MONDAY 13 MAY 2002

__________

Members present:

Mr Barry Sheerman, in the Chair
Valerie Davey
Mr David Chaytor
Paul Holmes
Ms Meg Munn
Mr Jonathan R Shaw
Mr Mark Simmonds

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Memoranda submitted by MARGARET HODGE MP and

STEVE AND DENISE SMITH

Examination of Witnesses

MRS MARGARET HODGE MBE, a Member of the House, Minister of State for Lifelong Learning and Higher Education, examined.

Chairman

  1. Can I welcome the Minister to our deliberations yet again. It is a pleasure, as ever, to see a former Chairman of this Committee being scrutinised and I understand that if all goes well tomorrow we are going to have a change of name from "Select" to "Scrutiny" Committees. Minister, we want to get as much out of this as we possibly can. We know that you and the Department and the Treasury and Number Ten have been working on this for some time. Would you like to say something briefly to open up the discussion or do you want to go straight into questions?
  2. (Margaret Hodge) I would be quite happy, Chairman, to go straight into questions. When I last came and gave evidence to you I did say that we had embarked on a review. We are now well into it and we beaver away hoping to come out with a sustainable solution which will ensure that we can meet our higher education target of having 50 per cent of under 30-year olds in higher education by 2010 without debt and the fear of debt being a deterrent to that target.

  3. There is a view about that, that if you had stuck to what everyone had understood to be your timetable you would get something out at the end of January and then that timetable started slipping. In January, if you had come through with three or four sensible ways of ameliorating the situation, particularly for students from poor backgrounds, then people would have said, "That is fine. There have been teething troubles with the thing. It has been shifted around a bit. It has been attended to", and you might have had a reasonable level of contentment at that time. Because it has gone on for so much longer and the predictions are that July is the earliest we are going to see your report, people are thinking that that is a long time to come out with something that plays around at the edges. We will be anticipating some pretty fundamental reforms of what was introduced post Dearing. Are we right to have that expectation?
  4. (Margaret Hodge) It may not surprise you, but I am not going to tell you exactly what you can expect at the end of this exercise. What I will say to you is that it has been a complex exercise which we have undertaken thoroughly and probably when we embarked on it we were not quite as aware of the enormous variations that you can look at in developing a student support scheme which lasts. We will be discussing one or two schemes in detail, I imagine, as we go along tonight and it all seems pretty straightforward when you start, and then you start thinking through what will that mean in practice, who will benefit from this, who will lose, what does that do in relation to where our ambitions for higher education take us over time, and it just takes time. Because I thought, Chairman, that you might ask me this question, I looked back at previous reviews that had been undertaken by various governments on student support and I remember one which you will recall that the previous Government undertook before it introduced its changes in higher education. At that time the now Foreign Secretary was then Opposition spokesperson on education and I will quote from what he said in the House of Commons in 1989 on the then review which was: "The review of student finance on which the scheme was based was promised in 1986 to be completed in a year. Instead the review took two and a half years. The previous Secretary of State promised an early debate but he dodged for all he was worth to avoid any debate whilst he was in office so as to pass the poisoned chalice to his luckless successor." What that quote made me think is that obviously previous people who have got into the detail of a review understand the complexity of it, but equally, unlike previous Secretaries of State of previous governments, neither this Secretary of State nor this team are avoiding engaging in debate on the issue.

  5. That is most instructive. A lot of people out there are saying that it was you who said January, so come on. This was not started off as a root and branch reform of the system but perhaps it is. How regularly do you and your cross-departmental group meet?
  6. (Margaret Hodge) Pretty regularly. We are doing a thorough job, Chairman, and you would feel angry if we came forward with a solution to the issue that was not something which was sustainable over time, certainly to see us through to at least ensure that we meet our target.

  7. I am going to push you on this. "Pretty regularly" is pretty vague. Is it every week, every month? Is it at ministerial level or is there some group working at civil servant level? How often is it?
  8. (Margaret Hodge) I have not got dates in my diary every week to see us forward into the future. We meet as and when we need to when further work has been completed. There are meetings both at official level, as you would expect, across government, quite rightly, and there are meetings within the department and there are meetings across department. It takes place as and when.

  9. Do you chair these meetings?
  10. (Margaret Hodge) Some of the meetings I chair, yes.

  11. Who chairs the others?
  12. (Margaret Hodge) It depends. Some of the meetings are clearly chaired by the Secretary of State in that she has overall responsibility for the policy.

  13. They are never chaired by anyone from the Treasury or Number Ten?
  14. (Margaret Hodge) No.

  15. They are always chaired by the department?
  16. (Margaret Hodge) They are always chaired by us, yes.

  17. In terms of the range of inquiries you are making how much participation has there been in this inquiry? We find in this Committee as we are looking for new evidence that two things strike us. One is the difficulty of actually firmly putting your hand on the evidence that, for example, fewer children from working class backgrounds are coming into higher education post-1998; and secondly, the rival claims are both about that and about the possible way forward. There are not many of them. The number of people you could list, such as Claire Callender and Iain Crawford and Nick Barr from the LSE, Wendy Piatt from IPPR, is quite a restricted little group that are presenting the evidence. Are you finding the difficulty that we are finding?
  18. (Margaret Hodge) I think there are plenty of views around and there is a whole range of ways in which you can determine the heart of what the review is about, which is the appropriate balance between what the student and their family pay and what the state should pay towards the support for students during their time in higher education. There is a huge range of options and the trick is not thinking of them but doing the very detailed work to ensure that when you go for a new scheme there is not an unintended consequence that we then regret one or two years down the line. The people you have talked to I have also talked to, but there are representations made by, for example, student bodies, the NUS and others. There are representations coming from various universities, higher education institutions, further education colleges and their representative bodies, Universities UK, who I believe want to give evidence to you, so what you have talked about is some individuals who have made it the focus of their research. There are plenty of other people who have thought about it and whom we have listened to.

  19. Is there independent research going on in the department?
  20. (Margaret Hodge) We always have a lot of independent research going on in the department. Because I thought you might ask me this I have had a list of seven bits of research going on which are relevant to this and we are planning five more.

  21. You are the Minister responsible for this area. Since the new arrangements came in post-Dearing and post the role of David Blunkett as Secretary of State, since those great changes in student finance, has there been a worrying drop in the number of young people coming from less privileged backgrounds? Is there hard evidence that young people from the poorer backgrounds have been put off by the new arrangements?
  22. (Margaret Hodge) I think I would answer that by saying that what we are trying to do is proactive work to ensure that as we reach that 2010 target we really see a change in the socio-economic composition of those who go to university. What is quite extraordinary, and I have said this in a number of arena about participation in higher education, is that, despite the massive expansion since the days when you and I went to university, there has been no change in the socio-economic composition of people who go there. If I can quote some figures at you which are quite interesting, in 1960, out of the top three groups - if you divide them into A/B/C and then C2/D/E - 27 per cent went to university and only four per cent of the three lower groups went to university, so there was a gap then of 23 per cent. If you look at the 2000 figures, 48 per cent of those in the top three groups go and now 18 per cent in the bottom three groups go, so you could say that that gap has increased if you look at it that way. You can look at the issue in different ways and I will give you a more optimistic view. If you look at those who go into higher education now, five years ago, in 1995, 26 per cent of them came from C2/D/E; now in 2000 we are up one per cent to 27 per cent. Nevertheless, even if you take that more optimistic take on the figures, what has happened is that we have seen growth in participation without any change in opportunity for young people from lower income backgrounds. Our purpose must be not just to expand numbers to meet the skills agenda but also from the social exclusion agenda to ensure that there is real opportunity across all socio-economic groups. It is because of that that we are undertaking the review, to ensure that debt and the fear of debt is not an inhibitor. The evidence is not clear as to the extent to which it is an inhibitor. I said to you last time that equally important is prior attainment and raising aspiration levels, but we are beginning to get quite a lot of anecdotal evidence both from universities and from student groups, from those at the coal face, saying that debt and the fear of debt is an inhibitor, particularly for working class young people. Claire Callender's work says a bit of that. Then we have this bit of research that says that four out of ten agreed with the statement that "some of my friends were put off going to university because of the cost". It is not great, you can equally mount an argument in the opposite direction, but it is enough to worry and concern us. We have to make sure that we have got that right. You would not like us to come in two or three years' time and say to you, "We are doing brilliantly. We are getting very close to our 50 per cent target" and yet it is still middle class people who are accessing it. If you are only at 48 per cent of middle class people you could easily get to 2010 without making any dent whatsoever into that social imbalance.

    Chairman: We come back to the fact that the social structure of the United Kingdom over those years has changed and those two lower social classes have shrunk quite dramatically as people have moved up.

    Ms Munn

  23. I am very interested in that point about whether debt is an inhibitor or not. If, at the end of this, we found out that debt was not an inhibitor at all, does that mean that we could be doing this work on student loans and looking at this issue and actually we do not really address what is inhibiting people from lower classes going to university?
  24. (Margaret Hodge) The answer is no because we have a three-pronged strategy to tackle the fact that people from lower income groups are not going to university. One is to raise their prior attainment levels and that is the whole of the secondary school agenda for 14-19-year olds, and tackle the staying on routes at 16, all that stuff that we have been going on about. Two is this business about raising aspirations, getting young people to aim higher. We have got this really worrying evidence that 44 per cent of people in these lower income groups never hear about university as an option for them whilst they are at school, which suggests that not just their families and their friends but also their teachers and their career advisers are not getting them to aim higher, so the Excellence Challenge programme, all the work we are doing there to raise the aspirations and to work with things like the Connection service and the parents, is important. Three is the issue of debt. We feel that there is probably enough evidence that those from very low income backgrounds are more debt averse than others so that, although we know that higher education is a good investment because of your lifelong earnings and your job opportunities and all those things, there is still that fear in the lower socio-economic groups that it does put people off. Again, the evidence that Claire Callender has put together also demonstrates that debt is increasing, partly because the loans are generous and people are taking them out, but also debt among the lowest socio-economic group is increasing more than for others. There are some worries there and I would rather be proactive and do something to prevent us regretting in two or three years' time that we got it wrong.

  25. So are you saying that in terms of the review your prime objective in whatever comes out of it is a system which supports the objective of getting more people, however that is measured, from those lower income groups into university?
  26. (Margaret Hodge) Yes. The prime objective is to achieve the 2010 target and to achieve it in a way whereby we get a better spread of people from varying backgrounds into higher education.

    Mr Simmonds

  27. Minister, if I understand you correctly, whilst the evidence is confusing about whether the current system is having an impact on encouraging or discouraging potential students from going on to higher and further education, is it your view that the Government's ambition to have 50 per cent of people in higher education by 2010 is adding complication to resolving and finding a solution to the problem because of the numbers that are going to be involved?
  28. (Margaret Hodge) No. I am very comfortable with that target and I think it is an appropriate target for these reasons. First, all the work that we have done around labour market predictions in the future demonstrates that out of the 1.7, 1.8 million jobs that are likely to emerge over the next decade, 80 per cent of those, eight out of ten, will require the sorts of skills and qualifications that you can only get through an experience in higher education. It may not be the experience perhaps that you had. It may not be the traditional honours degree. It could well be a much more vocation focused foundation degree or some sort other qualification. There is a spread. We also know that a one per cent increase in participation leads to about a half per cent increase in GDP which is about four million. There are two very strong economic arguments for us pursuing that target. It is an ambitious target, it is a tough target, it is an appropriate target, and then of course there is the other side of that coin, which is the social inclusion argument which we have dealt with.

  29. I understand that and I think that is logical, but is it complicating the structures of finding a solution to the problem because of the numbers that are involved? I understand why you have done it.
  30. (Margaret Hodge) Is it complicating? It is a part of our agenda for achieving a target, an ambition, that we set ourselves in our manifesto.

    Mr Shaw

  31. Minister, you have said that it is difficult to have any hard evidence as to whether the loans are putting off young people from working class backgrounds going into higher education. You say that on the one hand there is the Callender evidence and there is some anecdotal evidence but equally you can account for that as well in terms of the number of statistics you have quoted that it has hardly shifted. There is one pilot that is taking place at the moment where we will be able to gather real evidence of young people staying on in education and that is with the educational maintenance allowances. That is actually happening at the moment. The early research shows that it is sometimes seven per cent recruitment and, vitally, retention. We know that the key springboard to higher education is further education. I think some 43 per cent go on. One of the key things, is it not, is getting it on the radar of those youngsters and getting it on the radar is the first route to further education? You agree with that?
  32. (Margaret Hodge) Yes.

  33. You said that loans are generous and more people are taking them up. Are they too generous in terms of the interest subsidy, and also are they not big enough because we know that the debt is around£10,000 but a lot of that is credit card debt which is the worst type of debt? Are they too generous in terms of the subsidy that we are paying and are they not big enough?
  34. (Margaret Hodge) I knew you had taken evidence from Nick Barr and Iain Crawford, so I focused a bit of my thinking in preparing for this evening around those issues. This is a very good example of where it is easy to come to a quick answer without having thought through some of the implications properly. The fact that we do not charge real interest on the loans that we give to students of course is a subsidy to all students, but thinking that charging real interest would be redistributive and would be benefiting people from low income backgrounds at the expense of those from middle income backgrounds I think is questionable and I would like to take you through some of that argument. In my view, if you go down that road too far - and again it is a thing we are thinking about; we have not ruled it out; these are the problems that we are having to think about - those who benefit least from charging real interest would pay most. Let me take you through the argument.

    Chairman

  35. Let us get clear, Minister, what real interest means because the media have a habit of transferring this from what the Government borrow at to commercial rates of interest. To be fair to Nick Barr and Iain Crawford, that is not the argument they make.
  36. (Margaret Hodge) No. The Government borrows at varying rates of interest, as you know, Chairman. The rate that they talk about is actually six per cent which is the discount rate that the Treasury currently use. Interestingly enough, if you take the current regime, that is one of the difficulties with the current mortgages running now. It is six per cent plus the 2.3 per cent that we currently levy to keep the real value of the debt, so in fact what you would be charging would be 8.3 per cent under the Barr/Crawford scheme. The discount rate from the Treasury is six per cent. You have to keep the real value of the debt and currently inflation is running at about 2.3 per cent.

    Mr Shaw

  37. That is the view of the department, is it?
  38. (Margaret Hodge) I think that is the view. I think Barr and Crawford would concur on that 8.3 per cent. Let us take that as an instance. If you take that, when at the moment you are borrowing for your mortgage at five per cent or thereabouts, a middle class family would immediately think that it is cheaper to add a bit to your mortgage and lend it on to your children than would a lower income family who may be in social housing and who may not have access to a mortgage. That is the first unfairness. Let me take another unfairness. One of the misunderstandings from Nick Barr and Iain Crawford is that under the old mortgage loan scheme you only paid for 25 years and that was it. Under our new income contingent scheme you carry on paying until you are 65 or die or become a permanently disabled person. Unless that happens you carry on paying it. There is not a stop which, as I understand it, certainly with the documents I have seen on this, was what they suggested to you there was. You do carry on paying. Let me take some examples and we will let you have them in detail if you are interested in pursuing that. Take somebody who borrows £10,000 and they are a low income person. We have divided them up into deciles. Take the second decile. They currently pay back, with 2.3 per cent to keep the real value, £12,700. It takes them 40 years to pay that back. This is a low income person. If you add in six per cent they would actually pay in cash terms not £12,700 but £28,300. Let me just finish this point because it is very important. If you then add in that it is a woman who takes a career break for five years, she would pay back in cash terms £59,000. From currently paying back £12,700, with the six per cent it goes to £28,300, add in the career break and it is up to £59,000. These are cash and I can give it to you in real. That is what they pay back. Take somebody on a high income, and we have taken somebody in the eighth decile. They currently pay back, if they pay back fast, £11,000. If they pay back the six per cent interest they pay back £14,100. If they take a career break they pay £16,800. The difference between the high earner and the low earner without a career break is double, from £14,100 to £28,300, and the difference between the high earner and the low earner, assuming a career break, takes £16,800 to £59,000, which is getting on for four times as much. What is described by Nick Barr and Iain Crawford as being a progressive system is not quite as progressive when you start digging down into the details. I have talked about career breaks. There are other issues of course which come in.

  39. You say it is the difference between £14,100 and £28,300, but it is the type of loans or the type of debt that young people find themselves in. This average of £10,000 is not just the maintenance or fees. It is also the credit card debts because clearly the loans are not sufficient to maintain young people at university. They quoted us that the average graduate would pay in income tax and national insurance contributions some £800,000 over the course of a 40-year career. That starts putting those sums into perspective but at the moment the loans do not assist young people at the time in terms of being able to maintain an existence without this very large credit card debt. You are nodding your head, Minister.
  40. (Margaret Hodge) What I do not agree about is that, if we are concerned particularly that people from lower income backgrounds should participate, what they care about is the totality of their debt. I think the other implication -----

  41. It is not just in terms of totality. It is not just the size of the debt.
  42. (Margaret Hodge) It is.

  43. It is the interest on that debt. Minister, if you are looking to buy a car you will shop round for the best interest rate.
  44. (Margaret Hodge) Ah, I see what you mean.

  45. You will shop round for the best interest rates. You might end up with a £28,000 debt but that in terms of repayment might be better than the£10,000 or the credit card debt that you have got and be easier to pay back because it is a lower interest rate.
  46. (Margaret Hodge) I fear that what you are actually suggesting is that we should further subsidise the interest rates for students so that the debt is low, which I am suggesting to you -----

  47. No, I am not.
  48. (Margaret Hodge) You are because the alternative -----

  49. I am putting the argument forward that we heard last week from Barr and Crawford that it is about the status of the loan and the interest that the people pay in terms of the overall debt. What they were arguing was that in order that we are going to assist students more, if we take the idea that there is not going to be more money coming into student finance given that 43 per cent of higher education funding is on student finance so we are going to have to raise taxes for more student finance, how are we going to get more money for poorer students out of the same pile? How are we going to cut it differently?
  50. (Margaret Hodge) The presumption on which all that is predicated is that the only way in which students survive in the present framework is by them all taking out massive credit card debt and I do not accept that premise.

    Chairman

  51. Minister, to be fair to the Crawford/Barr argument, that was not actually what they were arguing. They were arguing, as Jonathan started to argue, that the alternative is that if a student is not able to borrow sufficient an amount of money two things happen. They have to work, which detracts from their study, which can be a very expensive drain on their resources in many ways, or they can go into credit card debt. That is the case that was being made.
  52. (Margaret Hodge) I do not accept the juxtaposition that you are putting. First of all, I do not think that working whilst you are a student in higher education need be detrimental. It depends on the number of hours worked. The Barclay Report shows that on average they are working 11 to 14 hours a week. If you look at young people in FE colleges and schools, we have about the same proportion doing part time jobs in the FE sector -- and nobody raises an issue around that -- as we have of students in higher education also doing part time work. Secondly, the value of the grant, despite what the NUS I understand said to you last week, has gone up eight per cent in cash terms and one per cent in real terms since we brought it in. We do not have the evidence in the analysis that we have both from the student income and expenditure survey and from the MORI Unite survey to suggest that a combination of loans, working, support from parents -- and lots of students do get support from parents -- means that there is not enough in the student's pocket to have a pretty good standard and quality of life whilst they are studying. Every student feels hard up but what in reality they feel they have to pay for may be two slightly different things.

    Paul Holmes

  53. I was very pleased to hear you say earlier on that your review does seem to be looking at providing more facilities for students from low socio-economic backgrounds. When you introduced the reforms in 1998 I was head of a sixth form and over the four years I saw evidence of students from poorer backgrounds failing to go to university because of those reforms. If you are moving to providing better support for that type of student, that is good but how do you square the circle? If you are going to put more money into students from poorer socio-economic groups, the money has to come from somewhere. If you are not going to go down the Crawford/Barr line of charging the other students more interest and fees etc., presumably it has therefore got to come from general taxation but the Treasury are not keen on that so where will the extra money come from under your review for the poorer students?
  54. (Margaret Hodge) You have to await the outcome of the review to see what conclusion we come to.

    Chairman

  55. Paul Holmes makes a fair point that you have not answered yet because it has not been put to you squarely. When you were chairman of this committee four years ago when these reforms took place, did you imagine that the system that the new Labour government introduced would work out to be a very large subsidy to middle class, professional families rather than what many people had anticipated coming out of Dearing and a new Labour government that would have been less subsidy to those people who could afford and more subsidy to those people who could not afford?
  56. (Margaret Hodge) I am happy to provide you with further examples. I will just show you New Zealand.

  57. Before we get to New Zealand, we are going to throw Hungary at you in a moment.
  58. (Margaret Hodge) Do, because I think it is another interesting example where the proposals that were put on the table were not accepted by the Hungarian government.

  59. Do you believe that the system we introduced as a Labour government after the last election as a result of our interpretation of what we took out of the Dearing recommendations has been a subsidy to people who could well afford to pay something towards their children's higher education or not?
  60. (Margaret Hodge) If you start thinking that the answer to student support is simply to raise real interest rates on student loans, you are in danger of hitting those very students whose interests you most want to protect.

  61. The fact of the matter is: is the system that was introduced a very large subsidy to people who can afford? I am not asking you whether other things run from that. Is it the case? I think we have you on record as believing this when you sat in this chair.
  62. (Margaret Hodge) One of the key reforms that David Blunkett and Tessa Blackstone introduced which I supported was a tuition fee, which is only paid by those who can afford it. It is means tested.

  63. If you listen to Lord Dearing, he will say the government got it wrong because it abolished maintenance grants and introduced inflation only interest rates which were a massive subsidy to the very people who did not need it.
  64. (Margaret Hodge) I think those reforms that we introduced started ensuring that those who were able to pay contributed. To say the tuition fee does not count misses half the point. To the extent that university is still largely enjoyed by the middle classes rather than people from low income backgrounds, it must be true that any subsidy that we put in through the taxpayer goes to middle class people. To that extent it is true but remember that what we are asking people to do is, when they graduate, to pay back on an income contingent basis. For example, eligibility to the loan is determined according to income. You only get the last 25 per cent of the loan depending on the income of your parents. I am not evading this. I think you are trying to make too simplistic a conclusion of what is very complex.

  65. I am not making any simplistic conclusion. I am just asking whether you believe that that was a subsidy for people who could afford or not. One of the vice-chancellors who gave evidence to this Committee pointed out -- as you know, there is an argument that higher education staff are not well paid -- that his staff paid more for the creche on the university premises, for their pre-school child to attend that creche, than middle class parents had to pay for their students to be at university. That puts it in perspective, in a sense.
  66. (Margaret Hodge) You have to also remember where we were moving from. The loan system that had been introduced in the previous government was a system which had no real interest on it. A decision could have been taken at that time to levy the real interest on the loans. To the extent that there are more middle class people at university, that would have been charging more middle class people more for going to university. What I have tried to say in response to some of the arguments that Nick Barr and Ian Crawford put forward is it is just not as simple as that. If you think interest charges are an easy answer, you hit those very people you most want to help.

  67. Can we erase Nick Barr and Ian Crawford's names from the record for the moment? This is one bit of evidence we want to take up with you. That is why I have been asking you the fundamentals. If we do not get the fundamentals right and if you do not get the fundamentals right in your working party, what are you really after? What is going to come? If you do not know what you are after, this is never going to report, is it? What are you after in terms of this report? What would bring a smile to your face when the report is published and everyone loves it and it is a great success?
  68. (Margaret Hodge) If we had a sustainable system in place which ensured that nobody was put off going to university because of debt and the fear of debt.

    Paul Holmes

  69. If you are going to put more money into students from poor backgrounds, whether through grants or scrapping tuition fees or whatever, the money has to come from somewhere. Are the only two options that you are looking at to get that money in higher repayments from students from wealthy backgrounds or from general taxation or is there some other equation that you have discovered in there for consideration?
  70. (Margaret Hodge) It is an issue of the balance between what students and their families pay and what the taxpayer pays.

  71. So far, we have been concentrating on the financial and social background of potential students coming into the system. When they come out the other end and start repaying, you said in a preparatory note for this meeting, "A fundamental principle of our 1998 reforms and one in which we still firmly believe is that it is right that those who benefit from higher education should contribute towards its cost." I can agree with a lot of that. If you are a lawyer like Cherie Blair earning a quarter of a million a year, you ought to pay more back. If you are an MP, you ought to pay more back. Some people would say that income tax is a fair way of doing that. What about those students who go into professions which benefit society and tend to be lower paid, like nurses or social workers or teachers? Under the present system, they are paying back the same basic loan as a highly paid lawyer, accountant or whatever. Are you going to address that at all in the repayment system?
  72. (Margaret Hodge) We have already in that the Bill is in the House of Lords at present. When that Bill becomes an Act, there will be a facility within it to ensure that those who go into teaching in shortage subjects will get support for the repayment of their loans. There is nothing in any system that will prevent you discriminating in favour of particular groups in society who you ant to encourage. The private sector do it now.

  73. You are saying the principle is that those who benefit from higher education should contribute towards its cost?
  74. (Margaret Hodge) Yes.

  75. Society benefits from the higher education of certain groups of graduates who put a lot back into society and do not get the same monetary rewards as many of their friends in university would. That is more than just a small number of teachers in shortage subjects. I would suggest that teachers in history or English, which are not shortage subjects, put just as much into society as a teacher of maths does. Under the partial system you are talking about, they are not going to get any assistance.
  76. (Margaret Hodge) You are at the heart of the issue. How do you get the balance right between the contribution of the individual, their families and the state? We can argue about that and that is the sort of debate we are engaged in. Secondly, it is still true that the graduate premium is probably healthier in the UK than it is elsewhere. It is still the case, despite the expansion in numbers, that you earn over your lifetime £400,000 more if you are a graduate, on average, than if you are not. Of course there are exceptions to that but your average earnings will be 35 per cent more than a non-graduate. You are right that it is an issue of balance. You are right that there may be areas where the public sector will wish to intervene. We must not forget that there is still a big graduate premium. I went to the States recently to look at some of their universities and I think there is a different attitude there, between the States and ourselves, where the students are much more an investment in their future; whereas here in the UK we still see them as a cost. That is an attitudinal difference which we need to reflect on.

  77. I accept that on average graduates do better and have more enjoyable jobs, but there is a huge variation from the graduate nurse to the graduate lawyer in their earnings over their lifetime. Is the review looking at a more systematic way of addressing that than just rewarding a few teachers of shortage subjects?
  78. (Margaret Hodge) We have to look at the balance. Within the distribution of the average there will be some who, for all sorts of reasons, either the choice of career or career breaks or whatever, will find it more difficult to pay back. Hence my concern about going too far down the road about interest rates. There is no reason in any scheme you devise why you cannot have exceptions.

    Chairman

  79. There is one part of the balance which you have not addressed which gives this Committee concern. You mentioned the student who gains the benefit from the education and his family. You mentioned the taxpayer. There is also another category and that is the universities themselves. There is no doubt that in the real world if there are large, extra resources put into student support many people fear that that money will no longer flow into what people think of as a priority and that is university pay. There are very real demands and shortages in university skills as teachers and researchers, so university teaching and university research, and another thing you are responsible for: universities in their capacity to lead regeneration in cities and regions. There is this other, very worrying voice coming to this Committee to say that, whatever they do, do not let them take away from the essential quality of our higher education by depriving us of the resources to do the job properly anyway.
  80. (Margaret Hodge) It is because we are very conscious of the competing demands on our resources that we are looking at the student support review in the context of the wider expenditure review on both higher education and education in the round or demands on education within our department. When we came in, in 1997, we inherited a generation of under-funding in the higher education sector. It amazes me how well the sector stood up, despite that 30 per cent cut in per unit funding over ten years until we started turning it round. We spend something like 6.8 per cent less on research today than we did 15 years ago or thereabouts. All those things are really worrying aspects; and yet we have kept our numbers up; we have kept our retention rate up; we are doing jolly well on research internationally; we have done a lot of innovative work about engaging with the local community. The QAA exercise shows that teaching standards are high. It has survived very well in a generation of under-investment. We have now to tackle some of those structural difficulties that the sector faces, whether it is pay, research, infrastructure, engagement in the local community, whether it is growing the sector to respond to our 2010 target. We have to see the student support review in that broader context and then see HE in the broader context of education spend across the whole department. Those are very tough decisions that the Secretary of State will have to take.

    Valerie Davey

  81. Can we move on to the area of fees? If you are looking to the variables that you already have, perception again is important. So many young people do not realise that 50 per cent possibly now pay no fees. The other 50 per cent, it seems to me, do not realise, many of them, that they are getting a good deal. In other words, this is only a quarter of the cost. This perception that 1,200 is the fee -- one of our vice-chancellors in the south west put it very succinctly when saying that it is nothing compared to the school fees which many of my parents have been paying up to now. How is the government considering the fee element, particularly given the comments we just heard from the chair, that what universities would like to do would be to have variability in that respect? They want to see variation between universities at fee level. Can you give us any background as to the thinking which the review is taking on fees?
  82. (Margaret Hodge) You are absolutely right to say that students do not understand that, even if they pay the current contribution to their fee, it is not the whole cost of their tuition in university, taken as an average cost. If you get into things like medicine, it is much higher. There is a huge amount of work to do when we have completed the student support review to get a proper understanding amongst students, parents and the wider community about the real costs and who contributes. I completely take that point. Before we get too gloomy, may I quote some of the stats from the MORI Unite poll? It is not ours; it was done by an independent organisation. Not all is gloom and doom out there. 96 per cent of those questioned thought university was worthwhile. 90 per cent thought it was a good investment. 86 per cent had a favourable impression of their higher education. 88 per cent were happy. 86 per cent were optimistic. These are not bad figures. Only ten per cent thought of dropping out for financial reasons. Let us build on that optimism which many students feel about their experience in higher education, although I totally accept what Valerie Davey said, which is that we have to get a better understanding of what the contribution to student fees really is.

  83. The universities' perception is that they want to vary those fees. They see a market there which they want to exploit. What is the government's attitude?
  84. (Margaret Hodge) That has been an argument that has been around in the sector for a decade and is constantly being raised with us. To the extent that we are looking at everything, we are looking at that.

  85. In FE, students pay those fees and the majority of them pay the full fee. How far in any sense has the review body looked at further education?
  86. (Margaret Hodge) The review body is looking at higher education and student funding there but, in my responsibility for life long learning in higher education, I am looking, together with my colleagues, across the whole support for students, across the whole age span. Students in FE aged 14 to 19 will not be paying fees. What you are talking about is a contribution to fees from adult students and that varies. It is not consistent across the whole sector. There are anomalies there. We know that over 40 per cent of our students are in FE that we want to get into HE. We have to ensure that we get the right incentives there to meet both the economic objectives of wider participation and the social inclusion objectives.

    Chairman

  87. What is the percentage of 18 to 21 year old students who do pay the fees?
  88. (Margaret Hodge) The last figure we got for last year was 42 per cent pay no fees and about between a third and 40 per cent pay full fees. We have not yet got this year's figures.

    Mr Chaytor

  89. One of the reasons that such a large proportion of students are so comparatively cheerful could be because they are spending too much money on drink. You have recently accused them of spending money on drink, new trainers, going to the pictures and things like that. What do you conclude from that? Is it that the level of the loan is too high or that they are borrowing too much from banks or the credit card companies?
  90. (Margaret Hodge) I was simply putting a question which I hope the Committee will accept is a legitimate question. If, out of the Unite MORI poll, we know that students on average are spending £25 a week on drink, that is £1,000 a year if my arithmetic serves me right, whilst nobody wants to interfere with lifestyle choices, least of all me -- my children go potty when I do -- is it appropriate that there should be state support to those life choices? That is all. Going back to some of Jonathan Shaw's questioning, if students choose to spend money in certain ways, we have to be clear the areas which we as a government and we as taxpayers are willing to put support into.

  91. Do you think there is an argument for increasing the level of the total amount of the loan?
  92. (Margaret Hodge) There is an argument. Again, you have to think about the balance between what the state puts into the system and what the student and the family puts into the system. We have to look at all the issues that the Chairman raised: how we see student funding in relation to other priorities across HE, FE and the wider education agenda.

  93. Is there an argument for rolling the tuition fee up into the loan or do you rule that out completely?
  94. (Margaret Hodge) We are looking at a huge range of options. They all have different impact as to who they benefit and disbenefit. They all have different costs, savings, and we have just got to get the balance right.

  95. On the tuition fee specifically, would you accept that the banding of the tuition fee -- the fact that there are just three bands, essentially, zero being a fee or a full fee ----
  96. (Margaret Hodge) No; it is means tested. It is gradual.

  97. The fact that people who pay the full fee start to pay the full fee at comparatively modest levels of household income, 35,000; whereas people whose household income is 350,000 still pay the same amount of full fee. Do you think there is an argument for increasing the income band so that payment of the fee becomes more progressive?
  98. (Margaret Hodge) There is an argument. You can look at these endless options. I would simply draw to your attention that, as far as we know from current data, 37 per cent of all students have an income of less than 10,000. That includes independent, mature students as well as younger students.

    Chairman

  99. They have a family income or their personal income?
  100. (Margaret Hodge) No. It depends. It is the parent with whom they live.

    Mr Shaw

  101. £10,000 a year?
  102. (Margaret Hodge) 10,000 or less. The higher you put it up the income scale, the more people you bring in.

    Mr Chaytor

  103. My question was not related to families whose incomes are 35,000 a year. It is the argument about council tax bands. You reach a point and then it stops. With tuition fees, you reach a point and then it stops. Would you not accept that that is inherently unprogressive?
  104. (Margaret Hodge) That is always a problem with means testing, where you put the cut off point. That is an issue. I was simply trying to say that the higher up you take it along the income scale the greater the cohort of students, both young and mature, dependent and independent, that you bring into the frame. You are then back into an affordability issue.

  105. Earlier, you mentioned your visit to the United States and your admiration for some of the aspects of the American system. One of the characteristics is the ability of universities to set their own fees. Have you ruled out completely an introduction of top up fees?
  106. (Margaret Hodge) You will have seen the letter that we sent to HEFCE this year and the letter that we sent in the last three years. It is an issue that has been put onto the agenda by a whole range of people, so we keep it on the agenda.

  107. That is not ruled out in terms of this review?
  108. (Margaret Hodge) Nothing is ruled out. I have to keep coming back to that.

    Chairman

  109. That makes you sound as though you are a ship, floating on the ocean with no compass, no bearings and you do not know where you are going to, Minister. How do you have this ship on any course at all if you have no parameters, no guidance or no priorities?
  110. (Margaret Hodge) I think you are being somewhat unfair on me because I have given you the parameters quite clearly. The parameters are the 2010 target, our desire to grow numbers and extend social inclusion. We are looking at all this issue in the context of the broader expenditure issues. Within that, you would be the first to criticise me if I did not look at all options to ensure that I was not closing a door which might support our objective.

    Mr Chaytor

  111. If nothing is ruled out and nothing is ruled in, I will adopt a different line of questioning. Coming back to the question of subsidised rates of interest, you disparaged the argument that there ought to be a reconsideration of interest subsidy by quoting the figures of six per cent and 2.3 per cent on top of that. Is it not the case that there is an infinite range of possibilities about the level of the interest rate? It is not a question of either the 2.3 per cent at the moment or the 8.3 per cent that you were quoting. It is entirely a political choice as to what the level of interest rates should be. Is it not also the case that if the scheme was redesigned to go back to a mortgage type loan, rather than an income contingent type loan, that would deal with your objections to higher interest rates impacting more on lower earners through their lifetime?
  112. (Margaret Hodge) I hope I was not disparaging the argument. What I was attempting to use that as an illustration of was the complexity of the argument. Of course there is a whole range of interest rates that we could look at but the lower the interest rate the less the addition that you get into your costing. Can I just correct something else for you to have on the record, Chairman? I do not know where this figure of 42 per cent came from that we spend on student support. My officials will correct me if I am wrong because I am doing this off the top of my head but I think it is 35 per cent which is the amount we spend on student support. That is based on OECD 1998 figures. In the 1998 figures we were still under the old regime. At that point part of the student support was money that we were putting into LEAs for them to pay their contribution into universities, so the actual proportion of the HE budget that goes on student support is 23 per cent against an OECD average of 16 or 17 per cent. I just want to put that correct on the record so that we know we are measuring like with like.

  113. Is it not possible therefore that you could construct a system that establishes an interest rate somewhere above 2.3 per cent?
  114. (Margaret Hodge) Yes.

  115. And a method of repayment that would redistribute the burden of subsidy to those who can most afford it during their working lifetimes?
  116. (Margaret Hodge) The lower the interest rate charged the more it then becomes a "subsidy" and the less you can raise to redistribute, which is an essential part of the schemes devised by Nick Barr and Iain Crawford. Of course you can play around with it. Those are some of the variations that clearly we are looking at. The only other thing I would say is that I think it would be regressive to go back to the mortgage scheme that the previous government had in place because once you reach the threshold where you have to start paying you have just got to pay it off. It is like a mortgage where you have to pay it off so that the years when your bills are highest because you have had a couple of kids and your partner may not be working or working part-time are going to be the time when your repayment will be strongest, whereas this is entirely income related.

  117. It is possible to negotiate payment where there is a mortgage as it would be on a student loan.
  118. (Margaret Hodge) Of course. You can do all those things.

    Chairman

  119. Minister, will you come directly back to David? What he is pushing you on is saying are you seriously considering and are you having a degree of difficulty with the Treasury on introducing a higher interest rate which some of us believe might be a quite easy way to move to a graduate tax, or have you discounted a graduate tax in any form?
  120. (Margaret Hodge) We have not discounted anything, as I keep saying; we would not. All I was trying to put to the Committee was that what may seem like a straightforward solution is rather more complicated. Let me just add one further complication to the agenda. Once we start charging real interest you come into consumer credit legislation which means that you have within 12 days, if a debtor asks, to tell them how much they owe and how much more they need to pay. Our current income contingent scheme means that you collect through Inland Revenue. Inland Revenue only tell you at the end of the year what you have paid so we would have to come out of the Inland Revenue scheme and then immediately what would happen would be that people would default more.

    Mr Chaytor

  121. We are not suggesting a commercial rate of interest. We are just floating the argument that there could be a different rate of interest. Minister, I will not ask you if you are considering a graduate tax because you say that nothing is ruled in and nothing is ruled out. Could you tell us what the arguments are against a graduate tax?
  122. (Margaret Hodge) The reason I chose, rightly or wrongly, to hone in on the argument about interest rates was that in a sense you have been I think, as I have read who has come to see you and the way you are thinking, focusing your considerations on that and all I wanted to say to you was that it is really a bit more complicated than it seems at first sight. There are arguments for and against absolutely everything and going into them is a little bit like the Chancellor going into every tax that he could or could not raise in a budget and it would certainly keep us here for ever.

    Chairman

  123. What is wrong with a graduate tax?
  124. (Margaret Hodge) There are pros and cons on all these options and they are ones that we will take into consideration during our deliberations.

  125. You must sense the frustration we are feeling here. On the one hand we know that you cannot rule anything in or anything out and you are having a whole discussion with the Treasury and Number Ten and we know this is a highly political issue because of where it started. It started with the Prime Minister at the Labour Party Conference surprising all of us, everyone in the PLP as well as everybody else, including colleagues round this table, by saying that it was the most commonly brought up subject on the doorstep. I did not hear it once and I have not heard any other colleagues who found that it was except in one or two university towns which may be very special, like Huddersfield. The fact of the matter is that what we are trying to get from you is what you as a Minister are battling for. What do you think is the fairest system you could bring in? Is there anything that attracts you rather than something else?
  126. (Margaret Hodge) It may not surprise you, Chairman, that I have to say to that that in the interests of collective decision making those discussions go on at present within the department and across government. What I am absolutely hoping you will do is that when we do announce the results of the review you will have me back here to grill me as to whether or not the proposals that we have come forward with are ones that you think are appropriate and right.

  127. Meg Munn is feeling really frustrated over here.
  128. (Margaret Hodge) You may be frustrated but I do not think surprised.

    Ms Munn

  129. No, no. I am not at all frustrated. I am finding this quite interesting because the whole point of this is for us to test out things that have come forward. This whole issue which we have all tackled, and I certainly had people saying about the issue of debt in Huddersfield, is this issue of debt perception and, having sat in the UK Youth Parliament where the issue was raised, when people talk about the amount of debt what they are talking about, as we were saying earlier, is not just the amount that is the student loan but the overall debt that they are leaving university with and that was given to us also in evidence by the NUS President in relation to that. You have said that what the Government is trying to do is to share the costs of education between the Government, the person who is going to have the benefit of that, and parents and family. Our understanding is that students make up gaps in the money they have to live on by taking out commercial loans, whether that is through their credit card or in other ways, in order to have the lifestyle they want, whether that is £25 a week on drink or a car or whatever, but they are doing that and a lot of them are happy to do that because they do believe that they are going to be able to repay that. The bit that worries me is that the overall headline figure is the figure that is putting off people who might not aspire to £25 a week on drink or a car but it is also likely to be the people for whom the parental support of additional money, which perhaps middle class parents are able to put in, is not there. How are you addressing that particular bit?
  130. (Margaret Hodge) The best evidence we have on student income and expenditure is the 1998 survey. We are just about to re-do it so we will have results in a couple of years' time. They demonstrate that the level of the loan is not that far from the sorts of costs that it is appropriate for the state to think it ought to meet. Again that does not mean that you re-determine lifestyle choices. If a student wants to build up a credit card debt because they spend a thousand pounds a year on booze or whatever, that is their choice. The question we have to ask ourselves, and you as a Committee have to ask yourselves, is: is it appropriate that we should subsidise that in any way or should that be an issue in which the state should intervene? There is a question mark there. I was raising that seriously as an issue for debate. There is not a free lunch in this world on student funding, so it has either got to come from the student and their family or the taxpayer and we need to determine that distribution between them.

  131. Does that mean that you and the department will be saying more clearly to people such as the NUS that to talk about £10,000 worth of debt with perhaps £5,000 of that due to credit card due to lifestyle choices is unhelpful?
  132. (Margaret Hodge) When we have a regard to what support the Government should give to students in their university for living expenses or for their tuition, we have to think carefully about what it is right for the Government to bear. Beyond that I do not want to get involved. It is not our debate. That is for individuals to determine. The only thing I have said and I stick to is that I am not concerned, as many others are, about students working part-time as long as they keep the balance right. Clearly if a student works too many hours that will be detrimental to their studies but if they work for ten to 14 hours a week, which appears to be the current average, I do not think it will be damaging to their studies.

  133. With respect, Minister, I do not think you have answered my point there. I am absolutely with you. Less booze, no car, get on your bike.
  134. (Margaret Hodge) No, no; they can have booze and cars.

  135. It is whether the Government should be supporting that. You started off saying that if the issue is that it is perception that is causing the problem to people and then you have the NUS going round saying, "This is the debt people are leaving university with". It is not just the NUS but other people as well. We have had evidence here that says that only a proportion of that is debt from student loans. Have you not got a responsibility to be a bit more up front and to have a debate about that issue?
  136. (Margaret Hodge) I would be very reluctant to get involved in determining students' life choices.

  137. I am not suggesting that.
  138. (Margaret Hodge) Should I tell the NUS what they say to their student body? I think that is difficult. That is up to them.

  139. I am saying should not the Government be saying that the average student loan debt that students are leaving university with is X and that if this overall figure which gets bandied around - I have heard young people quote it back and it gets bigger by the minute; it gets up to £16,000 - is an issue of lifestyle choice should that not be challenged?
  140. (Margaret Hodge) Yes. The fact that I have been saying that students spend on average £25 a week on drink is perhaps opening up that debate.

    Paul Holmes

  141. We keep talking about the average spending on drink etc of a student but we have already established that within the average there is a huge variation. I was at Nottingham University a few weeks ago and I was talking to a student there who is living on an absolute knife edge. She has got two part-time jobs, she is counting down to the last penny, she can afford two drinks in the bar a week, and yet there is another student who is rolling in money. The first millionaire I ever met was a student when I was at university who had inherited a million from his grandad. You have got such variations, especially since such a large chunk of the student population does come from the high and more affluent part of society. Is it not rather simplistic and crass to keep quoting this figure of the average student spending £25 a week on drink because the averages vary massively?
  142. (Margaret Hodge) Of course there is a distribution around the average. I will turn it round on you. What do you think the Government, the taxpayer, ought to be concerned with in terms of the amount of money a student gets? What is the right level? I do not know what your student in Nottingham is having but if I meet students I do start asking them where they spend their money and how does it go, which is a lifestyle choice that it may not be appropriate for the Government to fund, which is one that we ought to think about in ensuring that there is sufficient money. On the whole people in the system think it is a good investment. They are happy with it. I accept that point that Meg has made that we have got to be better about promoting the benefits and looking at choices around the debt that you come out with at the end of it. I think there are real questions to be asked about the extent to which we ought to invest taxpayers' money in supporting perfectly legitimate lifestyle choices that we all engaged in when we were at university.

  143. To move on to another extension in a new area, it is fairly obvious that under the new system, whatever it is whenever it comes in, a lot of students are going to be paying more money back probably, whether it is in bigger loans, higher interest rates, graduate tax. Whatever it is, students will be paying money back. The argument for that is, as we said earlier, that students on average are going to earn hundreds of thousands of pounds more than non-students over their lifetime. At what level do the repayments start kicking in? Is it still 80 per cent of average earnings when they start to repay the student loan?
  144. (Margaret Hodge) No. That was the old mortgage style. You start paying back once you start earning over £10,000 and then you pay nine per cent of all the additional money that you have earned over £10,000. To give you an example of what that would be, if you earn £11,000 you will be paying back £90.

  145. Without the exact figures students start to pay back at well under average earnings. If the argument for students paying back is that they are earning way over average earnings over the course of their working life, why should it be that they start paying back before they have even reached average earnings? Why not when they reach the average or why not when they are 20 per cent over the average?
  146. (Margaret Hodge) Another option.

    Chairman

  147. Minister, you will know that the Select Committee's previous report recommended a higher level of earnings.
  148. (Margaret Hodge) That is another option. All I would say back to you is that it is income contingent and that it is only nine per cent of all extra money earned above the £10,000 threshold.

    Paul Holmes

  149. But they are paying back before they even reach the average and the whole theory is that they are paying back because they are earning well above the average but they have to start before they even get to that point. Secondly, how far do you take into account the fact that a student, compared to somebody who left school at 16 and started earning, at minimum has spent at least five years not earning but racking up loans and debts because they have done two years of 'A' levels or equivalent and three years at university? Many students have done six, seven, eight years or more before they even start to earn, so yes, they are going to earn a lot of more in the future but up to this point they have spent five to eight years on average where they are earning nothing and racking debts up, and then you make them start to repay before they have even reached average earnings. Is that fair and are you looking at that?
  150. (Margaret Hodge) Lifetime earnings are £400,000 more. That is what we look at. To be absolutely honest, the issue you have raised is one that we need culturally to tackle. The main reason for leaving school at 16 is the attraction of immediate earnings. We have to convince people that immediate is not the same as lifetime.

    Mr Simmonds

  151. I do feel quite frustrated, Chairman. I am not sure that I particularly have gleaned very much about you and your department's thinking and the way you are going with this, and that may be deliberate from your perspective, but perhaps I could push you a little and ask you personally as the Minister responsible what are the positive aspects of the different funding regimes that exist in Scotland and Wales and Northern Ireland that you might like to include in the review when it comes out?
  152. (Margaret Hodge) Again those are different schemes that we are looking at.

  153. Are there parts of those schemes that you like?
  154. (Margaret Hodge) This is back to describing the pros and cons of a hundred different changes. I am not going to do that tonight. Clearly we are looking at what both the Scots and the Welsh have in their devolved administrations introduced.

  155. But without going into specifics you do think that there are positive aspects of the Scottish and Welsh schemes that you may well bring in to this?
  156. (Margaret Hodge) There are pros and cons of probably every variation you can think of.

    Mr Shaw

  157. Why was not post-16 funding included in this review given that that is absolutely fundamental to your original point about widening access and we know that that is the springboard?
  158. (Margaret Hodge) Post-16 funding is being looked at. The educational maintenance allowances are being piloted and are looking effective. Funding 16 to 19 year olds in FE is different to funding students, weekly payments against term repayments. They are very different up front payments against bringing money in. One of the reasons the EMA is working very well is they get the bonus at the end which provides a huge incentive for staying on. Of course they are related and you are right to be concerned about it, but I do think they are meeting a different cohort of people with different needs.

  159. The department has one budget. If the key is from FE, that is the springboard and surely you should have started at the beginning?
  160. (Margaret Hodge) That does not mean that we are not addressing those absolutely crucial issues and it does mean that we are seeing this review in the context of ----

    Mr Shaw: The Secretary of State will have to make tough choices. Within the budget, in terms of higher education, further education, all education, educational maintenance allowances will be part of that tough decision. It will not be a separate decision.

    Chairman

  161. I know you are in a building called Sanctuary House and it may seem you do not have your ear to the ground as well as this Committee but have you not noticed a change from the time when the Prime Minister made his intervention? We in the Committee are picking up much more of a way to emphasise not on what the problems were deterring students from going in from poorer backgrounds at 18, but the discussion has been about why not enough qualified young people stay on, 16 to 18, to ever be able to go to university. There has been a sea change in the discussion and debate around this six, seven or eight months.
  162. (Margaret Hodge) I do not think there has been a sea change. The moment I got this portfolio, it did not take me very long to come to the conclusion that we had to get 16 year old participation up. We had to get prior attainment up. We had to get aspirations up and we had to sort student funding. It is absolutely right to have this review now. We would knock ourselves if, three or five years down the line, we suddenly found that we had inappropriate systems in place which did not meet our aspirations.

  163. It would be even more of a shame if this unique opportunity to do something really magnificent, going beyond what people would imagine the original inquiry was about, if you missed the opportunity to do something very serious to enrich our university system. I do sometimes worry that the voice coming out around this -- I know we have not been able to prise much out of you today, Minister, because you are obviously bound by some sort of oath -- but the fact of the matter is that members of this Committee feel this is an opportunity that can be wasted if the imagination is not alive to the real opportunities to transform our higher education system because we believe that the options are pretty tight. Here is an opportunity to expand the real resource that flows into higher education.
  164. (Margaret Hodge) I feel as passionately as I know you and the Committee do. I think higher education is at a crossroads now. There is a lot that we have to get right over the coming period in terms of investment in all the areas that we talked about earlier on. If we do not get it right, we will pay a heavy price, not tomorrow but five or ten years down the line. I feel that about student support as much as I do about higher education across the board. There are lots of ambitions around. We have got to meet as many of them as we can.

    Valerie Davey

  165. Across departments, does that include social security, because quite a lot of the students I talk to want to expand into the benefit area as well. Has that been considered?
  166. (Margaret Hodge) We are looking at simplifying the current regime, particularly of targeted student support. The link between those students who most require support and the benefit system is something that we constantly keep under review. There is a lot of discussion between the two departments.

  167. Is the department part of this student review?
  168. (Margaret Hodge) They are certainly part of the targeted support work that we are doing and the simplification of that target support regime.

    Mr Chaytor

  169. Can I clarify your previous reply to Jonathan Shaw? Will the proposals of your review group include a proposal to establish a nation-wide and universal scheme of support for further education?
  170. (Margaret Hodge) Again, you are asking me to preempt spending review decisions. All I would observe is that that so far has been the most effective lever that we have found to increase participation at 16 and to keep young people in full time education at 17. That is the evidence so far.

    Chairman

  171. Do you still believe the postcode premiums are very useful in terms of identifying students from less privileged backgrounds?
  172. (Margaret Hodge) I am pleased that HEFCE are doing a review to ensure that the additional money that is required to both give support to students and to ensure they get the appropriate teaching is targeted better at those who need it most. That review is appropriate.

  173. Can I ask you for one bit of cooperation? Obviously, the department has modelled the impact of the Barr/Crawford proposals. I would be very surprised if they have not. Can we have copies?
  174. (Margaret Hodge) What I would very happily do is two things. One, give you some examples of tables when I spoke about repayment profiles. The other thing that I think would be of interest to you is to look at the New Zealand experience.

  175. We would like to see that but we do not want a couple of bits of evidence. If you have modelled the Crawford/Barr suggestions, could we look at the modelling?
  176. (Margaret Hodge) I will reflect on what we can send you and I will send you as much as I am able to.

  177. Have you done an assessment of the impact of the Scottish Cubie type system? Have you anything you could send us on that?
  178. (Margaret Hodge) Probably there was work done around that. It is one of the options we have looked at and I will check in the department and write to you.

  179. It is the implications of what it would cost in England, to roll it out here.
  180. (Margaret Hodge) I will check to see what we have available.

  181. If you have anything, you will give it?
  182. (Margaret Hodge) I will check to see what we have that we can give you.

  183. Minister, as usual, it has been a pleasure to have you in front of the Committee.

(Margaret Hodge) Thank you.

Chairman: We have not got everything we sought, but we will see you again.