The following Statement was made in the House of Commons on Thursday 24 February.
“With permission, Mr Deputy Speaker, I would like to make a Statement about how the Government are safeguarding the future of our universities, putting them on a sustainable path for taxpayers and students. Our universities—indeed, our entire higher education system—are some of the most innovative, important institutions in our country. Four of our great institutions are ranked in the global top 10 list. They are a true powerhouse of innovation and research—they even played a leading role in the development of the Covid vaccine—and they will play a significant role in the prosperity of our country for years to come.
We recognise that education at all levels plays a role in learners’ personal fulfilment and pursuit of knowledge, whether that is in the humanities or in science and engineering as in my case, and in higher or further education. As we move past the pandemic and start a new chapter in our country’s history, now is the time to ensure that our universities are on a solid footing and sustainable ground for generations to come. To do so, I am announcing the launch of two consultations, which, taken together, outline our proposals for the higher education sector and secure a better deal for the student and the taxpayer. The consultations will deliver solutions to the problems that Sir Philip Augar’s independent panel examined in such depth and so thoroughly. The higher education policy statement and reform consultation, and the lifelong loan entitlement consultation, address the pivotal recommendations made by the panel, to whom I am indebted for their excellent work.
As Members across the House know, one of the Augar panel’s core recommendations was the provision of a lifelong learning loan allowance. That is why today I am launching a consultation on the lifelong loan entitlement, to seek views from the sector and the public on the shape and scope of this important policy. Under this new and flexible skills system, people will be provided with a loan entitlement equivalent to four years of post-18 education to use over their lifetime, whether in modules or as a whole. They will be able to train, retrain and upskill as needed in response to changing skills needs, sectors and employment patterns. It will be a powerful and innovative vehicle in levelling up, providing real opportunities for everyone and giving businesses the skilled workforce they need to thrive and grow.
In light of the new entitlement, it is now more important than ever that our higher education funding system is fair for both the student and the taxpayer. The bottom line is this: if we fail to act, we can expect just 23% of students who enter full-time higher education next year to repay the full cost of their loan. That is a challenge that our reforms will address. We are maintaining the repayment threshold at its current level for current plan 2 graduates until 2025—those who took out loans after 2012. We are also reducing the repayment threshold to £25,000 and extending the loan repayment period from 30 years to 40 years for students starting their studies in autumn 2023. That will make the system fairer for students and taxpayers. Graduates will see the benefit of their degree all their earning life, so it is only right and fair that they continue to contribute. We expect that as a result of our changes the proportion of students paying back their loan in full will increase to just over half. Our significant regulatory reform work, which we are taking forward with the Office for Students, alongside the measures we are consulting on, will drive up student outcomes and help students to access high-value employment that benefits them and the economy.
Without those interventions, the student loan book will balloon to nearly half a trillion pounds—half a trillion pounds—by 2043. I have thought very carefully about fairness for students when pulling together this balanced package of reforms. I am pleased to say that we have delivered on our manifesto commitment to address high interest rates, by reducing interest rates for students starting next year to RPI plus 0%, ensuring that graduates, under these terms, will not have to repay more than they have borrowed in real terms. New students starting in the academic year September 2023 are expected to borrow an average of £39,300. I have seen some spurious headlines today. In today’s prices, they will borrow £39,300.
We forecast that the average graduate will repay £25,300 in today’s prices over the course of their loan. How does that compare with the current system? Under the current system, £19,500 is what they repay. I hope that offers colleagues clarity, rather than claptrap headlines. I want to be clear: no student will repay more than they took out in today’s prices. Let me repeat that: no student will repay more than they took out in today’s prices. We are also continuing to freeze tuition fees for all students for a further two years. The combination of those measures, the reduction in interest rates and the two-year freeze, means a student entering a three-year course next autumn could see their debt reduced by up to £6,500 at the point at which they become eligible to repay. When the total seven-year freeze is taken into account, that totals up to £11,500 less debt at the point at which they become eligible to repay.
Alongside that, we are investing almost £900 million in our fantastic higher education system over the next three years. That includes the largest increase in government funding for the higher education sector to support students and teaching in over a decade. An additional £750 million will be invested in high quality teaching and facilities, including in science and engineering, in subjects that support the NHS, and in degree apprenticeships. There are those who say, “Why aren’t you making higher education free?” To those people I would say, “Look at our counterparts in Scotland.” Over the last five years, universities in England have been able to cover their teaching costs more successfully than their Scottish peers, because of our more sustainable system of tuition fees and grants.
As part of our plans to reform the higher education sector, we are building on our work with the Office for Students to set minimum expectations around completion rates and progression to graduate jobs or further study. We are seeking views on policies that will help to ensure that every student has confidence that they are on a high-quality course that leads to good outcomes, a good job and ensuring that the growth in our university sector is focused on high-quality provision wherever they are in the country. We are consulting on controlling student numbers and introducing a minimum eligibility requirement to access student finance. I want to make sure that every student who goes to university will be able to reap its true benefits and not feel that they have been mis-sold and saddled with debt after completing their course.
It is really important that we have the conversation about the need for minimum eligibility requirements to ensure students are sufficiently prepared to benefit from higher education before they enter university. For example, that could be a return to the old requirement of two E grades at A-level, or a pass in GCSE English and maths. Of course, there will have to be exemptions for some groups, including mature students and part-time learners, on which we are also consulting. Young people should not be pushed into university if they are not ready. After our proposed exemptions that we are consulting on are applied, less than 1% of total entrants would be affected by a minimum eligibility requirement set at grade 4 at GCSE, but we will listen and be open-minded.
Student number controls would limit the uncontrolled growth of provision that does not lead to good outcomes or good jobs. Incentivising the expansion of provision with the best outcomes for students, society and the economy has to be our goal. The proposals are about advancing real social mobility. That means shifting from a focus on simply getting students in the door counting the inputs, to ensuring they complete their course and secure a good outcome after they graduate—being obsessed about outputs and outcomes.
As with everything my department does, my officials and I have also considered carefully how we can support disadvantaged students with this package of reforms. Access to higher education must be dependent on attainment and ability to succeed, and not inhibited by a student’s background. Our proposals to reduce fees for foundation years would make them more affordable for students who need a second chance to enter higher education. Our flagship national scholarship programme, in which we will be investing up to £75 million, will help to support high-achieving young people from disadvantaged backgrounds to achieve their dream, regardless of course or university.
Finally, to complement the lifelong loan entitlement, we are rolling out new approved higher technical qualifications. Those will be high-quality, job-facing alternatives to degrees, approved to deliver the skills that employers need. From academic year 2023-24, we will extend student finance access to those qualifications and allow learners studying them part-time to access maintenance loans, as they can with degrees. That will address financial barriers for learners and move towards the flexibility that we envisage through the lifelong loan entitlement. Those two policies will be vital to bringing further and higher education much closer together, just as the independent panel recommended.
I believe that these reforms are fit for a dynamic and growing economy. The reality is that, apart from buying somewhere to live, taking on a student loan can be one of the biggest financial commitments that any young person can make. I am confident that they will set the sector up for success in the years to come and keep our student finance system fair and sustainable for students and the taxpayer. I have been continually impressed by the resilience demonstrated by students throughout the adversity of this pandemic. We owe it to this generation, and generations to come, to ensure that education remains open to anyone with the ability and desire to benefit from it. I commend this Statement to the House.”
My Lords, in May 2019, the then Prime Minister, Theresa May, launched the report of the Augar review. That was a long time ago, and it feels like a very long time ago. I wish I could say that the time has been well used, but let us have a look at what has been put out in this report.
First, there are changes to student loans. From the academic year 2023-24, the interest rate on loans will be changed to RPI for everybody, which is interesting, because Ministers keep telling me that RPI is no longer an official statistic because of concerns over its methodology. I can only assume that, somehow, it is not good enough when you are paying money out to benefit recipients but it is fine when you are taking money away from students. If only the noble Lord, Lord Forsyth, were here, I think he would have something to say about that.
Secondly, it reduces the repayment threshold to £25,000 and increases the repayment term to 40 years—much of a working life. For those on the current loan scheme, the repayment threshold will stay at the current level until 2024-25, which, given the current inflation rate, is quite a bit of fiscal drag. The effect of these measures together is highly regressive, hitting the lowest earners the hardest.
Paul Johnson of the IFS said this about it:
“looked at from the point of view of progressivity, redistribution, winners and losers, the reforms look truly horrible. Low-to-middle-earning graduates could be made about £20,000 worse off over their lifetime by the changes; the highest earners could benefit by £25,000.”
The equality analysis published alongside the consultation document said that
“among new borrowers, the largest proportional increases in lifetime repayments will be from lower earners … by 174% for those in the 4th decile”.
My Lords, this is a very odd Statement because it suggests one or two nice things but does not really give us much detail. As the noble Baroness has just pointed out, the noble Lord, Lord Forsyth, is missed on this one. His intellectually honest toe-caps have gone into the ribs of many of us here and the Government Front Bench has actually felt them on many an occasion. A student finance system that celebrates going from 23% repayment to maybe half is a weird thing. Why do we still persist with this loan system? It is seen to be financially failing—unless creating a form of junk bond at the end of it is the aim. There will be not quite so much junk; that would seem to be about the essence of it.
If we are looking at how we get further education better into the system by giving better bonuses for lifelong learning—a suggestion of something that might be better in the future—we have to get people to go on the courses. What are we doing about careers guidance that would improve what people know about this? The first thing you will have to do is to train teachers, who are, let us face it, predominantly graduates, and we all know that what we did is right—if you do not come from that group, then you are very much in a minority—as we “stick to nurse”. Where is the training to make sure teachers are giving the right information to people or at least stand half a chance of so doing?
This has not got any easier with the introduction of T-levels and the removal of BTECs, which provided a series of fairly established ways of finding your way into higher education and the level 4 and 5 qualifications which are mentioned. We need some clear guidance to get this through and see how they are going to all tag in together. At the moment, I would say that it is an optimistic mess. We are not quite sure what the Government are expecting. It is going to be better, and it just might be that, after my entire lifetime, in relation to people at levels 4 and 5—I think it is technician-level qualification—we might be starting to address that, but we are doing it in a very chaotic way. The paths into education have fundamentally changed over the last couple of years, and they have changed in an incoherent manner.
I thank the noble Baroness and the noble Lord for their remarks and their questions. The noble Baroness rightly focuses on issues of fairness and access to higher education. The Government have tried to balance fairness to students with fairness to the taxpayer. Currently, a great proportion of the subsidy that the taxpayer makes towards higher education is funded by those who did not have the benefits of that higher education themselves. Students going to university have the advantages of their degree throughout their working lives.
Our estimate is that, over the course of their degree, the average graduate will borrow £39,300 from next year. Today, the average graduate would repay £19,500, and under the new proposed system, they would repay £25,300, so there is still a tremendous subsidy for the average graduate. The noble Baroness focuses on those who are more marginalised and are lower-earners, and she will be well aware that below £25,000 there is no repayment at all.
The noble Baroness also talked about the consultation around limitations on student numbers and minimum-entry requirements. This is, as she well understands, very much part of our drive towards having higher-quality courses. The numbers affected by the consultation—and I would stress it is a genuine consultation; we genuinely want to understand how stakeholders feel about this—and affected by proposed GCSE requirements would be less than 1% of students, and around 1% for the suggested entry requirement at A-level.
The noble Lord focuses on the barrier that that may present to those with special educational needs, but I would respectfully suggest it is also a tremendous barrier for everybody not to have English and maths at a basic level, since they are such an important entry requirement for almost every job. There are not many jobs in this country that you can do if you cannot read, write and add up. That is why the Government have extended their support, so that students can retake English and maths for whatever reason that might be.
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“the highest lifetime earners among new borrowers will experience large decreases in lifetime repayments (down 26%)”.
Why have the Government chosen to reform the loan system in a way which so profoundly benefits higher earners and hits those on lower incomes?
If noble Lords are wondering what the attraction of this particular approach is, it is perhaps worth mentioning that, thanks to a quirk of government accounting rules, these changes make the public finances look quite a bit better, but only in the short term. The IFS says that it will take about £1 billion off the cost of the student loan scheme, but:
“We expect the budget deficit to fall by about £5 billion in 2023 as a result of the changes, with subsequent hits to the deficit further down the road as new loans accumulate less interest.”
It finishes, drily:
“This will please the Treasury.”
Indeed it will.
However, this will not please many people because the pain does not fall equally in other ways. The equality analysis says that women, disabled people, some ethnic minorities and those from certain regions are likely to face increased lifetime repayments. Men gain and women lose. On average, men will repay around £5,500 less and women will pay £6,600 more. The IFS notes a remarkable comment:
“the taxpayer cost of funding men’s student loans will actually increase as a result of the reform … the saving on women’s student loans alone is greater than the total at £1.6 billion.”
Women students are not only paying for the reduced cost to the Exchequer; they are paying for the men’s changes as well. The Minister will doubtless say that this discrimination is not intentional, it is just that women earn less. But the Government know that women earn less across their lifetime. So, having known that, can the Minister tell the House what consideration was given to the differential impact of these proposals before deciding on them?
The Government are also consulting on other measures, including reintroducing government controls over student numbers. But not just by a global figure; they are consulting on whether to control them by sector, provider, subject, level or even by mode of study. Are the Government planning to do all of them? Might they do them all? Could the Government conceive of a world in which the Secretary of State could decide that physics is in but history is out? Could he close down the music department at Lindchester University completely? Could he decree that all computing is going to be done in FE from now on? This may not be their plan, but there is no way to tell from the documents published what their plan is. So could the Government give the House some hints?
They are also consulting on minimum eligibility requirements, including an option of requiring level 4 or above—that is a grade C in old money—in maths and English at GCSE. I found it quite hard to work out the numbers affected, because the tables in the equality analysis are quite confusing, but the Minister may be able to shed some light on that. I am pretty sure this will have a differential effect with regard to region and disadvantage.
It is not just about access to university; it is about access to the loan book. The Minister can confirm that presumably a student whose parents—or who themselves—could pay fees upfront has no problem, but then what happens to the more than half of pupils eligible for free school meals who will leave education without GCSE maths and English? Can the Minister tell the House what work has been done to look at the effect of such a plan on poorer children and young people from deprived areas?
There is also a proposal to limit funding for foundation years—and yes, once again this has differential effects. The equality analysis says that
“mature students and black, Asian and mixed/other ethnic minority groups … may be at greater risk of reduced access to HE and choice of provision”.
This is all really very disappointing. Augar was launched amid concerns about fairness and affordability for students, but those are clearly not the drivers at the heart of this response. The loan reforms are regressive and will hit lower-earning graduates. Rather than focusing on raising standards in schools and in HE, they risk penalising those who already find it hardest to get on through education.
Meanwhile, there is nothing on living costs for students, nothing to boost efforts on widening participation and nothing on the timing of admissions—except after a very big think they have decided not to do anything at all about post-qualification admissions. The consultation on the lifelong learning entitlement is still really vague. There is quite a lot on the how but not very much on the what, and certainly not on the why.
We have waited a thousand days for a response to Augar. That is roughly the length of an undergraduate degree, I reckon—you could probably do a PhD in that time; it is pretty much three years. After all that time, where is the strategic plan? Where is the vision for a strong, diverse higher education system that could help all of our young people and students to fulfil their potential? This feels like a missed opportunity. I hope the Minister can persuade me otherwise.
To come to the last point, which the noble Baroness also touched on, if we have a special educational needs review taking place, why are we putting in a requirement for English and maths, which are the things that certainly the group I come from—that is, dyslexics—find difficult? It is 10% of the population; stick in dyscalculia, and that is another 3%, and those are conservative figures. Why are we making it so much more difficult for this group to get on to that pathway? When it comes to adult entrants into education, we are getting rid of BTECs, which were the way in, and we are saying that people have to have two A-levels. If you want later entrants—if you want entrants after having done, say, a level 4 course—why are we putting this in? It does not make any sense. Can we have some coherence about this?
Reading this as it stands, the Equality Act might have quite a lot to say about it. I have mentioned only two groups; others are available. Can we get some coherence around this? At the moment, the Government have waved a few ideas at us. The repayment structure may be slightly better for the Treasury, but I do not think it makes much difference to anybody else. Can we please hear what the Government are really about? If they are going to limit the amount of money we waste on the repayment structure, they have set themselves a very unambitious target.