Student Loans Agreement

Debate between Lord Johnson of Marylebone and Jonathan Lord

Monday 18th July 2016 Westminster Hall

[Joseph Johnson]

Yes. As I said, we have written to Les Ebdon to give him guidance for his dealings with all universities. That guidance gives him strong political cover to ensure that all institutions do the heavy lifting that he requires of them as he negotiates access agreements. Through the Higher Education and Research Bill, which hon. Members have mentioned, we will strengthen his powers further, so he can start to look beyond the point of access to universities and at the whole student lifecycle. Widening participation is about much more than simply whether disadvantaged people get to university; it is also about how well they attain when they are there and how successfully they move on from higher education into employment or further study.

[Jonathan Lord (Woking) (Con)]

Will the Minister assure us that encouraging all places of further education to widen access will not undermine meritocracy? Will he also take to the newly expanded Department for Education the fact that education, from the early years up to university, is crucial in improving the life chances of those at the bottom of the scale?

[Joseph Johnson]

Yes, I assure my hon. Friend that universities are autonomous in setting their admissions policies. The access agreements—in future, those will be access and participation agreements—that they come to with Les Ebdon are not targets imposed by the Government but are voluntarily agreed by the universities with the director of fair access. That will remain the case. The autonomy of our great universities is key to underpinning their success and will remain a strong feature of our system.

[Jonathan Lord]

To return to a point that was raised a moment ago, does the Minister agree that it is somewhat rich for our colleague the Scottish National party spokesman, the hon. Member for Glenrothes, (Peter Grant), to talk about the Scottish system when English taxpayers are subsidising education in Scotland under the Barnett formula? As the Minister and his Department perhaps know, we also could have no tuition fees in this country if we had the same generous per-head allocation from central Government as Scotland does.

[Joseph Johnson]

Higher education has been a devolved issue since 1999, and it is up to the devolved Administrations to determine how they spend their resources. In England, we have chosen to put our higher education on a sustainable footing, which has meant that proportionately more people can go to universities in this country than ever before. We want that to continue.

[Sir David Amess in the Chair]

Many hon. Members raised the threshold freeze and retrospection. The e-petition that we are discussing was started by Mr Alex True, who is a recent graduate, because he was concerned by the Government’s decision, which we announced in November 2015, to freeze the repayment threshold at £21,000 until April 2021. This is an important matter and a proper subject for debate, and I welcome the opportunity to explain why the Government took that decision and its impact.

We considered freezing the threshold because we needed to ensure that higher education funding remained sustainable. The choice was either to ask graduates who benefit from university to meet more of the costs of their studies or to ask taxpayers to contribute more. We undertook a full consultation on the change, as Members have mentioned. The consultation was open for 12 weeks, until 14 October 2015, and we then undertook a full assessment of the equalities impact, in line with our obligations. The responses to the consultation, which I accept were often against the proposal, were analysed exceptionally carefully. On balance, the Government decided that it was fairer to ask graduates for a greater contribution to the costs of their study rather than to ask taxpayers to do so. The reasons for that are clear. Graduates benefit hugely from higher education. On average, graduate earnings are much higher than those of non-graduates. In 2015, graduates’ salaries averaged £31,500, compared with £22,000 for non-graduates. The threshold is still higher in real terms than the one we inherited from the Labour Government.

[Joseph Johnson]

Hon. Members made much the same point on many occasions throughout the debate, and I will come on to those arguments shortly.

[Jonathan Lord]

May I sympathise with the points made by the hon. Member for Sheffield Central (Paul Blomfield)? It is not just those on the Opposition Benches; those students affected have a lot of sympathy, certainly from me and, I hope, many of my colleagues, on the Government Benches, when it comes to the retrospective nature of these changes. As the Minister knows, I have had a heavy postbag from students for whom the goalposts have been changed and who are effectively due to pay a much higher interest rate than they could realistically have anticipated. I do not think that is right. We have heard eloquent speeches about the other challenges facing the younger members of society today. This is one area where we could help them out.

[Joseph Johnson]

I look forward to explaining shortly to my hon. Friend exactly why we took the decision and the reasons why we believe it was the right way forward to put our system on a sustainable footing and ensure more opportunities for young people to gain from all the advantages that higher education can bring them.

For loans taken out before 2012, graduates started repaying when their income reached £15,000. That threshold has now risen to £17,495. The Government set the repayment threshold at £21,000 for post-2012 borrowers, proposing that that would be uprated annually in line with earnings from 2016, when the first graduates under the new system would start repayments. When the policy was introduced, the threshold of £21,000 was about 75% of expected average earnings in 2016. Updated calculations, based on earnings figures from the Office for National Statistics, show that figure is now 83%, reflecting weaker than expected earnings growth over the intervening period. The proportion of borrowers liable to repay when the £21,000 threshold took effect in April is therefore significantly lower than could have been envisaged when the policy was originally introduced. The threshold would now be set at around £19,000 if it were to reflect the same ratio of average earnings.

I also wish to stress that the impact of the freeze is relatively modest—albeit, I accept, still unwelcome for graduates. Borrowers earning over £21,000 will repay about £6 a week more than if we had increased the threshold in line with average earnings. Of course, those graduates earning less than £21,000 will not be affected at all.