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Oral Statement from Business Secretary Vince Cable

Higher Education Funding and Student Finance: Oral Statement by the Business Secretary Vince Cable

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

House of Commons

Tuesday 12 October 2010

With permission, Mr Speaker, I would like to make a statement on the future funding of higher education and student finance, in the light of the report published today by Lord Browne’s independent inquiry.

Lord Browne was asked to undertake his review in November last year. The review was set up by the Labour Government on a cross-party basis, and that is how we wish to proceed.

I and the Minister for Universities and Science, the right hon. Member for Havant (Mr Willetts), thank Lord Browne and his review panel. The Government endorses the main thrust of the report. But we are open to suggestions from inside and outside the House over the next few weeks before making specific recommendations to Parliament, with a view to implementing the changes for students entering higher education in autumn 2012.

More detail will be contained in next week’s spending review on the funding implications, but as a strategic direction the Government believe that the report is on the right lines. Browne acknowledges that;

“the current funding and finance systems for higher education are unsustainable and need urgent reform”.

The issue is how, and it has to be framed in terms of how the higher education sector contributes to the deficit reduction programme. There is also, I think, consensus that there should be no up-front tuition fees for students, which would seriously deter students from low and middle-income families, and this Government strongly oppose up-front tuition fees.

Indeed, we share Lord Browne’s conclusion that we should extend exemption from up-front tuition fees to part-time students, currently 40% of the student population, who have been unfairly discriminated against hitherto.

The question, then, is how much the graduate contributions for tuition should be.

We are considering a level of £7,000. Many universities and colleges may well decide to charge less, because there is clearly scope for greater efficiency and innovation in how universities operate. Two-year ordinary degrees are one approach. Exceptionally, Lord Browne suggests that there should be circumstances under which universities can price their courses above this point, but he suggests that this would be conditional on demonstrating that funds would be invested in securing a good social mix with fair access for students from less privileged backgrounds, and in raising the quality of teaching and learning. We will consider this proposal carefully.

We believe it essential that if the graduate contribution is to rise, it should be linked to graduates’ ability to pay. On average, graduates earn comfortably more than £100,000 over their lifetimes compared with non-graduates, but not all graduates benefit in this way. Some choose socially useful but modestly paid or unpaid work, which may include time spent bringing up a family. At present, the graduate contribution acts too much like a poll tax, and is not fair.

I therefore asked Lord Browne specifically to look at progressive solutions to the problem, and he has come up with persuasive proposals to deal with it. He suggests a £21,000 graduate income threshold before any payment is made, as against £15,000 at present, and that it be linked to average earnings.

He also suggests that a real rate of interest should be paid, but only over that threshold. The effect is striking: 30% of graduates would pay less from their lifetime earnings than they do under the existing system. The top third of graduate earners would pay more than twice as much as the lowest third. That is fair and progressive.

The Government broadly endorse that approach, and we will examine the details of implementation. The principle of needs blind admission to universities must remain central.

The cost of university education to individuals and the state reflects living costs as well as tuition costs. The Browne report makes some constructive suggestions. We will make detailed proposals that will not only make it attractive for students from families of modest means to go to university, but be fair and affordable, including by exempting the poorest students from graduate contributions for some or all of their studies.

Lord Browne considers alternatives, including a graduate tax, which I believe the new leader of the Labour party favours. I have consistently argued for a progressive contribution, which we are now delivering. Some key features of a progressive graduate contribution would incorporate the best features of a graduate tax. It would be collected through the pay packet at a rate of 9p in the pound above the £21,000 threshold and, combined with a real interest rate, as Browne recommends, it would be progressive and related to ability to pay.

However, Browne identifies serious problems with what he calls a “pure” graduate tax. He concludes that the proposal is simply unworkable.

If there are any lingering doubts among those on the Opposition Benches, I strongly recommend that they read the open letter from the new shadow Chancellor to the new Labour leader three weeks ago, which reads:

“Oh, and for goodness’ sake, don’t pursue a graduate tax. We should be proud of our brave and correct decision to introduce tuition fees. Students don’t pay them, graduates do, when they’re earning more than £15,000 a year, at very low rates, stopped from their pay just like a graduate tax, but with the money going where it belongs: to universities rather than the Treasury.”

I do believe, moreover, that we need to look beyond the graduate population. Some 55% of young people do not go to university. We must not perpetuate the idea, encouraged by the pursuit of a misguided 50% participation target, that the only valued option for an 18-year-old is a three-year academic course at university. Vocational training, including apprenticeships, can be just as valuable as a degree, if not more so.

Finally, there is a challenge to us all to promote a long-term sustainable future for higher education. This has been a difficult issue for all parties in the House. Those on the Opposition Benches have ranged between early advocates of a graduate contribution, such as the right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) and the new shadow Chancellor, through to those implacably opposed to change, and to the current Labour leadership, who have apparently embraced a graduate tax. The Conservatives initially campaigned against graduate contributions, but reversed their position. My own party consistently opposed graduate contributions, but in the current economic climate we accept that the policy is simply no longer feasible.

That is why I intend, on behalf of the coalition, to put specific proposals to the House to implement radical and progressive reforms of higher education along the lines of the Browne report.

Download the summary

Download the report

Browne Review website

Published 12 October 2010