Examination of Witnesses (Questions 120-139)
MR DAVID NORMINGTON CB AND PROFESSOR SIR HOWARD NEWBY CBE
MONDAY 28 JANUARY 2002
120. Is not the reason that it is net, net, net because there is such a low collection rate?
(Mr Normington) No, I do not think there is a low collection rate. The Student Loans Company has got a very high collection rate. My recollection is that it is quite a high collection rate. I do not think there is a major problem there.
121. Let me read you another quote: "Interest subsidies are inefficient, expensive and unfair. Well-off students take out the maximum loan and put the money into a bank to make a profit. On the government's own estimate, confirmed by simulations at London School of Economics, interest subsidies mean that about one-third of lending to students is never repaid If total lending by the Student Loans Company is £1.2 billion"which is the year 2000 figure"the long-run cost of interest subsidies on this year's loans is around £400 millionenough to pay one-year maintenance scholarships to 75,000 students. As if that fiscal hole were not bad enough, these subsidies benefit most those who borrow mostonce more, better-off students." Would you comment on that?
(Mr Normington) I do not agree with the general issue there. I think it is true that it is a very beneficial loan rate. If you repay at inflation it is very beneficial.
122. There are students who are going out, to your knowledge, borrowing the maximum amount and sticking it in the market at a higher rate?
(Mr Normington) That is what we are sometimes told.
123. What are you doing about that? Do you think that is an economical use of taxpayers' money?
(Mr Normington) That is the system that the Government has decided to introduce and it is also the system the Government is reviewing.
124. My point is about the current student loans system. The quote I gave you is the Scottish Independent Committee of Inquiry into Student Finance and, of course, they did something about it there. My point is that the present system of student loans itself is a deterrent to people going into higher education, particularly to people from poorer social backgrounds. I would also make the point that the present system is neither effective, economic nor efficient in delivering the Government's stated objectives. Is that fair?
(Mr Normington) I have admitted that there is a fear of debt by students from poorer families and therefore the review is looking at whether we can provide more up-front support to children from those families. That is one of the issues that is being looked at. So I am agreeing with you that the Government has said it thinks it needs to look again at some of these issues. What I do not agree with you on is the basic principle that you get graduates to repay some of the costs of their higher education from the premium they get in their earnings, which is a bad principle on which to base a student financing system. That is the basic system across the world. It is also very important that you set up a system which has loan repayment arrangements which do not put off people unduly. That is in a sense one reason why the Government changed the system because the previous system did have a very sharp cliff edge in it in terms of repayment, where you pay nothing one day and £100 the next.
125. I did not mean to say there was not a good case for students repaying some of the premium. That is a good idea. It is a question of how you set up the system at the start. So you agree that at the moment there is a deterrent?
(Mr Normington) Yes, although numbers going into higher education continue to be buoyant.
126. Not from those social groupings?
(Mr Normington) The numbers coming from those families are increasing but, overall, the proportion is not changing.
127. May I direct a question to Sir John or maybe Mr Jones concerning specifically the effectiveness and efficiency of the student loan finance system in terms of delivering the Government's aims of improving access. Has the NAO done any work on that or looked at any work on that?
(Sir John Bourn) We did work on the Student Loans Company in terms of the setting up of its operation, its vulnerability to fraud, and its future on becoming a public limited company.
128. But nothing specifically?
(Sir John Bourn) But we have not looked, as yet, at the question of the way in which and the extent to which the Company and the student loan system has achieved the Government's objective for it.
129. Indeed, it is this Figure 19 everybody keeps talking about on Page 22. Has the NAO studied that system as a whole in terms of its effectiveness, efficiency and economy?
(Sir John Bourn) My view on that, if that counts as studying it, is that a system as complicated as that is bound to be a deterrent to people because they will not know exactly where they stand and if you come from a background where your parents or your teachers are not used to handling material of that complexity, I think it will lead to a lot of people, who might otherwise have gone to university, saying, "It is all too difficult, too problematic, I do not know where I will stand", and it is a deterrent. That is my view of it.
130. You are saying the system itself is a deterrent?
(Sir John Bourn) Yes, that is my view.
131. Thank you very much, Sir John. Mr Normington, did the ending of the grammar and direct grant schools have any impact on the ability of people from poorer backgrounds to break into higher education.
(Mr Normington) I am afraid factually I do not know the answer to that. I do not know whether at that point there was any change. It was a long time ago and, of course, much smaller proportions went into higher education.
132. Has any work, any academic study been done measuring the impact of that?
(Mr Normington) There may have been. I will certainly look at that, if you like, and let you know.
Mr Bacon: If you could.
Mr Gibb: You are the Permanent Secretary.
133. Mr Steinberg kicked off with my first lot of questions. I would like to continue with Mr Gibb's line. Could you say quantatively how many schools are as Mr Gibb described?
(Mr Normington) How many?
134. How many schools are like the ones Mr Gibb described?
(Mr Normington) I said to him I do not know. I just do not have the information.
135. Do you think the Department might look at that?
(Mr Normington) I know, and we could do this, how many have failed their OFSTED and are in special measures, which in terms of secondary schools is just over 60. I did say that I think you would find some of the poorest behaviour and poorest discipline related to those schools. I do not think that is an answer to either of your questions, but OFSTED does inspect and it does look at those issues, and often academic attainment and ethos and discipline are all linked; in fact usually they are.
136. I would just like to ask one other question for the general benefit and information of the Committee, not directly related to participation but it is something you will be coming before this Committee on in due course to talk about, namely Individual Learning Accounts. The Minister has said that so far the Department has exceeded spending by £63 million. When will you know what the total overspend is?
(Mr Normington) I think it will be a little time yet.
137. By May or May 2005?
(Mr Normington) It is really important we know soon. I cannot say precisely. I hope it will be by the end of this financial year, but I do not know for sure.
Mr Bacon: Thank you, Chairman.
138. Mr Bacon was referring to Mr Gibb's questions and drawing some comparisons between the comprehensive he mentioned in this article and Bradford Grammar School. I see that you went to school in Bradford. You did not go to Bradford Grammar School, did you?
(Mr Normington) I did.
139. The questions were well put. You did not reduce your teachers to tears, did you?
(Mr Normington) It is possible! It was a different school in those days, of course, it was a direct grant school.
Chairman: Brian Jenkins?
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