John Denham
Main Page: John Denham (Labour - Southampton, Itchen)Department Debates - View all John Denham's debates with the Cabinet Office
(9 years, 4 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Bailey
I understand the point that my hon. Friend makes and I could talk about it at some length, but I recognise that other people wish to speak in the debate so I will not pursue it any further.
It is now clear that the level of debt repayments is predicted to be much lower than when the scheme was initiated. In the early days, the Committee questioned the Minister on that point, and the estimate was a level of default of between 28% and 30%. It is now acknowledged by the Government that the rate is 45%, and that may rise. In crude terms, for every £100 the Government lend, they get only £55 back. That has huge implications for the Government’s long-term budgeting.
The principal reason for the projected increase in non-repayment is the fact that graduate income has not grown as anticipated by the Office for Budget Responsibility. That will keep an increasing number of graduates below the repayment threshold, and even if they reach the threshold they will repay at the lower rate, commensurate with their lower income. That will mean that they will be unlikely to pay off the debt within 30 years.
The IFS has estimated that 73% of graduates will not repay in full. We can add to that the difficulties that the Student Loans Company has had in securing repayments, particularly from former students living abroad, so there is a basic problem and other administrative problems.
The Select Committee has made recommendations on the latter. If we look at the implications for annual budgetary expenditure, we find that £7.4 billion in loans was given to undergraduates in 2012-13. In 2015-16, that figure is estimated to be £12.6 billion. If we estimate that nearly half of the loans will not be paid back, it is clear that that has enormous implications for future budgetary planning. If that were not a big enough problem in itself, the Chancellor added to it in his 2013 pre-Budget report by announcing the lifting of the cap on student numbers to allow the additional recruitment of 30,000 students. He tacitly admitted that there was a funding problem when he said that that would be funded by the sale of the student loan book. The Committee subsequently questioned Ministers and others on that. We expressed considerable concern that such ongoing expenditure should be financed in this way, and we were very doubtful about the Government’s potential to balance their books by doing so.
Mr John Denham (Southampton, Itchen) (Lab)
Does the Chair of the Select Committee accept that, when I was in charge of the Department for Innovation, Universities and Skills, we put considerable effort into trying to sell the previous loan book? We concluded that the inevitable uncertainties—future inflation rates, earnings rates and so on—made it quite impossible to get good value for money from the student loan book. Is that not a second reason why it was quite irresponsible of the Chancellor to suggest that this was an easy way of funding the long-term expansion of higher education?
Mr Bailey
I agree with my right hon. Friend. Indeed, the report’s recommendations underline that point. It is significant in another way, too: it was a tacit recognition by the Chancellor that if he were to expand the number of places, extra money would have to come from somewhere, and that that was not being provided for in the then current Budget projections. It is still unclear exactly how the escalating cost—it could well rise to considerably more than 30,000 students if the cap were removed completely—will be dealt with by the Government.
Mr Bailey
I understand the question, because I have heard the former Minister’s, shall we say, robust prosecution of this particular argument before. May I make an admission? I am not an accountant. All I do is go by what the authoritative bodies say. If the right hon. Gentleman wishes to argue with them that is fine, but I think most people would say it is a matter of common sense that if we lend so much money and get only so much back, sooner or later that particular default rate will have to be incorporated in national accounts and people will have to pay for it.
Mr Denham
May I add to my hon. Friend’s point? The Office for Budget Responsibility’s fiscal responsibility report makes it clear that there are three sets of national accounts: whole Government accounts, national accounts and resource accounts. The comments made by the right hon. Member for Havant (Mr Willetts) apply to only one of the three ways of looking at the national books. My hon. Friend is absolutely right. If we borrow £10 billion a year and write off £5 billion a year, that is bound to show up somewhere as a cost to the taxpayer—that is common sense.
Mr Bailey
I welcome the interventions of two former Ministers, which have shone an economic light on some of the most obscure elements of our education accounting.
To return to my point on the student loan book, the fact that the sale has now been abandoned underlines what my right hon. Friend said about the non-viability of this course of action in funding future financial higher education commitments.
In short, we have an education funding model that is producing an ever-increasing call on the nation’s finances, and actually further commitments are being added. The House of Commons Library paper projects that by the mid-2030s the addition to the national debt incurred as a result of this policy will be equivalent to 8%—about £350 billion to £360 billion at current prices. That is a huge sum of money that will have enormous implications for future Governments—and universities and students—in terms of financial planning.
Mr John Denham (Southampton, Itchen) (Lab)
I welcome this debate and congratulate colleagues on both sides of the House on securing it. I pay tribute to my hon. Friend the Member for West Bromwich West (Mr Bailey) and the hon. Member for Northampton South (Mr Binley) who opened the debate with their excellent speeches that summarised so well the situation and the conclusions of the Business, Innovation and Skills Committee. I will try not to tread the same ground, but I do wish to strike the same note as the Chairman of the Select Committee and query why the Government are refusing to review the system when so many organisations across higher education as well as in the business community are saying that changes are needed. Such complacency is very dangerous indeed.
It is clear why so many organisations are saying that something has to be done, even if they do not agree on the solutions. It is because English universities are boxed in. As the real value of fees erodes, the squeeze on university incomes threatens teaching quality and research excellence. Over the past few years, universities have done quite well out of the system, and have not faced the sort of pressures that our colleagues in health or local government have experienced. But everyone in universities knows that that will not last. The real value of those fees is now well below £8,500 and continues to shrink. The public finances cannot bear ever more debt write offs, but raising fees and graduate payments is still politically toxic. I would be surprised if any political party goes into the next election promising that. Indeed, I would be surprised if they are not forced to rule it out over the course of the campaign.
The idea of allowing universities to fund their own fees might have some role to play if current fees were much lower, but sanctioning ever-more eye-watering fees is likely to be controversial and socially divisive. All the solutions that people come up with essentially boil down to making graduates pay more, pay earlier, pay at higher rates of interests and pay for a longer period of time. The idea that we can simply solve a problem by going back to graduates and asking them to pay more money, however we dress it up, is clearly not right.
It is worth noting that concerns are coming not just from within the sector, but from a range of business and employer groups, including the CBI, which all claim that the system is not working. I will base my remarks around not one, but two observations. Yes, we need to reform the funding system, but we also need to reform the delivery of some of the higher education systems, to echo what the hon. Member for Northampton South has said. The second of those two points is as important as the first.
We have engaged in this debate for a year now and there is a marked division between those largely in the sector who say that there is nothing wrong with higher education just the way we fund it and those largely outside it who say that it is not just about funding but about the higher education on offer.
Before turning to funding, let us review the problem of delivery, which is intimately linked to it. There is now strong evidence that there is a mismatch between the education of many graduates and the needs of employers, society and the graduates themselves. According to the latest figures, which I got from the Office for National Statistics yesterday, the long-term employment prospects of graduates are continuing to deteriorate. The percentage of graduates not working in graduate jobs five years after graduation has now reached a record 34%, up 4% since 2010. The newest graduates are doing a little better in the sense that the percentage not in graduate jobs just after they graduate has fallen from a peak of 48% two years ago to 44%, but that is still much worse than in any year before 2010 and has happened despite the much-trumpeted increase in overall employment in recent years. Whatever sort of recovery is under way, it is clearly not using the skills and education of recent graduates in high value-added graduate jobs. These levels of graduate underemployment are a far cry from the aspirations of students who now borrow huge sums of money to go to university. At the same time, organisations such as the CBI continue to complain about the quality of graduates being produced.
Mr Lammy
Does my right hon. Friend agree, on that fundamental point, that not only is there underemployment among that group of graduates who are not working at the level that was expected, but those graduates have pushed out other young people who are unemployed—in London, one in four young people are unemployed and they are depressed because they are outside the market—who cannot get the jobs that they were hoping to get, often in retail, as a consequence?
Mr Denham
That must of course be the case if graduates are working in non-graduate jobs. That is a bigger issue than higher education, of course, but the failure to use a graduate work force in graduate jobs is a huge drag on the economy and is one of the reasons why the RAB charges and debt write-off charges are as bad as they are.
Let me be clear that if we understand an honours degree as giving not just knowledge but technical expertise and the capacity to analyse, think independently, exercise intellectual judgement, take responsibility and innovate, we certainly need 50% or more of our population to be educated in that way. We do not have too many graduates, but too many graduates who are not receiving the most appropriate degree-level education.
One of the effects of Government policy over the past four years has been to undermine employer-based higher education. Foundation degrees, usually employer supported, have declined by nearly a half under this Government and employer-funded part-time degrees fell from 40,000 to 25,000 in one year. Out of the hundreds of thousands in university, fewer than 20,000 full-time students across the entire higher education system in all years of study are being funded by employers to do their degrees. The work force development programme, created when I was a Minister, was shut by the coalition, even though it alone was creating 20,000 employer co- financed degrees a year by the time of the last election.
There is much that is good and much that is excellent in the English higher education system and we do not need to change all of it, but we need to make changes that increase the diversity of routes to study and enhance employer engagement with delivering higher education. When we talk about funding higher education, we need to think about how we deliver a better system.
Let me make one point about the long-term sustainability of the system. The Business, Innovation and Skills Committee has done an excellent job and I will not go over that ground, but since then we have had the latest fiscal responsibility report from the OBR, which makes interesting reading. Ministers justified heavy cuts in teaching funding as part of a deficit reduction programme, arguing that we should not put the costs on to future generations. The Chancellor said in 2010:
“If we do not deal with these debts and do not have a credible plan, it will be our children and grandchildren who are saddled with the debts that we were not prepared to pay.” —[Official Report, 20 October 2010; Vol. 516, c. 989.]
The leader of the Liberal Democrats said:
“This strikes me as little short of intergenerational theft. It is the equivalent of loading up our credit card with debt and then expecting our kids to pay it off.”
The recent OBR report underlines just how the debts we are building up now will hang around the necks of graduates and non-graduates in years to come. The OBR estimates that additional net debt arising from new loans will reach nearly 10% of GDP in the late 2030s and 2040s. That debt brings cost. Some debt will have to be written off after 30 years and after 2046, when that kicks in, it will leap dramatically to 0.25% of GDP. Graduates will be making cash repayments of about 0.45% of GDP in the same period and the Government will be paying interest on that stock of debt that the Library estimates at 0.3% of GDP. Many of those costs fall on taxpayers as a whole, not just on graduates.
There is a lot of uncertainty about the figures, but those are the best we have. They tell us that in about 30 years, the public and private cost of paying for the regulated debts will be around 1% of GDP. None of that will fund anybody going to university. According to the OECD, in 2010 the UK spent only 1.3% of GDP from public and private sources on higher education and at that time little was being spent on the cost of debt. The simple conclusion from the OBR is that the policies of the Government are pre-empting a massive share of future national wealth being used to pay for their high-fee, high-debt priorities and not being available to fund future higher education. It is the opposite of what Ministers claimed and it is loading debt on to future generations in a way that is unfair and unsustainable. That is my answer to those who say that we should not worry about RAB charges as they are all technical: there comes a point at which these debts have to be paid and when they do, they will take money out of the national economy that will not be available to pay for higher education.
As for the alternative, I have set out my views over the past year on a number of occasions and, given your remarks, Mr Deputy Speaker, I shall make just two brief observations. Let us not deny that this started under the Labour Government, but it has accelerated under this Government, and we have developed a one-size-fits-all higher education system that is entirely focused on 18-year-olds studying for three years away from home for a residential degree. That has been at the cost of part-time education, at the cost of employer co- sponsored education and at the cost of mature student study.
In a constituency such as mine, where even today relatively few young people go to university, we are closing the door on every single person who did not get a chance to go to university by saying that if they did not do it when they were 18 or 19, they cannot afford it, it will not be flexible, it has to be done over three years, they cannot study part time, they cannot do it intensively and all the rest of it. That is a bad thing for social mobility. Of course, the fact that the move towards younger people from deprived backgrounds going to university has continued is welcome, as many of us said at the time, but we must consider the whole picture if we want to see what is happening.
Of course, we have a difficulty in that there is no new public money for higher education so we will have to do something within the skin that we have. The good news is that money, public and private, is wasted hand over fist in the current system. Every year, billions of pounds are borrowed with the intention of writing it off. The RAB charges essentially mean that almost £1 in two is written off. We have the most wasteful, or at least the most expensive, model of higher education in the three-year residential degree. We are by far the outliers in the OECD as regards the extent to which our higher education system is based on a three-year residential degree for young people. Nobody else graduates so many young people so expensively in that model at the moment.
Paul Farrelly
I fully appreciate the point that my right hon. Friend is going to make, because I have read all of his work. Germany, to take the example of one of the most successful economies in the world, does not have the levels of fees that we do, so what is Germany doing so wrong that we are doing so right?
Mr Denham
That is an interesting point. Germany had a fees system and got rid of it, but the German system is much more diverse. Far fewer German students study away from home. The Germans have a different way—I would not suggest we go down this route —of seeing the diversity of the technical degree-level qualifications and other degrees and allowing people to study over a longer period of time. In other words, they have designed a system that meets the needs of their economy, but I believe it also meets the needs of graduates. I reject those who say, “If you should work more closely with employers, you are corrupting the purpose of higher education.” There will be room in the system for the senior common room on which the hon. Member for Northampton South missed out, and room for those who want to study hard for two years to get an employment-related degree. There is space in the system for everyone.
Mr Willetts
Will the right hon. Gentleman confirm that Germany has lower levels of social mobility than us? Many fewer people from low-income backgrounds go to university in Germany, because access in Germany is very restricted compared with access here.
Mr Denham
We should therefore not say that there is a simple model to pick off the shelf from somewhere else, but, as I shall say in a moment, we should pick up the elements of our system that work and take elements that work from other systems. We could even invent things of our own that are appropriate to our needs. We have the most expensive model of higher education. Ten years ago, when we first aimed for 50%, very few people, including Labour Members, assumed that the expansion would be done through having so many young people in such an expensive model of higher education.
Because teaching funds have been deliberately cut, fees are higher than would otherwise need to be the case. The private cost has risen, which is important because we should be stewards of what happens to people’s private money just as much as we are stewards of public money. Those who repay do not just repay their own course costs. Their fees help to subsidise research and to pay the fees of those who will never repay in full. I predict that there will be a point at which those graduates kick up against the bills they are being asked to pay for other people.
That is wasteful because the introduction of increased fees has caused politicians on both sides of the House to introduce new elements of public spending that do not teach students anything—Government’s of all parties have made maintenance systems more generous. The current Government required universities, under the Office for Fair Access, to put back 30% of all fees above £6,000 into widening participation, much of which was in fees and bursaries of completely nugatory value, which does not encourage universities at all—they just make universities compete for the same students. We have built waste into the system because politicians have been afraid of the consequences of their decisions. There is huge potential to use public and private money more efficiently to deliver a better system.
I have had a lot of support from the House of Commons Library, for which I am very grateful. Apart from my colleagues, one of the things I will miss most about being a Member of the House is the excellence of the House of Commons Library staff. I asked them to look at a model that would retain current levels of public spending; maintain institutional income to the sector from public and private sources; protect low-income students, so that no one in future would pay as much as people pay today, whatever the mode of study; have more intensive and flexible two-year and part-time courses; and have more employer-funded courses. I asked the Library to consider a system in which 70% of students do the traditional three-year residential degree and 30% study more intensively, have employer-sponsored courses and so on.
I also said to the Library, “Let’s be radical. Let’s spend public money on higher education to teach students something. Let’s strip away as much as we can of the money that is not spent on teaching students something.” That has the effect of reducing fees dramatically and reducing the cost of debt cancellation. In the spirit of my idea of keeping what is good, I said, “Let’s keep the current system that allows students to choose the university they want and take their resources with them—let’s not go back to a fixed allocation of numbers.” Having created a much larger fund for teaching, I would grant every English student a student entitlement that goes to the university that accepts them towards the cost of their fees.
In summary, in my model, public spending is at current levels and university sector income is unchanged, but spending on teaching increases from £0.7 billion to £5.5 billion. RAB charges fall by £3 billion a year. The student entitlement for each student, irrespective of the type of course they do, is £15,000, meaning that fees at full-cost universities, which currently charge £9,000 a year for a three-year degree, would fall to £4,000 a year. A two-year intensively studied degree costs just £4,500 in total—the student would probably study from home. Employers could co-sponsor a degree for an average contribution of £5,000 towards fees, less than typical recruitment and retention costs for a graduate. The same number of people would graduate because intensive study means fewer students at any one time. Spending per student would rise by 13%, an immediate and important boost to university finances.
More graduates would pay for their course in full. Let me be clear that I happen to believe that that is morally right: if we ask people to take on a debt and buy something, they should pay for it in full. For every mode of study, average lifetime payments would be less than they are today. If under that new much lower-cost system the higher-earning graduates—the City high-fliers—were paying too little, there would clearly be scope to introduce a free-standing graduate tax on the highest earnings, which could provide a useful fund for reinvestment in higher education teaching and research.
Paul Farrelly
I trust my right hon. Friend’s expertise, rigour and figures, but for the benefit of hon. Members, has he had his figures verified independently, for example by the House of Commons Library?
Mr Denham
I take responsibility, as all hon. Members must, for the use of those figures, but I have done my very best to ensure that they and the modelling have been done by the House of Commons Library, using the simplified higher education model produced by the Department for Business, Innovation and Skills.
Mr Willetts
Will the right hon. Gentleman clarify one important point? Is he therefore proposing that the maintenance grant goes and is not replaced by maintenance loans, and as a result that many more students do not travel from their home town to go to university?
Mr Denham
My proposals would replace the maintenance grant with the maintenance loan. In other words, the income available to the student would remain exactly as it is currently. The key thing is that, provided fees are low enough, the total graduate debt would be less than under the current system. Putting maintenance grant cash into teaching enables us to get the debt cancellation charges down.
I do not want to overstate my case. Producing an outline model with the help of the excellent people in the House of Commons Library is not a policy, but it shows that a different policy is possible. I would look to the Government to do the sort of modelling I have talked about, but properly, completely and within their resources. In the real world, we would not, as I have done, separate honours degrees from level 4 and 5 apprenticeships, and we would not separate higher and further education study in an integrated system, but it is clear that there should be a review, because things could be different and better than they are at the moment.
Mr Willetts
On write-offs, I hope people can accept that what we are talking about here is a forecast shaped with some rather peculiar assumptions, not an item of public spending today. On a review, a lot depends on what people mean. My view is that the last thing that the higher education sector needs is another equivalent of Robbins, Dearing or Browne. All three political parties represented in the Chamber today, when faced with how to finance higher education when money is tight, have all essentially reached the same decision: to go for a graduate repayment scheme. My right hon. Friend the Minister is entirely correct when he quotes Andreas Schleicher and the OECD in saying that this is the sustainable model.
In my experience as Minister—I am sure that it is my right hon. Friend’s experience as well—there were certain Ministers around the world who looked at us and tried to work out how to get something closer to what we have. The last thing we need is a review that throws all this up into the air, particularly if the anxieties that people are focusing on arise from an unfair comparison. The reason why there are so-called anxieties about the sustainability of this model is the forecasts, which are very peculiar indeed, and the assumption that everything is fixed until 2046.
When the advocates of a graduate tax stand up and say that they want a graduate tax, they do not then say, “It’s going to be 9%, and it’s going to have an earnings threshold of £21,000, and we commit now that that will be the threshold related to earnings for 30 years.” As soon as they did that, exactly the same kind of calculations would be possible and we could calculate the x billion pounds that they expect to collect in the next 30 years, and every six months we could recalculate and announce that they had just lost £3 billion and ask what they were going to do about the fiscal crisis in their scheme. In other words, the advocates of a graduate tax are of course assuming that it is a flexible device to ensure that people continue to pay for higher education, and that is what this graduate repayment scheme is. Although designed by Labour and adjusted by us, it is conceptually the same thing. The last thing we need is to reopen that question.
Mr Denham
I look forward to hearing the right hon. Gentleman, who I think is pursuing a debate about a pure graduate tax, which is of no interest to my proposals, as he will have heard. Could he tell us what the RAB charge represents? The only common-sense interpretation is that it is the best estimate we have at present of how much money will not be repaid. Does he accept that? It is not good enough to say, “It’s not very good, so I will ignore it.” Surely, the very least that he should be demanding from the Minister is a sensible projection of how much will not be paid back.
Mr Willetts
The only country that has a system like ours is Australia. The last time I was in Australia, comparing notes and discussing our two systems, when I asked the leading Australian expert what the Australian equivalent of the RAB charge was, he said, “I think when we launched the scheme five years ago, we did an estimate of write-offs, and come to think of it, we probably ought to have another look at it now.” The idea that every six months a new figure was churned out essentially based on what has happened to earnings in the previous six months compared with the OBR forecast in 2011 would have been regarded as absurd. I would happily have a much more credible set of assessments of write-offs, which would have to allow for the fact that this must be a flexible system.
Returning to the shadow Minister’s intervention, I accept that all of us in all parts of the House should openly recognise that the scheme will not remain unchanged until 2046. We do not sit around with our income tax system, saying, “Well, of course Geoffrey Howe decided income tax rates and thresholds in 1980, and now that 35 years have elapsed we can decide on a new set.” That is not how policy is conducted in this country. One of the reasons why I am unhappy with this focus on a particular way of calculating the RAB charge is that it brings with it a set of assumptions which, unlike any other area of public policy, have been determined until 2046, so the only thing to do if someone wanted to change it is to tear the whole system up and start again.
I completely accept that there will be a necessity—I am interested in this and I am doing something on it at present—for us to discuss the right balance of public and private benefit from higher education and the balance of public and private contribution to the costs of higher education. The graduate repayments must clearly reflect the private benefit from higher education, but nobody should be preoccupied with a set of calculations that are possible only because of some highly precise assumptions that bear no relationship to the real world of higher education over the next 30 years.
Mr Sheerman
The hon. Gentleman anticipates the second part of my remarks, and I do not want to detain the House for much longer.
I wanted to begin by setting the scene in establishing how important universities are to towns, cities and communities. Our higher education system is pretty marvellous. People come from all over the world to see it. I show them around and they marvel at its quality. However, it is not perfect; the hon. Gentleman is absolutely right in many ways. As my right hon. Friend the Member for Southampton, Itchen (Mr Denham) said, we are not delivering the right product in our universities. All my vice-chancellor friends will disown me for saying “product,” but it is a product.
Are we delivering the kinds of graduates our country needs? In lots of cases, we are—they are brilliant. My own university has one of the best design departments in the country. Young people who do its fashion degrees are snapped up by fashion houses all over the world. Indeed, the head of Burberry is one of our graduates. Mechanical engineers and design engineers are snapped up by Formula 1. My right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) has a son who is a graduate working in F1 because of the fine quality of the department. We do loads of things right—of course we do—but often not in a way that is appropriate to what is really needed.
That is not to say that things are not happening. There are people doing two-year degrees in Coventry. Skoda Coventry has people doing degrees either only in the morning so they can work in the afternoon, or only in the afternoon so they can work in the morning. The diversity of what is being done around the country is much greater than we might think.
Mr Denham
In its evidence, million+ said that the political sensitivity of fees denies it the chance to run two-year degrees that would cost 80% of the cost of a three-year degree, because that would take the fees to more than £9,000 a year, even though the degree would be cheaper. Does my hon. Friend agree that we need to remove some of the artificial constraints that have stopped universities being as flexible and creative as they would like to be?
Mr Sheerman
That is absolutely right. We must find the right model and give opportunities to people. Part-time degrees have plateaued—some say diminished—but not in Scotland and Wales, interestingly. We need a more flexible system.
I get a bit tired of the CBI saying, “We’re not getting the right people with the right skills as graduates”, but there is a strong element of truth in that. When people are delivered having finished their degree, there should be a strong element of their being fit for employment. When a good arts or social sciences graduate comes to see me, I say, “You’ve got an arts degree—go to Cranfield or the LSE and get yourself a business degree or something with economics that is much sharper, because that is what the market is looking for.” That is a good combination, but it creates a greater level of debt, and a lot of people are reluctant to increase their debt.
The level of debt is always on my mind. Young people’s inability to get mortgages is a very important issue. We are in an age when it is getting more and more difficult for people to get a home of their own. Many people are still living at home with their parents when they are in their 30s. Those within the middle-income areas in public services, education and health will be most hit by the inability to get a mortgage.
I do a great deal of work in identifying entrepreneurs and increasing their ability to be entrepreneurs. As some Members will know, a lot of it involves crowdfunding and crowdsourcing. I have been working with a number of universities to ensure that they are knowledgeable about crowdfunding platforms. Then, when their undergraduates become graduates and want to start a business, there is on the campus, as in Northampton, an ability for them to get money through crowdfunding for start-ups. When I go to universities nowadays, I look very carefully at how much space there is for young entrepreneurs. They do not have to be a private entrepreneur; they can be a social entrepreneur. Enterprise and entrepreneurship is going to be the future.
When people ask me why the industrial revolution started in places like Huddersfield, I say that it is because we had cheap power in the form of the water that flowed from the Pennines and turned the water mills that made the factories possible; we had high skills; and—people tend to leave out the third element—we had entrepreneurs who could put all that together and make something. Our universities have to be much more focused on how to create opportunities for entrepreneurship to be not only learned but encouraged. As opposed to the old, tidy world of going into the City, academic life, or whatever—the traditional occupations—we have to make it much more possible for young people, and older people, to find the spark of enterprise and entrepreneurship.
By the time people have graduated, they should understand some of the rules of how to be interviewed properly and organise themselves properly. That would make a real difference. I once horrified some people at a meeting in the House when I said that I would teach management from four years old onwards. I chair the all-party management group. Managing one’s life is pretty darn important. When I talk to undergraduates, I find that they do not know how to manage their life. If they did, they would be much more likely to get a job.
I go round universities all the time. I am a visiting professor at Huddersfield and at the Institute of Education in London. I talk to graduates and they do not know what the British economy is like. I ask, “How many people in this country make anything?”, and they say that the figure is 30% or 40%, but of course it is less than 10%. We have 1% of people working in agriculture, 30% in what Conservative Members tend to call public services—but I call it education, local government and health—and 60% in private services. People working in early-years or later-years care will be on the minimum wage or minimum wage-plus, as will those in retail and distribution. When I tell students this, they say, “Wow, is that true?” Then I say to them, “If you’re on the minimum wage or minimum wage-plus, you can’t have the good life.” Someone at the back always puts their hand up and says, “Mr Sheerman, I really disagree with that. You can have the good life in a cave—it is in your heart.” Then we get into the best discussion of the reason most of us come into Parliament—to give the people we represent and the people of this country the good life. We con people if they end up thinking that one can have the good life without high skills.
The model for universities has to be refined; we do not have to throw everything up in the air. We need more flexible degrees, with much more emphasis on people being work-ready and enterprising so that they can become entrepreneurs.
This has been a tremendous debate, and the quality of the speeches has been excellent. For the first time in a long time, I may not stay until the end. I have a sick elderly relative who has been rushed into hospital with pneumonia, so I may have to disappear, but that is no disrespect to those who speak after me.
Greg Clark
Every Member takes great pains to encourage young people to register to vote. Through the online registration system, it is easier than ever, and I think that everyone in the House, over the next few months, will encourage people in schools and universities to register. The hon. Gentleman mentioned the university of Keele, but he has to accept that without the reforms that my right hon. Friend the Member for Havant introduced, there would be fewer students going to Keele university in the future than is now possible. That would be bad for the university, which I had the privilege to visit just before Christmas, and bad for the hon. Gentleman’s constituents, who benefit substantially from the presence of that fine university.
The system is excellent for universities too. It is an extraordinary achievement, at a time of financial stringency, that, according to the Institute for Fiscal Studies, the resources available to universities for teaching have on average increased significantly. It estimates an increase from £22,000 under the previous system to about £28,000 per student under the current system. The Institute for Public Policy Research, which tends towards the left in its assessments, said that the main strengths of the current system are that it has increased the resource flowing into higher education, which has enabled institutions to maintain or enhance their level of provision. This led the OECD to conclude that the UK is probably the only country in Europe, and one of the few in the world, to be able to support and sustain a big increase in participation and yet raise unit costs. No wonder that recruitment increased last year for all university types with higher tariff providers to record levels.
Our system of university finance offers extraordinary opportunities to students, universities and the taxpayer, which is why it is mystifying that the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) called for a review. It was not clear to me in his response whether that was the Opposition’s new policy. They have had four and half years to come up with a policy, but now it seems to be a review. Just a few weeks ago, he was speculating vaguely, just as the success was being recognised, about turning turtle on it. It is completely unclear what his policy is. Is it a review or a change? He has previously said that fees would be reduced by £3,000, but that would blow a £3 billion black hole in the public finances and force universities to go cap in hand to the Treasury every year just to maintain their funding. It would decimate that stunning social progress I referred to earlier, since it would obliterate the funds from the access agreements, which will be worth £718 million next year—I was surprised that the right hon. Member for Southampton, Itchen (Mr Denham) did not think they were worth having—and impose pressure to cut student numbers. The IPPR said that the pressure to cut student numbers would crowd out students from disadvantaged backgrounds.
Mr Denham
For the record, I judge that of the roughly £700 million, £300 million is replicating the work that Aimhigher used to do and is of real value in encouraging social mobility, but £400 million is spent on fees, reductions and bursaries, which has almost no value in persuading somebody to go to university.
Greg Clark
Those funds are available through the access regulator to be invested in the best way. Social progress has been made and people from my background now have the chance to go to university in increasing numbers. To rob universities and our young people of that help and assistance is an extraordinary suggestion from the Labour party.
For what purpose? It would reduce the payments not for poorer graduates but for the very richest. Those who pay off the £9,000 loans in full would be the only beneficiaries. I am talking about the richest 20% of earners, who would pay off their loans on average 28 years after graduation, when they are in middle age, and when they are earning on average £78,000, according to a think-tank. Ironically, this debate has been largely focused on the concerns that too high a proportion of loans is notionally projected to be written off, yet the Opposition want to write off 100% of loans over £6,000 for all graduates, even the ones who can comfortably pay.
I am not instinctively a partisan politician, and I believe it is strongly in our interest that policy questions about our universities should be, wherever possible, rooted in consensus and stability. That was the intention behind the Browne review, which the hon. Member for Huddersfield (Mr Sheerman) referred to, and which the previous Government set up. My right hon. Friend the Member for Havant implemented that dispassionate and thorough report. I hope that the right hon. Member for Birmingham, Hodge Hill will reflect on the ever more obvious success of the system, get behind it and drop his temptation to engage in a stunt that would plunge the financing of higher education into chaos.