
  (Professor Callender) Well, we have not got any graduates, but this was their debt at the time, their current debt, and the current debt had increased three-fold. It is not the final debt, but the current debt, so that is quite legitimate and I have actually looked at that study quite thoroughly to check and looked at the academic rigour of it.
  (Dr Piatt) Just to pick up on that, I do think there has been scaremongering and a misrepresentation about debt which in itself is a disincentive and the things that Nick Barr mentioned, that if you added up how much tax a graduate would pay, that would be a prohibitive sum. What people do not understand of course is that a lot of the repayment of the debt to the Student Loans Company is of course income contingent, so there is a lack of understanding there. Back to the point about lack of evidence, this is something we were keenly aware of because we began a project in 2000, so it was something that we realised we would have to be very wary about and of course often in surveys the level of hardship reported by students can be overestimated and that is perhaps where Claire and I might depart slightly, and also this is why we have not recommended a radical overhaul of the system. We feel that it should bed down, but we do feel that there should be modifications based on some concerns which do emerge repeatedly and strongly from Claire's study and some of the other studies which have been undertaken, for example, Connor's, and one of the main ideas emerging is this idea of perceived risk, not even debt aversion per se as I think that is more contentious and unproved, but there does seem to be a higher perceived risk on the part of people from low-income backgrounds. So there is not a level playing field and I think this is where the Government can come in and help to minimise, not eliminate completely, but minimise that risk by allowing some kind of-non-repayable bursaries.

Jeff Ennis

  367. Looking at EMAs, Margaret Hodge is on record saying, "They are a most effective instrument that we have found to increase participation". Do you share that view?
  (Dr Piatt) I think it has certainly been shown to be effective. The numbers are not staggering. We are talking about 5 per cent, though it has gone up in the second valuation to about 5.9, and of course we do have to remember that part of that is the displacement from the work-based learning group, so it is not all people who would be unemployed at 16. However, we have clear evidence that it works and, therefore, I chose this scheme as the basis of the Higher Education Maintenance Allowance and also that it would present some kind of coherence so that if people have their EMA at 16, they know that this is going to continue to HE. It simplifies the system and gives them the reassurance that we need.
  (Professor Callender) I think the other advantage of EMAs is that they were specifically designed to be an incentive and that, I think, is terribly important.

  368. Have we costed out how much it would actually be to extend into higher education the EMAs?
  (Dr Piatt) Well, it is difficult, and, as you can imagine, you can think, "Well, should I give £2,000 and then £1,000 and £1,000?" which is the one that I looked at. I know it does not sound very generous, but within the constraints of the funds, and that would mean that you could give about 125,000 people that Higher Education Maintenance Allowance which would amount, and these are very rough figures, to, I think it was, about £500 million. I was aiming for around the £500 million/£600 million as a realistic amount that we could focus on and of course that would be very targeted probably on people with incomes less than £10,000.

  369. Do you think there would be any differences between a Higher EMA and the one which exists post-16 at the present time?
  (Dr Piatt) I think you would have to modify it to a certain extent. Very basically the payment would be probably monthly rather than weekly. There would be more emphasis on meeting assignments and having discussions with personal tutors rather than the strict attendance and the docked payment if you miss a lesson, which works for that age group, I think. I think what is also beneficial about it is that payment would be explicitly linked to that support and of course we have been saying that some non-traditional students need that extra support, so you are more likely to get it as soon as you get a financial incentive involved.
  (Professor Callender) I suppose the reality is that the vast majority of people at university do not have that support, so if you had, for example, as a condition that you must see your tutor once a month or once a week, I cannot imagine it happening.

  Chairman: Well, it would be wonderful discipline!

Valerie Davey

  370. In the calculation of the costings, did you take into account the hardship money which universities now get because we were talking earlier about rolling it up and using it? You did use that money?
  (Dr Piatt) No. That was just a very rough figure.

  371. So you could deduct it.
  (Dr Piatt) Yes, and some of the problems with the roll-up of course is that some of these bursaries are very specific, so you could not roll up all of that.

  372. But the majority of it is for university dispersal and so if they are complaining about the cost of actually dispersing it out, perhaps we could put it into the cost of maintaining and supporting students instead, and the money would be available through a different route by default.
  (Dr Piatt) Absolutely.

Mr Shaw

  373. Professor Callender, you wanted to dispel a myth in your opening statement about the proportion of student debt in terms of the student loan and commercial sources. In your paper to us as part of your evidence, you have said that increasingly students are borrowing more money from commercial sources. Can you just tell us a bit about that. How much more is that increasing?
  (Professor Callender) I am sorry, I am not sure what evidence you have got.

  374. I am looking at your paper of October 2001, 2.2, the fourth bullet point.
  (Professor Callender) That was looking at changes since 1995-96, so that was showing that there had been an increase in levels of credit card debt.

  375. So it is on the increase?
  (Professor Callender) It is on the increase, but that is the increase between 1995-96 and 1998-99.

  376. So you do not know what the situation is at the moment?
  (Professor Callender) No.

  377. Universities UK want students to have a £4,000 grant as opposed to a loan. They have said that is a matter for the Government to cost, and they have said that it will be for people on benefits, so it is going to be quite a narrow band of people. What are your observations, both yourself and Wendy Piatt, regarding that? Is that the solution? Is that the answer?
  (Professor Callender) I think that is part of the solution, absolutely, and a grant of £4,000 is a start. Whether that is going to be enough is open to question in terms of reasonable living costs. I think the living costs are approximately £5,500/£6,000 a year, not £10,000. I think perhaps there was a muddle with the debt, but the average living costs are about £5,500 across the board.

  378. Why do you not front-load it and give £4,000 in the first year—that is the crucial year, we have heard in your evidence—and then switch to loans in the second and third years?
  (Professor Callender) I would like to see something rather different. I want to think back in line with Wendy about what are the principles which need to inform our funding system, what are the aims and objectives and what are the desired outcomes. If one of the aims and objectives is to maximise access and equality of access to higher education, I think then help needs to go to those most in need, so I would like to see grants reintroduced and I think that could be paid for in a variety of ways. I think that Barr and Crawford have some interesting ideas, but actually that money freed up really would only give, for example, grants of £2,000. That £8 million that he talks about would really only give grants of £2,000 to various—

  379. It was £800 million, I thought.
  (Professor Callender) Yes, the £800 million would only pay for roughly all students whose parents' income was below £10,000 to have a grant of about £2,000. According to Hodge's figures, 37 per cent of all students come from families with an income of £10,000 or below.


 
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