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Lord McNally: My Lords, I do not know whether my declaration of interest is as a former vice-president of the National Union of Students or as the father of three children who will go through higher education in the 21st century. What I am aware of is that we all share a debt to Sir Ron for a very thorough piece of work and one which, as the noble Lord indicated, demands more than a knee-jerk reaction. Indeed, I suggest to the Minister that she commits herself to a two-day debate in October on the Dearing Report. I say two days because one day will certainly be taken up by all the chancellors, vice-chancellors and ex vice-chancellors who inhabit these Benches.

I have a few points. As regards the idea of funding centres of excellence--the so-called university premier league--how does that emerge from the report, and what is the Government's attitude to research funding as reflected by Dearing? The issue which will capture the headlines is fees and grants. Perhaps I may remind the Minister that those of us who oppose advertising on the BBC, raiding the lottery for current expenditure or paying for health at the point of need do so because we suspect that, whenever the Exchequer finds a honey-pot, the temptation is to keep on raiding it. The noble Baroness pointed out that the proposals will cover about

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25 per cent. of the cost of student fees. Is that a capped 25 per cent. or at some future stage will someone suggest 40 per cent., 80 per cent. or 100 per cent.? Is the honey-pot something which can be continually raided?

Finally, perhaps I may put to the Minister the real concern on this matter. I am the child of a working-class family, and I came through university on a full grant, with full fees paid. I am conscious--not least from the statistics that the noble Baroness quoted--that even after 30 years of university expansion we still fail to bring into our higher education system working-class children. The Minister gave some indication as to how the Government might respond to that. I hope the noble Baroness will consult much more fully on this issue. There is a suspicion that again that situation will be a deterrent to working-class children going into higher education. Will the Minister monitor from now on the impact of these proposals? Will she look both at home and abroad at new ways of trying to attract children from lower income groups into higher education?

As I said, I benefited from a poorer but perhaps more generous age. We on these Benches still believe that at some stage politicians of all parties will have to face this fact. If we really want the higher education system that the Minister so rightly says the country needs to equip it for the 21st century, we shall have to face the taxpayer with the need, through an equitable tax system, to pay for that investment. A tax system that begins by differentiating between what academic qualifications one has rather than considering one's ability to pay is not an equitable system. I do not believe I can think of anyone better qualified or with a better commitment than the Minister to see through a reform of the higher education system. We on these Benches wish her well in this matter. We are making decisions for the 21st century. She is well equipped to make them. We also welcome her commitment to further consultation during the next few months. We all know what our holiday reading is and we look forward to further discussion on the Dearing Report in the autumn.

Baroness Blackstone: My Lords, I am sure that we shall all have an interesting summer holiday reading this long and fascinating report. I begin by thanking the noble Lord, Lord Pilkington, for his initial comments and the noble Lord, Lord McNally, for the nice things that he said about me and I hope my competence to deal with some of these very difficult issues.

Both noble Lords asked a number of questions and I shall do my best to answer them. However, if any of them are unanswered I shall of course write to them. I believe that the noble Lord, Lord Pilkington, began with a question about the shift, as he described it, towards a full loan system, which he took from a quote

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in the Dearing Report. Perhaps I may explain to the noble Lord that it is not the Government's intention to shift to a full loans system in the sense that all middle-class students from higher income family backgrounds will get a full loan to cover their maintenance. The expectation is that parents will continue to contribute if they come from higher income groups. The noble Lord, Lord Pilkington, may be slightly confused because Sir Ron Dearing was commenting on a different scheme from that which the Government have put forward.

The noble Lord asked about the implications of the Government's proposals for public expenditure in the short term. There will be very limited implications since the charging of a fee will soon balance out the increased loans that will be made available. In fact, there will be a net gain after a very short period of time. The noble Lord also asked about whether the remaining student loans would still be counted against the PSBR. That is something that we shall be considering over the next few months. It requires a change in national accounting procedures. Clearly, it is something that we need to consider, just as we need to consider other countries' practices in this respect.

The noble Lord, Lord Pilkington, went on to ask whether we have any intention of charging a realistic rate of interest on existing loans. I do not know what the noble Lord regards as a realistic rate of interest, but we have no intention of changing the present scheme whereby students take out a loan and repay that loan in real terms--in other words, the only interest that they pay is the RPI; it is the increase in the loan in relation to inflation. There is no interest rate charged on top of that. We think that it would be wrong to charge students at commercial rates.

The noble Lord then asked about the university system, referring to the fact that the previous government left it in crisis. There is, of course, a serious crisis. The noble Lord also wanted to know what the Government intend to do about short-term funding needs. The noble Lord rightly pointed out that Sir Ron Dearing identified the fact that our universities have substantial needs which must be met if they are to return to the kind of quality that we would all like to see. The Department for Education and Employment is to conduct a comprehensive spending review during the summer and autumn when we shall look closely at those needs to see how far we are able to meet them.

The noble Lord, Lord Pilkington, went on to raise questions about GNVQs as a qualification for entry into higher education. Sir Ron Dearing advocates the recruitment to universities of students with such vocational qualifications. I am sure that the noble Lord is aware that many universities already recruit students with those qualifications. He suggested that there have recently been criticisms of the GNVQ and NVQ qualifications. I am fully aware that such criticisms have been made and that we need to do all that we can to strengthen those qualifications. The Government are trying to do just that. We shall, of course, be consulting further with the universities about their views on entry requirements and on the extent to which students with

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vocational qualifications should be admitted. However, I advise the noble Lord that it is the Government's intention that the current system, which was set up by our predecessors, should in this respect continue.

Lastly, the noble Lord suggested that the Government are jumping too early into financial decisions. We thought very hard about this. Our view was that it would be wrong to leave the universities, parents and students uncertain as to the Government's thinking in this area. We shall, of course, consult and we hope to hear from many Members of your Lordships' House as well as from all the interested parties who have a part to play in the delivery of higher education.

I turn now to the questions asked by the noble Lord, Lord McNally. The noble Lord asked about the Government's attitude to the Dearing Report's proposals on research funding. Again, this is a matter on which we want to consult and on which we do not wish to take a view until we have had the opportunity to hear the views of the funding councils, the research councils and the universities.

The noble Lord pointed to the tendency of the Exchequer to go on raiding honey-pots. I am, of course, extremely aware of that tendency. The answer to the noble Lord's question is that the Dearing Committee has made some suggestions on this, including that any change above the proportion of 25 per cent. should be introduced only after an affirmative order in Parliament and following an independent inquiry. Perhaps I may reassure the noble Lord that this Government have absolutely no intention of changing the proportion from a 25 per cent. contribution by students to the average cost of courses, with a 75 per cent. contribution coming from the state.

The noble Lord, Lord McNally, related his own experience as somebody who came from a working-class background and went to university--in the early 1960s, I think, which is about the same time as I went to university--with the benefit of a full grant. At that time, approximately 6 or 7 per cent. of all 18 year-olds had the opportunity to enter higher education. As I have already mentioned, the figure is now 30 per cent. It would be extremely difficult for us to continue to expand the system, as we wish and intend to do, on the basis of asking the taxpayer to pay for that additional expansion.

Perhaps I may remind the House that only 30 per cent. of the population get the benefits of higher education and that those benefits are considerable. First, I think that I am a good witness of the fact that it is an enjoyable experience. Secondly, students who benefit from higher education will have lifetime earnings which are considerably higher than those of comparable young people who do not have that benefit. On those grounds, we feel that it is reasonable that they should pay later. No one will be asked to pay up front--no student from the kind of home from which the noble Lord came. I believe that this is the most equitable approach to the question that he raised.

The noble Lord suggested that the academically qualified would be asked to pay as opposed to people being asked to pay on the basis of ability to pay. Perhaps

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I may stress once again that our scheme is one of income contingency. No one will be asked to pay if they are unable to afford it.

4.8 p.m.

Lord Glenamara: My Lords--

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