Examination of Witnesses (Questions 380
WEDNESDAY 22 MAY 2002
380. So we are doing brilliantly if we have
all these low-income families of 37 per cent. What are we worried
(Professor Callender) We have also got the top at
37 per cent, but the issue there is I still think that the problem
associated with Barr and Crawford is that at the end of the day,
those people who take up the largest loans, which we know to be
low-income groups, will end up having the largest repayment and
will take a long time to pay off those repayments. I think we
need to be somewhat more creative and we need to think about issues,
like, for example, if we give a grant of £4,000, that is
not going to be enough to live on, therefore, students may still
need loans, and I think we need to think about differential interest
rates for different income groups and students. I think we need
to think about who we make loans eligible to and not eligible.
There is an argument for means-testing loans even more. At the
moment there is a 75 per cent cut-off. We could think about saying
that only 50 per cent of students should be eligible to borrow
381. You are describing a whole variety of different
things and one of the issues that is putting people off is the
complexity of the current system and what you have just described
seems to make it even more complex.
(Professor Callender) It is going to make it more
complex, but I think we have got to decide what our key priority
is and if the priority is to actually give more help to lowest-income
groups, unfortunately there is no simple solution to that.
382. But we know that where a system of financial
support is complex, whether it is student support or whether it
is indeed other welfare benefits, the take-up by the target groups
is low. Can I ask you, Dr Piatt?
(Dr Piatt) I think the priority is to simplify the
non-repayable bursary aspect of student support. I think the figure
of 21 is cited as the number of grants which are available for
the neediest students, so having the HEMA would solve that problem.
In terms of the loan, it actually does not make it a lot more
complex if you allow certain exemptions from the real rate of
interest and very importantly, which has not been mentioned in
some evidence, is that the real rate of interest would be frozen
during periods of childcare and unemployment. Other schemes which
impose this real rate make those terribly important exemptions,
so the debt does not accumulate as much as it might do otherwise,
but the system can cope with some of those exemptions.
383. Repeatedly it has come through evidence
all around the piece that it is the perception of debt which has
been known to put people off. That implies that if we just explained
it better, the perception might change and, therefore, people
would come in. Is that not something we could pursue, and that
is just explaining it and saying, "It's not too bad really"?
(Dr Piatt) Information is the key. People constantly
pay lip-service to the importance of informed choice and making
sure everyone has access to the same amount of information. Realising
that in practice of course is much more difficult. I think the
Government have taken steps to do that with, for example, the
Connexions Service and I think they are very keenly aware of the
problem of disseminating information, so one has to be patient,
I think, to allow that information to get through. I think it
is gradually, and I think there is a change of perception in terms
of debt and loan, particularly amongst the top socio-economic
groups, or at least not 4 and 5, in that some surveys have recognised
an increasingly positive or at least a resigned attitude to debt
every year. The Barclays survey indicated that and the Mori/Unite
survey indicated it. So it is a big change in culture for Britain
of course. In Australia, it took many years for students to accept
this new investment in learning culture and America have had it
for many years. It is very embryonic in this country.
384. As to the 50 per cent, the emphasis seems
to have changed because the target was 50 per cent and now we
are moving towards 50 per cent, so that is a softening and I welcome
that. Does this drive the whole agenda? We all seem to be focusing
on this extra 2 or 3 per cent and these are the very poorest,
the ones we want to attract in, but is it the tail wagging the
dog, this 2 per cent, which is driving the whole thing up?
(Professor Callender) I think irrespective of whether
there was a target of 50 per cent or not, there are inequities
in the current student funding system and those need to be rectified.
The pressure may be that much greater now that there is a target
of 40 per cent and, as Professor Green suggested in her evidence,
in terms of where that expansion is going to come from, if there
is a serious commitment to widening participation, then it has
to come from those lower-income groups.
385. You were talking about the overall fairness,
Claire, or you started to. What about the FE students who are
not in the 16-to-19 group?
(Professor Callender) They are the second-class citizen
par excellence because at the moment the system of EMAs
is only for 16 to 18-year-olds. Older FE students are totally
reliant on access funds and access funds are arbitrary.
386. And the Government has been quite clear
that this review is for higher education?
(Professor Callender) It has been, and as three-quarters
of the FE population are older than 19, I am very concerned about
that older group. I am particularly concerned about any suggestions
that loans should be introduced for that age group, though I understand
that that is a possibility, and my concerns are three-fold. Firstly,
there are issues about returns to higher education, especially
in relation to catering education. We are aware that part of the
rationale behind loans is that you give the money back because
you get higher earnings and the data around the returns of further
education in terms of qualifications that further education students
get and especially older students is that they are certainly not
as good and in certain cases they are near to zero. That is number
one problem. Number two problem is the problem of debt and we
all know that story, but we all have in addition to remember is
that FE students will already have some debt because they are
normal people like the rest of us in this room, and in work I
did for the HEFCE, which was with FE students in 1998, what that
showed then was that 37 per cent of all students over the age
of 19 had some level of debt
387. In other words, we are saying that it is
not debt aversion generally that people are opposed to, but it
is debt aversion in terms of their education?
(Professor Callender) Yes, well, there is another
thing and that is about the attitudes towards fees for education.
When asked about whether FE students would be prepared to take
up loans, only 20 per cent did say they would be prepared. The
other bit of evidence is let's look at CDLs, let's look at creative
development loans, and in fact only a minority of people taking
vocational qualifications used CDLs, so they vote with their feet.
The highest, the most significant thing amongst FE students was
whether or not they thought they would benefit financially from
388. Are we not in danger of becoming sort of
nannyish about this?
(Professor Callender) No.
389. It is absolutely true that all sorts of
people at various stages of their life will have debt.
(Professor Callender) Of course they do.
390. It is a bit nannyish to always protect
them against that.
(Professor Callender) Of course they do, but what
one has to be completely aware about is what debt is used for.
If it is me, I use debt to improve my standing of living.
391. People on the poorest estate in my constituency
pay absolutely ghastly rates of interest to buy their children
toys at Christmas.
(Professor Callender) That is right, that is exactly
392. What we are suggesting in this Committee,
some of us, is that the loan system that is offered to students
is a very good buy compared to credit cards and to the rip-off
people on the street corners.
(Professor Callender) Absolutely, but what I am trying
to suggest about the use of credit is that I use credit in one
way, to improve my standard of living, and I should imagine the
people on your estate use credit to make ends meet, and that is
a very important difference. Yes, of course, relatively speaking,
the interest rates associated with student loans are by far preferential
to the sort of, sadly, repayments and interest rates that the
people on your housing estates in Huddersfield are having to pay,
but thank God that they are.
393. Can I just ask Wendy very quickly whether
she thinks that FE post-19 students ought to have been considered
if the Government's objective is to get greater access into higher
(Dr Piatt) Absolutely. One of our key proposals is
that extending the EMA to the 19-to-24 age group is so important
and again ideally for students who have not attained their initial
Level 2 qualification as this is the key to entering the labour
market, and again there are many students usually from low-income
backgrounds who leave school at 16 and then realise that the labour
market is a harsh environment, they need to come back into education,
and then there is the awful disincentive to start coming in at
19, so we really need to address that point. If I can just make
a quick point on the loan, it is very important to differentiate
between the type of vocational qualifications because they are
very different and the returns to them are very different, so
a qualification, particularly an HND in engineering, is relatively
lucrative in that there is a substantial wage premium to that
qualification, so it makes perfect sense to allow people who want
to take that qualification to take out a loan. Also going back
to Nick Barr, Nick did an analysis on the repayment of FE loans
using his economic modelling and it showed, on the whole, that
FE loans would be repaid extremely well. My main point is that
loans are better than nothing. What would these people have done
without having access to the capital that other people have access
to, so okay, we may be worried that they will be accumulating
some debt, but at least it enables them to start the qualifications
that they may not have been able to do in the first place. The
problem with CDLs is of course that the banks have discretion
over who they lend money to and to me that really does undermine
the credibility of CDLs and is partly the reason why lots of people
did not take out the CDL.
394. I was a head of a sixth form previously
and when I give examples sometimes of how I saw in recent years
that it became more difficult to get students from low-income
backgrounds to go to university, it sometimes gets dismissed as
anecdotal, although having seen 1,000 students go to university,
it is a pretty wide anecdotal base, but I was interested, Professor
Callender, in your report that you sent us on summarising the
research on student debt on participation. You quote various surveys
which provide more systematic evidence and one is, "Prospective
students from lower socio-economic classes are more likely than
those from better-off families to report they are deterred by
the costs of HE, and the prospects of debt", or "More
important" in deterring young people from entering the HE
system, "is the `pull' of economic independence offered by
employment, frequently in a chosen career that does not require
a higher education qualification". Again there is no systematic
evidence of the deterrent effect of the current fees and loans
system, yet in your report on the summary of research you point
out the difficulties of knowing exactly what is happening since
we are only just getting students graduating, but you report a
lot of different studies which produce a lot of evidence that
people from lower socio-economic backgrounds are deterred by the
current system of fees and loans. What would you say to those
people who say, "Well, there is no real evidence of this
(Professor Callender) I think I would be laughed off.
It is quite true in terms of the scientific study that needs to
be done to prove it has not been done. However, if I turned around,
they would laugh at me and also they are reporting that they feel
it is a deterrent and there is now mounting evidence and students
reporting it, but I cannot show you that participation rates have
gone down by X per cent because nobody has done the research,
including the Government and it is very costly, and it is only
the Government really at the end of the day that can afford to
fund this piece of research.
395. But the killer for us very often when we
ask questions to people slightly outside the research side is
that they say, again reasonably anecdotally, but some pretty firm
evidence backing that anecdote up, that it was not a very good
system of full grants in getting the target people in. The old
system did not work, but the new system does not seem to be working
any worse, so why do we think there is some sort of miracle answer
by going back to grants?
(Dr Piatt) I certainly do not think it is a miracle
answer and I often emphasise that there is too much emphasis on
the financial aspects of wider participation. As I emphasised
in the book I have submitted to you, the key reason why people
from the lower socio-economic groups do not go into higher education
is that they are not attaining the Level 3 qualification and they
are not performing as well at school. That is the key reason.
If they performed as well as their more affluent counterparts,
we would increase the number of those people in higher education
by about four, four-fold.
396. I think there was a report in The Independent
recently on the situation in Ireland where they have reduced fees
or abolished fees and introduced maintenance grants, and the participation
amongst poor students has decreased.
(Dr Piatt) Or not changed, yes, absolutely.
397. Do you have any observations, Professor
(Professor Callender) No, because I do not know the
398. It is rather interesting.
(Dr Piatt) Yes, that is true, but, having said that,
you are not going to see a huge change, but it is getting the
balance right. I do not want to overstate the importance of finance,
but, as I have said, from the evidence we have seen, there is
a case for enabling, just giving an extra push to those students
from low-income backgrounds to be able to enter higher education.
There are more important factors, but still I think there is enough
evidence to warrant that modification to the present system.
399. We are winding down in this session now
and probably when you leave this room, you will think, "They
didn't ask me the relevant questions and I didn't get a chance
to answer what I really wanted to answer", so last chance.
You have heard the discussion this morning and you have been following
actually all the course of this inquiry, and this is the last
session, so are there other things you want to put on record which
otherwise have not been put on?
(Dr Piatt) I think the main point is if the Government's
overriding objective is social inclusion, and I happen to think
that is the right priority, then just some of the policy instruments
they have employed have not been the best to achieve that and
that the best of the system they have inherited should be reformed
further. I think there is a genuine commitment to increasing attainment
in school in order to increase participation, a recognition of
the importance of ensuring that all adults attain a Level 2 qualification.
It is just that the funding at the moment does not quite reflect
those priorities, so I would suggest a funding regime that does
reflect those key priorities.
(Professor Callender) I would absolutely agree with
Wendy, that we need a funding system whereby what we are looking
at is the outcomes, and if the desired outcome is widening participation,
we have to then think about what would meet that overall aim and
objective and that policy outcome. My concern is that the current
policies that we have in place do not do that.