Student Loans

Labour is failing young people. Youth unemployment is up since Labour took office—it is now higher than in the eurozone. There are more people not in education, employment or training since Labour took office—now nearly 1 million. There is a midlife crisis in our economy, too. More than 2 million people aged between 50 and 64 are on out-of-work benefits. The deal for young people is bad, and it has been made worse by this Chancellor.

Too many young people are coming out of university with excessive debt, and they do not know what the future terms of their borrowing will be. If a private provider were to provide loans in this way, where someone did not know when they signed up what the interest rates, repayment deal or income threshold would be, that provider would be unable to enforce it—it would be unlawful. When it comes to this Government and the Chancellor freezing the threshold, for some reason those on the Government Benches think that is okay.

We have heard from Government Members who said that they joined the Labour party to fight for a better deal. We heard from the hon. Member for Kettering (Rosie Wrighting), who said that she is here to fight for her generation—generation Z. Is she not bitterly disappointed at the limp response from her Government now that they have power and can do something about intergenerational justice as she sees it? Instead, Labour Members come into this House to defend their Government increasing debt for students and freezing the earnings threshold at which those young people have to start repaying.

I am on plan 2, and I had a targeted maintenance grant. I will ask the hon. Member a simple question: does he think it is a fairer system to have targeted maintenance grants in it—yes or no?

Let me ask the hon. Member a question, because his party is in government, he has power and he can change things. Does he think the system is fair? No, he does not, because he has already told this House that it is not. Is he not bitterly disappointed that his own Government have not got a plan to change it? If he does not like the system that existed before July 2024, why are his Government not changing it?

The Opposition have brought forward a plan, which we are debating today. It would mean that those on plan 2 student loans will not end up paying more and more above RPI, so the Government will not be making money out of them having a loan. That is a meaningful change. The Government can go further because they are in power. I hope that our party, by the time of the next election, will be able to offer more, but we have already announced that we would abolish stamp duty, helping young people. We have already announced that we would scrap bad courses that offer no real additional employment prospects for people who do them, other than leaving them saddled with debt.

It would seem that most Labour Members have history degrees, given the amount of time they have spent speaking about the last decade, but we are talking about the system that exists now. When I went to university, I accepted the principle that young people who went to university did not contribute enough to the education that they received. Under the Blair Government, undergraduates were asked to contribute more. Clearly there is a benefit for society in having an educated and graduate workforce to take up jobs as teachers and doctors, for instance, but there is also a great benefit for those who take up those jobs, because of the higher earnings involved. That is a principle I supported. It is a principle most people supported, and I still support it. However, we have plainly reached a tipping point for too many students. The personal debt is so high that they have no real prospect of ever paying it back. Some have degrees that give them no real opportunity ever to earn more than they would have earned had they been in a good apprenticeship—a good apprenticeship that the last Government gave them the opportunity to enter into.

My son is studying for a degree in musical theatre performance, and is due to graduate in a few weeks’ time. That may be something that the hon. Member thinks has no value. My son will probably spend a certain amount of time working tables and trying to make a living while he progresses in his career. He would not be able to be of use to people as a future teacher, a future councillor, a future communications officer or, perhaps, a future politician without that degree. Is the hon. Member suggesting that his degree has no value?

I am sure that the hon. Lady’s son’s degree is an excellent degree and that, hopefully, he will gain an excellent job, but that is not the case for every student. Too many students in this country are saddled with tens of thousands of pounds of debt. They do not know their repayment terms because they change, and some of them have degrees that will give them no additional prospect of a job to allow them to repay their debt. I hope that most of us can agree on that principle. It is therefore perfectly legitimate to ask this question: should we be putting an end to some of these institutions and courses when they are doing nothing for the young people involved?

This is not a deregulated market. In order to be able to offer a degree, an institution has to be licensed. There is no groundbreaking idea behind saying that certain courses are not of degree quality, and that the public should not be subsidising those courses. Governments already make decisions about that. It is the Conservative party that is proposing—for some reason the Labour Government do not want to do it—that young people who are sold a future that simply does not exist should not be saddled with debt, and the taxpayer should not subsidise them.

Order. I am now imposing an immediate four-minute time limit.

I welcome the opportunity to discuss the student loans system. I took out a student loan under the plan 1 system. I am, fortunately, not young enough to have benefited from a plan 2, or, now, a plan 5 loan. However, despite having graduated with about £40,000 of student debt, I did consider myself fortunate—fortunate that I went to university under a Labour Government who had widened participation in higher education and created a fees, grants and loans system that enabled me to go to university and pay my living costs, which my single-parent family would not have been able to do without the grants that were, unfortunately, then cut by the Conservatives. I was happy to contribute towards my university education on the basis that most people at my school would not go to university, but a system that was one of contribution and fairness has become an aggressive system, and I believe it is time to review the plan 2, and now plan 5, loans systems.

I have heard from many of my constituents about the system as it is operating, including those at Brunel University. Recently, a teacher told me about the challenges of repaying her loan and how she is considering going part-time as a result of high interest rates. There are clearly a number of options that could be taken, such as changing the RPI basis to a CPI basis, capping lifetime interest costs and uprating the thresholds once again. Suggestions have also been made by the Good Growth Foundation.

It is important that, rather than going for any one of those changes, we properly analyse the options and the distributional impacts—work which the Conservative party clearly did not do given the half-baked proposals before us. It is quite baffling that the Conservatives moved this motion. Having been the architects of this regressive student loans system, having maintained the system for a decade, having continually frozen the repayment thresholds, and having trebled the fees when in coalition with the Lib Dems and cut maintenance grants for the poorest, they now pretend to be the party of students.

My hon. Friend is making an excellent point about how, when the Opposition say they are going to cut funding for certain courses, they really mean that those courses will be available for wealthier students who can afford to pay for them without a Government subsidy. Does he agree that that will lead to a decrease in students from working-class backgrounds being able to access arts degrees?

Order. Members are being very generous with their time, but I remind them that I will be starting the Front-Bench speeches at about 6.40 pm, and we still have four more Back Benchers left to speak.

I completely agree that everyone who would and could benefit from a university education should be able to go. We do not widen opportunities by cutting them.

John Burn-Murdoch’s analysis in the Financial Times has shown that other developed countries have increased participation in higher education and not seen the impact on graduate wages that we have seen. That is not inevitable as part of wider higher education participation. We have seen it because of the stagnation in the economy and of productivity caused by the last Conservative Government, not because of higher education participation.

There is a range of cost of living pressures on younger people. Yes, there are student loan costs, but there are also rising housing costs, the stagnation of wages more generally, childcare costs and renting costs, many of which need urgent action. I hear from young people in my constituency about the impact of starting a family or getting on the housing ladder. There was a generational compact that if people worked hard and got on, they would do better than their parents’ generation, but things we had come to take for granted were broken under the 14 years of Conservative Government.

Action was needed, and I am pleased that this Government are reforming and scrapping the broken leasehold system, capping ground rents and taking action on service charges. They have introduced the Renters Rights Act, which the Conservative party opposed. They are taking action on childcare with the 30 hours free childcare, and bringing down inflation and interest rates. I welcome the fact that the Chancellor and the Minister with responsibility for higher education have acknowledged that action is needed on student loans and are actively reviewing the student loans system. I hope that the Treasury Committee’s full inquiry, which is under way, will be fully and promptly responded to by the Government.

Let us be clear: the proposals before us would not solve the student loans system. They are a gimmick that would close participation and close doors of opportunity, which is exactly the opposite of what people and young people in this country need.

It is a pleasure to participate in this debate. Graduates were promised a fair deal, and we have heard all the promises that were made from when the current Prime Minister stood to be Leader of the Opposition to the announcements that were made afterwards. People were told to work hard, go to university and have a shot at a better life, and that their efforts would pay off. On those principles, Labour Members entirely agree with those of us in the Opposition.

The Education Secretary knows that those things should be in place, because in 2023 she wrote that graduates will pay less under a Labour Government. She, the actual Education Secretary, said that graduates would pay less under a Labour Government. Now in office, she says:

“We are where we are.”

The Chancellor knows it, too. In January, she said the student loan system was fair and reasonable—in January, this year. Yesterday, suddenly, she admitted it was broken, but, importantly, not a priority.

And the Leader of the Opposition knows it. Last month, she said the current system created an unfair debt trap for graduates. But what is the difference? The difference is that the Leader of the Opposition has a plan—a plan to cut interest rates that no one would accept on a normal loan. The moment a graduate throws their cap in the air, unfortunately the Labour party sees a target to tax. We Conservatives see a dream to back—dreams like Sammi’s. Sammi, from Keyingham in my constituency, is one of the first in her family to go to university. She borrowed £40,000. She works in the medical field and makes a payment every month, but she now owes £46,000 because of interest rates that no one would accept on a normal loan. Graduates such as Sammi need to earn £66,000 before they even start to reduce their loans. By refusing to cap interest at the rate of inflation to help people like Sammi, as the Conservatives are proposing today, the Chancellor, who admits that the system is broken, is making them pay more for longer.

Student finance is complicated. With thanks to my hon. Friend the Member for Glasgow South (Gordon McKee), who has been in and out of his seat all afternoon, I was able to produce a biscuit explainer today, which is available on all good social media channels.

Reforming the student finance system is not straightforward. It is a complex challenge—it is made much more difficult by the need to stabilise the economy, which is something that I obviously strongly support—but we must be clear that the task is harder because of the economic mess left behind by our predecessors: years of short-termism and under-investment that have constrained what can now be done.

Yet even within those constraints, the direction proposed by the Opposition is a bit flawed. The suggestion to scrap degrees, particularly in the arts and cultural sectors, is culturally dismissive, plainly disrespectful and insulting. It reflects a narrow view of value and ignores the real contribution of the creative industries to our economy and our national life.

Turning to the system itself, student finance is not neutral. It perpetuates an inequality. Those from less well-off backgrounds must take on larger maintenance loans simply to afford the cost of living, graduating with significantly higher debts than their peers. That undermines social mobility. Instead of higher education acting as a ladder of opportunity, the system has reinforced disadvantage. Those who start with less, leave with more to repay.

In reality, we all know that what we have is a form of a graduate tax—long-term, income-contingent and unavoidable for many—but without the clarity or fairness such a system should have. So we do need reform, but not through the Opposition’s plan; we must make a better plan. The Labour party is and will remain the party of working people, grounded in the principles of fairness, which means confronting systems that entrench inequality and replacing them with ones that expand opportunity. If we are serious about fairness, we must act—and act we will, for we will use the levers of the state to ensure fairness.