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Lord Pilkington of Oxenford: Would that the noble Lord, Lord Desai, was running the bank. I gave a figure of £17,000 a year with a repayment of £630 a year, which is equivalent to 3.7 per cent. on income tax, to three banks. But they were not as generous as the noble Lord; indeed, they said that they would not give a mortgage. So I should work to become a director of one of the big banks and we would all benefit!
Earl Russell: I believe that the noble Lord, Lord Desai, may inadvertently have strengthened the point made by the noble Lord, Lord Pilkington. The noble Lord, Lord Desai, was talking about the amount of repayment, but he raised the spectre of over-borrowing. The noble Lord, Lord Pilkington, talked very strictly about mortgages. Over-borrowing is something which might possibly concern a person who was being asked to lend money for a mortgage. It is quite a serious point. Can the Minister say whether the Treasury has had any consultation with the public service review bodies on the likely effect of the Bill?
Baroness Park of Monmouth: I should like to make a further point. Everyone is saying that, once they are graduates, students will be relatively well paid and that, therefore, they can well afford to repay the loan for their education. All that sounds perfectly sensible in principle. However, at present, students are feeling threatened and anxious. They will try to borrow as little money as possible and to earn as much as possible in ways that no academic wishes them to do; for example, they will go and stack shelves in supermarkets and work in bars. They will try to make enough money so as not to have to borrow too much for the future, especially if they know that they will not be going into the very highly paid professions. The result is that they very probably get a much worse degree than ought to have been the case. Indeed, we shall be turning out, with great pride, people with thirds and lower seconds who will never, therefore, make it in the high-flying professions and we shall have wasted all this effort. It seems to me to be quite mad that that issue is not being considered and that we are going towards a false economy which is against the interests of the country and, above all, against those of undergraduates.
Baroness Blackstone: The amendment strikes at the heart of the Government's policy on student support and raises fundamental issues relating to access to higher education by students from lower income backgrounds.
There has been some confusion in the debate among those who have contributed regarding the issue of the position of students while they are at university and the issue regarding the position of graduates after they have completed their courses and when they are paying back what they owe. We need to keep those two aspects slightly separate.
I should tell Members of the Committee who have talked about the problems of students while they are at university that, under the scheme that the Government are introducing, students will have access to no less money than they have under the present scheme. Therefore, the suggestion that we, for example, should reintroduce housing benefit for students (which was abolished by the previous government) seems a little odd coming from the Tory Benches. As I said, students will not be any worse off under the new scheme than they are under the present one.
I should also tell my noble friend Lord Glenamara that of course I accept that rents charged by universities are often quite high. But, again, students will not have any less money up front to pay for their rents while they are at university than is the case at present. Therefore, we must be careful in distinguishing two quite different matters.
I should like to correct the noble Baroness, Lady Blatch, on one matter. I recognise that we are discussing very complex issues but, so far as concerns medical students, they will in fact be eligible for 50 per cent. of the cost of their maintenance in years five and six through a bursary scheme. Therefore, they will not be any worse off than they are currently. I believe that the noble Baroness misunderstood the position in that respect. It has been suggested that students are not, and will not be, aware of how much they will have to repay. I should like to reiterate the fact that we have worked very hard to provide students with as much information as we can about the new scheme.
The Government's proposals for an entirely loans-based system are grounded in what I believe to be a very sound principle; namely, that students' living costs should be met out of their future earnings after graduation. I am grateful to the Liberal Front Bench for their support on the matter. As we have consistently made clear, the arrangements for repaying loans will be fairer than under the current scheme. The level of the repayments that graduates are expected to make will depend on their income, as a number of my noble friends said in their interventions, and so will reflect the career success to which their higher education contributed. No student should be deterred from entering higher education by these arrangements.
The noble Baroness, Lady Blatch, asked why the Government have not adopted the Dearing Committee's preferred option of retaining maintenance grants at roughly their present level. The Government share the committee's commitment to access and equity. There have been a number of comments suggesting that perhaps the new Labour Government do not do so, but of course they do. We also share its view that there should be a fairer balance between what graduates pay and what taxpayers pay; indeed that is what these arrangements are about in part. Our proposals build on the committee's recommendations. It is true that Dearing recommended keeping grants and that we are phasing them out, but Dearing also recommended that all students should make a contribution of £1,000 towards fees. Our starting point is that it is right to provide help with fees for those who need it. We will ask only those families who can afford to do so to contribute to fees. Perhaps I may tell the noble Baroness, Lady Carnegy of Lour, that of course we looked at the Dearing modelling before we made any final decision, but we do not believe that grants for maintenance have a place in a modern student support system. Graduates are the main winners in higher education: we believe that they should contribute towards the costs of maintaining themselves through a progressive, common-sense, purely income-contingent system of student loans. As the noble Baroness, Lady Maddock, said, students have largely accepted that fact. The National Union of Students accepted that before the election. It has nothing to do with wanting to support a new Labour Government. It had already believed that that was a fair and reasonable change to make.
It has been argued here that grants promote access, and that loans hinder it. I do not remember the noble Baroness or her colleagues arguing this when they introduced the loan scheme originally. Nor has it turned out to be the case. In the five years before loans were introduced, when students still received support from grant alone, participation among younger students from lower socio-economic groups rose by 2 percentage points, from 8.3 per cent. to 10.3 per cent. So any of us who had fears at that time have been proved to be wrong. I know that the noble Baroness will suggest that I was among them. But before she does so, I have to tell her that my fears were based on the former
Between 1990 and 1995, during which time loans were introduced and the proportion of support available through the loan increased, the rise was much greater--7.1 percentage points, from 10.3 per cent. to 17.4 per cent.
Students from less advantaged backgrounds were not put off by the flawed mortgage style scheme introduced in 1990. All the more reason to believe that they will not be deterred by the fairer loans which we are introducing. Loans do not put off students from lower social groups entering higher education.
Nor is it right to suggest that students from lower social groups, having entered higher education, are unwilling to take out loans or will find other ways of supporting themselves rather than commit themselves to a loan--if I may say that to the noble Baroness, Lady Park. The most recent student income and expenditure survey indicates that, in 1995-96, nearly 70 per cent. of students from social groups D and E had loans. That is well above the overall figure.
Participation by lower social groups in higher education remains poor. Of course that is of great concern. But the evidence shows, crucially, that this cannot be put down to finance. The reasons students enter higher education are more diverse and complex than that, as are their backgrounds and circumstances. The rapid rise in participation all over the developed world is testament to that.
Yet I believe, and the facts suggest, that there is one fundamental factor which governs a young person's choice to enter higher education. That is having the school qualifications which universities demand. Students must have the opportunities to study for them and be helped to attain them. But survey after survey shows that students from lower social groups are either not getting those opportunities or are not succeeding in exploiting them. This is where students from lower social groups are disadvantaged and why I believe that they are not entering higher education in the numbers they should be. For example, analyses of the youth cohort studies suggest that students from higher social groups on average achieve higher A-level points scores that those from lower social groups. They also show that young people from lower socio-economic backgrounds are less likely to go on to A-levels after compulsory
The key challenge is to get young people from poorer backgrounds onto the launch pad. Once they get to that point--once they achieve good A-level results--the proportions going on to higher education are very similar for different socio-economic groups. Student funding issues are secondary, but it is obviously vital to ensure that the financial package is adequate in particular for those with extra needs. That is why we have also taken specific action to encourage less well-represented groups to enter higher education.
First, as I have already explained, we are targeting basic support towards those students who need it. Less well-off students will receive free tuition and the full basic support available towards living costs.
Secondly, we are increasing the support available to students who find themselves in difficulty, either because of their circumstances or unforeseen problems. The access funds are there to provide extra help if students find they need it. They will be doubled for 1998-99, and extended to part-time students, as I have already said. A new £250 supplementary loan will be available. The sum of £5 million has been set aside for this for next year.
Thirdly, we are making special provision for students in particular circumstances. The disabled students' allowance will continue to be paid as grant and will no longer be means-tested. The other supplementary allowances which relate to students' personal circumstances--for example for students with dependants--will also continue as grants. We plan to convert some of the course-related allowances--for example, for extra weeks' attendance--to supplementary loans from 1999-2000. But I can assure Members of the Committee that broadly the same levels of support will be available to students while they are attending their course as in previous years. I believe that this is the key issue.
Of course, our proposals are aimed at generating additional resources for investment in further and higher education. I am sure that Members of the Committee do not need to be persuaded of the case of making this investment. By moving to an entirely loans-based system we shall be able to achieve greater savings, and so make more funding available for universities and colleges. At the same time, students will be assured of the support they need while they are studying, and will only be asked to contribute to the costs of their higher education once they have graduated and are earning enough to do so--and I must emphasise that again in response to noble Lords who spoke of graduates on low incomes.
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