Higher Education Bill

House of Commons, 27 January 2004.

Michael Martin (Speaker, Glasgow Springburn)

I inform the House that it is not a day for Back Benchers to come to the Chair to ask where they are in the list, and also on the question of applications to speak that there is a limit of eight minutes on Back-Bench speeches. I also inform the House that I have not selected either of the reasoned amendments on the Order Paper.

Charles Clarke (Labour, Norwich South)

I beg to move, That the Bill be now read a Second time.

A year ago, the Government published the White Paper on the future of higher education. It set out a wide range of proposals and, today, we reach the point of decision on those proposals. Our decision today in the House—the vote of every single Member of Parliament of every party—will determine the future of our universities and so determine the future ability of this country to prosper in the increasingly competitive global economy. In that world economy, the existence of the high-level intellectual and skilled talents of all our people will be decisive. Our success in that economy will determine the economic strength of this country. That was the reason for the White Paper; that is the reason for the Bill; and, despite all the entertainment of all the different forms of political speculation, we should all acknowledge today that the outcome of the debate will be real and substantial for this country's universities and for the future welfare of this country.

Let me begin with some aspects of the Bill that have received less attention but are nevertheless important. The Bill will create an arts and humanities research council—the first new research council since 1994 and a major step forward for the arts and humanities community, giving those disciplines their proper status. Some might call that measure the revenge of the mediaeval historians.

The Bill gives statutory underpinning to the office of the independent adjudicator, and thus provides a common and transparent means of redress for student complaints, in place of the often archaic arrangements with so-called visitors and other mechanisms—more appropriate to the novels of C.P. Snow than to modern university life.

The Bill transfers to the National Assembly for Wales student support for students living in Wales, wherever they study in the United Kingdom, from the academic year 2006–07 onwards, together with higher education fee levels for higher education institutions in Wales. That will enable the National Assembly for Wales to create a consistent structure of policy to govern higher education in Wales.

The Bill will simplify current arrangements for applications for higher education by enabling relevant information about student support to be shared between relevant institutions.

The Bill has three aspects of even greater substance, which I shall now address in turn: first, increasing levels of funding for universities; secondly, the establishment of an Office for Fair Access; and, thirdly, the creation of a fairer system of student support.

I shall deal first with university funding, and begin with the facts. Since 1980, academic salaries have increased by an average of only 20 per cent. compared with a rise in average earnings of 60 per cent. and of average graduate earnings by still more. The average salary of a professor or head of department is well below comparable salaries in both the public and the private sectors. At the same time, university student-staff ratios have worsened, from 10:1 in 1983 to 17:1 in 2001. Similar stories can be told in respect of books, equipment and other essentials for academic excellence. Between 1989 and 1997 under the Conservatives, planned public funding per student fell in real terms by more than 36 per cent. By comparison, the United States spends 2.3 per cent of its gross domestic product on tertiary education institutions, whereas we spend just 1.1 per cent.

We need to take account of the fact that many of the countries with which we need to compete in the global economy have significantly higher levels of participation in higher education than we do here. I cite Australia with 65 per cent., Finland with 72 per cent., Netherlands with 54 per cent., Norway with 62 per cent., Sweden with 69 per cent., and so on. The OECD average of 47 per cent is higher than the figure here. I put it to the House as strongly as I can that it is our bounden duty to do what we can to address that state of affairs. We cannot simply let it continue.

Through general public spending, we have already made great steps. From 1997–98 to 2005–06, we have increased publicy planned spending on universities by a total of about £2.9 billion. For the current spending period of 2002–03 to 2005–06, we have increased unit funding by 7 per cent. in real terms. In the same period, capital funding for teaching and learning is increasing by 185 per cent., and research capital funding by 77 per cent.

We have given and will continue to give substantial resources, particularly to modern universities, to widen access. For example, Manchester Metropolitan has received £7.5 million; London Metropolitan, £7.5 million; Leeds Metropolitan, £5.9 million; and so on. Continued access is important and we shall continue to address funding by that route.

Although the lion's share of spending will always come from the public purse—at least under Labour, though not I think under the Conservatives—that will not be enough. We cannot continue to rely on the taxpayer alone to solve these matters. The reason is clear. There are and always will be strongly competing demands for public resources. The annual cost of a nursery place for a three to four-year-old is about £1,775, or about £3,550 for a four-year-old. The annual cost of a secondary pupil is about £4,000; £4,200 for a further education student; and about £5,000 for a university student. Those are striking figures, and I contend that any Secretary of State looking at those figures is bound to say that if extra resources are available for investment, it should be directed at the under-fives and primary level. That is the area where we must target resources.

David Rendel (Liberal Democrat, Newbury)

If the Secretary of State really feels that such resources as are available to the public sector should be spent in areas other than higher education, surely what will happen in the near future is that the extra funding that is coming in from tuition fees will be removed by the Government from the Government grant and spent on the things that the Government apparently think should receive a higher priority.

Charles Clarke (Labour, Norwich South)

I have said on many occasions that is simply not the case. Extra resources are needed for the reasons that I have given. The Liberal Democrats have difficulty allocating the product of their 50 per cent. tax rate in so many different ways. What would they do for under-fives education? What would they do for primary education? They would have no resources left. If the Liberal Democrats were honest, they would face up to that fact and say that more resources are needed.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

In that case, will the Secretary of State tell the House what has fundamentally changed since three years ago, when the Labour party said that it would not introduce top-up fees? What makes universities' funding needs so significantly different? What makes the unacceptable level of tens of thousands of pounds of debt so much more acceptable to a Labour Government now?

Charles Clarke (Labour, Norwich South)

The short answer to that question is the very rapid pace of change in the global economy and the impact of a large number of universities working very directly in that context.

I conclude from those facts that it is fair to ask students, when they have graduated, to make a contribution to the cost of the university education from which they benefit. For example, I believe that that is just because the labour force survey suggests that individuals with higher education qualifications currently earn on average about 50 per cent. more than those without. I expect the fee regime that the Bill will put in place to provide at least £1 billion a year to universities—a significant sum and one that would allow an increase of about 30 per cent. in the funding of teachers.

I put it to right hon. and hon. Members on both sides of the House, but particularly to Conservative Members that one of the most significant implications of the Bill being defeated today would be that universities would be stripped of the resources that they need to address the challenges of the future. Moreover, if the Conservative proposals were ever to be put in place, all the income currently generated from fees would be lost—as well as that from any increase. One Tory Front Bencher is reported as saying, "We want all universities to be largely financially independent and some completely financially independent." That can only mean the complete removal of public financial support, which would utterly destroy our universities and take hundreds of thousands of student places away from our universities and from people who aspire to go to university.

Llew Smith (Labour, Blaenau Gwent)

Will the Secretary of State explain how it is that we can always find moneys to go to war—including the £7 billion to go to war with Iraq—and that we can always find moneys to spend on nuclear weapons of mass destruction but we cannot find money to provide and support a system of free higher education?

Charles Clarke (Labour, Norwich South)

I am of the view that the national security of this country is important and that international threats such as terrorism must be dealt with and addressed. I acknowledge that takes resources, but it is a false choice to suggest that there is a straight trade-off in the way that my hon. Friend implies.

I believe that our proposals for university funding meet the needs of the country. I report with pride the verdict of the OECD, published earlier this week, that the UK graduate contribution scheme could be a role model for other countries in Europe that may also have to consider the adequacy of their higher education systems in a modern knowledge-driven economy.

Graham Allen (Labour, Nottingham North)

From the studies made by my right hon. Friend, what conclusions has he reached in respect of the reduction in the number of students that would occur if the Conservative proposals were adopted? Does my right hon. Friend agree with Universities UK that 410,000 fewer students would attend university?

Charles Clarke (Labour, Norwich South)

I do accept those estimates. The fundamental fact that the Conservatives have not been prepared to face up to is that the result of their policies would be a massive reduction in numbers, certainly of the order of hundreds of thousands of students. The political strategy set out by the Leader of the Opposition is to stop the Bill today to create space to introduce that policy.

I said that the first main feature of the Bill deals with the need to get increased resources for universities. The second major feature is the establishment of the Office for Fair Access.

Lynne Jones (Labour, Birmingham, Selly Oak)

Universities UK says that there is a shortfall of £2 billion a year in higher education funding. According to the Institute for Fiscal Studies, the measures will raise £950 million for the universities, but will cost the Treasury £1 billion in terms of up-front money for loans. How will the measures fund the universities in future? How will they solve the funding crisis in the long term?

Charles Clarke (Labour, Norwich South)

We are putting more money in from the taxpayer and the Exchequer, courtesy of my right hon. Friend the Chancellor, and will continue to do so. We are putting more money in through the fee regime, which we have described. I acknowledge, and have always done so, that that does not completely fill the gap that my hon. Friend spoke about. But the question that she must answer is how taking out an income stream enables us to reach any solution whatever? If she decides to vote against the Bill tonight, she must face the consequences—there will not be any more money for universities beyond what we have already allocated to meet those needs.

James Paice (Conservative, South East Cambridgeshire)

On the subject of the money that all the right hon. Gentleman's concessions will cost the taxpayer, he is already on record as saying that that will have to come out of the education budget. Can he tell the House clearly whether or not that money will be taken from money that would otherwise be going in grant in aid to universities?

Charles Clarke (Labour, Norwich South)

Yes I can. No, it will not, as I have told Conservative spokesmen on a number of significant occasions.

I turn to the Office for Fair Access, which is a significant development in the Bill. We need to be candid about the reality of the situation facing our universities. It remains the case that one in four working-class young people who achieve eight good GCSE passes do not go on to higher education. It remains the case that 19 per cent. of young people from the lower socio-economic groups enter higher education, compared with 50 per cent. of young people from middle and upper groups. That has not changed over the decades. In 1960, 27 per cent. of upper groups went to university, but only 4 per cent. of working-class students. There has been an expansion of numbers in the meantime, but the key issue is the fact that the massive, vicious class differential in our higher education system has remained consistent. We must attack that.

Gerald Kaufman (Labour, Manchester, Gorton)

Is my right hon. Friend aware that Father Connolly of the Society of African Missions in my constituency wrote to me yesterday? He said:

"Poor families should not be deprived of the opportunity of a university education. But should they be responsible in financial terms for those who can afford it? The plan put forward by Mr. Blair is one to help everyone. It may not be perfect but it is a step in the right direction."

Father Connolly is an independent man who knows about poverty in Africa. He said—[Interruption.]

Michael Martin (Speaker, Glasgow Springburn)

Order. I must hear what the African missionary said.

Gerald Kaufman (Labour, Manchester, Gorton)

Father Connolly said:

"It is a matter of justice, a principle."

Charles Clarke (Labour, Norwich South)

First, my right hon. Friend is quite correct. Secondly, the hilarity among Opposition Members about poverty and access to higher education has been a characteristic of their conduct in government and opposition. I urge my hon. Friends to take the opportunity provided by the Bill to ensure that the appalling obscenity of the deep class difference that affects people who go to our universities is addressed and attacked. That is what the Office for Fair Access is about.

David Taylor (Labour/Co-operative, North West Leicestershire)

Does my right hon. Friend not agree that an access regulator with fewer teeth than a Glasgow granny, as well as a financial package for the working class that is broadly neutral in relation to the present position, are not great incentives if we are to remedy the deplorable position to which he rightly drew attention on working-class participation in higher education, particularly in the Russell group of universities?

Charles Clarke (Labour, Norwich South)

My hon. Friend is right. We have discussed the fact that getting high-quality schools for those communities is essential. He is right that we need financial packages such as the education maintenance allowance. He is right that we need a student support package of the kind that we are introducing in the Bill to encourage people from working-class families to go to university. However, above and beyond that, we need an Office for Fair Access with teeth, specifically to address the unacceptable disparity between social classes in applications to our greatest universities.I am not surprised that the Tories laugh, because for the first time in history we have decided to stifle the old approach. It is critical to end that disparity, and we are determined to do so.

Patrick McLoughlin (Conservative, West Derbyshire)

As I understand it, under the proposals that the right hon. Gentleman is putting before the House today, in a few years' time there may be a position in which two people who, having graduated from university, are on exactly the same income but pay different levels of taxation. Where is the justice in that?

Charles Clarke (Labour, Norwich South)

The hon. Gentleman is wrong, but I am happy to discuss the matter with him in Committee—[Interruption.]

Michael Martin (Speaker, Glasgow Springburn)

Order. I do not want the hon. Member for Blaby (Mr. Robathan) to shout at the top of his voice. I do not want him to shout at all.

Charles Clarke (Labour, Norwich South)

The whole purpose of the package is to link repayment to the ability to pay. That is the nature of our proposals, which are an improvement on the current state of affairs.

Martin Smyth (UUP, Belfast South)

I understand universities' need. In Northern Ireland, they have been underfunded by 30 per cent. compared with English universities. However, our universities have a higher proportion of people from lower-paid families who, with others, have written to us because they are concerned about the imposition that the legislation will make on them.

Charles Clarke (Labour, Norwich South)

Our proposals will help universities in Ireland and elsewhere. The hon. Gentleman is right that there are different cultures in Northern Ireland and Scotland concerning universities and their development. There is greater working-class access and participation in some parts of the country, but our proposals will help across the range.

Turning to our proposals on student support, the first key point is one that Members on both sides of the House must weigh very carefully indeed. Our proposals will eliminate up-front fees, which are currently a clear barrier to people going to university. At the moment, students and their parents must find £1,125 a year, which would increase to £1,200 a year by 2006, just to be able to get access to the campus. There is no doubt whatsoever that those up-front fees are unpopular—[Interruption.] They are unpopular, and they are the precise reason why we rightly decided to review the policy. The Opposition parties should acknowledge the fact that if they vote against the Bill today they will be voting to keep up-front fees. That is their decision. The opinions that they have just expressed are simply crocodile tears. The only way to get rid of up-front fees is to vote for the Bill. Every vote against is a vote to keep up-front fees, and every elector will know it.

James Gray (Conservative, North Wiltshire)

Will the Secretary of State apologise for having brought in up-front fees in the first place?

Charles Clarke (Labour, Norwich South)

I made that point one second ago.

George Howarth (Labour, Knowsley North and Sefton East)

Does my right hon. Friend accept that those of us who chose to judge these measures according to whether they made it easier for able working-class kids to go to university are now satisfied that he has addressed that issue fully? Will he go a little further and promise that in any future review, when he looks at the costs and the repayment regimes that will kick in, housing costs will be taken into account?

Charles Clarke (Labour, Norwich South)

Yes, I can give my hon. Friend that assurance. The review process that we are describing will take those factors into account.

Charles Clarke (Labour, Norwich South)

Before I give way, I shall make a little progress.

The second important aspect of student support is the establishment of a £3,000 package for all students from working-class families going into higher education. In my statement to the House on 8 January I set out a minimum £3,000 support package for students from the poorest backgrounds attending the most expensive courses, which was made up of £2,700 from the Government and a minimum £300 bursary from universities. This £3,000 package will ensure that no student qualifying for the higher education grant will be any worse off as a result of variable fees, and many will be better off.

Many universities are beginning to develop and announce bursary proposals that go far beyond those minimum requirements. We already have £4,000 bursary packages for a number of universities, such as Imperial college, Cambridge university and Essex university—substantial bursary packages that lead to students getting support of up to £6,700 a year to go to some of our elite universities. That is a significant development.

I also told the House that I was minded to combine the fee remission and the higher education grant into a single combined grant. Last week I published a discussion paper setting out the details of how making a single up-front cash payment of up to £2,700 from the Government to go with the £300 bursary from the university might work. My officials have been addressing the practical and financial implications of merging the two grants, and I can tell the House that from 2006 we will be offering all students from low-income backgrounds a single grant of up to £2,700. I intend that the detail of that should be discussed in Committee.

About 30 per cent. of students will be eligible for the full grant and a further 20 to 25 per cent., where the family income is up to £33,500, will be eligible for partial grant. That will give students real choice about how they manage their finances and will provide more cash up front to support them while they are studying.

Andy King (Labour, Rugby and Kenilworth)

I am grateful to my right hon. Friend for the commitment that he has made to open up access to those from the poorest sections in our society. That is real progress. Some of us have had some difficulties in relation to the variability aspect, and also with the possibility of the poorest students being forced into the poorest universities and the gulf widening. Can my right hon. Friend assure us that the aspect of variability will be looked at in the review?

Charles Clarke (Labour, Norwich South)

I can give my hon. Friend that assurance, as I will describe in a moment.

Hugh Bayley (Labour, City of York)

Is my right hon. Friend aware that York university is the only one of the top 10 universities in Britain that fully meets the Government's targets on access? The vice-chancellor of York university, Professor Brian Cantor, has written to me to say:

"Overall we support the Government Bill. It is an acceptable compromise and the best option on offer."

Does my right hon. Friend recognise that if the grants he is proposing are not brought in—if the Bill is defeated—fewer working-class kids will get to the best universities, like York?

Charles Clarke (Labour, Norwich South)

My hon. Friend is correct and I appreciate the support from him and from his vice-chancellor. Again I must make a political point. [Hon. Members: "Oh!"] Yes, listen to it. This package establishes a £3,000 package for students from working-class families going to university. That is the package that will operate if the Bill is supported today. Those who vote against will be voting against such a package, against grants and against the kind of opportunities for people from working-class families that are so critically important.

Kenneth Clarke (Conservative, Rushcliffe)

Does the right hon. Gentleman accept that people with wealthy parents will not be affected, because those parents will not allow their children to get into debt and they will pay the fees? Of course, children from the very poorest families will not be affected, because they will get the advantage of the bursaries that the right hon. Gentleman is enlarging upon to try to get a majority for his Bill. It is the ordinary student from the ordinary family who just fails to qualify for that help who will carry the burden of tens of thousands of pounds-worth of debt in the first years after they graduate. Does he seriously expect that that will have no effect at all on the willingness of such people to go in for the more expensive courses in higher education?

Charles Clarke (Labour, Norwich South)

I must say, this is the first time I have known the right hon. and learned Gentleman stand up as Mr. Ordinary. I always thought he was rather exceptional.

For the ordinary student, we are removing the up-front fee. If the right hon. and learned Gentleman votes against tonight, he will be voting to keep the up-front fee. For the ordinary student, we are increasing the threshold of repayment after graduation from £10,000 a year to £15,000 a year, which is a direct reduction in the amount per year that all students have to pay. If the right hon. and learned Gentleman votes against the Bill today, he will be voting to keep the threshold at £10,000, rather than £15,000, so the ordinary students in his constituency will find themselves in a far worse position than they otherwise would be.

Finally, for the ordinary students in his constituency, if the right hon. and learned Gentleman votes for the Bill tonight, he will vote for a 25-year cap so that beyond that time, all debts will be written off. If he votes against, he will be voting to keep that debt going on for ever for the ordinary students in his constituency. So the ordinary students have a lot to gain from the Bill, too.

Tom Levitt (Labour, High Peak)

I am grateful to my right hon. Friend for explaining how the level of support will be far higher than the maximum fees that will be charged. Will he confirm for the record that had universities been charging £15,000 or £20,000 a year in fees, there is no way that a similar package of support to cover those fees could have been considered, and it is that anarchy in universities that we legislated against when we said that we were abolishing top-up fees in the past?

Charles Clarke (Labour, Norwich South)

My hon. Friend is correct. It is important to acknowledge that, although the Opposition will find that difficult. I shall come to points about variability for the future. Precisely because of the package that we have today, including the Office for Fair Access, major universities in this country, including the university that the right hon. and learned Member for Rushcliffe (Mr. Clarke) attended when he was young and fancy-free, are able to offer bursaries of £4,000 a year on top of what the state is offering for working-class children from his constituency.

Ian Lucas (Labour, Wrexham)

I am grateful to my right hon. Friend for the recent discussions that have taken place with me and my colleagues. On variability, is it not sensible to weigh the evidence before making the decision in principle to introduce variability? Would not a sensible way forward be to hold a review to investigate the adverse effects of variability before the decision is made in principle? If my right hon. Friend were to give me that assurance, I could undertake to give him my support.

Charles Clarke (Labour, Norwich South)

I shall have a word or two to say about variability in a moment, but I am afraid I cannot entirely meet the generous invitation from my hon. Friend.

Claire Ward (Labour, Watford)

Does my right hon. Friend agree that as Members go through the Lobby tonight, they need to remember one simple fact: if we agree that universities require more money, either we raise it through general taxation and ask those—the majority—who do not go to university to subsidise to a greater extent those who gain the benefit of a university education, or we ask those who are gaining personally from that university education to make some contribution to that benefit?

Charles Clarke (Labour, Norwich South)

My hon. Friend is entirely correct in what she says. That is the choice that is faced, and our proposals are widely recognised as fair, in that students make some contribution when they have graduated to the cost of their education.

I now turn to variability, which has been a key element in the proposals.

Robert Jackson (Conservative, Wantage)

One of my colleagues has spoken up for middle England. Will the Secretary of State not agree that the interest of middle England in universities is that they should be of good quality, and that is what this Government are taking steps to deliver?

Charles Clarke (Labour, Norwich South)

I am grateful for that comment. At the risk of being invidious, I pay tribute to the hon. Gentleman, as he has had the courage to face up to the logic of the situation which we are trying to address. He has avoided the blind opportunism that has informed the policies of the Leader of the Opposition and his Front-Bench team, who are not prepared to face the real issues, whereas he is.

Charles Clarke (Labour, Norwich South)

I am going to make progress on the question of variability. Much concern has been expressed by Labour Members, and, on one or two aspects, by Opposition Members, about the future of variability. People see calls for fees of £10,000, £15,000 and £20,000 a year, and say that although they can accept the £3,000 fee cap, they are concerned that in the future some new regime could be established that could undermine that approach. I want to set out clearly our approach on this matter, which is important.

The maximum level of tuition fees will be set at £3,000 in real terms. That figure will need the approval of the House in an affirmative resolution on Royal Assent to this Bill. As I said, many colleagues have expressed the fear that this is a prelude to fee levels rising much higher in later years. I assure the House that fees at that level form no part of the Government's agenda, and I can provide a threefold assurance that fee rises on that scale will not happen.

First, the £3,000 cap in real terms will apply for the whole of the next Parliament, and lest there be any doubt, we shall bring forward an amendment in Committee which ensures that no vote to raise the maximum level of tuition fees over and above inflation can take place until 2010 at the earliest. Secondly, the ability to raise the fee beyond that level will, under clause 24, require an affirmative resolution. I have given previously and repeat this afternoon the undertaking that that debate will take place on the Floor of the House, enabling every Member to participate publicly and openly in the vote. Thirdly, before any vote takes place, there will be a review by an independent commission, reporting to Parliament directly on the impact of the new fee regime three years after implementation.

Yesterday, in a written ministerial statement, I set out for discussion the draft scope of that review, and the exact terms of reference will be the subject of discussion in Committee. Clearly, if as a result of the review by the commission significant changes were to be made, legislation might be needed.

Angela Eagle (Labour, Wallasey)

I thank my right hon. Friend for the way in which he has listened to those of us who have difficulties with variability and the prospect of a cap that goes up as well as down, and for the way in which he has listened to ways of screwing down that cap for the whole of the next Parliament. Will he confirm that an amendment will be included in the Bill to make certain that that £3,000 level cannot rise without a further resort to primary legislation?

Charles Clarke (Labour, Norwich South)

I can confirm that that is the case. Were there to be a proposal that the fee should rise beyond £3,000 in real terms during the next Parliament, primary legislation would be required to change that. May I say that I respect the way in which my hon. Friend has pursued that discussion?

Kate Hoey (Labour, Vauxhall)

Perhaps my right hon. Friend will correct me if I am wrong, but if we cannot keep our manifesto commitment, how can we commit the next Parliament to something that has happened in this Parliament? We cannot do it.

Charles Clarke (Labour, Norwich South)

We can do it simply by including in the Bill a commitment that no order to raise the fee can be made, so that there can be no change without primary legislation.

Richard Burden (Labour, Birmingham, Northfield)

Clearly, my right hon. Friend is aware that many Members are concerned that the variable element of the fee will be the thin end of wedge the thickness of which we do not yet see. Can he confirm again that if there were proposals to change that situation, primary legislation would be required?

Charles Clarke (Labour, Norwich South)

I can confirm explicitly that if there were a proposal in the next Parliament to make a change in the situation, primary legislation would be required.

Michael Connarty (Labour, Falkirk East)

In front of other witnesses, the vice-chancellor of Essex university, who is writing on behalf of UK universities, said to me that he will charge £3,000 for every course, that he wants £5,000 and needs £5,000 now, and that he will be looking for further increases in the future. Is not the Secretary of State setting up a major conflict, with the universities demanding more funding which he has said he will not give them for at least two Parliaments?

Charles Clarke (Labour, Norwich South)

That is not the case. My expectation is that almost all universities will charge around £3,000 for at least one of their courses, and that almost all universities will have courses for which they do not charge £3,000. The variation will vary from university to university, as the hon. Gentleman would acknowledge, and that will be the state of affairs.

Quentin Davies (Conservative, Grantham and Stamford)

The right hon. Gentleman is coming towards the end of his speech. Is not the most striking aspect of that speech the fact that there has been no sense of apology whatever by the Government for having clearly deceived the British public at the last election about their intentions in this matter?

Charles Clarke (Labour, Norwich South)

The hon. Gentleman is well known as an intellectual among Conservative Members. I am therefore slightly surprised that he has not taken the opportunity of his intellect to think more carefully about the future of our universities than Opposition Front Benchers have done.

A further concern that has been raised throughout the process has been the question of the future of our professions.

Anne Campbell (Labour, Cambridge)

I congratulate my right hon. Friend on the way in which he has conducted negotiations with Back Benchers over the past few weeks. Can he tell me what assessment he has made of the effect on students of the variable fee, and whether some students might be put off going to more expensive universities and taking more expensive courses because of the variability?

Charles Clarke (Labour, Norwich South)

My assessment is that that will not happen. The terms of reference of the commission to which I referred, and which I set out yesterday, include the impact of the new arrangements on students and prospective students—looking in particular at overall levels of application, participation in higher education, choice of institution and course, levels of debt and so on—precisely to test the fear of my hon. Friend and colleagues like her that there might be such an effect. I do not believe that there will be such an effect, but the concern that she expresses is legitimate, and it is right for us to make a serious analysis of it, as I have set out.

There is an additional question, however, in relation to recruitment to the professions. I set out in our White Paper last year the importance that the Government attach to continuing to attract high-quality recruits to the public sector and the professions. We said that Government would have to consider carefully how best to maintain our success in recruiting able students and graduates to public service. I know that that is a particular concern of my right hon. Friend the Member for Newcastle upon Tyne, East and Wallsend (Mr. Brown), because I have discussed it with him. He is concerned that students who do not qualify for the full £3,000 support package should still be able to have, in his words, a gateway into the professions.

I am commissioning a report next year to examine gateways into the professions, which will look particularly at the position of students who do not qualify for the full £3,000 support package, taking into account the starting points for repayment and the taper. It will examine recruitment of graduates to the public services under the new student finance system.

The Government are already spending more than £700 million every year to support the recruitment and retention of teachers, doctors and dentists, nurses, midwives, social workers and other health professionals. Other employers in both the public and private sectors will no doubt want to consider schemes to ensure that they, too, can bring through the graduates they need. Obviously, the proposals of the report will be considered in the context of the next comprehensive spending review so that full account can be taken of the concerns that my right hon. Friend the Member for Newcastle upon Tyne, East and Wallsend has expressed throughout the course of this discussion.

I conclude by saying that this Bill genuinely poses a choice for every Member of this House. Members can vote for the Bill, which provides more resource for universities, an end to up-front fees, a student support package of £3,000 a year for the poorest students, an increase in the threshold at which one repays, and a 25-year cap on the loan being written off. Alternatively, they can decide to vote against it, but if they do so, they should be clear that they will be voting against more money for the universities, voting to keep up-front fees, voting for a system that discriminates against working class communities, voting against grants and voting for higher repayments afterwards. That is the choice facing the House. I commend the Bill to the House.

Tim Yeo (Conservative, South Suffolk)

This is one of the most important debates that we will have during this Parliament, and I very much regret that neither the Prime Minister nor the Chancellor of the Exchequer intend to remain for it. In view of the disreputable way in which the Government's policy has emerged, it may be that they do not wish to listen to what the Opposition have to say.

The debate started in extraordinary circumstances. Not only was the publication of the Bill delayed for several weeks, but in the two and a half weeks since it was published, the goalposts have been moved again, most recently this very morning. Late last night, the Secretary of State made a written statement describing the commission that will review the impact of variable tuition fees. This morning, further concessions on the workings of the commission have been made following discussions—from which the Secretary of State was apparently excluded—between the Chancellor of the Exchequer and the right hon. Member for Newcastle upon Tyne, East and Wallsend (Mr. Brown).

In his statement, the Secretary of State said:

"Work to establish baseline data for the review will begin in the 2004–05 academic year."—[Official Report, 26 January 2004; Vol. 417, c. 6WS.]

If that is when the baseline data begin to be established, how on earth can the commission draw any conclusions about anything in one year's time, as opposed to the three years that the Secretary of State said last night would be needed for its work to be completed? Furthermore, the review is supposed to consider the impact of the new policy, but variable fees do not start until 2006, so what conclusions can the commission draw in 2005? If that is the concession that persuaded the right hon. Member for Newcastle upon Tyne, East and Wallsend to give up his opposition to the Bill, he is not the man he was as Minister for Agriculture, Fisheries and Food.

Claire Ward (Labour, Watford)

Will the hon. Gentleman give way?

Tim Yeo (Conservative, South Suffolk)

Presently.

The issues that the Bill tries to address are profoundly important for the future of our universities, which have been underfunded by successive Governments for many years and, as a result, are at risk of losing talent and status. Restoring adequate funding in a fair and sustainable way is one of the most urgent challenges facing the Government.

Claire Ward (Labour, Watford)

rose—

James Purnell (Labour, Stalybridge and Hyde)

rose—

Tim Yeo (Conservative, South Suffolk)

I shall give way in a moment.

The Bill is crucial for students. It will have a deep impact on their lives, not only while they study, but for many years afterwards; and it will affect whether some young men and women who are qualified to go to university feel able to do so.

James Purnell (Labour, Stalybridge and Hyde)

rose—

Tim Yeo (Conservative, South Suffolk)

The hon. Gentleman should not be over-eager—I shall give way to him presently.

What matters about this debate and the vote that follows is not how it leaves the standing of the Prime Minister, the Secretary of State or the Labour Government. A more important issue is at stake—how we are to shape higher education and our investment in the human capital of the nation. Unfortunately, it has become clear in the past month that the Bill is deeply flawed. We are opposed to it because it attacks university independence, damages students, and fails to solve the long-term funding needs of universities. It does, however, confirm yet again to the British people that they cannot trust this Government.

James Purnell (Labour, Stalybridge and Hyde)

Did the hon. Gentleman, like me, hear the hon. Member for Havant (Mr. Willetts) say on "Question Time" that under Tory plans fewer people would go to university? How many fewer would it be—100,000, 200,000, 300,000, or perhaps even 400,000?

Tim Yeo (Conservative, South Suffolk)

I did not have the pleasure of hearing my hon. Friend on "Question Time", but I am delighted to deal with the hon. Gentleman's query. Conservative Members are indeed concerned about the numbers of people going to university. That is why yesterday's written answer by the Minister for Lifelong Learning, Further and Higher Education is so relevant. He said, in relation to those pupils who are qualified to go to university by achieving two A-level passes, that one of the main reasons why they do not go is the expected costs involved. That is the evidence from the research that was commissioned by the Government, but, unfortunately they ignored it, because the Bill will raise the costs of going to university for those very pupils who are qualified to go, but are deterred by the costs. The result of the Bill will be to threaten the numbers who go to university in future.

Let us trace the history of the Government's approach to funding higher education. [Interruption.] I am not surprised that Labour Members do not want to hear this part. Let me remind them of what the Prime Minister said during the 1997 general election campaign:

"Labour has no plans to introduce tuition fees for higher education".

One year later, the Teaching and Higher Education Act 1998 introduced tuition fees for the first time. In 2001, the Labour general election manifesto said:

"We will not introduce top-up fees and have legislated to prevent them".

On 22 January 2003, the Government published their White Paper, which broke all those promises.

Claire Ward (Labour, Watford)

Will the hon. Gentleman give way?

Tim Yeo (Conservative, South Suffolk)

I shall give way presently.

A couple of weeks ago, on 14 January, the Prime Minister spoke to the Institute of Public Policy Research about his new policy of top-up fees. He said:

"These changes are imperative for Britain's future".

He went on to say:

"They are in tune with Labour values"

and that they

"are a prime example of the modern path to social justice".

That is quite a shift from the election manifesto that promised that those same changes would never be made. I doubt whether the Prime Minister's words will be much help to Labour Members of Parliament when they are on the doorsteps seeking re-election and trying to explain to their voters why they went back on their word. It is no surprise that many people inside the Labour party resent being accused of betrayal when they refuse to break their election pledges.

James Plaskitt (Labour, Warwick and Leamington)

Can the hon. Gentleman tell us how many vice-chancellors support his party's stance?

Tim Yeo (Conservative, South Suffolk)

I congratulate the hon. Gentleman on reading out the Whips' hand-out.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. The House listened with respect to the Secretary of State, and it should do the same for the spokesman for the Opposition.

Tim Yeo (Conservative, South Suffolk)

Of course, many vice-chancellors—

Claire Ward (Labour, Watford)

Will the hon. Gentleman give way?

Tim Yeo (Conservative, South Suffolk)

I shall deal first with the intervention made by the hon. Lady's colleague.

Many vice-chancellors want the Bill to be given a Second Reading today, because they know that it will unlock the door to top-up fees not of £3,000 but of £6,000, £10,000 or £15,000. I shall quote one of the many vice-chancellors who have made this point. Richard Sykes of Imperial college has said:

"I think this is a good start but it can't stay at £3,000 if we really are going to have world class universities in this country".

The vice-chancellors want the Bill because they want fees—[Interruption.]

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. Hon. Members who are seeking to catch the eye of the hon. Gentleman who is speaking must not remain standing for any length of time if it is obvious that he is not going to give way. We cannot have Members standing up all over the Chamber.

Tim Yeo (Conservative, South Suffolk)

Let me remind the hon. Member for Warwick and Leamington (Mr. Plaskitt) that, for every vice-chancellor who supports the Bill, there are thousands of students at his or her university who oppose it. Thousands of members of staff in higher education also oppose it, including 111 in the Secretary of State's own constituency who wrote to the Eastern Daily Press last Friday to say so. I wish the hon. Gentleman luck on the doorstep when he explains to voters that his reason for breaking his promises to them was that he was so impressed by an advertisement placed in The Guardian by the vice-chancellors. I would prefer to be in the position of the Conservative candidate who will oppose him, who will be able to say that we listened to the thousands of students and staff, and that that is why we are keeping our promises.

Tim Yeo (Conservative, South Suffolk)

I shall give way in a moment.

Before I examine the Higher Education Bill in more detail, I want to dispose of one of the Secretary of State's more bizarre assertions, namely that there is no plan B. The number of changes that he has made to his own policy in the two months since the Queen's Speech shows that, far from there being no plan B, the Government are already on about plan F. Last night, with the announcement of the independent review, they finally admitted that there were indeed alternatives to their own policy. They have finally conceded that the principle of variability is up for grabs. At least, that is what they have told their own rebels; we shall find out in due course whether they have said the same thing to the universities. I shall now give way to the hon. Member for Watford (Claire Ward).

Claire Ward (Labour, Watford)

I am very grateful to the hon. Gentleman for giving way. I know that he has a rather burdensome work load, being shadow Secretary of State for Health and Education. Has the extent of his portfolio meant that he has been unable to formulate an alternative policy on these issues? So far, I have not heard any alternative proposals. I have heard his opposition, but I have no idea what his policy is.

Tim Yeo (Conservative, South Suffolk)

Well, that was a pretty pathetic effort from someone who is on the Government's payroll. Let me remind the hon. Lady that it is the Government's Higher Education Bill that we are debating today. I certainly look forward to debating with her and other hon. Members the Conservative policy on higher education in the Second Reading debate of the higher education Bill that the next Conservative Government will introduce early in the next Parliament. The big difference between that Bill and this one will be that—[Interruption.]

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. I hope that I shall not have to keep getting to my feet. There is a great deal of interest in this very important matter, not only in the Chamber but in the country outside, and hon. Members should be aware that the nation is watching not only the debate but their behaviour in the House of Commons this afternoon. I shall intervene if I have to, but I hope that I do not have to do so again.

Tim Yeo (Conservative, South Suffolk)

The big difference between this Bill and the one that will be introduced by the next Conservative Government is that ours will honour the pledges in our manifesto. That is in contrast to the Bill that we are debating today, which breaks the pledges in the Labour manifesto.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

The hon. Gentleman is quite right to criticise the Labour party, as many others in the country have done, for saying at the general election that it would do one thing and now doing something that takes it in the opposite direction. On the specific issue of top-up fees, can he give the House a pledge today that, if elected at the next election, his party would neither support nor introduce standard top-up fees or variable top-up fees during the first Parliament when it is in government?

Tim Yeo (Conservative, South Suffolk)

Yes, I can.

I turn now to the detail of the Bill. It creates a new regulatory structure—[Interruption.] Do Labour Members want to hear about the Bill or not? It creates a new regulatory structure which removes, for the first time, the freedom of universities to decide which students they should admit. It imposes huge new burdens on the vast majority of students, which, in many cases, will affect their families too. Let us be clear: we still do not know how much, if any, of the money that students will pay in top-up fees will represent a net increase in funding for universities.

Tim Yeo (Conservative, South Suffolk)

I shall give way in a moment.

If fees average £2,500 a year, about £1 billion will be paid to universities by students in top-up fees. Of that £1 billion, at least 10 per cent. will have to be paid out by the universities in bursaries to students from poorer families. The Secretary of State would like us to believe that that will leave about £900 million in the hands of the universities. However, the Bill and all the last-minute changes that the Government have announced to try to bolster their support will also impose costs, including £635 million a year to cover the cost of subsidising the new loans. Another £450 million a year will be required for student grants, along with £30 million a year to cover the cost of writing off loans that have not been repaid within 25 years. Those costs exceed £1.1 billion, although it is unclear whether the further announcements made in the Secretary of State's speech today have added still further to that total.

Tim Yeo (Conservative, South Suffolk)

In a moment. I have not finished this point yet.

On 15 January, the Secretary of State told the House that those costs would be met from within the existing higher education budget. If he wants to tell us that that is not the case, and that extra money will be available, now is the moment for him to do so. The House, the universities and the nation will see his refusal to deny that point. If he sticks by what he told the House, universities will find the cash that they thought they had been promised as hard to lay hands on as weapons of mass destruction in the Iraqi desert.

Michael Driscoll, the chairman of the group of mainstream universities and vice-chancellor of Middlesex university, warned in The Times Higher Educational Supplement the day after the Bill was published:

"The devil will be in the detail. The government duped us last time by taking the amount we gained in fees straight out of the teaching grant."

The Government did indeed dupe them last time. Last year, funding per student was less in real terms than it was in 1997–98, the year in which tuition fees were introduced. All the income from tuition fees has been clawed back by the Treasury. Whether universities receive a penny of extra money as a result of this Bill and all the other announcements still depends entirely on whether the Chancellor of the Exchequer agrees to increase the total spending limit of the Department for Education and Skills. That is something that he has conspicuously refused to say that he will do. If he were here now, we could ask him about that ourselves. His absence from the House, like his refusal to be a sponsor of the Bill, does not bode well for the universities. Of course, one reason why he may be so reluctant to cough up the cash is that he can see just what a disastrous deal that would be for the taxpayer if he did so.

Tim Yeo (Conservative, South Suffolk)

I will give way in a moment. If enough extra money is given to the Department for Education and Skills to cover all the new costs that the policy will impose, for every £1 received by the universities the Chancellor would have to sting taxpayers for £1.20. Let me remind the House that all those calculations were done before account was taken of the extra £1 billion a year that the Institute for Fiscal Studies estimates will be required to fund the costs of meeting the Prime Minister's arbitrary target of sending half of young people to university.

Clive Soley (Labour, Ealing, Acton and Shepherd's Bush)

We really have to try, but I am grateful for small mercies. The hon. Gentleman is talking about the finances, so may I put a question to him? This is the answer that my party and this Parliament want to hear from the Conservative party. Do the Conservatives intend to cap the number of people who can go to university, regardless of what qualifications they have, or are they saying that they will pay all the money that he says is needed through the taxpayer? We need an answer. What is the cap? If there is no cap, where will the money come from?

Tim Yeo (Conservative, South Suffolk)

It is not our intention to cap the number of people going to university. As I have just pointed out at some length, Government policy—through the Bill and the associated announcements—does not contribute a single penny either to meeting the costs of increasing the number of students or even to addressing the shortfall that universities say they suffer from. In fact, it is under Labour that we have seen a fall in funding per student—

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. There is little point in Members standing to seek to intervene when the Member addressing the House is still responding to a previous intervention.

Tim Yeo (Conservative, South Suffolk)

I am not surprised that Labour Members are reluctant to hear these facts, because they expose the flaws at the very heart of Government policy. They expose more clearly than we have been able to achieve until this morning the extent to which the Government have misled universities. They have tried to persuade vice-chancellors that the Bill addresses their funding needs. It does not. They have tried to persuade students and their families that the Bill might finance an increase in the number of people going to university. It will not. It has a number of other flaws, which I shall explain. First, I give way to my hon. Friend the Member for Esher and Walton (Mr. Taylor).

Ian Taylor (Conservative, Esher and Walton)

My hon. Friend is right to probe the Government on what their legislation actually means, but can he offer some clarification? Given that he has made it clear that there is a genuine funding gap—vice-chancellors are very concerned about the finances of universities—and that the Conservative party apparently will not ask the students to make any contribution under its policy, are we therefore to conclude that all the burden of the underfunding that the Conservatives would have to remove will fall on the taxpayer?

Tim Yeo (Conservative, South Suffolk)

My hon. Friend will have to contain himself a little longer, because it is a curious constitutional doctrine that says that an Opposition cannot oppose a Bill as deeply flawed as this before they have laid out their alternative policy in every detail. He was with me in the House in 1988 when the Bill that introduced the poll tax was being considered. I do not remember the Labour Opposition explaining in every detail how they would finance local government when they fought against the poll tax.

Patrick McLoughlin (Conservative, West Derbyshire)

I am grateful to my hon. Friend for giving way because I want to go back to the point about the number of students at university. Will he take time to remind the House of, or pass comment on, the fact that in 1979 when the Labour Government left office, the position in this country was that one person in eight went to university? During the 18 years of Conservative government, that came down to one in three. We have a record to be proud of on university access.

Tim Yeo (Conservative, South Suffolk)

My hon. Friend is absolutely right. He has quoted statistics correctly, but I further point out to him that the fastest expansion in the number of students from social class groups III M, IV and V going to university occurred in that period.

Robert Jackson (Conservative, Wantage)

My hon. Friend is arguing that if private funding is introduced alongside public funding, the public funding will always be clawed back, so that there will be no point in the exercise. That is an argument against any form of mixed funding. Mixed funding regimes operate successfully in many countries around the world. Why cannot they be made to work properly in this country? After all, most of us know that is the direction in which we will eventually have to go to fund our public services.

Tim Yeo (Conservative, South Suffolk)

The answer to my hon. Friend is simple: such regimes could be made to work if they were introduced by a Government who knew what they were doing and were honest with students, universities and taxpayers. This is not a question of argument with him, as I have quoted the facts. In the last five years—since the introduction of tuition fees—the Government have clawed back every penny of the extra income that universities thought they were going to receive. That is exactly what will happen again.

Tim Yeo (Conservative, South Suffolk)

I will give way presently, but I must make some progress.

The principles of university independence and academic freedom are fundamental to Conservative Members, but they are threatened by the establishment of a regulator whose role is to manipulate university admissions policy. The Government claim that the regulator's job is to widen the mix of backgrounds from which students come. No one, least of all Conservative Members, will argue with that goal; as I have just explained, no party has done more than the Conservative party to widen access to universities.

We believe passionately in equality of opportunity, but we have a different vision from the Government of how to achieve it. The answer lies in raising the achievements and aspirations of pupils while they are still at school. It lies in firing the ambitions of teachers at schools that historically have not sent many pupils to university. That is where Government energy should be directed, but, as always, Ministers prefer to regulate.

Graham Allen (Labour, Nottingham North)

Will the hon. Gentleman give way?

Tim Yeo (Conservative, South Suffolk)

Presently. The establishment of the new university regulator, referred to in the Bill as the Director of Fair Access to higher education, is central to Government policy. No university will be able to charge a penny in top-up fees without the regulator's say so. As the Minister for Lifelong Learning, Further and Higher Education told the House on 15 January, in a comment that revealed which universities the Government are particularly gunning for:

"The simple fact is that none of the Russell Group universities will be able to charge anything above £1,125 . . . unless they satisfy the access regulator that they are doing everything they possibly can to encourage youngsters from non-traditional backgrounds . . . to come to their university."—[Official Report, 15 January 2004; Vol. 416, c. 955.]

Instead of selecting students on the basis of academic merit and potential, university admissions policies will have to reflect the prejudices of Ministers—another example of how this Government constantly interfere with and overrule the judgment of qualified professional people on how to do their jobs.

Graham Allen (Labour, Nottingham North)

Will the hon. Gentleman give way?

Tim Yeo (Conservative, South Suffolk)

Presently.

Michael Fallon (Conservative, Sevenoaks)

Will my hon. Friend give way?

Tim Yeo (Conservative, South Suffolk)

Yes.

Michael Fallon (Conservative, Sevenoaks)

For the benefit of the House, will my hon. Friend confirm that under clause 30 the director of fair access is not to be an independent person, but must follow the guidance issued by the Secretary of State? He will be a creature of Ministers.

Tim Yeo (Conservative, South Suffolk)

My hon. Friend anticipates the passage of my speech that I am just coming to. That is a very important point, because part 3 sets out how the burden of regulations from which universities already suffer will be increased. As the explanatory notes explain, universities cannot charge top-up fees until

"they have in force a plan . . . approved by the relevant authority."

In other words, that means the regulator. Governing bodies will have to show how they are attracting applications from prospective students who are members of groups that are under-represented in higher education, regardless of whether such applicants are qualified to study at their universities.

Unfortunately, getting the plan approved by the regulator is not the end of the story. Clause 35 gives the regulator the power to fine any university that he considers is not doing what he wants by ordering the Higher Education Funding Council to cut its grants. Universities will have no right of appeal. Given that the Secretary of State appoints the regulator and fixes his salary, that the regulator reports directly to the Secretary of State, not Parliament, and that the Secretary of State outlines the matters on which the regulator must report, it is clear that, as my hon. Friend the Member for Sevenoaks (Mr. Fallon) said, the regulator is a creature of the Secretary of State. The regulations that tell the regulator how to do his job will also be made by the Secretary of State, although he has refused to let Parliament see them in time for the debate.

The Bill gives Ministers the power to decide who goes to which university and to take money away from a university that does not do what it is told. Let nobody fantasise that the Bill opens a door to more independence for universities; it does precisely the opposite. It brings all universities under tighter political control than ever before. It will inflict damage on our universities, including those that aspire to be world class.

John Bercow (Conservative, Buckingham)

Given the importance of the United Kingdom research base, will my hon. Friend hazard a guess about why the first 10 clauses focus exclusively on arts and humanities, duties on public bodies and the powers of the Secretary of State but are silent about the wider pursuit of necessary commercial sponsorship?

Tim Yeo (Conservative, South Suffolk)

My hon. Friend makes an important point about support for science, especially scientific research. I hope that the Government will pay more attention to that; indeed, Committee proceedings may provide an opportunity to explore the answer to my hon. Friend's extremely penetrating question.

Graham Allen (Labour, Nottingham North)

Does the hon. Gentleman realise that 65 per cent. of families in my constituency have disposable incomes of less than £15,000? That is one reason why we have the fewest people going to university of any constituency. The figures mean that people who get the necessary A-levels will receive a full grant of £2,700 plus a university bursary of £3,000. How can the hon. Gentleman talk at the Dispatch Box about access when he will lead his colleagues—but hopefully, none of mine—through the Lobby tonight to do away with a £3,000 grant that would allow those kids to go to university?

Tim Yeo (Conservative, South Suffolk)

It is interesting that the hon. Gentleman makes that point—I believe that he was a member of the Government when tuition fees were introduced. I presume that, at that time, the concerns of his poorer constituents were not at the forefront of his mind.

Let us consider the effect of the measure on students. In every walk of life from industry to science and from medicine to the media, graduates contribute to our national life. Britain's long-term competitiveness, our standing in the world and the quality of our public services depend on our educational system and our universities' ability to produced well-qualified and motivated graduates. Those men and women are already starting their working lives with average debts of £8,000 to £10,000 and the Bill trebles that burden of debt. It will inevitably affect the choices that students and their families make.

Only a Government who neither understand nor care about the anxieties of many young people and their families about debt could introduce such a Bill. Or perhaps Ministers have simply stopped listening. In May last year, a Joseph Rowntree Foundation report concluded:

"Young people from disadvantaged backgrounds are often deterred"—

I am sorry that the hon. Member for Nottingham, North (Mr. Allen) is not listening because it relates directly to his point. The report stated:

"Young people from disadvantaged backgrounds are often deterred from both entering full-time education in the first place and from continuing within higher education long enough to reach their full academic potential because of the economic hardships they suffer, in particular debt."

Last year, a survey for the Higher Education Funding Council and Universities UK found that respondents from lower social groups were more likely than those from higher social groups to hold debt-averse views. However, the Bill will force the majority of students to borrow unprecedentedly large amounts of money.

Let us consider the case of a student whose parents' total income is only £33,500. Perhaps the father is a firefighter and the mother, a classroom assistant. If the student wants to go to a university in London that charges the full £3,000 fee, he or she will rack up debts of £27,000. If he or she achieves a starting salary of £20,000 and enjoys annual pay increases of 5 per cent., the loan will not be repaid for more than 20 years. The Government claim that such debts will not deter prospective students.

Tim Loughton (Conservative, East Worthing and Shoreham)

Does my hon. Friend share my special concern about the effects on the national health service? The British Medical Association has calculated that doctors training in London could start their careers with £64,000 of debt. Doctors take six years to train and cannot take holiday and evening jobs to subsidise their training because of its nature. At a time when we are desperately short of doctors and have not achieved the numbers that the Government admit we need, how on earth will the measure do anything other than deter people from training as doctors?

Tim Yeo (Conservative, South Suffolk)

My hon. Friend is right. The Bill will almost certainly adversely affect the supply of students to study medicine. In Canada, where higher tuition fees were introduced, evidence shows that the number of medical students from low-income families has fallen.

Tim Yeo (Conservative, South Suffolk)

I must make progress. In the document entitled "Higher Education Funding", the Government stated:

"International experience suggests that higher variable fees can be introduced without adversely affecting the participation of students from less well-off families."

Yet a survey for the Australian Education Department pointed out only last month that students from disadvantaged backgrounds make up a smaller proportion of all Australian students now than in 1991. In the United States, a congressional advisory committee pointed out that almost half of qualified school leavers from low-income households are prevented by financial barriers from taking four-year degree courses. Almost a quarter are prevented from going to university.

Nobody knows how many British school leavers the Bill will deter from going to university, but the Secretary of State admitted that the level of fees that universities charge has a direct impact. On 3 December, he said that more students could be attracted to study physics if the relevant university charged a zero fee. If he believes that a zero fee will encourage students to study, how many students will be discouraged by fees of £9,000 over three years?

Even the £3,000 cap is unlikely to stay for long; nobody in the university world believes that it will. Last week, Professor Michael Stirling, chairman of the Russell Group and vice-chancellor of Birmingham university told The Daily Telegraph:

"It's a step in the right direction, though no-one is pretending it's enough to cap top-up fees at £3,000."

Professor Nick Barr, an economist at the London School of Economics and one of the architects of the Government's policy said on 7 January:

"The cap that is proposed will have to rise."

It is no good the Secretary of State saying that the Government will enshrine the cap in primary legislation.

In 2001, voters were told that the Government had legislated to prevent top-up fees, but that did not stop them introducing them two years later. Every hon. Member who supports the Bill will open the door to top-up fees, not of £3,000 but £6,000 and £10,000. At that point, the gap between universities that can charge such fees and those that cannot will get bigger. When fees reach those levels, it cannot be disputed that cost will affect students' behaviour. The student at a London university whose parental income is £33,500 or more will face a debt of £36,000 when fees are £6,000 and £48,000 when they rise to £10,000. The Secretary of State hilariously told "Newsnight" that he would bet his mortgage that the £3,000 limit would be in place in 10 years. Does he really think that a single student will believe him, after he has broken every other promise he made on this subject?

The Secretary of State should count himself lucky to have a mortgage at all. Graduates who start their working lives with debts that take 20 years to pay off, and on which outgoings will rise to £240 a month, will find the size of any mortgage they can take out severely curtailed. At the very time when we should be encouraging a culture of saving, the Bill will saddle them with debt. It will erode the savings of those who are in or near retirement as they struggle to support the next generation.

There is a considerable stake in this evening's vote, but not much of it has anything to do with the dire warnings that the Government Whips have been issuing as they go about their arm-twisting on behalf of the Prime Minister. I urge Members of all parties, especially those on the Government Back Benches, to reflect very carefully on the consequences of their votes—the consequences for students, for their families, for universities and, indeed, for themselves. No one will remember the circumstances in which this vote took place when suffering the effects of the Bill.

Approving this Bill will force future generations of students heavily into debt just when they should be encouraged to save. Approving this Bill opens the door to the making of access to university dependent on ability to pay, not ability to learn. Approving this Bill increases the burden of regulation on all universities; and approving this Bill does not give universities a single penny of extra income.

Members of all parties fought the last general election on the basis of pledges that they would not introduce top-up fees. At the next general election, some Members will be able to look voters in the eye and say that they honoured that pledge. I am proud to be one of them. I gave that pledge, I meant to give it, I wish to keep it, and I urge every other Member to join me in rejecting the Bill.

Nick Brown (Labour, Newcastle upon Tyne East and Wallsend)

It was kind of the hon. Member for South Suffolk (Mr. Yeo) to remind the House of the three happy years that we spent arguing about agriculture policy across the Dispatch Boxes. I recall that he went out of his way to be helpful to me then, and I hope that I shall be able to say something later in my speech that will be helpful to him.

I do not want to concentrate on the good things in the Bill, some of which we knew about from the beginning, because I think the Secretary of State has already made his case very well. I want to concentrate on my well-known objections to the Bill, and on how far the Government have moved to meet them. I had four objections: the increase in the level of debt for graduates; the difficulties with regard to the current proposals for meeting the universities' funding gap, as it is said to be; and the two issues of principle—the manifesto pledge and, most significant for me, the potential introduction of a marketplace in higher education.

I worry about debt. I am not talking about the debt and the financial burden that affects those from the very poorest backgrounds, for I think that the Government set out to do a lot for youngsters in that position. My fear is for the next poorest, particularly those who wish to make a career in the professions and public service and are therefore likely to incur above-average expenses while studying. I also worry about the amount of debt with which youngsters in their early twenties will be encumbered. That will apply especially to a young person who meets someone at university with whom he or she wants to set up home. Those young people will have to manage a joint debt at precisely the time when they might be thinking of taking out a mortgage.

The Government have gone a long way towards meeting that point, with the establishment of an independent commission to examine the impact on youngsters in the position I have described, the offer of an interim report, and the concession that in the spending review moneys will be set aside for the purpose of whatever recommendations are produced by the interim commission. I must tell my right hon. Friend that he is probably the only Secretary of State, now, to have that "nod and a wink" arrangement with the Treasury in regard to the spending review. If I helped him towards that, and if there is anything that I—along with my friends on the Back Benches—can do to underpin it, we stand ready. As is famously known in this place, the Secretary of State is not the only friend I have who might be influential in these matters.

Gordon Prentice (Labour, Pendle)

May I ask who will select the members of the independent commission?

Nick Brown (Labour, Newcastle upon Tyne East and Wallsend)

I am happy for my hon. Friend to do that, but I suspect that the Government will appoint someone of national standing and independent character, so that the independent commission can consider the issues and we all have an opportunity to put our views to it—including the National Union of Students.

I think I can say something that will genuinely help the hon. Member for South Suffolk. I agree with him that inherent in the proposals as currently structured is a failure to meet what the funding gap is said to be. There is clearly an issue involving moneys for the universities. I do not think that the flawed market mechanism that the Government are introducing will deal with the gap without compromising fairness. It is essential to examine alternatives, and I agree with the hon. Member for Wantage (Mr. Jackson) that it is perfectly reasonable to consider mixed funding. There is no reason why that proposal should not be at least considered, for it is entirely rational. I also think it reasonable to consider alternatives proposed by the Opposition in general. [Hon. Members: "What are they?"] Even given my reduced circumstances, it is not for me to say what the Opposition's proposals are. I respectfully suggest that it is for the Opposition to say what they are. Perhaps, having identified the funding gap, they could present their proposals for dealing with it. After all, a funding gap must be filled with money, and the money must come from somewhere.

Patrick Hall (Labour, Bedford)

Will my right hon. Friend give way?

Nick Brown (Labour, Newcastle upon Tyne East and Wallsend)

If I remember the new rules correctly, only two goes are allowed—but I will give way.

Patrick Hall (Labour, Bedford)

Does my right hon. Friend accept that the £1 billion a year that it is estimated will be raised by variable fees will represent 68 per cent. of the revenue shortfall identified for English universities? Is that not a significant contribution?

Nick Brown (Labour, Newcastle upon Tyne East and Wallsend)

It is a significant contribution, but much depends on who we listen to. There is indeed a shortfall, as everyone accepts. According to some, it is a significant shortfall. The shortfall will have to be dealt with, but I think it wrong that the market-based solution was sold to the universities as the only solution on offer. There are other ideas, good ideas, that are worth exploring—and now at least we have the opportunity to do that.

Let me make myself perfectly plain. I favour a graduate contribution based on earnings—the earnings of a youngster who has benefited from higher education—rather than on the financial position of that youngster's mum and dad. That is my view, and it is comparable with what is in the Labour party manifesto. I do not think there is anything wrong with continuing to argue for it, and there will be an opportunity for those of us who hold it to put it to the commission.

Of course I realise that that is a double-edged sword. As with any argument, it will be perfectly possible to lose this argument—don't I know it? But at least we have a chance to make the case again. Indeed, there are elements of just such a scheme in the Government's current proposals. We are not as far apart as it may seem.

Lembit Öpik (Liberal Democrat, Montgomeryshire)

Will the right hon. Gentleman give way?

Nick Brown (Labour, Newcastle upon Tyne East and Wallsend)

You will put me right on this, Mr. Deputy Speaker. Am I allowed to take a further intervention?

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Whether or not the right hon. Gentleman takes an intervention is entirely a matter for him.

Nick Brown (Labour, Newcastle upon Tyne East and Wallsend)

I am relatively new to this. Despite all the things I have done in this place, the experience of being a Government Back Bencher is entirely new to me—although I think I am getting the hang of it. I can tell the hon. Member for Montgomeryshire (Lembit Öpik) that his intervention would take time from my speech, and that he will be able to make his own speech later. I cannot take any more interventions.

On the question of how we treat our manifesto pledges, there is the separate issue—although this point is, of course, addressed to the whole House, it particularly concerns my hon. Friends—of how we treat our party. The issues that we are discussing today should have been discussed in the Labour party policy forum. We would be in better shape—and so would the proposals—had we gone through that exercise first to test the ideas in front of our hon. Friends and colleagues whom we expect to support us before rallying behind the agreed proposals. Instead, the proposals were presented to us first, there was a demand that we should agree with them and we put up a fight to try to amend them so that they could be agreed. One of the concessions is to put the commission's work through the party's policy-making process, which will allow us in the Labour party an opportunity to argue our points of view.

The heart of my objection to the original proposals, which have now been circumscribed, is the remorseless march towards the market. I passionately believe that the "marketisation" of higher education is wrong—for me it is a matter of not only economics and funding but social justice and social cohesion. I shall treat the House to a quote from the "University College Record" by Lord Butler of Brockwell in October 2003:

"We have also to think about the disincentive . . . But £5,000 or £7,000 or even more does not look intolerable when it is borne in mind that private secondary education may be costing parents £20,000 per year."

That argument is perfectly logical if it is taken in its own terms, but some of my constituents do not earn £20,000 a year, and we must stand up for them.

I want universities to soar, but if they are to do so our people must come with them. These proposals box in the cap and the move towards the market, and I take the Secretary of State at his word when he says that this is not a transitional move to a marketplace and that the proposals are as they stand.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

We took the Secretary of State and the Prime Minister at their word when they said in their last manifesto that they would not introduce top-up fees—sadly, top-up fees are being introduced. I was looking forward to a principled debate, but we have had a shabby charade. Labour Member after Labour Member will line up tonight to go into the Aye Lobby to support a Thatcherite policy in direct opposition to what they said during the general election campaign, betraying the principles on which the Labour party is built.

It is no surprise that the British Market Research Bureau, which conducted the latest opinion poll on the issue, says that 70 per cent. of the public are against top-up fees. The general secretary of the Association of University Teachers, Sally Hunt, described top-up fees as

"the most unpopular policy under this government".

The grand old Duke of York, the right hon. Member for Newcastle upon Tyne, East and Wallsend (Mr. Brown), led his troops to the hill, and we have seen him lead them back down again—what a shabby performance!

Nick Palmer (Labour, Broxtowe)

Will the hon. Gentleman give way?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

No, I will not.

The Bill is bad for students, bad for families, bad for lecturers, bad for universities, bad for taxpayers and bad for the country. It is not bad for the Liberal Democrats, because at the next general election we will remind voters of the promises and what should have happened.

The sadness is that the debate about the future of higher education should be one of the most engaging that this House has ever had. It should be about how we tackle the current inequities between academic and vocational pathways into higher education. The Secretary of State did not mention the unacceptable fact that 45 per cent. of young people who obtain vocational qualifications at level 3 do not end up in university, yet 92 per cent. of those with two A-levels do. That inequity should be debated and tackled. We should debate how we could offer a climbing frame of opportunity to attain higher skills and higher education throughout life, rather than just for students with two A-levels.

Instead, the debate has become little more than a sordid trade-off, with the Secretary of State acting more like Del Boy in "Only Fools and Horses" as he tries to sell dodgy goods to his own Back Benchers. We all know that the Bill is not simply about higher education—the Prime Minister has been at pains to point that out. It is about changing the way in which this country pays for its public services. That is at the heart of it. The Bill is stage one of a process that will see responsibility for paying for child care, transport, and health and social care shift from general taxation to the individual. If hon. Members do not believe me, they should read the Institute for Public Policy Research report when it is published tomorrow. It describes Government policy and thinking on the issue.

Hon. Members should not be fooled into thinking that the Bill is only about higher education: it is not. Why else would we have seen in the past few days Labour Whips running around Westminster threatening to hand out redundancy notices? They have cajoled and even offered dinner with Cabinet members to ensure that sufficient MPs break their promise to the people of Britain. In an act of sheer desperation, the Chairman of the Education and Skills Committee even resorted to sending out pictures of the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) in brown paper envelopes to recalcitrant MPs to frighten them into submission. How desperate is that?

Hugh Bayley (Labour, City of York)

The hon. Gentleman made the point that students in further education have poorer opportunities than those in higher education. Those in further education face variable fees. Why does he not propose getting rid of variable fees in further education, and why does he propose to spend on universities all the Liberal Democrats' tax increase, rather than spending it on further education?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I shall come to the second point that the hon. Gentleman raises—I consider him as more than just a political neighbour—later in my speech, and I assure the hon. Member for Huddersfield (Mr. Sheerman) that I will not do so too late. On the first point, I agree, and our policy is to achieve that objective. It is unacceptable for students in further education to be burdened with differential fees at a time when the whole debate in this House is about higher education. I remind the hon. Member for City of York (Hugh Bayley) that the Bill is about higher education. The Secretary of State makes no proposals to tackle any of the issues that the hon. Gentleman feels so strongly about. As Labour Members seem so keen on reviews, I suggest that he ask Ministers to set up another review to consider those important issues.

James Purnell (Labour, Stalybridge and Hyde)

Does the hon. Gentleman recall that the hon. Member for Yeovil (Mr. Laws)—his colleague—did not support the Child Trust Funds Bill because he thought that the priority for funding should be children under five, not children at 18? Given that the hon. Member for Harrogate and Knaresborough (Mr. Willis) could fund only one education pledge, why would it all go on those aged over 18?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I am delighted that the hon. Gentleman takes such an interest in our policy—and the consistency of it. My hon. Friend the Member for Yeovil (Mr. Laws) is right. The Government intend to spend up to £350 million giving people such as my hon. Friend baby bonds when they have children, but we would prefer that money to be spent on early-years education. It is a tough choice, but mature political parties have to make tough choices.

I have no doubt that the Secretary of State and the Minister for Lifelong Learning, Further and Higher Education are sincere in their desire to put forward their proposals. I congratulate them both sincerely on their willingness to debate those proposals and to be challenged on them. However, when the Bill is lost tonight, I urge the Secretary of State not to throw his toys out of the pram and say that there is no plan B or C. Plenty of other ideas and devices are available.

Clive Betts (Labour, Sheffield, Attercliffe)

rose—

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I should like to make some progress, because many hon. Members want to speak.

As for the Bill, I have to tell the Secretary of State that it contains elements that are worthy of retention. We applaud the moving of higher education and student support for students in Wales to the Welsh Assembly. That is absolutely right. We support the establishment of an arts and humanities council that will raise the profile of both in higher education. Indeed, that is in stark contrast to the comments that the Secretary of State made earlier about the classics and ancient literature having no great place in higher education.

The proposal for an independent adjudication system is welcome, but I hope that the Secretary of State will seek to widen that so that we have an education ombudsman dealing not only with higher education students, but with further and higher education students and staffing in those two sectors as well. That is overdue, and I hope that the Secretary of State will support it.

Clive Betts (Labour, Sheffield, Attercliffe)

rose—

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

How can I resist?

Clive Betts (Labour, Sheffield, Attercliffe)

I thank the hon. Gentleman for giving way. I should like to be clear as to where the Liberal Democrats stand when they talk about tough choices. When the hon. Gentleman's party has paid for its extra long-term care for the elderly, its extra for pensioners, its extra for the police, its extra for schools and now extra for further education, how will it fund this higher education policy? Can he be explicit about that, so that we all understand where the Liberal Democrats are coming from?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Unlike the hon. Gentleman when he was running Sheffield council, when nobody knew where money was coming from or going to, my right hon. Friend the Member for Ross, Skye and Inverness, West (Mr. Kennedy), the leader of my party, has made absolutely clear what our priorities are for a 50p rate. He has made it clear in the House and in a letter to the Prime Minister. If the hon. Gentleman would like a copy of that letter, I shall make sure that he receives one, because I would not like him to be left out.

Although there are good elements in the Bill, they are not sufficient reasons to support it on Second Reading. Despite the so-called concessions, it fails to meet the primary objectives set by the Government in 2001: to bridge the funding gap in our universities, to widen access and to remove the fear of debt for future students.

We accept the need to resolve the funding crisis in our universities after two decades of chronic under-funding. The question is: will the introduction of a market, supported by variable fees and a cap, resolve the funding gap?

Alice Mahon (Labour, Halifax)

I am following the hon. Gentleman's argument very carefully, and I think he will find that I agree with it. Twenty-three years ago, I went as a mature student to Bradford university with a full grant and with tuition fees paid. My eldest son went to Oxford. Today, however, I would not face this kind of debt, and my eldest son would certainly have been looking for a cheaper university.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

The right hon. Lady—the hon. Lady; she should be a right hon. Lady—is absolutely correct. I recently attended, as did the Secretary of State, the student of the year awards, which the Assessment and Qualifications Alliance presented at the Queen Elizabeth II conference centre. Much to my surprise, I met there a girl I had taught nearly 30 years ago in my first A-level group. She came from a very poor home in Chapeltown, Leeds. Her son was one of the students who received an award. She came down to London specifically to tell me that she would never have got to university without the support that she received. Certainly, her son would not have received the award without that support. We should never forget that.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Like many of my colleagues, I have a sheaf of letters and e-mails from students, many of them medical and dental students. They already have debts of £20,000, £25,000 or £30,000 under the present regime. What is my hon. Friend's information as to the likely average debt if the proposals go through? Is it morally acceptable to send people off into life after education with that amount of debt round their necks?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

The evidence that the British Medical Association presented this week of medical students with debts of £50,000 to £60,000 gives a flavour of what we shall see in the United Kingdom.

A better example is to take a student who is basically on a £3,000 fee course for three years. Barclays bank estimates that by 2010 that debt will have risen to £33,700. That is a staggering amount for any student to go into the world with. If we are talking about students having to set up pensions—

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

Those figures are wrong.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

The right hon. Gentleman should take that up with Barclays bank, which prepared those figures and which is a fairly reputable institution.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I am moving on.

The issue that I want to tackle is that of whether the market, supported by variable fees with a cap, will resolve the funding gap in our universities.

Graham Allen (Labour, Nottingham North)

rose—

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I want to develop the point, and then if the hon. Gentleman still wishes to intervene he may.

The answer is patently "No". It will be 2009 before the universities receive the £1.1 billion promised from the package. That is the truth—2009. By then, the gap will have increased to a point at which increases in fees will be needed. If the universities are saying that they need £1 billion to £2 billion now, in five years' time what will that gap be? It will certainly not have been bridged by the uprated tuition fees, the top-up fees.The House has to understand that no Government will ever return to plugging that gap purely from taxpayers' money.

Graham Allen (Labour, Nottingham North)

Will the hon. Gentleman give way?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Please let me finish the point.

When Members vote tonight, they must forget all the promises that the Secretary of State has made. The reality is that by 2009 it will not be possible to go back to a system of state funding our universities with flat-rate fees. That is the truth of what we are talking about.

The right hon. Gentleman's latest concession—to put the matter in the Bill in order to have an inquiry in 2009—is an act of desperation. When before has a Secretary of State had to put something into a Bill just to persuade his own Back Benchers that he is not lying? That is the situation that we have got into.

Although I am vehemently opposed to both the flat rate and variable fees, I recognise that the only way in which a market in higher education based on variable fee income can work is to allow that market to determine the fee level. That is the truth, and it is the point that the hon. Member for Wantage (Mr. Jackson) made honestly and fairly. It is the only logical outcome of the policy proposed today. That is why we as a party—every one of our Members, 54 of us—will be going into the Lobby against the Bill tonight on that issue of principle.

Labour MPs who support the Bill tonight must realise that the cap is not sustainable after 2009 because of the injection of funds that would be needed, and we must also realise that by 2014, the year in which the Secretary of State promised Mr. Paxman—and bet his house on it—that the cap on university fees would be no higher than it is now, the higher education system would be in utter and total chaos without the supporting funds.

The prospect of annual fees in excess of £15,000, as proposed by Richard Sykes of Imperial college, is not fanciful. It is not fiction; it is the reality of what we will actually see, because it is the reality in America. How can any Labour Back Bencher be seduced into thinking that such a policy would assist in broadening access for underrepresented groups, and how could it possibly prevent the establishment of a two-tier university system, where students choose both course and university on the basis of cost? The Prime Minister, of course, claims that that will not be the case.

Lynne Jones (Labour, Birmingham, Selly Oak)

We already have a de facto two-tier system. Universities UK's own research shows that young people from disadvantaged backgrounds are disproportionately represented at the modern universities and not represented at the prestigious universities. Is not the problem that the measures proposed today will exacerbate that already bad situation?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

The hon. Lady is absolutely right, but there are two sides to that coin. Our recent research looking at major cities—Newcastle, Manchester, Liverpool, Leeds and Nottingham—has shown that, on average, roughly 45 per cent. of students studying in higher education go locally for their education, and that that percentage is increasing very quickly indeed. In Newcastle, nearly 70 per cent. of students leaving the Bluecoat school, which is a very high quality, high achieving school, study locally.

Graham Allen (Labour, Nottingham North)

rose—

Peter Bradley (Labour, The Wrekin)

rose—

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Please let me finish my answer to the previous intervention.

The other side of that coin—it is a very serious issue—is that we must drive up the quality of what is offered locally, to match whatever there is across the country. We must be able to tell young people, "You have a genuine choice between going local and going away", and it should not be a choice made on the basis of price. That is the point—if the new universities are in the 25 per cent. that do not charge top-up fees and all the rest do, we will create a two-tier system by default, purely on the basis of price. That is something that I do not want.

Graham Allen (Labour, Nottingham North)

I had almost forgotten what I was going to say—but it was not "I will see the hon. Gentleman in the Lobby tonight". Would the hon. Gentleman consider the question of the market? He seems to be implying that there is not a market already and that there is no variability already. That strikes at the heart of many of the concerns that colleagues on this side of the House have too. There is a market, but it is rigged. It works against the interests of working-class kids who actually get the right A-levels. Will the hon. Gentleman address the question of how, by using social policy, we make a deeply imperfect market a better one for all those who are qualified to go to university?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I have a lot of respect for the hon. Gentleman and the way he fights for his constituency, but I do not think that it is possible to tackle inequality simply by creating other inequalities. We must tackle inequality, and I agree wholeheartedly with the Secretary of State and the Under-Secretary with responsibility for skills and vocational education that we must tackle it much lower down. We have to ensure that from 14 onwards there is an aspiration for all our young people to go into higher education through a vocational or academic route or a mixture of those, and that is the big issue that we must tackle. However, I do not want young people to find suddenly, when they go up those routes and get their level 3 qualifications, that there is a financial barrier that prevents them from taking the next route. That is the issue that I am interested in, and that is why I shall vote against the Bill tonight.

As I was saying before those useful interventions, the Prime Minister, I think rather disingenuously, has said that there is no evidence from abroad—from Australia, Canada and the United States—that countries that have introduced contribution costs limit access. That is absolute nonsense. It is impossible to find any research—other than research written in Australia by the man who introduced the fees in the first place, whom the Secretary of State quotes in his evidence—to show that that has not happened. In Australia fee levels have risen by 25 per cent. since 1996, when variable fees were introduced. In America, with its Ivy league, which is reputed to have the Cambridge-style bursary system, only 4.7 per cent. of students from the lowest socio-economic groups go to Harvard and the figure is roughly the same for the other Ivy league universities. In the United States, money counts and money buys you into the best universities. That may be the Secretary of State's vision, but it is not my mine, and it is certainly not the vision I spent my life in education defending and promoting.

I realise that the Secretary of State has tried to mitigate the worst effects of the system, but the Office for Fair Access is a classic fudge. If any Back Benchers have bought that, naivety is not the word to describe them. What will OFFA actually do? The hon. Member for South Suffolk (Mr. Yeo) was right to say that it is a bureaucratic irrelevance and a sop to its critics, and that it will burden universities with meaningless plans. At the end of the day, it has absolutely no powers. It has no powers over admissions, which is surely the key if we are to tackle issues of inequality. It has no powers over what goes into the plans—the Secretary of State has all the powers there—and it has no powers to impose penalties. So what is this guy getting £100,000 for? I would like that job—[Interruption.] He must have two children with fees to pay.

One measure that we welcome is the move away from up-front fees, though it was the present Government who imposed them. Few Members present in the House at the time will have forgotten the promise given by the right hon. Member for Sheffield, Brightside (Mr. Blunkett), now the Home Secretary. He said in 1997 that

"the entire objective in taking our difficult decisions has been to put higher education on a firm footing for two decades."—[Official Report, 23 July 1997; Vol. 298, c. 958.]

That is why tuition fees were introduced in the first place. My hon. Friend the Member for Bath (Mr. Foster) and I said at the time that that was the thin end of the wedge, which is exactly what it has been. The policy is going ahead by stealth, whether we like it or not. It was designed somewhere in the bowels of the No. 10 policy unit.

Has anyone objectively analysed the new arrangement from the position of a student from a poor background, or even one from a modest income background? For poorer students, there will be a new grant of up to £3,000, but the benefit will come only if the student attends the cheapest course at the cheapest university. That would make the student £1,500 better off. If students go to a good university on a £3,000 course, they will receive £3,000 up front and be left with a fee of £3,000 to pay. Will hon. Members explain how a student is better off on that account, because I simply do not understand it? If, by contrast, students go to a university that charges the £1,200 fee, they will have £1,500 of disposable income to spend. They will not get the bursary, but they will not have to pay the full fee.

Geraint Davies (Labour, Croydon Central)

Does the hon. Gentleman agree that the introduction of a time limit on repayment means that low-paid graduates—someone on £17,000, for example—would, over 25 years, have to pay £4,500, which is 9 per cent. of the money earned over £15,000? Graduates would have to pay that £4,500 irrespective of the level of fees—whether they were £9,000, £18,000 or £20,000—so payment is linked to earnings rather than fee levels. Furthermore, in the British Medical Association example, where a student faces paying £63,000, he would, if earning £30,000, only have to pay half the fees. It is misleading the House to imply that they have to pay all the fees, because what they have to pay is linked to what they earn, which is progressive.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I was hoping that the hon. Gentleman was going to explain something. All he has done is confuse the House even more, so I leave hon. Members to reach their own conclusions.

It is no use the Secretary of State and the Prime Minister talking about debt as an investment for families for whom debt is a daily nightmare. The Secretary of State should look no further than the research for the Department for Education and Skills that was conducted by Professor Callendar of South Bank university. She said:

"Debt aversion has the greatest impact on the participation of the very group the government most wants to attract into"

higher education. She concluded by saying:

"Top up fees of £3,000 will put even more poor students off university".

That is the Government's own research.

Debt, and the fear of debt, will affect not only applications to universities, but the courses that students will choose and their future life plans. A recent MORI-Unite poll shows that two out of five students who are currently in higher education would have chosen a different university or course if fees of £3,000 were charged. That is the view of real students in real universities.

The principle that students access the universities and courses of their choice on merit must be the only criterion for access to higher education—it is the Robbins principle of access to higher education. The Bill will break that principle, which has been the hallmark of Britain's higher education system for the past 40 years, and Labour Back Benchers will troop into the Aye Lobby tonight to support that.

The Government say that there is no plan B, but they are wrong.

Clive Soley (Labour, Ealing, Acton and Shepherd's Bush)

Will the hon. Gentleman give way?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I am getting on to plan B.

We have a plan B. It is fully costed and meets the Government's objective of putting more money into universities. It would broaden and deepen participation and ensure that graduates who gain a lot financially from their degrees pay back more towards the cost of higher education. What is more, our figures have been analysed by the Higher Education Policy Institute, and its director agrees with them. Our proposals are not difficult to understand. We would abolish fees, abandon any plans for top-up fees, and reintroduce proper maintenance grants of up to £2,000 a year for students from the least-well-off backgrounds. Crucially, we would invest an additional £1 billion—matching the Government's money—in our universities from 2005, not from 2009 when the full impact of the top-up fees policy will happen. There would be more money with less bureaucracy for universities and less debt for students. There would be a saving to the Treasury of at least £450 million for each £1 billion put in to service the debt.

We would pay for our proposals with a concept that has been sadly missing from new Labour ever since it came to power in 1997: fair progressive taxation. We would not use general taxation to find more money for higher education, as the Prime Minister tries to pretend, because we would have a higher tax band for incomes of more than £100,000 a year. Let me remind Labour Back Benchers that our proposal would impose an extra tax burden on the wealthiest 1 per cent. of the population. However, those on the Labour Front Bench oppose the idea that the wealthiest 1 per cent. should pay a bit more tax. In reply to the hon. Member for Watford (Claire Ward), who is no longer in the Chamber, 82 per cent. of those people are graduates who, like the Prime Minister and the Secretary of State, were given a free higher education when they were students and the country was less affluent.

Adrian Bailey (Labour/Co-operative, West Bromwich West)

During the hon. Gentleman's earlier comments, he made great play of the fact that Labour's plans for tuition fees would not meet the escalating costs that might develop over the next five or 10 years. Will he assure me that the current proposal of the Liberal Democrats for a 50 per cent. taxation rate on incomes greater than £100,000 a year would fully fund the scary figures that he projected without prejudicing any of their myriad other spending commitments?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I was with the hon. Gentleman until his last comment. He should go to bed with a book rather than a Millbank handout—it does not affect one's health in the same way.

The first part of the hon. Gentleman's question is very genuine, and it is something that all political parties have to answer. My argument is that the Secretary of State certainly does not agree with all that the universities ask for—nor do we as a party—and I am pretty sure that those on the Conservative Front Bench would not agree either. Much of the expansion in resources that they want is for capital projects; some of it is for research, some for teaching. We would have to disaggregate that. The Secretary of State has reached the conclusion that £1 billion is about the right sum to raise from differential fees to put into the universities. We broadly agree with his assessment. The difference between us is that the universities need that money now. Under our proposals, they will get that money in 2005; they do not have to wait until 2006, 2007, 2008 or 2009—four or five years later. By that time, we will have put £5.5 billion extra into the universities to plug that gap.

The Prime Minister argues, in true right-wing style, that a 50p rate would drive high earners out of the country and that all the evidence supports that. Well, it does not. The Prime Minister cannot find a single piece of evidence from a reputable economist—other than one in the United States in 1974—who can, in fact, support that view. Richard Adams, writing in The Guardian last Friday, said:

"The wealthiest potential payers probably live in tax havens like Sark and would not be affected".

There is not a serious economic commentator who claims that a 50p rate would have a major impact on tax avoidance. Rather than worrying about losing our richest people, we should be worrying about losing our best graduates. We should be worried about who will do a PhD under the new proposals. Who, when saddled with debts of £20,000 to £30,000, will take on a low-paid research post? Those are the issues with which we should be concerned.

I tell the Secretary of State that we will vote against the proposals tonight not because we are against the thrust of what the Government want to do or against their broad analysis, but because they are wrong in principle. The Liberal Democrats said so at the last election. We keep our manifesto promises; they break them.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. I remind the House that there is an eight-minute limit on Back-Bench speeches.

Jim Dowd (Labour, Lewisham West)

Thank you, Mr. Deputy Speaker. I recognise that far more hon. Members want to speak than we have time to fit in, so I will not take any interventions and will just make a couple of points.

First, I congratulate my right hon. Friends the Secretary of State for Education and Skills and the Minister for Lifelong Learning, Further and Higher Education on the way in which they have engaged in this process, which involves what is undeniably one of the most difficult and contentious issues with which we have had to deal since the Government came to power on that glorious day in 1997. I sincerely hope that that process of engagement, of listening, of concession—call it what you like—has not reached a conclusion; that, as we gain a Second Reading for the Bill this evening and as it progresses through its other stages in Parliament, we are able to improve it; and that my right hon. Friends recognise that it can still accommodate improvement.

One of the differences that we have been grappling with this afternoon is that we are talking about equity and opportunity. It strikes me, coming from a very working-class part of inner London, that the gravest inequity is between the higher education sector, which seems to exercise people disproportionately, and the further education sector, largely because the FE sector is almost overwhelmingly working class and does not have the HE sector's clout or influence. I speak as a member of the majority of people in this country who did not have the benefit and advantage of a university education. However, in the House, I am in a singular minority. Even though I have not done the precise calculations, I suggest that the number of hon. Members who have been through higher education is about the reverse of the national figure of 80 per cent. who have not, so I shall consider what the proposals mean for people in my part of south-east London. I am not sure what the Tories propose, but it seems that they want to retain elitism, have no cap and find all the money from public funds in the fullness of time. If student numbers fall, it is patently obvious that it will not be middle-class kids who go without: it will be the working-class kids who we are trying to get into university who will miss out yet again, and higher education will remain the divisive and elitist institution that it has been for far too long.

The famous Liberal Democrat proposal of a 50 per cent. tax rate on salaries of more than £100,000 is a replacement for their magic penny in the last Parliament, which was supposed to fund everything; it is a marvellous commodity because they can spend it time and time again. Even as the hon. Member for Harrogate and Knaresborough (Mr. Willis) was speaking, he added another pledge. He blithely said that, as he wanted equality between higher and further education, he would abolish all FE fees. Does the hon. Gentleman have any idea how much that would cost? Would that be paid for by the Liberal Democrats' magic 50 per cent. tax rate? He nods. I heard him on the radio this morning trying to argue that his party's special tax device was not general taxation.

Barry Sheerman (Labour/Co-operative, Huddersfield)

But that was this morning.

Jim Dowd (Labour, Lewisham West)

Indeed. It just seems so long ago.

Of course it would be general taxation. If the economic illiteracy displayed this morning is any reflection of the rest of the Liberal Democrats' plans, it is small wonder that nobody believes them and that they will never be in a position to implement their policies.

If there are additional priorities for public money, I entirely agree with my right hon. Friend the Secretary of State—as I am sure do most of my right hon. and hon. Friends—that money should go into the early-years, primary and secondary school sectors, where the building blocks of education and progress are created.

The big issue in my part of the world—which I am sure is shared in urban and working-class communities elsewhere—is not young people being fearful of debt or its consequences in later life but getting working-class kids even to think that they can get into university. A couple of weeks ago I was privileged to visit Forest Hill school in my constituency to see the Aim Higher roadshow, which opens the eyes of kids in south-east London by saying, "If you want to do this, you do not have to be intimidated and think it is something that only kids better off than you can do."

If all the Government were doing today was introducing top-up or variable fees, even I would have great difficulty giving that my support. I congratulate my right hon. Friend the Secretary of State because the Bill goes way beyond that by realigning the whole system of student support across the country. I shall support that balancing act this evening because it will change the prospects for many thousands of young people in my constituency by giving them an opportunity that they have previously been denied.

I particularly welcome the abolition of up-front fees, which are a bar to students from families on lower incomes, and the reintroduction of maintenance grants. I also welcome my right hon. Friend's acknowledgement today that fee remission will be bundled up to provide an even bigger incentive. The 25-year cap will mean that debt will not be for life, with repayments reflecting earnings over that time.

The Liberal Democrats say that 82 per cent. of people who earn more than £100,000 a year went to university, so it is fair that they should pay. What about the other 18 per cent. who did not go to university? And if 82 per cent. of high salary earners went through higher education, that shows what a good investment it is, with incomes considerably uprated as a consequence.

Mention of debt aversion really irritates me. It is old fashioned, patronising and condescending: the assumption seems to be, "Working class people don't really know how to handle money. That's why they've got so little." They know how to handle money all right. And they know a bargain when they see one. Higher education is a bargain. I fully support this package in the round, and hope that every one of my colleagues on the Labour Benches will do the same.

William Hague (Conservative, Richmond (Yorks))

I am grateful for the chance to take part in this debate, in which the Education Secretary made a number of detailed points and my hon. Friend the Member for South Suffolk (Mr. Yeo) made some powerful points of detail.

Throughout today and before it, it has been fascinating to watch negotiations and concessions unfold; and I have no doubt that that has been as fascinating for the Education Secretary as it has for the rest of us. It is not unusual for a Minister to make concessions when he has said he will not make concessions—that is part of the normal negotiating process of politics; it is quite unusual for a Minister to make concessions he did not wish to make; and it is wholly extraordinary for a Minister to make concessions that he was not aware he was making. That is what appears to have happened in the negotiations—the joviality of the right hon. Member for Newcastle upon Tyne, East and Wallsend (Mr. Brown) rather confirms that that has happened—between him and the Chancellor. Whether those concessions amount to anything is a matter for debate, but one thing is not really a matter of dispute, and it is the central point on the basis of which I am opposed to the legislation. We all said—the entire House of Commons said—that we would not introduce such legislation. It is not just something the governing party said it would not do; it is not just something the Labour party said it would not do; extraordinarily and most unusually, the manifestos of the three main political parties said that they would not introduce such a measure—[Interruption.] And, indeed, other political parties such as Plaid Cymru. With the agreement of my colleagues, I wrote in the Conservative manifesto:

"we will not introduce top-up fees".

The Liberal Democrats made an even grander claim, as parties do when they are more distant from office. "All fees will be abolished," they said grandly. The Labour party said:

"We will not introduce 'top-up' fees and have legislated to prevent them."

What an extraordinarily categoric and emphatic thing to say. It is most unusual for the same promise to be made by all parties. Normally, manifestos contain contrasting promises for the electorate to choose from. But this was the same from every political party, and by my calculation it means that 635 or more of the 659 Members of Parliament stood on a platform of not introducing top-up fees.

Patrick McLoughlin (Conservative, West Derbyshire)

When the Secretary of State was asked about that, he said that things had changed since the election. Can my right hon. Friend think what those things are?

William Hague (Conservative, Richmond (Yorks))

That was one of the weaker parts of the Secretary of State's speech. When asked, he said that the pace of economic growth was unexpected—something that did not amuse the Chancellor, who was sitting three places away from him at the time. The Secretary of State appeared to have no faith in the Chancellor, whereas the right hon. Member for Newcastle upon Tyne, East and Wallsend only has faith in the Chancellor and, extraordinarily, the two have come together in support of the legislation. What happened in the intervening period—the two and a half years of economic growth that the Chancellor predicted—to take the Secretary of State so much by surprise that he had to break a manifesto commitment was not adequately explained in his opening speech.

It is not just the Government who are breaking faith with the electorate—the body politic is breaching their faith. We all go to schools and universities and say, "Politics matters, and your vote matters." We are all ashamed in the House, or we jolly well should be, that only 59 per cent. of people voted in the general election. We tell people that their participation counts, but what are we supposed to say if we pass legislation that the entire House of Commons said it would not pass—if within two and a half years of the election it is passed through the House of Commons in direct defiance of all those pledges? I went to a primary school the other week to talk to the children about Westminster and what MPs do. An 11-year-old put up their hand and said, "But Mr. Hague how do we know, if you are going there for five years, that you are going to do what you said you would?" I said, "We all try." In fact, in that rare spirit of cross-party generosity that comes across us all when we talk to people who do not have a vote for another seven years, I even said, "Mr. Blair tries. We all try. Sometimes it doesn't work, aspirations are unfulfilled, targets aren't met, but we try to keep the promises that we made to the people." What will we say in future?

Graham Allen (Labour, Nottingham North)

rose—

William Hague (Conservative, Richmond (Yorks))

Will the hon. Member for Nottingham, North (Mr. Allen) be able to say that the Labour party kept its election commitment?

Graham Allen (Labour, Nottingham North)

I shall say it in my speech, if I am lucky enough to catch the Deputy Speaker's eye. Does the right hon. Gentleman know what the Conservative policy is on the issue? If so, would he tell all the parties present and all those who are watching his entertaining speech at home?

William Hague (Conservative, Richmond (Yorks))

The hon. Gentleman knows that the great virtue of being an ex-leader of a party is that one does not have to explain the policies for the future. I am responsible for the past, not for the future. My hon. Friends will explain their policy before the general election, and it will then be the job of every Member of Parliament elected to support that future Conservative Government and every Member of Parliament elected to any party to hold them to account when they are in office to keep whatever commitment they make at that general election. That should be the job of all Members of Parliament in the House.

That is why, even though the Prime Minister has looked them in the eye and asked, "Are you going to be loyal?", it would be better for the health of our democracy if Labour Members were loyal to the voters, kept faith with the country and were true to their word than if they were loyal to a transient Prime Minister. I have always said that people regard the Prime Minister first with fascination, then with admiration, then with disillusionment, and then with contempt. We are well down that process now. As the waves of contempt close over him in the future, we will still want a healthy democracy. We will still want people to believe that their vote counts, and that what Members of the House of Commons say they will do is what they will do in practice.

Let us not try to claim in the House that none of us has ever made a U-turn or changed a policy. Usually when any party changes a policy, it is because circumstances have changed in some way—there has been a war, there has been a recession, or some new information has come to light. There is nothing that we know now about the state of our universities that we did not know two and a half years ago. There is a serious problem in our universities with academic salaries. There are many serious problems in our universities, but we knew all that at the time of the last general election and we all knew it when we wrote our manifestos.

We did not write those manifestos casually. We are not talking about something that was slipped in by some junior official who went to the printers while the leaders of the parties were not looking. Our commitment went into the manifesto because in each party we had a meeting about it. I was leader of the party when we wrote it into our manifesto, and we had a meeting about it. We asked, "Is everyone responsible for this policy sure that this is right—that this is what we are happy to do if we win the election?" We knew that was an unlikely event, but we still took it seriously. Presumably the same thing took place in the party of Government, which did expect to win the election.

That was a premeditated promise, a categoric commitment, and it is a shameless and ruthless breach of that commitment that the Government are engaged in today. That is why it is a bad day for our democracy if the Bill goes through. It may be a bad day for higher education, or it may be a good one. I do not think it is, but even if it were, it is an overriding argument that when the entire House of Commons has pledged itself to a particular policy, it should do its utmost to keep faith with the country, rather than breach faith with the country.

I know it might be advantageous in a narrow party sense—I am talking about my party—for the Bill to be passed by a small majority tonight, or to be passed by any majority. Then the great agony of negotiating, deciding and voting on it on Report and so on will begin. The right hon. Member for Newcastle upon Tyne, East and Wallsend will continue to make his trips to the Treasury and will become an even more central and powerful figure in the Labour party, and what an awful process that will be for so many of his colleagues. All these things will go on, and Labour Members will parade around at the next election as though they had a placard round their neck that read, "These people do not keep their word." In many ways we are happy for them to parade around with that placard, but it is not good for our democracy or our democratic values.

There are many other objections to the Bill. Although it is presented as a way of escaping further increases in taxation, it is tantamount to an increase in taxation, and a particularly harsh, arbitrary and unfair increase in taxation, because it will particularly hit people on middle incomes who have bright children. The man who said to me a few weeks ago—[Interruption.] I will not give way again because I only have 28 seconds left. As for the man who said to me the other day, "I've saved a bit, I'm not going to get any help, I've got three bright children, and I want them all to go to university," what will the Government say to him? Are they sure that the third child is not going to be discriminated against because they are the third child wishing to go to university? It is a bad policy that is bad for democracy in this country and it should be rejected.

Barry Sheerman (Labour/Co-operative, Huddersfield)

I follow an entertaining speech, but the former leader of the Conservative party is trying to reinvent the British constitution. I always understood that the parliamentary constitution of this country meant that a manifesto commitment lasted for one Parliament and did not bind the next Parliament. We can agree to disagree on that.

I want to speak briefly on what the challenges of this Bill mean for higher education and for the future of our country. The House should bear two things in mind, one of which is that this country will not survive as a competitive nation unless it uses all the skills of all its people and releases the potential of every child and adult in this country to the fullest extent.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Will the hon. Gentleman give way?

Barry Sheerman (Labour/Co-operative, Huddersfield)

No.

As Chairman of the Education and Skills Committee, which has conducted four inquiries into higher education in the very recent past, I can speak with some authority, as some of the leading experts in the country have given evidence to us. There is no doubt that if we examine our education system, we will all recognise one clear underperformance: the underachievement of many people who come from poorer backgrounds, and the inability of our education system, over 150 years of public education, to deliver the full potential, in terms of educational opportunity, of all our children, however clever they may be. If we examine the graph showing bright working-class children and average middle-class children at two and a half years of age, we find that by the age of six they have crossed over in terms of academic performance. Such a failure is a disgrace to all of us.

I do not agree with everything in this Bill, but I believe that we should support it. I do agree, however, that in 1997, for the first time in the history of this country, a Prime Minister ran—this is a manifesto commitment—on "Education, education, education," as our Government's priority. That was what they were going to deliver, and they renewed that commitment in the following election. That is what mattered. I do not remember a stirring commitment from any Conservative Member.

I remind the House that since 1997 the Government have poured money into those areas in which policy evidence suggests that it is most effective: early years, sure start and the preparation of young children; free nursery education for four-year-olds and now three-year-olds; an 80 per cent. increase for school buildings; a 60 per cent. increase for junior schools; and a 35 per cent. increase throughout secondary education. We never had such spending previously in the history of this country. That is something of which I, as a Labour Member of Parliament, am proud to put before an electorate. In addition, the provision of education maintenance allowance at 16 is keeping young people from working-class backgrounds in education from 16 to 18—the time at which they can drop out.

That is what we have achieved, and I put this Bill in that context of great achievement. I remember that cheap jibe from the Leader of the Opposition recently—that he was a grammar school boy talking to a public school boy. No one is responsible for the school to which he or she is sent, but we have every responsibility for the school to which we send our children. That is our responsibility as individuals. I have always used and supported, as have most of my Labour colleagues, state schools—we have not preached about the public sector and sent our children to the private sector.

In terms of the context of the Bill, I want to comment on why it is important to invest in higher education and find diverse resources to invest. The Government are wrong if they do not believe that there will be a greater call on the taxpayer over the coming years to invest in a higher education system that really competes with the best in the world. However much money we get from this new form of variable fee, which I support, it will not be enough to make our university sector the most competitive in the world, so more taxpayers' money will be required.

Some of my hon. Friends talk complacently about a two-tier system. Do they realise how many opportunities a child who is sent to the private sector, or to a selective school or grammar school, has in terms of getting to the best universities compared with the ordinary child who goes through the comprehensive system? The system is still rigged in favour of the privileged. The Bill will make a remarkable step towards opening up our universities to all the talents. I am an unashamed elitist, but I want the kind of elitism that is based on a person's potential and grades, not on whom they know, how well connected they are, and whether they are given the best opportunity to get the best A-levels and to peak at 18. I want every child of talent to be able to walk through the doors of every first-class institution in this country.

Graham Allen (Labour, Nottingham North)

Does my hon. Friend agree that restoring a grant, particularly at the level of £3,000, will be seen as one of this Government's greatest achievements in education? He said that no more money is available for this package, but has he considered the zero rate of interest that will be charged on the loan to pay the fees? That is a Government-preferred rate that could save several hundred million pounds, which could go into making the grant even higher—it might end up going from a standing start to more than £3,000 for people on the lowest incomes.

Barry Sheerman (Labour/Co-operative, Huddersfield)

My hon. Friend tempts me on to interesting territory. As he knows, the Select Committee on Education and Skills recommended that the zero interest subsidy for middle class families—amounting to £1.2 billion—could have been taken away and used for other purposes, but the Government did not accept that, for reasons that I understand.

Overall, my hon. Friend is right. The package before the House will build on our other reforms to open up educational opportunities in the educational system. As politicians, we should always admit it when we are wrong. I was wrong—and my Select Committee agreed with me—when I came out against the Office for Fair Access. On reflection over the months, I decided that I, personally, was wrong about that. OFA will be part of the process of prising open the system and providing the necessary leverage to ensure that the most talented people can get into any institution into which their talent drives them. In other words, it will do something that universities are loth to do. That is not a criticism. Universities started to talk about top-up fees because they had had 18 years of the Conservatives screwing them into the ground, with more students, fewer resources, appalling pay for lecturers, and no opportunity to do anything about it. In frustration, many said, "We've got to have top-up fees—we need £10,000 or £15,000 to make this a world-class competitive higher education sector."

That is the background. Now, the Bill is introducing the fees policy. It is a good Bill which opens up educational opportunity and delivers in a way that was never possible in the past. Our future economic prosperity depends on investment in higher education. The good life for all our constituents depends on how much we pile into that, and on retaining in our country people with higher education. I recommend the Bill; I am unashamedly in favour of it.

Gillian Shephard (Conservative, South West Norfolk)

I draw the attention of the House to the fact that for the past three years I have been a member of the governing council of the university of Oxford, which is an unpaid position.

A year ago, the Government published their White Paper on higher education, which identified a number of problems in the higher education sector. They were primarily that the sector needs to expand—up to a participation rate of 50 per cent.—that it needs more funds, and that participation should widen across socio-economic groups. The House is entitled to ask whether the Bill will solve those problems and, if it will not, to reject it. In the brief time that I have for my speech, I hope to address those questions and to raise one or two others.

The Government's White Paper presents some interesting contrasts with its predecessor: the Dearing inquiry that was proposed to the House in February 1996. In 1996, the number of young people in higher education, after a very rapid expansion, was approaching one in three; at present, about 43 per cent. of people aged between 18 and 30 are involved. In 1996, the UK was spending more on higher education than any country in the western industrialised world. A third of all first degrees were in science, mathematics and engineering. Last year, a third of all first-time graduates had studied business and administration, creative arts and design or social studies.

Like its successor, the Dearing inquiry was concerned with the growth of knowledge, technological advance, international competition, the need for professional flexibility and for updating and upskilling. It, too, had to consider the implications of increasing student numbers; the number of first-time graduates had more than doubled between 1979 and 1996. Unlike its successor, however, the Dearing committee was not asked to assume that a growth in numbers was desirable for its own sake; rather, the inquiry was asked to make recommendations on

"how the shape, structure, size and funding of higher education, including support for students, should develop to meet the needs of the UK over the next 20 years."—[Official Report, 19 February 1996; Vol. 272, c. 22.]

By contrast, the Government's White Paper sets a 50 per cent. target for participation in higher education. The basis for that target is, in essence, a political aspiration—that is okay—based on what the Government believe is economically and sociologically desirable. Their justification for that figure is vague; it does not seem to be linked to the requirements of the jobs market. Indeed, the Association of Graduate Recruiters has reported that the majority of its member companies, which include KPMG, Unilever, JP Morgan and, notably, the national health service, finds that the UK already produces too many graduates.

Robert Jackson (Conservative, Wantage)

During my right hon. Friend's visits to Oxford, has she encountered the Higher Education Policy Institute, which has produced papers showing that a reasonable projection is that student numbers will rise to 50 per cent. by the end of this decade? That is a projection, not a target, and it flows from the fact that all Governments—like our own party—are committed to the idea that all qualified young people who wish to enter higher education will be able do so.

Gillian Shephard (Conservative, South West Norfolk)

That happens to have been my position. I am perfectly well aware of the existence of the institute and indeed have been in touch with it.

My point is that the Government have a perfect right to aspire to a 50 per cent. participation rate in higher education, but they do not have the right to convey the impression that there is an objective justification for such a target, nor to assume that without such justification they will necessarily carry the day with those who have to foot the bill or, in other ways, accept the consequences. The Government must also accept that since that 50 per cent. expansion is part of the higher education funding crisis—in their terms—they must be able to justify it and persuade others of the rightness of their arguments.

Jonathan R Shaw (Labour, Chatham and Aylesford)

In the light of the comments of the hon. Member for Wantage (Mr. Jackson), will the right hon. Lady tell the queue of parents whose children have two or more A-levels that they will not have a university place?

Gillian Shephard (Conservative, South West Norfolk)

My point is that admission to university should be based on merit and capability, not on targets set by the Government according to what is politically desirable. That point is shared by many academics, including Professor Alan Smithers of Liverpool university, who has said:

"Higher education has been expanded as a superior form of youth training to keep down unemployment. There are a lot of courses which don't lead to a good understanding of the world or equip students for a job."

Those are his words, not mine.

Alan Howarth (Labour, Newport East)

Will the right hon. Lady give way?

Gillian Shephard (Conservative, South West Norfolk)

No, I shall not give way again.

What will the Bill do to address the second problem—that of underfunding—bearing in mind that the Government are in part the author of their own misfortunes? Will its proposals improve the funding position of the universities? Professor Michael Sterling, the chairman of the Russell Group, thinks not. In The Times on 8 January this year, he said:

"We have all got ourselves into a mode of belief that what is in the Bill will solve the problem. Everybody knows that it won't, including Charles Clarke."

It is true that he made those remarks on 8 January, and that 26 or 27 concessions have been made since then, but the principle is still a good one.

The cost of the proposals in the Bill will be more than £1 billion, as the right hon. Member for Newcastle upon Tyne, East and Wallsend (Mr. Brown) has confirmed. That cost will have to be met from the higher education budget, because top-up fees will raise less than £1 billion, once the cost of bursaries has been taken into account, not to mention the cost of any further concessions. There could be another one tonight: who can say? The reference by the right hon. Member for Newcastle upon Tyne, East and Wallsend to the nods and winks from the Treasury was most revealing. Perhaps we shall see more concessions based on such nods and winks. What a pity that the representatives of the Treasury are not in the House this afternoon.

The third problem that the White Paper identifies is the low participation rate in higher education among the three lowest socio-economic groups. On this, the Government have to confront their own broken promises. They broke the promise made in the 1997 general election campaign that tuition fees would not be introduced, when they revealed in their response to the Dearing report that they planned to introduced such fees and that, for good measure, they would abolish maintenance grants. In 2001, they promised not to introduce top-up fees, yet the Bill introduces them.

At the same time, graduate student debt is increasing dramatically. A recent MORI poll published in The Daily Telegraph last week found that student debt had risen by 74 per cent. over the past four years, with the average graduate debt standing at £8,000. Quite what kind of blow the Government believe the Bill will strike for higher participation from the three lowest socio-economic groups is not clear, but whatever their belief, it is not shared by university teachers and students. As the president of the National Union of Students has said:

"We must question why the Government refuse to recognise the deterrent that debt is for students from the poorest backgrounds."

The Bill cannot achieve what the Government said in their White Paper needed to be done. That alone should be enough to persuade any right-minded person to vote against it, but there are other, more fundamental objections. Not least is the fact that the Government, having trumpeted their intention to give universities and colleges more independence, are introducing a Bill that will, unprecedentedly, impose financial penalties on institutions that fail to introduce approved admission criteria. This extraordinary control-freakery in pursuit of a social, rather than an academic, agenda has never been seen in this country before. It is to be expected, however, from a Government who have shown time and again, today and during the wider debate, that they regard universities, in part, as instruments of social policy, while ignoring their real role, which is to create and disseminate new knowledge and to preserve and transmit to future generations a body of knowledge inherited from the work of earlier generations.

I accept that universities should, and almost always do, make every effort to disseminate what they can offer to students, provide outreach programmes and preparation courses, and sell their wares across the country. However, if they are to remain the guardians of academic excellence and freedom, they must be allowed to admit on merit alone.

James Purnell (Labour, Stalybridge and Hyde)

Will the right hon. Lady give way?

Gillian Shephard (Conservative, South West Norfolk)

No. The Government are the authors of their own misfortunes. The electorate are repelled by their cynical ditching of their election pledges—not once, but twice. The electorate can see that these proposals will help neither students nor higher education and that they will deter, not encourage, young people from less well off homes to enter higher education. They will also strike a fundamental blow at the independence of universities.

Finally, the Government's inability, despite a majority of 164, to handle their own affairs will not be lost on the voters. The Bill should be opposed.

Alan Howarth (Labour, Newport East)

In the early 1990s, as higher education Minister, I thought hard about how to retrieve the universities from what was already a gathering financial crisis. I concluded that we should move towards top-up fees. I was indeed edging in that direction when my Secretary of State, the right hon. and learned Member for Rushcliffe (Mr. Clarke), genially kicked top-up fees right out of play. It is true that they were not practical politics then. The new student maintenance loans were still controversial and the Inland Revenue refused to have anything to do with administering repayments by graduates. Now, more than a decade later, I very much welcome the Bill, as well as the package of student support and funding for the universities, introduced by my right hon. Friend the Secretary of State.

The Government's policy is fair to students. Up-front fees will go and students from low-income households will be vastly better supported by grant, fee remission and bursary. Loans for maintenance will be increased to match average student expenditure on essentials. That means that no one will be unable to afford to go to university.

The loans will carry no real rate of interest. Critics who worry about debt aversion and graduates being locked into additional debt should acknowledge that the Government are not plunging students into mortgage-type debt, credit card debt or loan shark debt. There is nothing for students to be scared of in these changes. While graduates are earning less than £15,000 or not earning at all, no repayments will be required. On earnings of £20,000, graduates will repay annually only half what they presently repay. Outstanding debts will be written off after 25 years. It is a very good deal indeed.

Tim Boswell (Conservative, Daventry)

The right hon. Gentleman, who shared responsibilities with me at the time he refers to, has mentioned a repayment threshold of £15,000. Would he care to speculate as to what the starting point would be under the mortgage-type loans, which he traduces but which he and I administered under the Conservative Government? Would it not already be more than £20,000?

Alan Howarth (Labour, Newport East)

We can certainly say that raising the threshold is a substantial improvement and that the important thing to do is to work towards creating better conditions—more propitious conditions—for people to go to university.

The Government are being fair to students in holding down the maximum annual repayable fee to £3,000. If in due course it is proposed that the maximum fee should be raised in real terms, we will all need to think very carefully indeed in considering graduates' income and expenditure patterns. People need to save more for their pensions while shouldering prodigious mortgage costs, bringing up children and, possibly, caring for elderly relatives. They will have to repay university fees as well as student loans. I hope, for the sake of universities, that the £3,000 maximum fee is eventually increased somewhat, but it must be affordable for graduates.

Graham Allen (Labour, Nottingham North)

Will my right hon. Friend make it clear in terms of repayment of fees that no student and no parent, rich or poor, will pay anything? Graduates will repay the fees, and do so at the rate of £5.25 a week when they are on £18,000 a year and at only £25 a week when they are on £30,000 a year. As my hon. Friend the Member for Lewisham, West (Jim Dowd) said, on an interest-free loan, everybody can realise what a great deal that is.

Alan Howarth (Labour, Newport East)

I am greatly looking forward to my hon. Friend's speech.

Variable fees are fairer to students than flat-rate fees. This infamous marketisation will mean, within the strict limit that the Government are imposing, a dynamic of accountability that will help to ensure the responsiveness of university departments to their students. It would plainly be unfair if the Department for Education and Skills, like so many "Gosplanners", were to impose a single tariff for every university course whatever its academic level, quality, cost, popularity and value in the marketplace. I welcome the new powers for the Welsh Assembly, but I urge my Assembly Member colleagues to reconsider their position on variable fees.

I am pleased that my right hon. Friend intends to move towards abolishing the means-testing of student loans. That, too, will be fair to students because it will confer on them financial independence from their parents and therefore treat them as young adults, like their peers who left school and went more or less straight into paid employment.

The policy is fair to taxpayers as well as students. Everyone gains from excellent universities, which are the trustees of our civilisation and inherit, transmit and develop our culture. They ensure that we continue to have a worthwhile life of the mind. Whitehall, in its obsessive materialism and instrumentalism, often ignores that. Whitehall validly recognises, however, that, without more university education, we will be less prosperous. Universities are therefore a public good and the Government are right to plan to increase expenditure on higher education and envisage that five sixths of funding for universities should derive from general taxation. The income from top-up fees will be only one sixteenth of the amount that the taxpayer will provide. That contrast has not been sufficiently noted.

Equally, it is right that taxpayers should not be required to pay for all the increase in funding for universities. Graduates enjoy a large personal benefit culturally and materially from their higher education. Eighty-two per cent. of taxpayers have not been to university. I cannot ask my constituents in disadvantaged wards of Newport, East to foot the bill for all the private and personal gain of university students.

David Rendel (Liberal Democrat, Newbury)

Will the right hon. Gentleman give way?

Alan Howarth (Labour, Newport East)

No. Any extra revenue from taxation available for education should go towards improving education from infancy onwards. Precisely because we want more people from disadvantaged backgrounds to go to university, our priority for public expenditure must be pre-university education so that we raise aspirations.

My right hon. Friend's policies are fair, too, to the universities. The Government are providing significant financial relief. Top-up fees may bring in £1 billion; a £3,000 fee is a 30 per cent. increase in funding per student; and £1 billion represents 10 per cent. of planned public expenditure on the universities—a significant proportional increase.

The financial plight of the universities as it is, even after the Government's important improvements in funding since 1997, remains dire. Libraries and laboratories are miserably and stupidly underfunded, buildings are dilapidating, staff-student ratios have drastically deteriorated, the findings of the latest research assessment exercise were not honoured and, most unjustly and foolishly of all, academic salaries have become a pittance.

The extra £1 billion from top-up fees comes, of course, on top of the Government's commitment to increase public spending on higher education by 6 per cent. a year in real terms over the next three years, rising to £10 billion in 2005–06. Although that increase falls short of the £10 billion over three years for which Universities UK has—reasonably enough—bid, it will make a big difference. And it is only fair. Universities trebled student numbers in 20 years while maintaining standards in teaching; in 20 years, too, funding per student fell by 40 per cent.; research ratings improved while funding failed to keep pace; academic salaries all but stood still while average earnings in the United Kingdom rose by almost half. No group of workers has increased its productivity more or been so poorly rewarded. Against that record, some of my right hon. Friends should be wary of castigating the universities for poor management.

Top-up fees also have the virtue that they bring a small enhancement of independence to universities. My right hon. Friend the Secretary of State should aim further to increase their independence. The White Paper spoke of the desirability of new endowments. While the Conservatives can dream their dreams, the Government should at least lay the foundation for the long-term creation of endowments. We cannot revert to the vision of that brief moment in the history of the universities—the 25 years between the Robbins report of 1963 and the Education Reform Act 1988—of a fully state-funded system, underwriting students to live and study away from home. We know, too, however, that even as the state has withdrawn from that commitment, it has multiplied its intrusions into the affairs of universities, with a change to the legal status of tenure, the Secretary of State's ever more detailed and prescriptive letters of guidance to the Further Education Funding Council and bureaucratic Pelion piled on Ossa.

Now the Bill creates an Office for Fair Access. Its purpose is unexceptionable; the state has legitimate claims to make, but I find the notion of a regulator for universities disquieting. I hope that my right hon. Friend ensures that OFFA operates with the lightest touch and, that as the Government increase the financial independence of universities, they will become less dirigiste, trust the universities more and allow them scope as free centres of knowledge, thought and teaching.

Michael Jack (Conservative, Fylde)

I find it somewhat odd to speak in a debate in which the Government of the day include two former presidents of the National Union of Students who, when they stood on those conference platforms and made their speeches defending the interests of students, would not have dared for one moment to advance proposals such as those that have found their way into this Bill. It seems in a way that they have sold out for a mess of pottage, which I find deeply distasteful and disappointing.

In their White Paper "The Future of Higher Education", the Government rightly say

"Our economy is becoming even more knowledge-based and we are increasingly making our living through selling high-value services . . . A comprehensive review of the academic literature suggests there is compelling evidence that education increases productivity."

I agree with those two sentences.

Graham Allen (Labour, Nottingham North)

On a point of order, Mr. Deputy Speaker. Is it not a convention that when a Member names or implies the name of another, the Member in question is allowed to respond to an accusation made in that way?

Alan Haselhurst (Deputy Speaker, Saffron Walden)

I am grateful to the hon. Gentleman for speaking on the basis of his long experience of procedural matters, but I have not as yet observed a breach of the convention to which he refers. The right hon. Member for Fylde (Mr. Jack) was engaged in a quotation. The convention is certainly correct, but it is up to him whether to observe it in due course.

Michael Jack (Conservative, Fylde)

I am grateful to you, Mr. Deputy Speaker.

In answer to a parliamentary question that I asked about the rate of return to the United Kingdom in respect of investment in higher education, the Minister for Children, the right hon. Member for Barking (Margaret Hodge) said that the social rate of return on higher education for men and women entering at 18 was between 9 and 11 per cent. That is a superb rate of return.

The White Paper points out that the more that is put in, the more the nation gains. That is why investing in its brightest and best is the right thing for the nation to do, and why it is wrong to do as the Bill does and put barriers in the way of access to higher education for talented young people.

Lorna Fitzsimons (Labour, Rochdale)

After being named, I had given up hope.

As one of, in fact, six former presidents of the NUS present in the Chamber, all of whom support the Government's proposals, I can safely say that I am on record as supporting a graduate tax when I was president.

Michael Jack (Conservative, Fylde)

The two former presidents to whom I was referring are the Foreign Secretary and the Secretary of State for Education and Skills, who, unlike the hon. Lady, were of my vintage.

Let me say a little more about the rate of return to the nation. The House of Commons Library has calculated for me that graduates who, by definition, are earning more are paying more in taxes. There is already a tax differential of some £2000 a year between what a graduate pays in tax and what a non-graduate pays. On that basis, the nation is earning a very good rate of return on its investment in graduates.

I believe that, as a point of principle, it is right for the nation to invest in its brightest and best for all our good. The young lady who tackled the Prime Minister on "Newsnight" asked whether the dustman would not be glad that she, a doctor-to-be, had used her skills and talents to provide the cure that he needed without being deterred from entering the profession—like many graduates who wish to become medical students—by talk of £60,000 of debt.

The rest of the debate is in Hansard.