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Mr. Rendel: Will the Minister give way?

Alan Johnson: No, I will give way later.

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I think it was the hon. Member for Daventry (Mr. Boswell) who said that, once we have introduced these proposals—once we have introduced our extra support for students—there will be no money left for universities. The £1,500 grant announced by my right hon. Friend the Secretary of State on 8 January—which will now be £2,700 up front—the 25-year cap and the increase in the loan do not affect by one iota the money from this package that goes to universities. We pay the student support, and that is what we should do as a matter of public policy. The universities will still get the £1 billion to £1.4 billion from this package that we originally envisaged.

Mr. Rendel rose—

Mr. Yeo rose—

Alan Johnson: I give way to the hon. Member for South Suffolk (Mr. Yeo).

Mr. Yeo: The Minister has just reached an absolutely crucial point in the argument, and I hope that he will weigh his answer very carefully. Is he saying that the money that will now be used to subsidise the extra loans, to pay for the maintenance grants and to write off the loans that will not be repaid after 25 years, will be provided to the Department for Education and Skills by the Chancellor through an increase in its spending total or not? If the answer is that it will not, we know what happened last time—all the money from tuition fees was clawed back from the universities by a cut in the Higher Education Funding Council grant.

Alan Johnson: The money for deferring up-front fees, introducing a deferred system with a huge cost because we shall apply no real rate of interest, the money for the £1,000 grant, the money for the higher threshold, and the money to provide support to part-time students—for the first time ever in this country—will all come from the Chancellor. What we have found from within the higher education budget is the money for the extra on the maintenance grant, the 25-year cap and the increased loan.

Mr. Rendel: I am grateful to the Minister for giving way a second time. If he were to introduce an extra tax on the highest paid, would he accept that he could give the money to the universities now, as he said, whereas under his own policy it will not be coming in until the year 2009?

Alan Johnson: I shall come on to that precise point in a few moments.

Do we need investment? Yes, and quickly. The Bill will provide the investment, combined with investment from the taxpayer, which is quite proper. We are asking for a £1 graduate contribution for every £14 that the taxpayer contributes.

Do we need expansion? Yes, again. I heard the concerns of the right hon. Member for South-West Norfolk (Mrs. Shephard) about pushing towards the 50 per cent. target. In fact, we need the investment whether we expand or not, but I believe that it is important to expand higher education towards 50 per cent.

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participation. We have one of the lowest drop-out rates in the world. The Organisation for Economic Co-operation and Development says that graduates in this country get a better return than graduates anywhere else. The Council for Industry and Higher Education, which completely supports the drive to 50 per cent., points out that 90 per cent. of this country's graduates gain employment in which they use their degree.

I am not a graduate myself, but they say that graduates are more tolerant, healthier, less involved in crime and more involved in their communities, which is certainly my experience of the graduates in their places around the Chamber.

The third crucial question is whether graduates should make a contribution. I say to Conservative Members—particularly to the right hon. Member for Richmond, Yorks, who led the Conservative party when the Dearing report was published—that Dearing was a national committee of inquiry. The report was a seminal work. Everyone says that Dearing did a thorough job. There are 20 volumes and God knows how many pages.

The Dearing report was unanimous in saying—and this is the answer to the hon. Member for Newbury (Mr. Rendel)—that we are fooling ourselves if we believe that we can fund higher education at 40 and 50 per cent. participation rates purely from the taxpayer in the same way as we did when university education was the preserve of a tiny elite—only 6 per cent. in the early 1960s. It was Dearing who said—the previous Government commissioned Dearing—that graduates should make a contribution.

I say to my right hon. Friend the Member for Birmingham, Ladywood that Dearing was first minded to go for a graduate tax. He did not do so because he felt that the graduate contribution scheme that we are introducing through the Bill was superior, for two basic reasons. The first was that graduates paid their contribution towards their education and did not continue to pay for the rest of their lives. The second was that lump sums can be paid up front under a graduate contribution scheme to get the money paid off quickly. Dearing said that the graduate contribution scheme was income contingent, as with the graduate tax; that it was paid through the Inland Revenue, as with the graduate tax; and that if earnings fell below a certain level, the graduate would cease to pay, as with the graduate tax. That is why I believe that the Dearing report is at the nub of the debate.

Paul Farrelly (Newcastle-under-Lyme) (Lab): Can my hon. Friend help me on the subject of Dearing and grants? There was a slick operation going on this morning, with a list of concessions on offer, but my right hon. Friend's speech did not live up to it. Outside this place, the media are talking of no concessions being made. Can the Minister be precise? As a result of what has been said today, what extra maintenance grant will the children of a postman on an average income of £18,624 receive, when the wife earns perhaps another £5,000?

Alan Johnson: I will gladly come to that very point and answer my hon. Friend, but I want to stay with the logic of our important debate. Should graduates contribute? Yes, they should. We have had the Dearing

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national committee of inquiry and, after devolution, the Cubie commission was established in Scotland and the Rees commission in Wales. Cubie was even more vehement than Dearing about graduates paying a contribution, and the Cubie report fully supported graduate contributions.

I have considerable personal respect for the hon. Member for Harrogate and Knaresborough (Mr. Willis), but he cannot come here simon-pure in his principle that graduates must never make a contribution, when in Scotland the Liberal Democrats are part of a coalition Government and every graduate makes a contribution of just over £2,000 through the graduate endowment scheme. How can the Liberals take a principled stance against graduate contributions while supporting—they are right to support it—that system in Scotland?

Mrs. Anne Campbell: Does my right hon. Friend agree that one of the real disadvantages of the Government's scheme compared with a graduate tax is the fact that someone who earns a lot may pay off their money quickly, but it might take a person on a low to average income 25 years before the amount is written off?

Alan Johnson: If my hon. Friend has those precise concerns, I believe that she should read the Dearing report. Dearing set out six reasons why a graduate contribution scheme was superior to a graduate tax. We have had this debate within the parliamentary Labour party and I think that we should take it further. I sincerely believe that this option is much better.

We now get on to the really important question of whether there should be a fixed fee or a variable fee.

Richard Burden: My right hon. Friend will be aware that the problem that several of us have concerns the cap and that I asked my right hon. Friend the Education Secretary a question about that during his opening remarks. Will he clarify one thing for me? He has guaranteed that the cap will not rise during the course of the next Parliament and that it would require primary legislation to raise it within that time. It has also been said that if the commission recommended significant changes thereafter, it would be likely that primary legislation would be required. Would an increase in the rate of variability count as a significant change?

Alan Johnson: Yes, it undoubtedly would.

May I address the very issue about which my hon. Friend the Member for Birmingham, Northfield (Richard Burden) spoke to me only last evening: the question of fixed versus variable fees? We heard important contributions from my right hon. Friend the Member for Newcastle upon Tyne, East and Wallsend (Mr. Brown) and my hon. Friends the Members for Cambridge (Mrs. Campbell), for Southampton, Test (Dr. Whitehead) and for Norwich, North (Dr. Gibson). I accept completely the concerns of my right hon. Friend the Member for Newcastle upon Tyne, East and Wallsend about variability. From our point of view, we understood right from the start—since the first early-day motion was tabled by my hon. Friend the Member for Cambridge—that the primary concern was about poor students.

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We now have a situation in which we are putting forward a £2,700 grant—this relates to the intervention made by my hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly). A £4,000 bursary is being offered at Cambridge, Imperial and Exeter, and I am sure that that is soon to be offered by many other universities. There will be access to a £3,555 loan. That is £10,250 a year of support—those studying physics, incidentally, will get an extra £1,000 on top.

We also have a situation in which 16 and 17-year-olds from poor backgrounds will, from this summer, get £1,500 a year to stay in school. If we do not keep them in school, we cannot get them to do two decent A-levels so that they can get to university. There will be a sum of £11,100 over a five-year period, which represents the kind of package that has never before been seen to help poorer students. However, I accept that my right hon. Friend the Member for Newcastle upon Tyne, East and Wallsend and others still have concerns about variability. Our view was simply that going to a fixed fee of £2,500, as has been suggested, or £3,000 with absolute rigidity and no ability to charge less, would be wrong. However, after three years of the scheme's operation, an independent commission will look at it and report straight to the House—not to the Government—after examining the concerns expressed by my right hon. and hon. Friends. It is important that we do that because that point will be the prime time at which to consider the question of fixed versus variable and to decide whether we should switch from one to the other.

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