Examination of Witness (Questions 280
MONDAY 13 MAY 2002
280. What is wrong with a graduate tax?
(Margaret Hodge) There are pros and cons on all these
options and they are ones that we will take into consideration
during our deliberations.
281. 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 No. 10 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?
(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.
282. Meg Munn is feeling really frustrated over
(Margaret Hodge) You may be frustrated but I do not
283. 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 Sheffield, 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
(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 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.
284. 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?
(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.
285. 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.
(Margaret Hodge) No, no; they can have booze and cars.
286. 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?
(Margaret Hodge) I would be very reluctant to get
involved in determining students' life choices.
287. I am not suggesting that.
(Margaret Hodge) Should I tell the NUS what they say
to their student body? I think that is difficult. That is up to
288. 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 aroundI have heard young people quote it back and
it gets bigger by the minute; it gets up to £16,000is
an issue of lifestyle choice should that not be challenged?
(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.
289. 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?
(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.
290. 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
(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
291. 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?
(Margaret Hodge) Another option.
292. Minister, you will know that the Select
Committee's previous report recommended a higher level of earnings.
(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
293. 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?
(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.
294. 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?
(Margaret Hodge) Again those are different schemes
that we are looking at.
295. Are there parts of those schemes that you
(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.
296. 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?
(Margaret Hodge) There are pros and cons of probably
every variation you can think of.
297. 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
(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 have very different needs on up front payments against bringing
money in regularly. 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.
298. The department has one budget. If the key
is from FE, that is the springboard and surely you should have
started at the beginning?
(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
299. I know you are in a building called Sanctuary
Buildings 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.
(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.