Higher Education Bill

Public Bill Committee, 9 March 2004.

Standing Committee H

Higher Education Bill

Roger Gale (Conservative, North Thanet)

Mr. Hood sends his apologies. I believe that he is stuck in traffic and may join us later. In the meantime, I have the pleasure of the Committee's company.Clause 32 Approval of plans

Clause 32 - Approval of plans

Tim Collins (Conservative, Westmorland and Lonsdale)

I beg to move amendment No. 45, in

clause 32, page 15, line 9, leave out 'if it thinks fit'.

Roger Gale (Conservative, North Thanet)

With this we may discuss the following amendments: No. 289, in

clause 32, page 15, line 10, leave out 'may' and insert 'shall'.

Amendment No. 288, in

clause 32, page 15, line 13, leave out subsection (4).

Amendment No. 105, in

clause 32, page 15, line 15, leave out from 'may' to end of line 19 and insert

'specify matters to which the necessary authority may have regard in making any determination relating to approval.'.

Amendment No. 75, in

clause 32, page 15, leave out lines 16 and 17.

Amendment No. 76, in

clause 32, page 15, line 20, leave out 'may' and insert 'shall'.

Amendment No. 46, in

clause 32, page 15, line 24, leave out paragraph (b).

Tim Collins (Conservative, Westmorland and Lonsdale)

It is a pleasure to serve under your esteemed yet unscheduled and unexpected chairmanship, Mr. Gale. We look forward to seeing whether you transmogrify into your co-Chairman, Mr. Hood, with a whirr of BBC special effects worthy of the regeneration of Dr. Who.

We come to the final day of our deliberations. It is unlikely that the Government will grant us even more time, so we are grateful for the little that we have had and look forward to getting through the immense amount of material that remains. There are some 18 clauses, schedules and new clauses. The Minister will be relieved to hear that given that there is so much material for us to get through, we hope to make progress and do not intend to prolong matters unduly.

The clause is important. It is at the heart of the process by which the director of the office for fair access will impose his or her will on higher education institutions. It also introduces an important mechanism for establishing the extent to which OFFA will be answerable to the Secretary of State for the way in which the powers that the Bill allocates are exercised. Some of the amendments explore how

OFFA will use the powers that are granted to it and how sensible it is for the Secretary of State to have as much power to direct and instruct OFFA on how it should do its job as the clause provides.

The amendment is a clarifying amendment. We are uncertain why ''if it thinks fit'' is necessary in subsection (2), which states:

''The relevant authority may, if it thinks fit, approve the plan.''

As the word ''may'' implies that approval of the plan is not automatic, and as clause 32 and other clauses in part 3 give OFFA some discretion, we are uncertain why it is necessary to specify ''if it thinks fit''. Those words are redundant and we are interested to hear the Minister's technical explanation of them.

Tim Boswell (Conservative, Daventry)

My hon. Friend is aware that I am under a time restraint, owing to other duties. Does he agree that it is also interesting that the clause does not appear to have any time signature on what is a reasonable time in which to consider and approve a plan, and that a constant process of niggling queries and responses to them may be tantamount to failing to approve the plan at all?

Tim Collins (Conservative, Westmorland and Lonsdale)

I am sure that members of the Committee are aware both that, sadly, my hon. Friend must attend another Committee to deliberate on another piece of legislation and that we shall be the poorer for the absence of his learned contributions. For many of us, our knowledge of classical times and military tactics of the ancient Greeks will be all the more lacking if he is not here.

My hon. Friend makes an important point. The clause not does not specify any limit on the time that OFFA may need to consider the approval of a plan. I suspect he would agree that the Minister is likely to say that approval will take place within a framework that has been previously established, that it will be done academic year by academic year, and that it is unlikely that the procedure will drag on for month after month. I am sure that the Minister will also reassure us, as he has done previously, that he expects that most of the time for approval will simply amount to rubber-stamping plans that are already in place in many, if not all, higher education institutions.

We must be careful when legislating to think of the difficult cases that could arise. I dare say that the Government expect the Bill to be on the statute book for some years; we are confident that it will be removed within 18 months. None the less, they must legislate on the basis that it will be in place for a long time, so we have to think of the difficulties that could arise. I am sure that many higher education institutions would have welcomed something to limit the time that can be spent considering the plans, and we will discover whether the Minister can address that point.

Amendment No. 289 is designed to broaden the discretion of the director of OFFA. Instead of the Bill stating that the relevant authority ''may'' issue guidance to institutions, it should state ''shall''. That allows us to explore the problem of higher education institutions being left in limbo as a result of the Bill's wording. We contend that we would be much better off without a director of access to higher education. We do

not want that institution to be created because it will create the possibility for conflict and interference with academic freedom, and for heavy-handed, heavy-booted interventionism.

If we are, however, to have such an institution, it is logical for universities to know the ground on which they stand. Being in a state of not knowing whether they are to be issued with guidance or given a framework, or whether at any time they will be subject to intervention or interference, is the worst of all possible worlds. Uncertainty in such circumstances begets problems and worries. We are interested in exploring why the Bill provides that OFFA merely ''may'' rather than ''shall'' issue guidance.

At the heart of the group are amendments Nos. 288 and 105. In amendment No. 288, we propose to delete subsection (4), which prescribes:

''The relevant authority's functions under this section''—

that is OFFA's function—

''are to be exercised in accordance with regulations.''

That is the deadly part of the Bill because it states that OFFA is to be circumscribed and handcuffed. It is not to be an independent institution, but will be subject to direction in fairly specific terms from the Secretary of State.

Chris Grayling (Conservative, Epsom and Ewell)

The sinister hand of the Minister.

Tim Collins (Conservative, Westmorland and Lonsdale)

Splendid stuff, and the Minister is looking at his hand. We need some chilling music from the ''Hammer House of Horror'' archives.

What regulations might either the present or a future Secretary of State issue to instruct OFFA? The Minister has been kind enough to share some paperwork with us, but it is stamped with that magical word ''draft'' all the way through. At most, it is merely a reflection of what regulations Ministers might want to issue now, and certainly of what they want to say now about how they will use their legislative powers to impose things in the future. I fear we cannot be confident that, once this general and sweeping power has been granted to Ministers, all that it will be used for is simply to reflect existing regulations.

Although it is welcome that the Minister has chosen to share his thinking with the Committee in advance by issuing the regulations in draft form, they give rise to some concern. In their present form, they would be open to disagreement and lack clarity, so they could be interpreted differently. They specify some of the more controversial proceedings relating to OFFA's operations. I do not want to revisit last week's debate, and I am sure, Mr. Gale, that you would bring me sharply to order if I were to do so, but there are difficulties with differing interpretations of access, admissions policies and equality of opportunity. Specifying that regulations will be set out for OFFA does not address all those concerns, not least because there is nothing in clause 32—one would not expect it—to establish a self-denying ordinance by which Ministers cannot return to or amend a set of regulations once they have issued them. As it stands,

once that power is granted, as it is in clause 32(4), it is open to present or future Ministers to alter, reinterpret or issue new guidance on those regulations.

I reiterate that it is our view that we do not need OFFA at all, but if we are to have it, it makes sense for it to be politically neutral and independent rather than subject to detailed day-to-day ministerial intervention. However benevolent current Ministers are, they may not always be so benevolent in future or may be succeeded by others who are not so benevolent.

The general powers granted to the Secretary of State in clause 32 are too sweeping and too widespread. They must be circumscribed and limited. Amendment No. 105 would remove the requirement, cited in line 20, that

''Regulations may require the institution . . . to publish the plan in the prescribed manner'',

and replace it so that regulations

''specify matters to which the necessary authority may have regard in making any determinations relating to approval.''

The amendment explores the precise ways in which the Government anticipate that OFFA will operate on the important subject of the plan's content and the way in which it is published. Higher education institutions will be at great pains not only to address any perception of unfair access policies, but to do so in public, so that they are seen to address such problems. In an earlier debate, the Minister said that some institutions—including Oxbridge, but it may not be limited to those universities—had very good access policies, but had not been successful in publicising them. He thought that part of OFFA's role would be to require higher education institutions to devote a greater amount of their time, and possibly more resources, to providing publicity for the efforts that they already undertake as part of their access plans.

One way to partly resolve that relates to the publication of the access plan itself, which in turn relates to clause 32(6), which amendment No. 105 would amend. It will be interesting to hear the Minister's proposals for publicising access plans. If we are to have those plans, it will be a great advantage if they are widely known. We would not want them to be obscure. Some Committee members might remember the famous description in the work by Douglas Adams of a planning document that was supposedly publicly accessible but which was, in fact, at the bottom of a locked filing cabinet, in a room marked ''Beware of the tiger'', under a flight of stairs without a light bulb. It is desirable for the access plans of higher education institutions to be a little more publicly available than that, so what exactly does the Minister have in mind to achieve that? Will he, for example, require their contents to be made available on the internet or in newspaper advertisements? Will he require any changes that are made to the plans from one academic year to the next to be publicised in the same way?

Leaving aside the advantages of freedom of information, has the Minister given any thought to a possible disadvantage? If the access plans negotiated with the access regulator are to be fully effective, they may need to address issues that it is not so easy to publicise. If individual admissions tutors or others at a university or higher education institution are not

entirely signed up to the principles underlying the access plans, if might be felt necessary, in verbal discussions or even written communications between the access regulator and the institution's governing body directly, to address previous perceived failings and difficulties with certain named individuals. It would not be sensible to splash such things all over the public prints or the internet. Does the Minister envisage any part of an access plan being kept confidential or being publicised differently from other materials?

The Minister will know that there is the greatest nervousness among some in the higher education world about this very topic—the practice of individual admissions tutors—and what is envisaged for the plans. He has gone to great lengths to stress that there is a major difference between access and admission, but we do not accept that distinction. Even if we were to pretend for a moment that such a distinction could easily be drawn, it is difficult to understand how one could properly analyse the success or otherwise of access without considering the work of admissions tutors. Should they be named in relation to access plans as a matter of policy? Should there be specific provisions relating to their practices, desirable or otherwise? The matter is of particular interest to several people in the higher education world who are keen for the measures to be implemented with a light touch.

Although the Minister already knows this, let me put it on the record again that Universities UK strongly supports the Bill. We must put all its comments in that context. None the less, it has expressed concerns about clause 32. In its briefing to the Committee, it says:

''Universities UK is concerned that the promotion of higher education and of equality of opportunity in connection with access to higher education is not achieved at the cost of some of the most important qualities that define higher education, namely academic freedom and institutional autonomy.''

It goes on to say that it is worried about the discretion given to the relevant authority. Although that discretion will, of course, be subject to judicial review, Universities UK is concerned that the clause makes no specific reference to academic freedom or institutional autonomy.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

First, I thank you, Mr. Gale, for your good wishes last week. I also thank the Committee, especially the many members of the Conservative party who visited me in Harrogate.

I have much sympathy with the issues raised by the hon. Member for Westmorland and Lonsdale (Mr. Collins). However, given that the Secretary of State indicated in an article in The Sunday Times that, irrespective of their achievements, preferential treatment would be given to students from schools that are under-represented in higher education, does he not think that his comments are much more pertinent as those plans, and OFFA itself, can now be seen as instruments of social engineering rather than as tools for getting high-quality students into higher education?

Tim Collins (Conservative, Westmorland and Lonsdale)

I am most grateful to the hon. Gentleman. First, he enables me to put on record that all hon. Members offer him their best wishes. It is a pleasure to see him back, and I trust that all that he went through last week has been successfully concluded. As he is aware, many members of the Conservative party visited his constituency at the weekend in order to wish him well—indeed, those wishes were the centrepiece of the literature that many of us were putting through letterboxes in his constituency later on Sunday morning.

The hon. Gentleman makes a salient point. A number of Committee members—not only Conservatives—believe that academic freedom should be preserved and that there should be no possibility of political interference. It is not simply a question of whether we believe that today's Ministers would choose not to use the discretion straight away. The problem is that if clause 32 remains unamended, they or subsequent Ministers would have an ability that should be denied to Ministers of any colour.

I strongly endorse what the hon. Gentleman said about the need to avoid social engineering. That is particularly welcome, because we were a little confused about whether his objection to the creation of OFFA was purely mechanistic—in other words, he would have preferred it to be within the Higher Education Funding Council for England, but was broadly supportive of its objectives—or whether, like Conservative Members, he objects to the potential for politically inspired interference in admissions policy. I take it from his intervention that he shares some of our wider concerns.

I was referring to the opinion of Universities UK on clause 32. It will come as no surprise that it is the clause about which it has the greatest and widest concerns. Universities UK supports and welcomes the Bill overall, and it presently takes the view that accepting the provisions of this part of the Bill are a price worth paying. However, in addition to the objections that I listed earlier, it states:

''Universities UK feels that the Secretary of State reserves very wide powers to make regulations governing the work of the Office of Fair Access.''

That is why, in amendment No. 288, we seek to remove those wide powers that the Secretary of State reserves to himself. Ours is not a theoretical objection. I am prepared to be candid and admit that other amendments in the group are probing, but amendment No. 288 is not. It reflects the genuine concern, felt at the highest level in the world of higher education, that the present Secretary of State and future Secretaries of State should not be given the power, through the instruction and regulation of OFFA, to be involved in such detail in the way in which universities conduct themselves.

At the heart of the concepts of academic freedom and institutional autonomy is the right of higher education institutions to decide for themselves whom to admit. If a plan has to be imposed upon institutions by OFFA, and if, in respect of those plans, OFFA can be subject to detailed regulation by a Secretary of

State, we shall be perilously close to direct political interference in matters that should be beyond the purview of any politician. It is not a question of whether the politicians are from the red party, the blue party or the gold party; it is a question of whether any politician should have that sort of power. Our view is that they should not. Indeed,

Given my suspicion that the Minister will seek to rely on the traditional distinction that he draws between access policy and admissions procedures, it is worth quoting one final sentence from the Universities UK submission:

''Future Secretaries of State are given powerful scope by the legislation, as currently drafted, for political interference in admissions policies and decisions.''

That was not dreamt up on the Conservative Benches. We did not come up with it during our amiable discussions at Harrogate. The body that represents the higher education institutions of this land has quite specifically stated, on the record, that this is a matter of concern. The Minister has assiduously held discussions with Members of Parliament and higher educations institutions: the fact that Universities UK states its view so starkly shows it has not been wholly reassured by the language that the Minister has used so far. I therefore hope that he can offer some new assurances today, perhaps in slightly revised language, about the way in which the powers will be used. It would be highly desirable for the Government to accept amendment No. 288. Universities UK, in a specific reference to that amendment, says that it is concerned about the possibility of a Secretary of State being involved in interference with the approval of a plan.

I am sure that the Minister will say that he hopes that OFFA will operate with a light touch and that he forswears any likelihood that the Secretary of State would want to use regulations to interfere directly in individual decisions. I therefore suggest, in a genuinely helpful spirit, that he give the following categorical assurance: that if OFFA reaches an agreement with a higher education institution and is content with the terms of the access plan that has been negotiated with that institution, and if the institution has accepted in full and without qualification all the obligations that OFFA has suggested as part of that negotiation process, there would be no question of a Secretary of State interfering to instruct OFFA not to accept that plan or to instruct OFFA to reopen negotiations on one or more individual points?

I think that the Minister would recognise that that would be welcome assurance and I make my request in a genuinely helpful spirit. The legislation as it stands does not prevent a Secretary of State from interfering at that point. Universities UK is undoubtedly worried that there might be, for whatever reason, good or bad, political interference in a process which at that stage had already reached agreement. If the Minister could give that clear and categorical assurance, it would not answer all our concerns, but would go a considerable way towards removing some of them.

I said, Mr. Gale, that I did not want to prolong matters unduly. These are genuinely important issues. At this point I am happy to see whether other hon. Members wish to speak and to leave the Minister plenty of time in which to respond.

Roger Gale (Conservative, North Thanet)

Before we proceed with the debate, we have received a message to say that Mr. Hood's wife is unwell, which is why he is not with us this morning. I am sure that the Committee will wish to send him and his wife our good wishes. Mr. Stevenson has kindly agreed to take over at 10 am to allow me to carry out some prior engagements.

David Rendel (Liberal Democrat, Newbury)

I, too, do not wish to speak at great length, but we have tabled two amendments in this group. I should like to speak to them briefly, but first I should like to respond to the remarks made by the hon. Member for Westmorland and Lonsdale about the Conservative amendments. We have some sympathy with amendment No. 45, as we, too, cannot see any reason why the words ''if it thinks fit'' are included. I do not think that it will make much difference whether or not they are included, as the meaning of the clause will probably be the same either way, but it will be interesting to hear why Ministers feel that they are necessary.

We are not sure that amendment No. 289 is necessary. It would provide that the relevant authority ''shall'' issue guidance to institutions, but that would be odd if the relevant authority had no guidance to give. The words ''may'' and ''shall'' are more or less equivalent in this case, although it is important that the Secretary of State issue guidance when it is needed.

Amendment No. 288, about which the hon. Gentleman spoke at some length, is interesting. We have some sympathy with it, but our response depends on the Minister's reply. If we are to have the procedure under which the plans are published, we are in favour of regulation. However, there seems to be a lot of power in the hands of the Minister to change the way in which the plans work; in particular, there is a concern, as there has been throughout the Committee stage, that regulations may, in effect, alter admissions rather than just applications. We want the Minister to make it clear that the regulations and plans will have nothing to do with admissions. He has tried to make that clear that already, but I hope that he will reiterate it in relation to this part of the Bill. It is an important point when considering amendment No. 288.

It is important to have plans that safeguard public money properly, so I do not think that amendment No. 105 is sensible. We have never objected to plans as such; what we have objected to is the use of OFFA, which we regard as unnecessarily bureaucratic, and we would object to any attempt to make plans for admissions rather than applications.

I might have missed it, but I am not sure whether the hon. Gentleman mentioned amendment No. 46. It is clearly an attempt to get rid of devolution. We are in favour of devolution in general, so we would not support him if he pressed it to a vote. I doubt that he will.

We tabled amendments Nos. 75 and 76. There is not much point in having plans and OFFA or, as we would prefer, HEFCE and the Teacher Training Agency, if the Secretary of State is going to make all the decisions. Amendment No. 75 is an attempt to ensure that some decision-making powers are left in the hands of the regulatory authority rather than simply those of the Secretary of State. As it stands, subsection (5)(a) appears to allow the Secretary of State to make decisions about plans and how they should be agreed, which would allow him and any future Secretaries of State to make decisions on a party political basis or for the purposes of social engineering. As my hon. Friend the Member for Harrogate and Knaresborough (Mr. Willis) said, we do not want that.

Although there are good reasons to remove subsection (5)(a), there is a lot of sense in keeping paragraph (b), so we do not propose to remove the whole subsection. The relevant authorities need some guidance about the matters that they should take into account.

Tim Collins (Conservative, Westmorland and Lonsdale)

There is not a lot to distinguish our parties on this group of amendments. As the hon. Gentleman rightly says, amendment No. 75 would remove subsection (5)(a) but keep paragraph (b). However, does he believe that it would be sensible for the Secretary of State to have the power to

''specify matters to which the relevant authority is . . . to have regard''?

He is rightly saying that institutions need to know where they stand, but is it desirable for the Secretary of State to be the final arbiter?

David Rendel (Liberal Democrat, Newbury)

There is a point to the Secretary of State giving some sort of guidance to the relevant authority—otherwise the relevant authority will be left entirely on its own to decide what the plans are about. My party approves of higher education institutions having a plan to ensure that they treat applications fairly and receive them from people from all sorts of groups, including those that are not well represented.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Given that the Liberal Democrats believe that the state should pay for the whole of the higher education product, is it not important that the Secretary of State, as the custodian of Government funds, should have something to say about how those funds are spent?

David Rendel (Liberal Democrat, Newbury)

I am delighted that my hon. Friend has reinforced a point I made about an earlier amendment. Given that we are discussing the spending of public funds—if we had our way, all the funds spent in this respect would be public—it is important that the Secretary of State has some control over they way in which they are spent. That is what government is all about.

I turn to amendment No. 76. Plans should be public, because they can affect the decisions that potential students make about which universities to apply to. A plan might contain nothing about how admissions are decided, but if the university—or higher education institution of any sort—was going out of its way to

ensure that it attracted applications from a particular group which might be under-represented at that institution, that information, in itself, would serve as an important piece of guidance to potential students about how that university was working and the sort of people that it was trying to attract. It is important that such information is made public to the student, because they will then be able to choose whether to make it part of their decision-making process.

[Mr. George Stevenson in the Chair]In general terms, transparency is always worth aiming at. It appears that there is at least the potential for plans to remain hidden and for students, if not to be actively misled, at least not to be given as much information as they would have if we changed subsection (6) by replacing ''may'' with ''shall'' and ensured that all the plans were published in full.

Chris Grayling (Conservative, Epsom and Ewell)

Has the hon. Gentleman realised the implications of the amendment? A requirement to make a plan public would be an implicit acknowledgement that the plan might have an impact on the admissions process. If the plan is simply about seeking applications from a broader range of students, there is no need to make it public, whereas if the plan will have an impact on the admissions process, his points are valid.

David Rendel (Liberal Democrat, Newbury)

That is not entirely fair. Universities' plans are made public now, and I do not see any reason why they should not be in future.

I listened carefully to what the hon. Member for Westmorland and Lonsdale said about the potential for the plan to contain specific information about an individual who had not performed well in the past. That is unlikely to happen. I am not sure that I would want that to be included, but if it was I would not want it to be hidden, as that would imply that the university had guilty secret that it did not want to release but felt that it had to have in its plan. If universities are going to take any decisions about how they work to attract applications based on what one individual in the institution is or is not doing or had or had not done, that will be unfortunate, but if something is important, it should be a matter of public record.

There are good reasons to aim for transparency in this case to ensure that everyone knows precisely what the situation is, and I hope that the Government will support the amendment.

Anne Campbell (Labour, Cambridge)

I welcome you to the Committee, Mr. Stevenson, and seek your guidance. May I discuss something that relates to the clause but not, strictly speaking, to the amendment?

Roger Gale (Conservative, North Thanet)

If the query does not strictly speaking relate to the amendment, clause 32 stand part will be the appropriate time.

Simon Thomas (Plaid Cymru, Ceredigion)

Amendment No. 46 would remove the provisions that relate to Wales and the National Assembly. Although I resist it on the grounds that it is an anti-devolution amendment, as the hon. Member for Newbury (Mr. Rendel) said, I also resist it because it is flawed. It

would establish a scheme in Wales whereby plans with contents, durations and variations could not be approved. Removing subsection (7)(b), which states:

''in relation to Wales, by the Assembly'',

would leave subsection (7)(a), which states:

''in relation to England, by the Secretary of State''.

That would leave no way to approve plans in Wales. The Secretary of State could approve the plans for England, but no one could do that for Wales. The amendment would leave Wales in limbo, which is what Tory Members have generally sought to do.

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

May I welcome you to the Chair, Mr. Stevenson?

Roger Gale (Conservative, North Thanet)

Nice to be here.

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

I am sure that you had everything planned in your diary, Mr. Stevenson, but welcome, as we round the last bend and on to the straight for the home—or rather, the home straight. [Laughter.] I will move on rapidly.

Opposition Members have raised some relevant points in this important debate and I hope that I can allay some of their concerns and demonstrate how seriously we take them. The amendment, which the hon. Member for Westmorland and Lonsdale rightly said is a probing amendment, would remove ''if it thinks fit'' from subsection (2), which says:

''The relevant authority may, if it thinks fit, approve the plan.''

The hon. Member for Newbury said that the amendment would have a minimal effect, in that it would not prevent the director from approving an access plan. However, it would leave uncertainty about the scope of the director's discretion. Removing ''if it thinks fit'' would make subsection (2) less clear. It is a simple matter of terminology in a piece of legislation in which it is important to be as clear as possible. I can give no more clever an answer than that. The words are correct.

Amendment No. 289 is one of two amendments in the group on which we can have either the famous debate, which we have in all Committees, about whether ''shall'' should replace ''may'' or the less frequent debate of whether ''may'' should replace ''shall''. The amendment would require the relevant authority to issue guidance, yet it would have no discretion. I appreciate the intention behind the amendment and it raises a relevant consideration. We do issue guidance and we intend it to be issued in future. However, my simple point is that our provisions repeat the arrangements that are well known elsewhere. Similar arrangements apply to the Countryside Agency and the Disability Rights Commission. In those cases, legislation says that guidance may be provided.

Tim Collins (Conservative, Westmorland and Lonsdale)

I hear what the Minister says, but it would help all concerned if he can say whether he expects such guidance to be issued.

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

I am happy to do that. We expect guidance to be issued and we envisage no circumstances in which it will not be issued, although we are keen to hang on to the word ''may''.

Amendments Nos. 288 and 105 get to the nub of the issue. I was, however, curious about the emphasis that the hon. Member for Westmorland and Lonsdale placed on amendment No. 288, which would delete subsection (4). That subsection states:

''The relevant authority's functions under this section are to be exercised in accordance with regulations'',

and its contents caused hon. Members to see the sinister hand of the Minister at work, with the dark music from the Hammer horror films playing in the background. It is usual for us to issue regulations so that we do not have to put everything into primary legislation. Those regulations are, of course, approved by Parliament. I accept that they are accepted under the negative procedure. Nevertheless, Parliament can pray in aid and the regulations are placed before both Houses of Parliament. I accept that the draft regulations may not be the final version, but we produced them precisely because we wanted the Committee to have an idea of what they would look like.

The hon. Member for Westmorland and Lonsdale quoted Universities UK, but subsection (5), not subsection (4), is the key issue. We are offered two solutions: one by the hon. Gentleman for Westmoreland and Lonsdale and one by the hon. Member for Newbury. The problem with the solution proposed by the hon. Member for Westmorland and Lonsdale in his amendment No. 105 is the very clear anomaly in the wording. It would remove subsection (5) after the words ''Regulations may.'' I was confused because he went on to talk about subsection (6). So far as I can see, however, the amendment would remove paragraphs (a) and (b) and replace them with another form of words after ''Regulations may,'' so that the subsection would read,

''Regulations may specify matters to which the necessary authority may have regard in making any determination relating to approval.''

The nub of my argument is that the amendment would introduce a serious technical fault. The term ''necessary authority'' is not defined and it is not used anywhere else, but the term ''relevant authority'' is. It is a serious error to introduce a new term that is not defined anywhere in the Bill, especially as it would be introduced into a clause to which similar amendments have not been tabled and in which the words ''relevant authority'' appear over and over again. It would draw people's attention to something that is extremely strange.

Conservative Members are playing on our wicket by removing paragraph (b). As the hon. Member for Newbury rightly pointed out, they do not want a regulator or fees, but if there were a regulator, a combination of their amendments Nos. 288 and 105 would mean that there would be no regulations or guidance to guide that regulator.

Tim Collins (Conservative, Westmorland and Lonsdale)

The Minister makes a perfectly valid point about the technical drafting error of introducing the word ''necessary'' as opposed to ''relevant''. On the philosophical point, however, we do not think that there should be a regulator, as he rightly says. Does he accept that if we are to have one, he should be transparently politically independent and not subject to regulation by the Secretary of State?

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

No, I do not accept that. The regulator should be subject to guidance. Last week we debated whether that guidance should be statutory or non-statutory, and an amendment was tabled about not issuing guidance. We believe that there should be guidance. The regulator has the power to ignore it, as is the case with any legislation, but we should be absolutely clear about what the measures in the Bill mean, for the very reasons cited by the hon. Gentleman and Universities UK. There should be no ambiguity.

Tim Collins (Conservative, Westmorland and Lonsdale)

I really would welcome clarification from the Minister. He just said that that the authority may ignore the guidance, but subsection (4) states:

''The relevant authority's functions under this section are to be exercised in accordance with regulations.''

There is no discretion. The regulator cannot ignore those regulations.

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

The regulator cannot ignore the regulations, which are approved by Parliament, but he can ignore the guidance, whether it is statutory or non-statutory. Subsection (4) is designed purely to avoid primary legislation being overloaded with issues that should, quite properly, be subject to change in Committee. Amendment No. 105 is not the answer, but I want to make it clear that there is no attempt to interfere with academic freedom, as the hon. Gentleman suggested.

The hon. Member for Harrogate and Knaresborough, who I am delighted to see fit and well and back in the Committee—we would have come to Harrogate but all the trains were full—referred to an article in The Sunday Times. That article was about the Schwartz committee. The hon. Gentleman was not present last Thursday when we had a long discussion about admissions and access. We set up the Schwartz committee, with the full support of the higher education sector, to examine admissions, and it is considering issues such as post-qualification applications. The reference in The Sunday Times article was not to the Secretary of State's views, but to what the journalist predicts will come from the Schwartz committee. There is no attempt to interfere with academic freedom and, in response to a point made by the hon. Member for Newbury (Mr. Rendel), I repeat that there is no question of admissions being part of the regulator's role; that role covers access.

Amendment No. 105, however, is not the answer to the problem, but we think that amendment No. 75 is. We can now replace the sinister music with the Hallelujah chorus, because we are prepared to accept amendment No. 75, and I may as well give a reason for

that. An important point, which was made by the hon. Member for Westmorland and Lonsdale, is that the amendment would delete clause 32(5)(a), which could be misread and regarded as sinister. That paragraph prescribes

''cases in which the relevant authority must, or may not, approve a plan''.

Subsection (5)(a) was included in the Bill because of regulation 6 in the draft regulations, which states:

''If the Director does not approve a plan, he must not approve a further plan submitted by the governing body in respect of the first academic year covered by the plan which was not approved.''

The reason for that provision is that there must be closure, and that must be when the prospectus goes out to students applying to attend that university. What must not happen is that a plan is rejected and students think that they are entering university with a fee of £1,200 a year, only to find out later that the fee is now £2,000 because an access plan has been agreed with a higher rate attached. That is the only reason for subsection (5)(a) being in the Bill. However, we think that we can deal with the problem in a different way, such as through guidance.

I accept the points made by hon. Members that the paragraph could be used to suggest that a future Secretary of State will use the power to prescribe that a plan must not be approved because it comes from London Metropolitan university, Cambridge university or wherever. That would be a wide-ranging power to take—a sledgehammer to crack a fairly small nut. Therefore, amendment No. 75, which is aimed purely at subsection (5)(a), should be accepted. We urge the Committee to vote for that, and those are words that I did not think I would hear myself say.

Amendment No. 76 is another that deals with the difference between ''shall'' and ''may''. It refers to subsection (6), which the hon. Member for Westmorland and Lonsdale mentioned earlier. We want to retain the word ''may'' because of the reasons that I laid out when discussing the previous amendment that sought to replace ''may'' with ''shall''. We are, of course, asking for the plans to be published. Draft regulation 7 states:

''Where the Director has approved a plan, the governing body must publish it in a manner which makes it conveniently accessible to students and prospective students.''

The hon. Gentleman asked how that would be done, and the answer is via a website, e-mail, or through the media. We do not expect individuals to be named—an important point that he raised—but what he said about sensitive information would be a good reason for keeping the word ''may''. Some sections of a plan should remain discreet, but the major elements, particularly letting students know about bursaries, will be set out in the access plan. It is therefore important that the plan should be published and made widely accessible. There is nothing between us on that, and I give the same assurance that I gave on the previous amendment. We expect agreements to be publicised.

The hon. Member for Daventry (Mr. Boswell) is not with us, but he asked about time scales. We have used the usual terminology. Draft regulation 5(a) states that the director

''must inform the governing body within a reasonable time'',

and draft regulation 5(b) states that the governing body

''may, within a reasonable time''.

Rather than specifying days or weeks, we have used the accepted terminology. It makes it clear that the university and the director must publish the prospectus, so that students will know of the arrangements before they apply.

Perhaps after the weekend the Conservative party is warming to devolution, because the hon. Member for Westmorland and Lonsdale did not say anything about amendment No. 46. However, the hon. Member for Ceredigion (Mr. Thomas) was correct. It is not just that the amendment would interfere with devolution; it would put the Committee in the strange situation of allowing a regulator to operate in Wales without direction or guidance. That would be a serious flaw.

I hope that the hon. Gentleman will withdraw the amendment, but I hope that the Committee will support amendment No. 75.

David Rendel (Liberal Democrat, Newbury)

On a point of order, Mr. Stevenson. The Minister generously said that he will accept one of our amendments. It is not the lead amendment, so I wonder whether we need to ask you to put the question formally.

Roger Gale (Conservative, North Thanet)

I shall sort that out when we come to it.

Tim Collins (Conservative, Westmorland and Lonsdale)

As I said earlier, amendment No. 45 is a probing amendment. I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 75, in

clause 32, page 15, leave out lines 16 and 17.—[Mr. Rendel.]

Question proposed, That the clause, as amended, stand part of the Bill.

Anne Campbell (Labour, Cambridge)

Approving the plans means also approving the level of fee that a university or college wishes to levy. I wish to probe a little more the degree to which collaboration between colleges and universities on fees is acceptable. The question was raised with me late last night by the Association of Colleges. I apologise for not giving the Minister private notice of it: he may need to write to me.

The question arises from the Office of Fair Trading's action against schools in the independent sector that have collaborated over fee setting. The Department for Education and Skills is not involved in that action; it is being brought by the OFT. The Association of Colleges would like to investigate whether the chapter 1 prohibition in the Competition Act 1998—the Minister may be familiar with it from one of his previous roles—would prohibit colleges from exchanging information about price co-ordination. The advice from the Department for Education and Skills suggests that it could. In general, the exchange of price information may lead to price co-ordination, which could be said to eliminate the competition that would otherwise occur between undertakings. That

would be the case whether the information exchanged related directly to the prices charged or to elements of the pricing policy.

The Association of Colleges is concerned because colleges and universities have been encouraged to deliver higher education programmes in partnership. Ministers have said that they hope that all institutions will use the power to vary fees. They could, for example, use low fees to attract foundation degree students but have higher fees elsewhere. However, a disgruntled law student or a litigious parent, who was unhappy about the blanket £3,000 that a university charged for a law degree course to cross-subsidise foundation degree courses, might take a complaint to a solicitor. They might then make a complaint to the Office of Fair Trading under the Competition Act 1998 or the Enterprise Act 2002, and there may be a threat of judicial review if action is not taken. There would then be a big investigation into university price fixing, involving great legal costs and the even greater cost of providing documents for the investigation and possibly for a parallel civil suit. The most likely risk is that there would be lots of unnecessary cost and disruption. Many people out there would appreciate the Minister's advice on the issue, because it is not clear from the clause whether such price fixing would be allowed.

Tim Collins (Conservative, Westmorland and Lonsdale)

The hon. Member for Cambridge has made an interesting contribution and she raises a significant point. As she rightly said, there is a need for clarification, and I want to press the Minister on one issue. Is he confident that any advice that he may give the hon. Lady and the Association of Colleges will stand up to scrutiny in the UK and European courts? It has been a common theme of our deliberations that higher education institutions are independent, and although their public role is hugely significant, they are not formal parts of the public sector.

The hon. Lady correctly identified some of the association's concerns, which are perhaps understandable, and I am sure that the Minister will be mindful of the fact that, sadly, this is not a matter on which any Minister can issue a firm guarantee that no action will be taken, because autonomous or, indeed, independent institutions are subject to UK and EU competition regulation. I would be grateful if he could deal with that point.

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

First, let me put on record what clause 32 is about. It covers the approval of plans, specifying that an institution will need to apply to the relevant authority to have its plan approved and giving that authority the power to approve it. The clause also empowers the relevant authority to issue guidance to institutions and puts a duty on the authority to carry out its functions in accordance with regulations. It allows for regulations to set out any matter to which the authority may or may not have regard in deciding to approve a plan. Under the clause, regulations may also place a duty on institutions to publish any approved plans.

We have made the draft regulations for England available in draft form to the Committee. They allow for discussion, if necessary between the director and institutions, before a final decision is made. It is under this clause that we could introduce a minimum percentage of additional fee income that institutions should spend on outreach and bursaries through their access plans. We are not planning to use that at present, but it is a reserve power.

I have to tread cautiously on the question raised by my hon. Friend the Member for Cambridge (Mrs. Campbell) about guidance on the Competition Act 1998. The hon. Member for Westmorland and Lonsdale touched on the point as well. The advice to universities should come from the Office of Fair Trading. It publishes a booklet, and the universities should be au fait with it. I do not know for how long they have been, but they are governed by the Competition Act. A point that I made as a back-handed compliment to the sector is that I do not think that the institutions are capable of forming a cartel, but if they formed one, that would breach the Competition Act.

I will not offer any guidance other than to look at that from the OFT. We have always envisaged higher education institutions—my hon. Friend the Member for Cambridge referred to university colleges—being able to reach joint plans, and in particular joint access plans, when they cover a specific region. It would make sense for institutions in Leeds, Harlow or Nottinghamshire to reach a joint access plan for getting youngsters from poorer backgrounds throughout the region into higher education. That may include charging a similar fee, as long as it does not breach the OFT rules.

The answer is no to the question whether we are ruling out joint access plans. We have made it clear in everything that we have published that universities could collaborate on that, but they will have to be careful that collaboration does not stray into a cartel or price fixing, because the Competition Act would then take effect. I am willing to write to hon. Members about that, although I do not think that there will be much more than that statement in the letter. It might be a bit longer once it has filtered through 17 solicitors, but it will contain essentially the same message.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I welcome you to the Chair, Mr. Stevenson.

The hon. Member for Cambridge has raised an important point. In addition to the letter, will the Minister get an official ruling from the OFT before Report? If not, will he consider including provisions in the Bill in the same way as has been done in clause 39, which is designed to overcome the Enterprise Act 2002 provisions on bankruptcy? I do not want to go into it too much, but the Government are clearly trying to overturn a previous piece of legislation with clause 39. Considering other legislation, in particular the Competition Act 1998, it is possible to include in the Bill provisions to give universities the safeguards that

they need to go about the legitimate business of co-operating to attract students, especially from lower socio-economic groups.

Anne Campbell (Labour, Cambridge)

I want to add to what the hon. Gentleman has just said. It would make the situation clear once and for all if the Government included in the Bill a provision that specifically excluded groups of institutions operating legitimately and with the Government's best wishes to achieve the effect that my right hon. Friend has mentioned. It will be difficult for colleges to achieve that effect unless they can be sure that they will not fall foul of the Office of Fair Trading. I hope that he will discuss the matter with his advisers and consider carefully whether a specific provision could be included in the Bill to exclude colleges that are co-operating legitimately from the Competition Act.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

The essential element is that the institutions would be working together at the Government's behest. It is an instruction from the Government, through OFFA, that they should co-operate to provide a product. That is significantly different from organisations themselves deciding, as the private schools have allegedly done, to fix prices within their market.

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

I will consider the point that my hon. Friend and the hon. Member for Harrogate and Knaresborough make. I do not see this as being in the legislation, but I will reflect on it further. We have thought about this a lot. I do not think that the Office of Fair Trading would be willing to write a letter unless it had details about a specific case. I will write to the Committee next week. Once the Bill receives Royal Assent we plan to issue substantial advice in conjunction with HEFCE and the Office of Fair Trading so that colleges, universities and higher education institutes understand the issues here. I will reflect on what hon. Members said, but we are keen to ensure that we overcome the difficulties.

Question put and agreed to.

Clause 32, as amended, ordered to stand part of the Bill.

Clause 33 - Duration of plans

Tim Collins (Conservative, Westmorland and Lonsdale)

I seek a clarification from the Minister on a point that has been the subject of correspondence to all members of the Committee from Universities UK. It is happy with the clause, on the basis that the maximum duration of plans will be five years. That is not specified in the Bill. It would be helpful if he could confirm that that is also his interpretation. Could he also confirm that he would not expect the general power that is granted under subsection (2) to the Secretary of State or the Assembly in Wales to issue general regulations would be used to extend the maximum duration of plans beyond five years? That seems to be what Universities UK is expecting.

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

The clause specifies that a plan must prescribe the period during which it is to be enforced. Paragraph 8 of the draft regulations states:

''The maximum period of time during which a plan may be in force is five years.''

We have made it absolutely clear that that is our intention. That does not prevent the approval of a new plan when the previous plan expires. In other words, plans may be renewed subject to the approval process. Neither does it prevent the director of fair access and an institution from agreeing to vary the plan at any intervening point. The maximum period is five years. We do not expect to change that, although if in the light of experience six years or four years seemed much better, and there was consensus about that, we would seek to change the regulation. That is the reason for putting this in regulations, rather than in primary legislation. We think that five years is just about right, and so does the sector.

Question put and agreed to.

Clause 33 ordered to stand part of the Bill.

Clause 34 - Variation of plans

Jonathan R Shaw (Labour, Chatham and Aylesford)

I beg to move amendment No. 270, in

clause 34, page 15, line 35, after 'varied', insert 'by the relevant institution'.

I welcome you to the Chair, Mr. Stevenson. This is a probing amendment to seek some clarification from my right hon. Friend. It would be helpful for universities to understand the extent to which a plan may be varied. Would OFFA intervene and vary a plan before the access period was over? It is important for the new plans to settle down, but the institution may want to introduce a variation. For example, it may want to increase the bursaries to students who are in difficulties. We would not want fees to be increased, as that would be a huge departure, but subtle changes—they may be to do with bursaries, for example, or with outreach programmes in communities linking up with the local further education college—may need to be made, and plans varied in the light of experience. Will the institutions have the powers to do that?

It has been suggested that the OFFA's extending powers may mean the evil hand of a sinister Minister wandering all over admissions, which would not be the case under a Labour Government. It will not necessarily be the evil hand of a Labour Minister—[Interruption.] I should say a helping hand, perhaps with a backdrop of Joe Cocker, rather than the Hammer House of Horrors, to which the hon. Member for Westmorland and Lonsdale referred, but the personality of the director of OFFA will set the mood and affect the atmosphere. Although I have every confidence in Labour Ministers, the people who are appointed do not always turn out to be what one might expect. That also happens in the case of former Ministers, as we have seen too often recently.

I would appreciate clarification of the extent to which OFFA could vary plans within the set period. Will the universities be allowed to make variations in accordance with their experience, especially early on, as institutions and students get used to the new regime?

Tim Collins (Conservative, Westmorland and Lonsdale)

This is a genuinely important amendment and I commend the hon. Gentleman for tabling it. I was disappointed that he said it was largely a probing amendment, because although it is not perfect, if he were to press it to a Division we would support it.

If there is to be a vestige of academic freedom and institutional autonomy after the Bill is enacted, it is crucial that once a plan has been perhaps laboriously negotiated between the director and the university, and during the time frame of the plan which, as the Minister said, may be as long as five years, the university should know exactly where it stands. It should know that once agreements have been reached it will be left to get on with implementing them.

The difficulty with clause 34 is that it puts in place a procedure whereby a negotiated and agreed access plan can be overturned or varied. There is no limitation on the extent of variation, so conceivably it could be changed almost in its entirety at any point in its lifetime. That does not give higher education institutions the certainties that they require.

The amendment goes only some way towards ameliorating the position, as it would retain the phrase

''with the approval of the relevant authority'',

which we object to. An access plan that is negotiated ought to be a contract: it should be reached by mutual consent, having been negotiated equally, implemented properly and subsequently respected by both parties. The clause clearly implies that this is not a contract within that term's widely understood interpretation: if one party to a contract can unilaterally, at any time, vary any part of the terms of that contract, it is not a contract of the sort with which people will be familiar within other contexts. That is the problem.

The amendment at least requires that the act of variation be made by the university or higher education institution. However, by retaining the need for that variation to have the approval of the relevant authority, we believe that it would give far too much discretion to the director of fair access to rip up freely negotiated agreements and to go down pathways that would be deeply injurious to the principles of university independence. Our view is that the Bill would be better without the clause. We think that there should be enforced access plans, and that there should not be a director at all. However, if we are to have such plans and a director, it must surely be a matter of common sense that everyone can see, that if the negotiations are to have value once a plan has been agreed, that there should not be the constant prospect of its being reorganised.

David Rendel (Liberal Democrat, Newbury)

I am genuinely confused what by what the hon. Gentleman is saying, so I hope that he can clarify it. He seems to be saying that these are matters

that have to do with a contract between two parties, so it is important that it should not be varied on either side, just unilaterally. I should have thought that the removal of the words

''with the approval of the relevant authority''

would mean the removal of one of the parties to the contract. I can understand why he wants to insert the other words—to ensure that the other party has a chance to have a say—but removing the second part removes the second party to the contract, does it not?

Tim Collins (Conservative, Westmorland and Lonsdale)

As the hon. Gentleman rightly says, it would be desirable to ensure that any variation can occur only by mutual consent. That is the point on which he and I would agree. The amendment does not specify the need for the approval of the relevant institution: it simply says that the variation would be made ''by the relevant institution''. In a sense, that is natural, because the institution that implements the access plan is the relevant institution—in this case, a university. Our point is that it would be preferable for the legislation to make it clear that it requires the mutual consent of both parties to the plan before variations can be made. We believe that that objective would be achieved with the removal of the clause. I am not convinced that doing so with the amendment would meet the exact equality that we should like, but it would be more balanced than the clause as it stands. It would be better to have clause 34 amended by amendment No. 270 than to have it as it is now, although frankly, it would be better not to have it at all.

We know that the universities, in their guidance to this Committee, did not specify that they support the amendment, but they said:

''Universities UK believes that it should be clear that institutions will have the freedom to vary their plans if the need arises. We do not, however, think that OFFA should have the power to require them to vary their plans within the period of the access agreement.''

That is the point on which we rest our case. If the universities believe, for whatever reason, within the spirit of the access plan—in order, perhaps, to ensure that the objectives are better delivered in the light of changing circumstances—that they should have the right to consider changes and make recommendations to OFFA, leading to further negotiation and a new agreement, it should not be within the scope of the director unilaterally to alter plans.

Government Members—who may be more attached to the principle of the plans and to the director than Opposition Members—may take the view that there would be concern if the access plan was not implemented. That is covered by clauses 35 and 36, to which we will, I hope, turn our attention later.

There are already procedures within the Bill to enforce the plans. This is a different point: it is about varying the plans after they have been agreed, independent of any assessment of whether they have been properly implemented. We are concerned about the matter, and we hope that the Minister will be in a position to give a clear assurance that he would not expect that the Secretary of State would use the powers of regulation to interfere with the implementation of

plans or to exact a political penalty on an institution that had, for any particular reason, offended the Government of the day.

It is easy for Governments, of whatever colour—this is not a point about the present Administration at all—to take offence at the actions of higher education institutions. It will be within your recollection, Mr. Stevenson, and that of other members of the Committee, how Lady Thatcher, when she was Prime Minister, was not exactly bowled over with joy and delight about Oxford when it denied her an honorary degree. It will be within the more recent memory of members of the Committee that the Chancellor has expressed fairly firm views about Oxford's admissions procedures.

If an instrument such as that provided under clause 34 allows that OFFA—which, as we have established, is very much the creature, indeed the plaything, of the Secretary of State—can intervene to change unilaterally the terms of an agreement on an access plan, even when such an agreement has already been reached between an institution and OFFA, there will be a real temptation in the hands of a future Secretary of State or Prime Minister to use that instrument as a weapon against a higher education institution if, for whatever reason, they happen to have a falling out.

I urge the Minister, if he insists on retaining the clause, at least to give the higher education world an assurance that the power of unilateral variation would be used rarely. I hope that he would be able to explain any of the circumstances in which he would think that such a variation would be appropriate. Will he also seek to make it clear that his general expectation would be that in all but the most exceptional circumstances, once an agreement had been reached—although proper attention would be paid to whether the agreement was being properly implemented—there would not be a constant process of reopening, renegotiation and renewed discussion? If that were to be the case, it would only create anxiety in the world of higher education, as people would genuinely not know at any given time what they were expected to do.

Certainty is essential in higher education, and I am sure that members of that world would much welcome any assurances that the Minister can give that he does not expect the clause to be used often. I hope that he will be able to say that he would not expect clause 34 to be used at all, in which case we can save ourselves a lot of bother by getting rid of it.

Roger Gale (Conservative, North Thanet)

Before I call the Minister, let me say that a pretty wide-ranging discussion is taking place on the amendment, and I shall take that fully into account in any debate on clause stand part. I do not want simply to rehearse the arguments that have already been put before the Committee.

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

The amendment is designed to ensure that the plan can be varied only by the institution whose plan it is. I agree that that must be the case. My argument is that the legislation already provides for that, so I must resist the amendment.

Before I come on to the reassurances sought on both sides of the Committee, I want to note briefly that the amendment is technically defective, since it refers to variation by the institution. However, it is the governing body that is responsible for the plan and for any variation of it. That is a minor technical point. This is a good point in the proceedings at which to discuss the mechanisms provided by the legislation for varying access plans. I am grateful to my hon. Friend the Member for Chatham and Aylesford (Jonathan Shaw) for raising the point and allowing me to clarify the position.

In England, an institution's access plan is the responsibility of that institution. It is quite clear that it is the institution and only the institution that can seek the approval of the director to vary a plan, just as it is only the institution that can propose a plan in the first place. The Bill will permit the director not to vary a plan but to approve a proposal from an institution. Subsection (1) states:

''Regulations may make provision enabling an English approved plan or a Welsh approved plan to be varied with the approval of the relevant authority''

It does not say ''by'' the relevant authority.

Paragraph 7 of the Secretary of State's letter to the director sets out the specific arrangements for changing access plans, and regulation 9, which we have published in draft, sets out the arrangements for the variation of plans. In all cases, it is the institution alone that can propose to vary a plan. Changing circumstances may mean that institutions will want to change their plans. For example, an institution might wish to vary its access plan in respect of outreach arrangements. It may wish to pursue those activities in a new area or try a new approach such as mentoring, or it may wish to change its fee levels and bursaries. It is right that institutions should have the option to apply to the director to make such changes, rather than have the plan frozen in aspic for five years irrespective of the circumstances. An institution might start by thinking that summer schools are a better idea than mentoring, then think, ''Actually, the summer schools haven't attracted enough applicants, let's move to a different arrangement.''

Chris Grayling (Conservative, Epsom and Ewell)

Surely, the Minister is not suggesting that a university that decides to vary its activities within the confines of an overall plan—for example, by introducing a new scholarship—would have to go back to the regulator to seek permission to do so. That would be ludicrous.

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

I do not think that that would be ludicrous. Once a plan is agreed, any proposed variation must go back to the regulator. That would be a simple process. In the circumstances that I have described, it would be a very simple process.

Chris Grayling (Conservative, Epsom and Ewell)

It is mad.

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

The hon. Gentleman may think it mad, but what is the point of setting up arrangements to ensure that the access plan meets the approval of the regulator and is in accordance with the regulations and the widening participation agenda, if we then tell institutions that they need not come back to the regulator if they want to change any aspect of it in next five years? That would be rather mad. I appreciate the fact that Opposition Members do not want the plans or the regulator, but if an institution has a plan, which is to be in force for five years, we must be flexible enough to allow it to propose changes to that plan, but we cannot allow it to make changes in isolation without informing the regulator that the plan that they had agreed openly is being changed. I simply cannot understand an opposite point of view.

David Rendel (Liberal Democrat, Newbury)

If, as the Minister has said all along, these plans would be light-touch regulation, surely they should be drawn up in such a way as not to specify the precise detail of which scholarships will be given—whether there will be three of £500 and six of £600, for example—but to give a more general idea, thus allowing some variation between the exact number and value of the scholarships as time went on, without having to go back to the regulator.

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

I think that common sense will prevail. That is the kind of arrangement that will apply in such circumstances, but both parties to the agreement have to know what it is. If the agreement changes—Members on both sides of the Committee seek assurance that only one party will be able to change it—both parties must know that it has changed.

Chris Grayling (Conservative, Epsom and Ewell)

I will press the Minister on this point, which is hugely important for the universities. Does he believe that the plans will set out broad parameters for action by a university, such as by its saying, ''We've identified within our region certain social groups that are under-represented, and we will take steps through better marketing, and so forth, to attract applications from those groups'', or is it his intention that they will say, ''We will run these nine specific activities, timetabled and set out in a detailed structure''? Which of those two models is the plan supposed to be? If it is the second, does the Minister accept that the burden of bureaucracy on universities seems to be extraordinarily onerous and inflexible?

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

As we said in a debate last week, the Bill provides a light touch, but not a soft touch. Paragraph 7 of the guidance says:

''It will be for you''—

the director—

''to decide, depending on the scale or extent of the change . . . whether to call in the whole access agreement for reconsideration.''

People must be informed of changes to the plan, which might mean a simple exchange of correspondence thanking someone for saying that a part of the plan has changed—end of story. Increasing the fee cannot apply to students already in the system, but if, for

instance, it is decided after three years that the fee should be increased from £2,000 to £2,500 or to £3,000, the regulator will want to assure himself or herself that the additional money going back into bursaries and grants is properly reflected.

Universities and higher education institutions can put more into a plan than is necessary. We are looking for a light-touch approach, but the whole point of our debate is who has the authority to change the plan.

Patrick Hall (Labour, Bedford)

Does my right hon. Friend not agree that the institution in question will want to improve its agreement to widen access, given the likely circumstances? Having secured the agreement of OFFA and publicised agreement of the overall plan, the institution will be pleased to publicise the relevant information. In the context of a light touch, that would mean a letter or perhaps a few phone calls. The institution would have the opportunity to say, ''We're putting forward these amendments, but they are wider than just this institution. They are being introduced in the context of which OFFA approves.'' That would therefore be seen as a positive thing to say.

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

My hon. Friend is absolutely right. The major concern is, as he and the hon. Member for Westmorland and Lonsdale rightly said, who has the authority to change the plan. Provided that there is a sensible system, there should be no problems whatever. The institution may wish to change its fee levels or bursaries. We think that it is right that the institutions should have the option to apply to the director, so that they can make such changes and the director will have to be satisfied with the access arrangements in the plan.

Some changes, as we have discussed, will be relatively small, such as outreach to a new area or a small requirement to the bursary scheme, and therefore will not cause the director any great concern. However, the director may want to examine in more detail with the institutions variations such a significant rise in fee levels—within the cap, obviously—or a wholesale change to a bursary scheme. It will be for the director to decide how light touch he or she should be, depending on the circumstances.

Tim Collins (Conservative, Westmorland and Lonsdale)

The Minister is right that the sector is concerned about who has the final authority and he has given some helpful clarification on that point. However, the clause says that regulations about how the system operates may be made. The sector would therefore further welcome a guarantee from the Minister that the relevant decision would indeed be up to the director and that no regulations either now or in the future would give the Secretary of State a right to overturn a director's decision relating to approval of a variation.

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

I can give that assurance. The task in question is the job of the regulator. Incidentally, the hon. Gentleman asked me in a previous debate whether I would reassure the Committee that OFFA would not interfere in individual cases. I can give that

reassurance. Provided an agreement is in line with the legislation, we do not intend the Secretary of State to be involved in any individual case.

The draft regulations provide more detail about the process to be followed by an institution and by the director if an institution wishes to vary its plan. Institutions may allow some variation in their initial access plan, such as building in at the outset changes to the fee and bursary levels over the lifetime of an access plan, so that a student is fully aware, when they go to that university, of what the arrangements will be over the three years—if it is a three-year degree course. In deciding whether an institution can vary its access plan, the interests of its current and prospective students will be paramount.

I draw the attention of hon. Members to paragraph 7 of the draft guidance from the Secretary of State, which makes it clear that a key principle of varying access plans

''should be that students should know, before committing to a course, what fees they can expect to be paying. Students should be protected against institutions changing fee levels where the possibility of that change has not been notified to the student cohort before they committed themselves to the course.''

Having clarified the position, I hope that my hon. Friend the Member for Chatham and Aylesford will withdraw his amendment in the knowledge that what he seeks to achieve is already provided for in the Bill. The firm assurances that I have put on the record mean that there can no longer be any doubt about who is responsible for changes to the access plans.

Jonathan R Shaw (Labour, Chatham and Aylesford)

I am grateful for the comments made by my right hon. Friend the Minister. He has provided the reassurance that Universities UK and I sought—that is that institutions alone can vary the plan. If there is a departure from the agreed plan, it is reasonable that the institution should then return to the regulator to seek permission for that change. As the Minister said, such a change might be minor or major. As my hon. Friend the Member for Bedford (Mr. Hall) said, recourse to the regulator should be seen in a positive way, because one of the purposes of the regulator is to spread good practice. The Minister is not sinister in this context—[Interruption.] Or in any other context, despite what was implied by the usual assortment of highly emotive words used by the hon. Member for Westmorland and Lonsdale. We heard from him that the Secretary of State might take offence, might engage in a vendetta, or that if OFFA was his plaything, he might use it as a weapon. That is the weird world of Westmorland.

I hope that the Committee was reassured by the sound words from my right hon. Friend the Minister and that the debate has been useful in providing clarification. It is important that we get OFFA right, and that the universities understand both what we mean by OFFA and what the expectations of institutions' relationships with it are. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Motion made, and Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 19, Noes 2.

Clause 35 - Enforcement of plans: England

Graham Allen (Labour, Nottingham North)

I beg to move amendment No. 231, in

clause 35, page 16, line 19, at end add—

'(3) No plan is to be enforced against the relevant institution except as provided for in this section.'.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to discuss the following: Amendment No. 232, in

clause 36, page 16, line 39, at end add—

'(5) No plan is to be enforced against the relevant institution except as provided for in this section.'.

Graham Allen (Labour, Nottingham North)

I hate to leave anyone with the impression that I have it in for the vice-chancellors. The fact that their connections with No. 10 Downing street almost led my party to breaking point two or three weeks ago to satisfy their requirements should not be seen as causing me to have hard feelings. Therefore, despite what I said last week about them having to be subject to Ofsted like everyone else in the education system, I want to do Universities UK a favour by moving the following amendment. I hope that I will be back in its good books because there is a great deal for us to work together on.

Universities UK seeks to ensure that, while plans are meaningful and can be enforced, they do not expose institutions to additional litigation, which would waste valuable resources. Institutions must also rely on the judgments of the relevant authorities without fear that they may be undone by litigants challenging compliance with the plan. There is an enforcement regime laid out in the Bill, and the amendments promote the idea that that regime should be made exclusive. I would be grateful if the Minister could respond to the points raised by these probing amendments.

Tim Collins (Conservative, Westmorland and Lonsdale)

This is proving to be a morning of surprises. First, the Minister accepted an amendment tabled by the Liberal Democrats, and now I am in the fairly unusual position of supporting an amendment tabled by the hon. Gentleman. I am not sure whether he will get back in the good books of the vice-chancellors after his preamble. If he had not said that preamble, he might have been the toast of the vice-chancellors this evening, but perhaps not now.

None the less, the hon. Gentleman made an important point. It is an unwelcome but unavoidable feature of today's society that we are more litigious. People are more likely than in previous decades to sue for all sorts of, sometimes apparently flippant, reasons. That can cause disruption, additional cost and worry for, in this case, vice-chancellors and others responsible for the governance of higher education institutions. It is worth reiterating that Conservative Members believe that there should be no procedure for enforcing access plans and we are not in favour of having a director. We are in favour of higher education institutions entering into voluntary access plans, but we are not in favour of an element of compulsion or direction. If there is to be an element of enforcement, it must be done, as the hon. Gentleman said, by the director or—although this goes against the grain—by the Secretary of State, but not by anybody else.

We heard from the hon. Member for Cambridge of a concern expressed by the Association of Colleges in a different context about the possibility of a law student going to court because of a concern about fee structures. If anybody will exploit a more litigious world, it will be a law student. The same could apply in this case. If an individual, whether a student, parent or potential employer, believed that an access plan had been violated or that by taking legal action they were more likely to achieve their objective of, say, admission to a particular university, it is possible that that gap might remain if the amendment is not accepted.

It would therefore be helpful if the Minister could make it clear that he is prepared to accept the amendment, which has much to commend it. He supported an Opposition amendment this morning, so it may be even easier for him to accept an amendment tabled by one of his hon. Friends, particularly one who is seeking to be so helpful today, as he is on all other days.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Is the hon. Gentleman saying that if variability is allowed to reach the point at which there are American-style fees of £30,000 or £40,000 for a course lasting a few years or more, students will be prevented from having redress against an institution for failing to provide the quality of education that such a cost determines, particularly if we got to the point where half the students pay full fees, as has happened in Australia—

Roger Gale (Conservative, North Thanet)

Order. This is an intervention, not a mini-speech. Interventions should be relatively brief.

11 am

Tim Collins (Conservative, Westmorland and Lonsdale)

The hon. Gentleman is right to be worried about a scenario in which the fees are not £3,000 but £15,000 or £20,000—I think he quoted £30,000 or £40,000. The way to prevent that from happening is not to have fees at all. The question is not whether the fees should be variable, but whether we should have them. We believe that we should not.

It is not desirable for us to promote the means whereby individuals can sue many of our public institutions. That is a problem not only in higher education, but in the health service and state education as a whole. It is also a problem in the police service. There is much too much suing and Governments of both parties must accept responsibility for having helped to create that climate. The ambulance chasing and the fact that so many people in the public services spend their time looking over their shoulder, worried about what might happen if someone were to bring legal action against them, is the parallel with America that concerns me. That is why I support the amendment, not because it is desirable to have heavy-handed enforcement of the plans, but because if someone is to enforce them, that should be done in a predicable way by an organ of the state. We do not want a large number of other people running around, acting unpredictably, while trying to find a sympathetic judge to make a ruling that could cost an enormous amount of money. That would create complexity and difficulty, not only for the institution against which the case was brought, but for all the other institutions that would have to be worried about the precedent that had been set.

I hope that the Minister will accept the spirit, if not the terms, of the amendment. For all I know, it may be technically flawed. Those of us who do not have the benefit of the superb civil service that the Minister rightly has at his disposal understand that we may draft technically flawed amendments for one reason or another. I hope that he will be prepared to consider ensuring that only the director or, if push came to shove, the Secretary of State can enforce the plans. The sector would welcome clarification of that. If he cannot accept the amendment and thus provide that clarification, will he address, perhaps in correspondence, the way in which that could be achieved? I think he will acknowledge that this is a genuine concern.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I accept what the hon. Gentleman said about the ambulance-chasing culture. The reality is that students will pay an increasing amount towards their higher education and it is possible that the sums involved will be significant. If OFFA agrees a plan under regulations set by the Secretary of State through HEFCE, will the Minister assure us that the Government, as the controller of the plan, rather than the institution, will indemnify any action taken by an individual student against a university in relation to the plan?

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

I hope that I can give the Committee the assurance that it seeks. My hon. Friend's amendment would make it explicit that the director in

England and the designated authority in Wales could enforce plans only in accordance with the powers in clauses 35 and 36 respectively. I am in a kindly, giving mood today, but, unfortunately, I cannot accept the amendment, even though I accept much of his advice on such issues, because the Bill provides for no enforcement powers other than those in clauses 35 and 36. I do not oppose the principle behind the amendment, but it is unnecessary. Let me reassure the Committee by setting out in some detail why that is the case.

Access plans in England will be enforced by the director, who will direct HEFCE or the Teacher Training Agency to impose a financial sanction on the institution and/or director who refuses to renew an institution's access plan. Those—and only those—are the sanctions that the director can apply if institutions breach their access plans. The director will have to comply with provisions in regulations on enforcing plans.

Let me clarify the concern that institutions might be exposed to enforcement on two fronts—from the director or from a student issuing a complaint. I assure my hon. Friend that, although the plan will benefit students considerably and will rightly be a public document, it will not give students or prospective students additional legal rights. Enforcing the plan is a matter between the director and the institution. Student complaints will be based on their contract with the institution, and the plans will not give students or prospective students new legal rights. Nor do they relate to the quality of the student experience, to take up the point raised by the hon. Member for Harrogate and Knaresborough. In fact, part of the White Paper process is the issuing of the new, comprehensive student guide, which will make clear the quality of each course at each institution, as judged by final-year students the year before the applicants apply. There will, therefore, be measures of quality, but the issue of quality will lie outside the access plan and students will be able to complain about quality in the way that they do now.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

The Minister makes an important point, but part of the access plan may relate to the quality of support that the university offers students from less traditional backgrounds. Therefore, the contract between the student and the university—I accept that this is much broader than the plan—would include that element. Would a university that offered a daily tutorial that did not take place be breaking the contract and be subject to a sanction other than through the relevant funding council?

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

I want specifically to explore such examples. That is why I need to take a little time over this important amendment.

In the unlikely event that matters such as those that the hon. Gentleman raised came to court under procedures other than those in the Bill, we have every expectation that the court would take account of any enforcement action that the director had already taken and judge accordingly. Let us imagine that an institution does not provide the bursaries that it said it

would in its plan. That would be a breach of the plan and would be a matter for the director to consider. One sanction open to the director would be to withhold the grant until he was satisfied that the institution had made good, or substantially good, its breach of the plan. Once it had done that, the grant would be restored, so restitution to the student is an important part of the process. Likewise, in deciding about enforcement action, the director would have to take account of any court judgment that may have been made.

Let me give the Committee an example of how sanctions could work in practice. I appreciate that it does not relate to the specific point about the tutorial, but it deals with the area in which disputes are likely to arise. If an institution had an access plan that allowed it to charge its students £2,300 and then charged £3,000 without varying its plan, the director of fair access, having advised the institution of his intentions, would have the following sanctions available to him. These are all set out in either the regulations or the draft guidance from the Secretary of State.

First, the director could direct the relevant funding council to reduce the institution's grant by 110 per cent. of the total amount by which fees were overcharged. That would be restored to the institution when it had made good the breach. Secondly, the director could direct the funding body to impose a financial sanction by reducing the institution's grant by up to £500,000. Thirdly, the director could refuse to renew the institution's access plan.

We appreciate the need for clarity and transparency in describing how plans will be enforced by the director of fair access in England and the designated authority in Wales. Although amendment No. 231 is well intentioned, it would not add to the clarity already provided by the Bill and our draft regulations 10 to 15, which should be read in conjunction with it.

Tim Collins (Conservative, Westmorland and Lonsdale)

The Minister set out a particular example, which I want to extend. He described circumstances in which a higher education institution had breached its plan, and he talked about the options that would be available to the director to enforce the plan and bring the institution back into compliance with it. Does he not accept that the director would be subject, as many other organisations and institutions are, to the process of judicial review? If the director chose not to use one or more of the options, it would be open to a student who felt himself to have been disadvantaged to go to court to seek an instruction against the director to act. Is there not such a route for the individual student, irrespective of what the Minister said about the role of the director?

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

I do not agree. We have been careful to ensure that the access plan is an agreement between the institution and director. We considered judicial review in deciding whether there should be an appeals process between the institution and director if the access plan was rejected, but we decided that it would build in delay and bureaucracy and that, in any case,

the institution had access to judicial review if it felt so strongly about the issue. I cannot predict what individuals will try to do through the courts, but we can be assured that the Bill is clear about who has the power of enforcement: the director.

If we kept the regulator out of Wales, we could give Offa's dyke a completely new meaning—I have been waiting to use that one, Mr. Stevenson. However, on amendment No. 232, I repeat that the Welsh Assembly has not decided whether it will introduce variable fees after 2007. It is important to say that because we may not have time to discuss related issues. Should variable fees be introduced in Wales, however, the Bill provides a framework for the Assembly to implement variable fees. That includes powers to designate an authority to agree fee plans and undertake a similar role to that of the director in England. The exact mechanisms for agreeing and monitoring the plans have not been determined and will be tailored to meet specifically Welsh circumstances, and the Bill allows the Assembly the flexibility to determine the appropriate authority to approve and monitor plans.

In practice, the relevant authority in Wales could refuse to renew a plan in respect of an institution that had, for example, charged fees that were higher than the permitted amount. Additionally, financial sanctions set out under the enforcement measures in clause 36 could be applied. The same argument applies: we do not believe that in England or Wales there is any chink in the armour as far as this legislation is concerned, and we are clear that enforcement lies with the director. We think that the amendments are unnecessary, and I urge my hon. Friend not to insist on them.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Will the Minister clarify that the only enforcement that the Government are putting into the Bill is where the fee or bursary structure is not part and parcel of the agreed plan? The other elements of the access plan, which are to ensure not only access to but, we hope, retention within universities, have nothing to do with the enforcement plans, and no student would have redress in that case.

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

I want to be helpful. The hon. Gentleman was not here, but we discussed the fact that the regulator has the power to issue sanctions where the access plan is breached. HEFCE has the power to issue sanctions, having worked closely with the regulator, where the fee cap is breached. That is a matter of degree, so I guess that the heinous crime would be the sort of situation to which the hon. Gentleman referred: if a university decided that it would introduce what he, and everybody else, understood in 1998 to be the definition of top-up fees. We are not proposing that here. The Government have set a maximum fee of £3,000, but if the university decides that it will not receive any student support, but will top it up to whatever level that it likes, that will be a serious breach, in which circumstances the regulator and HEFCE will have a serious punishment reserved to them.

Circumstances such as the hon. Gentleman described, for instance if an institution said that it would have a summer school in June, but did not do so—possibly for some perfectly valid reason—would not be treated as seriously. That would be a breach of the access plan, but would be in a completely different ballpark to breaching the fee level. I hope that that is helpful; we have certainly discussed the matter at great length in relation to other amendments.

Graham Allen (Labour, Nottingham North)

The Minister is clearly determined to make us an offer that we cannot refuse, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 35 ordered to stand part of the Bill.

Clause 36 - Enforcement of plans: Wales

[Part I]

Clause 39 - Effect of bankruptcy

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I beg to move amendment No. 183, in

clause 39, page 18, line 18, at end insert

'provided that no such regulations may establish any person or body to whom a loan is outstanding as a preferential creditor'.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to discuss clause stand part.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I welcome you back to the Committee, Mr. Gale. I thank the Minister and the usual channels for allowing us to begin the afternoon sitting by briefly discussing bankruptcy. Although I hope that the debate will be short, it is an important issue to consider. From the outset, I say that this is a probing amendment and we will not ask the Committee to divide on it. I hope that we will receive a satisfactory response from the Minister.

The reason behind the amendment and for raising the issue of bankruptcy is that the whole Committee would agree that, whatever way we dress it up, future students will leave university with significantly more debt. We can call it an investment, but the reality is that, as far as the usual terms of financial prudence and credit worthiness are concerned, students will have significantly more debt.

We must recognise that, since 1992, the number of students filing for bankruptcy has significantly increased. In 1992, eight students filed for bankruptcy. By 1997, that figure had reached 77. By 2002, it had reached 276, and the latest available figures for 2002-03 show that the number has jumped to 899. There has been a huge growth in the number of students filing for bankruptcy over the last few years, and in particular in the last financial year.

The maximum that a student can borrow from the Student Loans Company is roughly £12,000, but under the proposals, that will rise to £19,650. That is a significant jump, and I am not including other debts that a student might have, which might increase with their debt portfolio. However, there is no evidence, despite the rapid increase in bankruptcy over recent years, that there are widespread plans for students to file for bankruptcy. There are roughly 1.8 million students in the system, of which 1.1 million are full time, and most of them take out some sort of loan. The fact that only a relatively small number of students file

for bankruptcy is an indication that this is not a massive problem for the state to consider. Nevertheless, it is a problem all the same.

I flatly reject the views of the former Minister for Lifelong Learning and Higher Education, the right hon. Member for Barking (Margaret Hodge), when she said:

''Graduates should not see bankruptcy as an easy route to repaying the money they have borrowed through the generously subsidised student loans system.''—[Official Report, 15 May 2003; Vol. 405, c. 13WS.]

I agree with what she said, but she is fundamentally wrong to suggest that students see bankruptcy as an easy way out of their debt problems. The reality is that students have significant debts. I say that because the penalties for filing for bankruptcy are significant, and the Committee should not run away with the idea that it is an easy decision for anyone to file for bankruptcy, particularly someone starting out on their career. It affects not only a graduate's credit worthiness, but their employment opportunities. It would preclude them from becoming a solicitor, chartered accountant, accredited accountant, architect, stockbroker, surveyor, and valuer for an auctioneer and from entering many other professions.

Jonathan R Shaw (Labour, Chatham and Aylesford)

And an MP.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

A discharged bankrupt can become an MP, but, as always, the hon. Gentleman makes a serious point, and we may return to it.

There is a pragmatic issue to address, but there is also a fundamental principle. In 2002, following the Teaching and Higher Education Act 1998, the Insolvency Service considered whether students should be allowed to file for bankruptcy. It decided that students should have all their debts written off if they filed for bankruptcy. Sections 251 and 252 of the Enterprise Act 2002 abolished Crown preference for the Inland Revenue and Customs and Excise by not allowing them to be preferential creditors for either company or individual bankruptcies. It is important that the Minister addresses that specific point.

The 2002 Act was not taken lightly by the Government, and the philosophy behind it was that bankruptcy should not be seen as a damning indictment of an individual's ability or business prospects but, as the Americans see it, as part of a journey. The 2002 Act made it clear that the traditional Crown preference for the Inland Revenue and Customs and Excise should be set aside. The Government did that not only for British law, but to come into line with much of European and worldwide law. Australia is often cited as an example of where the new student loan and top-up fee system has been successfully introduced. A significant number of its students have very high debts, and many file for bankruptcy, but the Australian state has been deliberately excluded from being a preferential creditor.

What is the justification for suddenly taking students out of the bankruptcy arena? They are being told that if they file for bankruptcy in future, they will have to retain any debt to the Student Loans Company

and carry it forward to when they are discharged from bankruptcy. They will not have to take forward other debts, even those owed to people who were forced into bankruptcy as a result, something which often happens with small companies that have several unsecured loans. Will the Minister respond to that important issue?

The Government seem to be viewing students through the eyes of the right hon. Member for Barking, who is now the Minister for Children. She believes that students will leave university owing money to the Student Loans Company, file for bankruptcy in a cavalier fashion, go off round the world for a couple of years and eventually come back when all will be well. I do not believe that that is true, but it also belies the fact that the sort of debts that students will have in future will stay with them for a significant number of years.

All members of the Committee would accept that young graduates are unlikely to stay in the same job or career over the 25 years that their debt would stay with them. They are likely to move about. They are also far more likely to be self-employed than any other group of graduates in the history of our university system. It might be 10 years after they leave university, when they have started a business or been part of a business that they get into financial difficulties and want to file for bankruptcy. Are we saying that when people in their mid-30s get into that position and file for bankruptcy, they should be left with a significant debt to the Student Loans Company as a preferential creditor? That is fundamentally wrong.

My final point concerns the student debt portfolio itself. In 1997, when the Labour Government came into office, they inherited from their predecessors a provision to sell the student debt portfolio into the private sector. Hon. Members will know that one of the first pieces of legislation that the Government had to put forward was a Bill to sell the debt. It was unsuccessful, but it was part and parcel of Government policy to do that. It may be Government policy in future to sell all or part of the student debt portfolio into the private sector. In those circumstances, would a private bank that had bought the debt from the Government be a preferential creditor under the Bill? If so, it would put it in a very different situation to any other debt of any other individual or any other company in the United Kingdom. They are serious issues and I hope that the Minister can respond.

Chris Grayling (Conservative, Epsom and Ewell)

The hon. Gentleman has raised some important issues that should be aired in Committee. The Government's view should be set clearly on the record. I have a series of points that I would like to raise, and I hope that the Minister will address them. I share the hon. Gentleman's view that bankruptcy is a very serious step to take. Despite the reports of web-based communications going around the student cohorts saying that the best way to get out of fees is to file for bankruptcy, I do not seriously believe that, with the

possible exception of a small number of graduates on the fringe, large numbers of graduates will declare themselves bankrupt just to get out of their student fees. The consequence of doing so for their professional lives would be immense.

The fact that the issue even arises reinforces the fact that many students feel intimidated by the debt burden that they are building up through both the existing system and to a much greater extent through the system that the Government propose. I hope that the Minister will not seek to portray this measure, whether right or wrong, as being simply a response to a tide among students of using bankruptcy as a way to get out of repaying their debts. I do not believe that most serious graduates would consider such as route.

There are two key considerations. One is the financial process that students or graduates will go through in the case of bankruptcy. The second concerns the Government's involvement as an active or passive creditor. Will the Minister give us his views on that?

On the process, if a student or graduate had, for whatever reason, reached the point of having to be declared voluntarily or involuntarily bankrupt, the individual would be subject to the regime of the insolvency courts and his finances would be tied up in the courts. The Insolvency Service, the relevant officer of the Crown or an officer of the court would set parameters for managing that individual's finances. Bank accounts would be frozen and so on, and he would be given a small amount of money to live on. That is the normal process for such cases.

However, at the same time, the clock would be ticking. Labour Members sometimes do not fully understand that the student loan structure is not about paying when possible, but about a deferred interest process. The interest rate this year is 3.1 per cent. Interest continues to accrue each month of each year that goes by, whether the individual is a student, a graduate earning less than the threshold, a graduate who has given up to take a career break, or a graduate who has gone bankrupt.

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

The hon. Gentleman made that point before. The only rate of interest applied is for the cost of living. It is equivalent to the retail prices index so that the loan holds its original value. Does he accept that, or is he under the misconception that another rate of interest applies? If he does accept that, does he further accept that it is perfectly reasonable for us to ensure that the value of the original loan is maintained, without adding any extra burden, which a real rate of interest would do?

Chris Grayling (Conservative, Epsom and Ewell)

The Minister misses the point. I fully accept that the Government currently charge a rate of interest that is equivalent to the RPI, but it is still a rate of interest. Each student or graduate with a student loan will make an interest payment of 3.1 per cent. on that debt this year. That is lower than commercial rates, but two-year fixed-rate mortgages are available at 4 per cent. That is not a massive difference. Whether

it is 2 per cent., 2.5 per cent. or 3.1 per cent.—the rates of inflation in recent years—it is still a fact that each year that a repayment is not made to the Exchequer, interest accrues on the loan and is added to the total.

If someone is bankrupt, he may not be able to make his repayments. Not only will he not have the resources to do that, but the law will preclude him from doing so. In that case, money accrues on the overall debt level while someone is bankrupt.

Patrick Hall (Labour, Bedford)

I am trying to follow the hon. Gentleman's logic. Is he suggesting that if there is a period of years within which the debt is not repaid, the inflation interest is compounded and the sum due is greater when the person is in employment and starts making repayments?

Chris Grayling (Conservative, Epsom and Ewell)

Let us look at that in practical terms. Suppose someone goes bankrupt with, for example, a debt of £10,000, which is about half the maximum debt expected under the Government's proposals. Let us assume that the Government are charging interest on that loan at the rate that applies this year. If that person is bankrupt for three years and unable to make the repayments, £310 in interest will be added to the loan in the first year and it will become £10,310. In the second year, another 3.1 per cent. will be charged and just over £310 will be added, so the loan will become £10,600 and a bit. The same will happen in the third year, after which the person will end up with a debt of about £11,000. Therefore, the debt does not simply stay at £10,000 until the person can afford to repay it; it increases year by year as the interest is deferred and rolled up. The graduate will be constrained by the courts from making any payments, but the debt will rise accordingly.

Is it the Government's intention that the debt on the loan simply carries on accruing until a person emerges from bankruptcy, goes back into the employment market, gets back on their feet and starts making repayments? From their point of view, the bankruptcy will, de facto, never have happened. If that is the Government's intention, what role will they take during bankruptcy proceedings? That relates very much to the point made by the hon. Member for Harrogate and Knaresborough (Mr. Willis).

If, in law, the debt simply continues, the Government will have no place as a creditor. When an individual's assets are put into the pot to be divided among the creditors, the Government's involvement would be irrelevant, and one assumes that they would not seek to participate. If they did, they would have their cake and eat it because they would have the comfort of knowing that they alone among the creditors were pretty much guaranteed of getting their money back over the 25-year period to be prescribed in the student loan regulations that they introduce. On that basis, they would face no risk. On that basis, one assumes that they would not seek to be an active participant in the bankruptcy process. If they were, they would have to recover money at the expense of other creditors, despite having a guarantee that they

would get their money back anyway. It is important that the Government address those issues and explain how they see their role.

George Mudie (Labour, Leeds East)

The hon. Gentleman refers to the Government benefiting ahead of other creditors, but what is to prevent a graduate from taking out a few loans or using credit cards—people's credit limits are raised with amazing speed—to pay off their student loan and then declare themselves bankrupt? That would be perfectly straightforward. In that situation, the Government would benefit at the expense of other creditors.

Chris Grayling (Conservative, Epsom and Ewell)

The hon. Gentleman is right that there is nothing to prevent an individual from doing that, but the downside is that their credit ratings would be destroyed for the foreseeable future and their professional career would be massively undermined. They would pay a pretty heavy price for a short-term measure to remove their student debt. It would be wrong to say that no one would be tempted to do that, but I doubt that many smart graduates would see that as a sensible way of building financial prosperity. That is not how I see the Government benefiting from other creditors.

Let us imagine that someone goes bankrupt owing the Minister and the Government £10,000 each. Normally, if the Government came in as an active creditor, both creditors would get half—they would both get £5,000 of their £10,000. Under the Bill, however, the Government are guaranteed to get their money back later. It would be perfectly possible, therefore, for the insolvency courts to give the Minister all his £10,000 so that he was not out of pocket. The Government would get everything back when the person was out of bankruptcy. It is logical, and a natural extension of what the Government are saying, that they would not seek to be an active creditor in such situations and would not seek to jump in and get their half of the £10,000—their £5,000. They would ensure that the other creditors did not lose out because they had the guarantee that they would be able to recover their money at a later date when that person was discharged from bankruptcy.

I should be grateful for the Minister's clarification of that because, while I understand the rationale behind the measure, the Government should not be able to have their cake and eat it and establish themselves in the position where they get their money back regardless, at the expense of—

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

The taxpayers.

Chris Grayling (Conservative, Epsom and Ewell)

Well, I do not believe that the Government should introduce measures that allow them to get their money back in all circumstances and then take money back from the creditors' pot as well. They need to clarify and explain that.

Ivan Lewis (Labour, Bury South)

It is a delight to get back on my feet after a month of sitting in the Committee. There has certainly been a process of ageing. At the beginning of our proceedings, my hon.

Friend the Member for Stalybridge and Hyde (James Purnell) was 33; he is now 34. I was 36 and I am now 37. It has obviously been a difficult and stressful time.

I am delighted to have the opportunity to respond. It is important to recognise that young people making choices and examining bankruptcy as an option is not a minor matter or a joke, but a serious issue. It is indicative that the National Union of Students has made it clear to students and graduates that it does not regard opting for the bankruptcy route as a sensible decision because of its consequences, as outlined by the hon. Member for Harrogate and Knaresborough.

However, it is also important not to exaggerate the number of students choosing that option. Less than 1 per cent. of student loan borrowers go down the bankruptcy route. The irony is that the income-contingent nature of the system of student support that the Government propose minimises the dangers to graduates of financial indebtedness over a period of time.

Chris Grayling (Conservative, Epsom and Ewell)

On the figure of less than 1 per cent., the Minister will be aware that at current levels 1 per cent. of the student loan book is approximately £120 million. That is not an insignificant sum. Will he clarify the figure of less than 1 per cent? Are we talking about massively less than 1 per cent. or something close to £120 million?

Ivan Lewis (Labour, Bury South)

Of the people who take out student loans, less than 1 per cent. of that cohort find themselves in a bankruptcy situation. There was an increase within the past year, which I think most people accept was largely connected with the publicity on the option of using bankruptcy as a way of not paying student loans. A particular issue arose and it received a tremendous amount of publicity. There was such a dramatic increase in those 12 months that it is reasonable to link it to the attention that was focused on the issue and the ensuing greater awareness of that option. The figures are 2,400 bankrupts and 2 million borrowers. I hope that that gives the hon. Member for Epsom and Ewell (Chris Grayling) a clearer idea of the numbers involved.

The decisions that we make on bankruptcy are a matter of principle. There are a range of reasons why it is appropriate to remove student loans from the bankruptcy process. It would be wrong to allow a small minority of graduates to evade responsibilities that are accepted by the majority. I expect that all members of the Committee will accept that the vast majority of graduates would regard it as their responsibility to pay the loan back. We should do nothing to support the small minority who might choose not to fulfil those responsibilities.

Bearing in mind the damage that can be caused to an individual's life chances by bankruptcy, it is right to remove any perceived incentive that would encourage students or graduates to make that choice. When we speak of the Government's role—Conservatives Members are usually good at making this point—we

mean protecting the interests of the taxpayer. Whatever legislative framework we use, we should ensure that we behave responsibly in protecting the public interest—and in this case, public money.

We should remember that, despite the hon. Gentleman's observations, the student loan has an incredibly favourable rate of interest. No one can dispute that. It is nowhere near a commercial rate. Graduates will not find themselves facing bankruptcy because of their student liabilities, because the repayments are income contingent. Indeed, under the new proposals, graduates will begin to pay back only when they are earning £15,000 a year, and outstanding liabilities will be written off after 25 years. A series of principled and practical reasons make it appropriate to remove student loans from the bankruptcy regime.

As for the amendment, the fact is that we have no desire for the Government to become a preferential creditor. The clause takes student liabilities out of the bankruptcy framework. If we designated the Government a preferential creditor, the hon. Member for Harrogate and Knaresborough would have a valid point; but removal from the framework means that more non-governmental creditors are likely to benefit than if we did what he suggests. I suspect, in any case, that his amendment was probing.

The hon. Gentleman spoke about the Enterprise Act. One of the central aims of that Act is to free more money for ordinary creditors in bankruptcy cases. As I said, taking student loan debt out of the equation reinforces that view.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Will the Minister confirm a point raised by the hon. Member for Epsom and Ewell, which is that in the event of graduates going bankrupt who had some assets available for redistribution to creditors, the Student Loans Company would never be a creditor, and that they would not be discharged from bankruptcy even if money owing to it had been repaid?

Ivan Lewis (Labour, Bury South)

No. The purpose of the clause is to remove the student loan from the bankruptcy framework. The student loan will be related entirely to a graduate's income under the income contingent scheme. The status quo is that the student loan is part of the bankruptcy framework. In many ways, that was an unintended consequence of legislation enacted by successive Governments. However, because of issues raised in the past 12 to 18 months, the Government became aware of the implications. We want to change that legislation through the Bill, thereby entirely removing that set of circumstances from the bankruptcy framework. That would also reinforce the point that the Government cannot be a preferred creditor in such circumstances, because that is not part of the bankruptcy framework and we have no intention of making it so.

The hon. Gentleman also raised the historical question of selling off debt. That happened with the old mortgage-style student loan debt, which was sold in 1998 and 1999, but there are no plans to sell any more student loan debt to the private sector. In any

case, the terms and conditions of the loan are preserved by the sale agreement. Despite what he said about that, there are genuinely no risks or concerns.

George Mudie (Labour, Leeds East)

The Minister seems to be using a sledgehammer to crack a nut. First, perhaps he will tell us about any other instance where something cannot be dealt with by bankruptcy proceedings. What other debt, and which other Department or private sector creditor, can be faced with that? Is this a unique, pioneering example in the bankruptcy world? Secondly, will he tell us whether there have been discussions with the Department of Trade and Industry? I understand that it is probably responsible for bankruptcy law.

Ivan Lewis (Labour, Bury South)

I can respond directly to my hon. Friend and give some specific examples. On secured creditors against their security, for example, a debt to a building society can be extinguished in relation to a mortgage, but the building society's right to equity on the property is not affected. Other examples are debt incurred through fraud, fines imposed for offences or confiscation orders, or liabilities to the court, such as bail bonds, and liability to pay damages for negligence, nuisance, breach of duty or personal injury. Those are all items that are not included—and would not be possible to include—as part of the bankruptcy framework.

On consultation with the DTI, my hon. Friend knows only too well that joined-up Government is a reality. If he believes that—[Interruption.] It was ever thus under the previous Government. I assure him that consultation with all relevant Departments took place before we made the judgment that this is an appropriate measure.

I should like to respond to the comments made by the hon. Member for Epsom and Ewell—at least, those that I understood. The student loan balance would remain during bankruptcy. Interest rates accrue at RPI to maintain the same value in real terms. In the previous year that was 1.3 per cent., and next year it should be less than 3.1 per cent. As my right hon. Friend the Minister of State said, without RPI interest the loan would lose value in real terms. When the graduate repays the loan, they repay only the value in real terms. That is a reasonable, logical and appropriate way to protect public resources and funds.

David Rendel (Liberal Democrat, Newbury)

There is one further thing about which I am a bit confused. Perhaps an individual has debts in the private sector and another debt to the student loan body. If the private sector debt is comparatively smaller, and the assets would be sufficient to cover that, but not his total debts, does the Bill mean that he could not become bankrupt, because the debt to the student loan body would be discounted?

Ivan Lewis (Labour, Bury South)

As far as I know, that would not be the case, but I am happy to the write to the hon. Gentleman on that issue if that would be helpful.

Chris Grayling (Conservative, Epsom and Ewell)

To clarify what I am pretty sure the Under-Secretary said, is it the case that Governments will no longer seek to recover capital from student loan debt from the pots of money that the official receiver recovers when somebody goes bankrupt? In other words, the Government will not seek to be one of the creditors who recover money during that process.

Ivan Lewis (Labour, Bury South)

That is entirely the purpose of the clause. The issue is important, not minor, but the whole debate is sometimes deliberately contrived to give the impression that the student finance regime that we propose will have a punitive impact on graduates. It is important to cite some hard facts. A graduate earning £20,000 a year will repay only £450 a year, which is £8.60 a week. That is the impact of the income-contingent student finance regime that we propose. The idea that the changes that we are making will increase the risk of bankruptcy for graduates is absolutely untrue. With that, I would ask the hon. Member for Harrogate and Knaresborough to withdraw the amendment.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I thank the Under-Secretary most sincerely for his response. People reading the Committee Hansard will find his comments very interesting indeed. The Government have said today that the Bill will totally change the situation with regard to an individual's debt and credit worthiness. We now have a new term, ''permanent deferred creditor'', to describe what a graduate's loans will result in.

The Government have also said that although the finance company and those assessing a graduate's overall credit worthiness will have to take a debt to the Student Loans Company into consideration, in fact, bankruptcy will not be part of that. The Under-Secretary is right. One of the reasons for the amendment was to secure from the Government an understanding that under the clause a student's debts will be totally separate in case of bankruptcy. The debt will sail on, irrespective of whether a person goes bankrupt. That will create a unique situation in British law.

Ivan Lewis (Labour, Bury South)

Does the hon. Gentleman believe that it would be responsible of any Government to tell the vast majority of graduates who fulfil their responsibilities, as is appropriate, that it is absolutely fine for the debt of the small minority who do not to be written off when bankruptcy occurs?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

The Under-Secretary cannot have his cake and eat it. I totally agree with him. In fact, I said in my opening remarks that I did not believe that students simply filed for bankruptcy for a laugh or because it was a cool way to get out of debt. By the way, the figures that the Under-Secretary cited were totally different from those that the Minister of State gave me in a parliamentary answer in February.

Ivan Lewis (Labour, Bury South)

They have changed.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Well, they have changed quickly from 899 to more than 2,000. That is an astonishing change in less than a month in the number of people filing for

bankruptcy. Also, I hope that my remarks at no time suggested that I was deliberately encouraging students to file for bankruptcy.

Why is it right that the plumber who puts in a new gas fire for a graduate in their home should do without any recompense at all when that graduate goes bankrupt, but it is okay for the debt to the Student Loan Company to continue ad infinitum? It might be right for the taxpayer, I accept that, but why is it not right for the individual business man to be in a similar situation?

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

Can I test the hon. Gentleman on the matter? There is nothing between either party about loans. As far as I know, the policy of the Liberal Democrats and the Conservatives is not to do away with income-contingent loans and go back to a universal grant.

Does the hon. Gentleman accept that the unique factor is the income-contingent repayment? When it was introduced in 1998, everybody involved with the original legislation understood that this was exactly the kind of situation that would arise because of the income-contingent nature of the repayment. If one is not earning above the threshold, one does not make a payment; if one is, one makes a payment. It should therefore be kept completely out of the bankruptcy situation. I know that he had some involvement with the original legislation. Does he not accept that that was the original intention and that everyone involved when income contingency was introduced felt that that was the situation, until the debate in the Lords on the Enterprise Act revealed that unbeknown to anybody there was a flaw?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I fully accept what the Minister says. As we sat through those debates on the original legislation, I do not think that any of us contemplated a situation whereby students deliberately filed for bankruptcy to get out of paying back their debts. The point that I made to both the Minister and the Under-Secretary is that the number of students who actually do that is very small indeed, by the Minister's own admission. I accept the point that the Minister rightly made that, given the mass publicity that followed the Lords debate in 2002, people were encouraged—frivolously, and quite wrongly in my view—to file for bankruptcy.

I will obviously reflect on what the Minister says and on the debate—that is why this is a probing amendment. However, I do not believe that the situation is so big that we should say to any individual who is likely to be a self-employed business person in the future that if they file for bankruptcy, and find themselves in such a serious situation, they should come back after bankruptcy to find that they still have their student loan, even though it is repayable—I fully

accept that—on an income-contingent basis. That was the basis of the probing amendment, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 39 ordered to stand part of the Bill.

Clause 40 - Other amendments of section 22 of Teaching and Higher Education Act 1998

Anne Campbell (Labour, Cambridge)

I beg to move amendment No. 213, in

clause 40, page 18, line 36, at end insert—

'(2A) After subsection (2) insert—

''(2A) In determining the levels of residual income below which a parental contribution shall not be required in respect of any grant for an eligible student, regulations under this section must establish different levels for each region reflecting such indices of the cost of living in different regions as the Secretary of State considers appropriate.''.'.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to discuss amendment No. 214, in

schedule 6, page 33, line 23, at end insert—

'9A In section 43(1) (general interpretation), insert—

''region'' means—

(a) Wales, and

(b) the regions of England specified in Schedule 1 to the Regional Development Agencies Act 1998.''.'.

Anne Campbell (Labour, Cambridge)

One of the interesting things about the process of a White Paper and then a Bill is the change that takes place in the course of that evolution. I appreciate the way in which my right hon. Friend the Minister has listened to the fears expressed by Back Benchers and has managed to modify the Bill quite considerably to accommodate those concerns.

When we began this process, the White Paper originally said that there would be grants of £1,000 for those whose family income was under £10,000 a year. That was then changed to families with incomes under £15,000 a year. It later became a grant of £1,500, available to those from families with incomes under £15,000 a year. We have now seen a further change with the roll-up of the fee remission of another £1,200, making a total grant of £2,700, and a bursary of £300, which adds up to a final figure of £3,000. That is a good deal for people from lower-income families. I no longer have the concerns that I had about students from very low-income families being deterred from going to university. What is now on offer is much better than the current situation. I believe that more students from poorer backgrounds will be encouraged to go to university under the Government's proposals.

However, I have a concern and I hope to be able to push the Minister a little further this afternoon on it. There are students who come from families who do not appear to have a very low income but who live in an area that has high-cost housing. That is the case in my constituency and in those of my hon. Friends who have subscribed to the amendment. The problem was first brought to my attention by my hon. Friend the Member for Reading, West (Mr. Salter), who has great

concerns about families in his constituency who do not appear to be on very low incomes but who have small disposable incomes.

I have examined comparable house prices in different regions and areas. There are huge discrepancies. You will be sorry to hear, Mr. Gale, that I do not have the figures for every Committee member, but I have focused on a couple of places to illustrate the point that I am trying to make about the huge differences. The figures were taken from the Land Registry, and they are recent, having been last updated on 4 February this year. In the constituency of my hon. Friend the Member for Reading, West, the average price of a two or three-bedroom terraced property is £156,000; in Greater Manchester, it is just over £68,000; in Salford, it is £58,000. In parts of London, the figure is much higher. Greater London's average price for such a property is £271,000, but that varies: in Barking and Dagenham, the figure is £158,000 and in Kensington and Chelsea it is about £1.5 million. Cambridge is very expensive compared with many of those places, although not with Kensington and Chelsea's £1.5 million: the average cost of a terraced house in Cambridge is about £234,000. I am seeking to illustrate that the disposable income of somebody who lives in a very high-cost housing area such as my constituency will be far less than that of people who live in cheaper housing areas.

I have also examined the mortgage repayment for an average Cambridge terraced house costing £234,000. Assuming that the purchaser had a deposit of about £25,000, they would be paying their mortgage on £209,000. The Council of Mortgage Lenders average interest rate for the past month was 4.19 per cent. Using that figure and the Moneyfacts mortgage calculator, the monthly repayment on a repayment mortgage for that property over 25 years works out at £1,125. That is consistent with Nationwide's figure of £1,238 as the monthly repayment.

Let us consider someone in Cambridge who comes from a family at the top end of the income scale at which a grant would be payable, with an income of around £33,000. The take-home pay on a salary of £33,000 would be just over £2,000 a month, out of which one might pay £1,125 in mortgage costs, thus leaving a disposable income of about £1,000 a month. That is not a great deal for a family that may consist of two adults and two teenage children. Now let us consider the same calculations for a family in Manchester. First, I remind the Committee that one can buy a terraced house in greater Manchester for £68,000. If we make the same assumptions as before and allow for a deposit of £25,000, mortgage repayments of £43,000, and take-home pay of £33,000, the mortgage calculation would be £225 a month, thus leaving £1,941 of disposable income.

There is a huge difference between the disposable income of those two hypothetical families, who have the same income but live in different areas. In Cambridge, they would have a disposable income of about £1,000 a month, whereas in Manchester it would be almost £2,000 a month.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

The amendment is an interesting one, and raises a crucial issue about differential house pricing and costs. However, does the hon. Lady accept that, in Cambridge, there will be people who earn £33,000 and live in housing association properties with relatively low rents, whereas there will be others on the same income who live in expensive homes? Does she presume that each of those students would get the same grant?

Anne Campbell (Labour, Cambridge)

Someone who has lived in a housing association property for some time may earn £33,000, but there is no way that someone coming into the city on that kind of salary would qualify for a housing association property. The Hundred Houses Society, a housing association in Cambridge, told me that it would not be able to offer a property to anyone earning over about £18,000 a year. That makes it almost impossible for anyone earning between £18,000 and £30,000 a year to live in the city, because they would not be able to afford the rent or mortgage repayments, and they would not qualify for local authority housing or for housing association properties. There is a real dilemma there. I do not say that that situation exists in all expensive housing areas, but it is certainly true in my constituency.

For a mortgage payer in Cambridge to be as well off as someone earning £33,000 in Manchester, they would need to earn £8,400 more a year. In other words, in Cambridge, one would have to earn £41,400 a year to be as well off as someone in Manchester earning £33,000 and paying a different mortgage.

James Plaskitt (Labour, Warwick and Leamington)

I follow the drift of my hon. Friend's argument, but as she seeks to redress the situation by establishing different levels for each region, will she define how she intends the word ''region'' to be used?

Anne Campbell (Labour, Cambridge)

I hope that there may be a fairly liberal interpretation of ''region'', because I know that there are some low-cost areas in the eastern region. For example, houses in Suffolk and some parts of Norfolk are much cheaper than in my constituency. The sensible approach would be to say that areas that achieve area cost adjustment through their local authority funding mechanisms—

Mr. Plaskitt indicated dissent.

Anne Campbell (Labour, Cambridge)

I am sorry that my hon. Friend is shaking his head. Perhaps he is unaware of the difficulty that low-income families have surviving in expensive parts of my constituency. It would be helpful to make use of a mechanism such as the area cost adjustment, which is already in place.

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

I thought that amendment No. 214 defined regions as those

''specified in schedule 1 to the Regional Development Agencies Act''.

That would give no flexibility and would define regions in accordance with the regional development agency's boundary. That is a genuine point. Perhaps I have misread the amendment, although I do not think that I have.

Anne Campbell (Labour, Cambridge)

I confess that when I read the amendment again, I realised that it might exclude my constituency, so I was trying to encourage the Minister to think about it flexibly. Nevertheless, whether we take regions or county council areas, to which the area cost adjustment currently applies, the principle is the same, and the figures that I chose to illustrate my point demonstrate the problems of living in high-cost housing areas.

James Plaskitt (Labour, Warwick and Leamington)

Let me explain why I am concerned about my hon. Friend's proposal. Let us imagine a typical terraced property in Leamington. A similar-sized property just 10 miles away in the city of Coventry would be about one third of the price, but both properties would be in the same region under any system of regionalisation.

Anne Campbell (Labour, Cambridge)

There will obviously be big differences. People will choose to live in areas that they can afford and within travelling distance of where they want to work. It is difficult for teachers, social workers, postal workers, bus drivers and council workers, such as refuse collectors, to live anywhere near Cambridge, and they tend live outside it, where housing is cheaper. I cannot accept that families in high-cost housing areas feel anything like as well off as families in low-cost housing areas, because their disposable income is much lower. That would certainly apply to many students.

I am grateful to my hon. Friend the Member for Nottingham, North (Mr. Allen) for finding out what percentage of students in the constituencies of members of the Committee would qualify for the full grant if they managed to achieve the two A-levels needed to enter university. In several constituencies, the percentage is very high. As he said, 65 per cent. of students in his constituency would qualify for the full grant, while 41 per cent. in mine would qualify, at the current rates. That illustrates that Cambridge is not full of very high-income families. There are low-income families, who find it difficult to survive, because of the high housing costs.

I am suggesting that the family income threshold for those who qualify for the full grant should be a higher in high-cost areas than in lower-cost areas. Currently, the full grant goes up to an income of £15,950 a year, and some grant is payable to those with an income right up to just over £33,000 a year.

I am glad that Cambridge university has recognised the problem and deals with it in the way in which it structures its bursaries. Cambridge is suggesting that bursaries be available to students with family incomes of up to £35,000 a year. We may need to recognise that some families need a higher income in order to achieve the same standard of living as others. I am sure that this will prove to be an interesting debate.

We must also recognise that students from families with little disposable income are the most reluctant to go to university. It is for that reason that the Minister and Labour Back Benchers have campaigned so hard to get a grant in place to support those we want to encourage to go to university. I very much hope that the Committee will give that proper consideration and come to the conclusion, as I have, that there should be different thresholds in high-cost housing areas.

Tim Collins (Conservative, Westmorland and Lonsdale)

The hon. Lady deserves the Committee's congratulations on raising this issue. I suspect that she will not have carried all Committee members with her on how the problem should be tackled, but she is quite right to address a problem that is of concern in many parts of the country.

I thought that the hon. Lady underestimated her contribution to proceedings when she made her comment about how interesting it had been to observe how the Government's proposals had evolved since the original White Paper. That is slightly to understate the pressure that she and a number of Labour Members put Ministers under. I am not quite sure that it was so much a process of smooth evolution as of complex negotiation. It is precisely because she has made a significant contribution to the evolution of policy in a number of respects that what she is saying is of particular importance.

It was clear from a few interventions that the hon. Lady took from Labour Members that some people will be a little sceptical about whether it is possible to address the issue on a regional basis. For example, in my region—the north-west—there is a huge distinction between the property prices that apply in the Lake District national park in my constituency, and those that apply in the middle of inner-city Merseyside or Manchester. As other people have mentioned, there would be major distinctions even within some local authority areas or constituencies. In my case, the distinction between properties in the national park area and outside is dramatic. It would therefore be quite difficult to deal with the problem on a regional basis.

Having said that, it is worth while addressing not only the exact text of the amendment but the spirit behind it, and I hope that the Minister will do that. That is important, because there are huge differences in the housing costs faced by people in different parts of the country, and that clearly makes a huge difference to their disposable income and therefore to their prospects of providing significant support to their offspring as and when they decide to go to university. That subject needs to be tackled.

I will be candid with the hon. Lady: I am not sure that there is an easy way of doing what she suggests. The Government have chosen to go down the route of providing support on the basis of income. That is objectively measurable: it is fairly easy to ascertain the difference between people who are on high, middle or low incomes. She is right to address the difficulties that arise from the possibility that a big chunk of that income is consumed by housing costs, but there would be difficulties in some circumstances, even within the

same ward, in measuring differences in housing costs, for the reasons that I and other hon. Members have cited.

I suspect that we all have areas in our constituencies in which there is a big, or at least measurable, difference between the value of houses on different sides of the same road. The issue would get very complicated. That is not to belittle the point that the hon. Lady makes, which is legitimate and important. However, if we are in the business of finding practical solutions, I take the view that trying to address the problem at regional level would create more anomalies than it would resolve. To be perfectly candid, I have some scepticism about whether trying to address it even at local authority level would resolve the problem rather than making it worse.

I look forward to what the Minister may be able to say about the matter. Perhaps he will be able to say that the Government will reflect on it. I do not think that there is an easy answer. I have expressed reservations about the hon. Lady's solution, but I do not pretend to have a magic-wand solution myself; I suspect that none of us has. However, if the Government were to deploy great and weighty minds to think about this issue, that would be widely welcomed.

David Chaytor (Labour, Bury North)

I entirely understand the concerns of my hon. Friend the Member for Cambridge (Mrs. Campbell). I commend her for her research and for the statistical analysis that she presented to the Committee. However, I am mindful of the comment made about an earlier amendment by the hon. Member for Ceredigion (Mr. Thomas). He described it as ''anti-devolution''. Given the prospect of successful referendum results on devolution to the north of England later this year, I describe this amendment as ''anti-devolution'' also, because it works against the interests of people in the northern regions.

Although I accept the detailed analysis given by my hon. Friend, I am also mindful that such statistical projection based on house prices is exactly the sort of projection given by the Conservative Government in 1990 to justify the standard spending assessment regime, and particularly the area cost adjustment component of that regime, which for more than a decade systematically discriminated against regions in the north of England. I am therefore sceptical about whether such a solution is fair or workable.

If we base anything on house prices, we base it on shifting sand. As we know, house price differentials are not stable. What might be an enormous differential one year can turn out to be different the following year. If there is any house price trend at the moment, it is that the rate of increase in the south-east is slowing, while in the north it is increasing. We may see a convergence of house prices across the country. That is testimony to the fact that prices have been overheating in the south-east and have become unsustainable. Nevertheless, it would be misguided to legislate on the basis of a differential in 2004 that may have disappeared by 2007.

My second objection is the impossibility of generalising across regions. A few kilometres from the town in which I live, there are communities in which one can still buy a terraced house for £25,000. If one travels four or five miles in another direction, the typical price for a terraced house is similar to that cited by my hon. Friend the Member for Reading, West. It is utterly impossible to generalise across regions. As several hon. Members have already said, the variations within regions are enormous.

I do not deny that there is difficulty for low-income families in certain towns throughout the country, but almost by definition, families earning £20,000 or £30,000 a year cannot buy terraced houses that cost £150,000, because they could not secure a mortgage. It does not necessarily follow therefore that those families who live in rented accommodation, often in social housing of one sort or another, will be at such a disadvantage, because the rents are not directly proportionate to the capital value of house prices.

Anne Campbell (Labour, Cambridge)

I am grateful to my hon. Friend for making that point. Does he agree that housing associations and local authorities will not accept for properties families with incomes above £18,000 a year? Moreover, people may have qualified for that low-cost property some time ago when they were earning that amount, and continued to live in it when they have increased their incomes. Does he also accept that there is a strong relationship between the rents in the private rented sector and mortgage costs? I have undertaken research and found that, to pay the rent for a two to three-bedroom house in the city centre of Cambridge, a person would have to find about £900 a month.

David Chaytor (Labour, Bury North)

I do not deny the validity of the first of my hon. Friend's points, but I say in response to her second point that it is highly unlikely that many people on low incomes would be living in the centre of Cambridge. Her example is not sufficient for a generalised argument.

For those who are living in houses that are currently valued at £150,000 in Reading or £235,000 in Cambridge, it follows that they bought them some time ago. Therefore, they have the benefit of a significant windfall capital gain by virtue of having lived in the houses for a certain time. When discussing the matter with my hon. Friend the Member for Reading, West, I said that the difference between someone on a low income in Reading and someone on a low income in one of the towns in the north is that the family in Reading has the choice, if they choose to exercise it, of selling their house, moving to a different region and pocketing the capital asset. That choice is not available to someone in a small town in the north of England, whose capital assets are about £25,000.

My hon. Friend the Member for Cambridge has identified a problem, but her proposed solution is not appropriate. It would establish a remarkable precedent for the way in which the Government—or any Government—established a framework for all other forms of benefit payments. Does she similarly

argue that there should be regional variations for child benefit, the minimum wage or tax and pension credits? That is the logic of her argument.

David Rendel (Liberal Democrat, Newbury)

I have much sympathy with the hon. Lady's amendment. Like me, my hon. Friend the Member for Harrogate and Knaresborough comes from an area in which housing costs are extremely high, and we are both aware of the particular problem that she has highlighted. However, as has been said, there are good reasons for supposing that this is not the right way of tackling it. We keep addressing the difficulty of high house prices by providing more resources for people who live in high-cost areas to meet those prices, as a result of which house prices continue to increase. In a sense, we make the problem worse each time we provide more resources to pay for house prices rather than trying to do something to bring them down or at least make them more even throughout the country.

In the end, to a large extent, house prices are a matter of supply and demand. The fact is that many people want to live in high-cost areas and there are not so many who want to live in low-cost areas. While supply and demand are out of kilter with each other, and more money is pouring into areas where supply is low and demand high, that simply enables people to pay ever higher house prices in those areas. We have tried that with various cost of living allowances: we have given such allowances to a large number of public sector workers in London. We must do that: I have myself argued in favour of special living allowances for high-cost areas in my area and others. In the short term, that is the only answer. However, we must surely consider longer-term solutions that will provide more housing to meet demand, or change the areas where demand exists. Perhaps we should try to generate higher demand in areas where house prices are currently comparatively low, and put jobs back into areas of high unemployment where it is more difficult to obtain work so that there is lower demand for housing. If it can be tackled in that way, it will be a much more effective long-term solution to a genuine problem.

Anne Campbell (Labour, Cambridge)

Forgive me if I am wrong, but I thought that when the Liberal Democrats had a policy on the national minimum wage, it was a regional, rather than a national policy. Perhaps the hon. Gentleman might have argued then for regional variation in the national minimum wage, whereas he now seems to be arguing against the equivalent proposal.

David Rendel (Liberal Democrat, Newbury)

Part of the reason for a regional policy for the national minimum wage is to encourage employment into areas where housing prices are low. That is the long-term solution to the problem.

James Purnell (Labour, Stalybridge and Hyde)

I, like other hon. Members, have some sympathy with the amendment. As someone who was briefly a chair of housing in an inner London borough, I know that

there are genuine difficulties in finding housing for people who are not, by the standards of the south-east, particularly poor. However, now that I represent a seat in the north-west, I should also tell my hon. Friend the Member for Cambridge that there is a real anger at what is perceived to be a larger share of public spending going to the south-east to address its problems. She talked repeatedly about somebody in Greater Manchester and their housing costs. Perhaps we could turn that into the Greater Manchester question—not the West Lothian question.

Many of my constituents would say that, for example, a large amount of money goes to transport in the south-east to tackle congestion there and a large amount of money deals with social housing there. On health and equality, people in my region live five to 10 years less long than people in my hon. Friend's region. As has already been mentioned, in local government, the spending formula already distributes money unevenly. To exacerbate that by treating the symptoms rather than the causes of inequality would create quite genuine anger and make it more difficult for someone like me to sell this Bill to my constituents.

I do not want to repeat the comments made by my hon. Friend the Member for Bury, North (Mr. Chaytor), because I agree with all of them. I want to amplify a couple of points that my hon. Friend the Member for Cambridge made in response to a couple of interventions. She said that she wanted the adjustment to be more precise and more flexible than on a regional level. I can understand that, because the point made about regional variations is absolutely right. However, the danger is that if the definitions were made on the basis of local authorities, the other problem of boundaries between local authorities would become much worse. If regional policy was introduced, there would be a problem of one person in one street receiving a certain level of grant and another in another street receiving another. If local authority definitions were used, that problem would occur all over the country. It would happen between Barking and whatever the rich place next to Barking is. There would be widespread difficulties concerning house price variations. There are practical difficulties. Even at regional level, it would be such a blunt instrument that some people who are well off because house prices in their area are low would receive a benefit that they did not need, or there would be the opposite problem, and massive boundary problems across different local authorities.

There is also the practical problem of people working in one area and living in another, and how that would be dealt with. Like my hon. Friend the Member for Bury, North, I have a very well-off area a few miles down the road from where I live. Some parts of Stockport are much better off than parts of Surrey, and with similarly high house prices. In some areas of Stockport, house prices have doubled in the past two or three years. It would be very dangerous to build policy on the shifting sands of house prices.

The solution to the problem is to deal with the causes of regional inequality, not the symptoms. We need to ensure that there is greater economic

development in the regions of the north, and proper investment in their infrastructure. The Government are doing that, and we hope that the problem that my hon. Friend the Member for Cambridge wants to tackle will lessen over time as that investment is made.

As hon. Members have said, the fact that house prices are starting to converge is evidence that people are deciding that they would be better off living in an area of lower-cost housing rather than struggling and living in very cramped accommodation in the south-east. People make choices. If they live in the south-east on an income of £25,000, they will not be living in a house that is worth £250,000 or £300,000, but will be living in cheaper accommodation, sharing accommodation, or commuting. In return, they have the advantage of a thriving economy, very low unemployment, and the investment that I mentioned earlier.

My final fear about the amendment is that it would be self-defeating. I am no economist, but awarding grants to people with a higher level of income in one part of the country would make buying houses in that area more attractive. The same is true of school places: house prices rise in areas with access to local schools that people find attractive. In the end, the adjustment would simply be played out in higher house prices in the areas that received that benefit. It would serve only to accentuate the economic inequalities that we should seek to redress. I therefore cannot support the amendment, because it would be very hard justify to my constituents. It would worsen the problem that it is designed to solve.

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

I, too, recognise the genuine problem to which my hon. Friend the Member for Cambridge refers. I believe that she will be one of the delegates whom I am meeting tomorrow to talk about it. I share the view expressed by the hon. Member for Westmorland and Lonsdale (Mr. Collins) in that I cannot think of a solution to the problem of how we deal with grants. I am, however, sure that the amendment does not provide a solution. I will take time to explain that statement, which in no way detracts from the problem that my hon. Friend the Member for Cambridge and other colleagues have described.

My hon. Friends for Bury, North and for Stalybridge and Hyde made very eloquent speeches, but I will start with the wording of the amendment. My point is technical, but it goes further than that. The amendment refers to residual income and parental contribution, but parental contribution does not come into it. It did with fee remission, and it does with loans. We means-test 25 per cent. of the loan because we expect a parental contribution, but parental contribution does not come into it in the case of the grant now that fee remission is rolled up with grants. However, that is a minor point.

It is not the case that residual income is the same as disposable income, and that house prices will therefore be a factor. This year, we are moving to residual income for the first time. Residual income is not defined like that. It does not deal with disposable income, but makes a £1,000 allowance for each

dependent child, and considers pension premium payments and maintenance payments. It also excludes any income earned during their studies by adult students whose income is assessed for grant. Using the term ''residual income'' will not do what my hon. Friend the Member for Cambridge wants it to do.

Graham Allen (Labour, Nottingham North)

It is notoriously difficult to come up with answers as Committees are proceeding, but my right hon. Friend the Minister has generously accepted that there is a problem. He has also established that there is no obvious answer at the moment. There are, however, a number of commissions and inquiries that relate to the issue. He does not have to give an answer now, but will he give some thought to whether consideration of the problem that he and other colleagues have identified comes within the remit of the various commissions and whether they could come up with something that satisfies us, perhaps not in the next year, but over the next couple of years?

There is a genuine problem, and the answer is not for someone to get on their bike and sell their house. There must be something equally ingenious such as the system that we now have for repayment of fees on an income-contingent basis, which no one had thought of before. An answer can be divined, and perhaps the Minister will put that question before one of the commissions.

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

As always, my hon. Friend makes a good point. However, he talks about one of the commissions when in fact there is only one—the independent commission that will come into play three years after the introduction of variable fees. We could ask the commission to consider the issue but, even with its brain power, it would find it difficult to solve the problem in a simple way, and if we cannot solve it in a simple way and we are going to introduce the complexity and uncertainty that the amendment would introduce, it is not worth going down that route in the first place.

There is a serious problem relating to residual income, but there is also a problem with how the proposal would work. Let us think it through. There are a lot of us northerners on both sides of the Committee—adopted northerner though I may be, along with others on the Government Benches. We could go for one of two systems. We could keep the existing baseline and say that those who are below the £15,000 level get the full maintenance grant and then it is tapered up to £33,000 a year. We could implant on top of that a shadow scale to reflect the cost of living in the area, but in that case there would be a serious problem.

I can imagine someone living in Slough selling a valuable house in the Thames valley and moving to Hull, where it is probably possible to buy a whole street for a relatively low price. The person might have an income of £25,000 or £30,000, which meant qualification for the full grant, but next door might be someone on £25,000, and only £900 of the grant would be received. Then the grant would have to be

reassessed because the person was living in a different area, with all the complications that that entailed. That would involve an enormous amount of extra money, because there would be the grant, which is expensive as it is, and we would be adding an extra tier on top. From reading the amendment, however, I think that what my hon. Friend the Member for Cambridge suggests is worse than that, because it would establish different levels for each region, so there would be, for example, a Yorkshire and Humber scale, a north-west scale and a Merseyside scale. There would be a regional scale as defined by the regional development agency boundaries.

Anne Campbell (Labour, Cambridge)

Last November, my right hon. Friend the Chancellor of the Exchequer announced in the pre-Budget report the introduction of geographically differential pay across the public sector. He also talked about a stronger local and regional dimension for the pay review bodies. That encompasses the principle that I am asking the Minister to take on board this afternoon. He is arguing strongly against that principle, but all I am saying is that it has already been accepted in another Department.

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

That reflects back to a point made by my hon. Friend the Member for Stalybridge and Hyde: the answer is to look at increasing the prosperity of the country as a whole. That is very much part of the regional agenda. The initiative announced by my right hon. Friend the Chancellor of the Exchequer in last year's Budget was to get retail price indices on a regional basis.

I was a trade union negotiator and remember that we had a dispute about a similar issue in the late 1980s, because places such as Cambridge and other areas did not qualify for London weighting. We introduced something called the difficult recruitment area supplement. The Chancellor made the point that such issues need to be examined much more closely, and he will produce those indices every four or five years rather than annually. However, for us to meet the terms of the amendment, we would need annual indices, because we reassess the entitlement to the grant every year of a three-year degree course or every two years if it is a foundation degree, so I do not think that that helps the argument put forward by my hon. Friend the Member for Cambridge.

The alternative to the system that I quoted, which has its problems and is very expensive, would be to set up those different levels. That would open up the prospect of someone in my constituency or other constituencies not qualifying for the full grant on an income of under £15,000 a year, because the whole basis of that argument is that there would be a different scale, and qualification for the full grant might occur at a lower level. That would create much more antagonism than already exists. I am not saying that the people of Hull, West and Hessle were chairing me round the streets because of the Higher Education Bill, because, although many of my constituents support it,

it is not top of their agenda. However, there would be outrage in my constituency and in others if we went down the route suggested.

On the amendment, the question of where the boundary is set is a real issue. A situation could arise in which a student or a family moves just down the road, crosses a boundary and thereby loses or gains their grant or finds that their grant decreases between one year and the next. That would be a real problem. There is no reliable measure of regional variations at present; the Chancellor might produce one eventually, but even if he were to do so, I do not know whether it would be produced annually.

The point has already been made about variations within regions that are as big as those between regions. We did not just pluck that concept from the air; it was demonstrated by a very detailed analysis carried out by the Joseph Rowntree Foundation. The hon. Member for Westmorland and Lonsdale was right that the process would come down to ward level, with all the complications that that would involve.

As my hon. Friend the Member for Bury, North said, there is no means test applied by Government anywhere else, as far as we are aware. There is no means test or variation of that kind for tax credit, nor is there a variation for benefits. In the summer, we are rolling out the education maintenance allowance nationwide. My hon. Friend the Under-Secretary is responsible for that. It is horrendous to think of having to introduce such a measure for the education maintenance allowance, which we would have to do if we introduced it for grants for higher education. That would cause huge difficulties.

My hon. Friend the Member for Stalybridge and Hyde spoke about the disparities between the regions. However, another problem with the amendment is that it would create losers among exactly the sorts of people whom we are trying to encourage into higher education. If one examines the percentages of those entering higher education in conjunction with the cost of living index, there is an interesting dichotomy. For instance, London, which we would seek to help with this, has the highest density of people entering higher education—almost 24 per cent. The money that we would be taking away would come from Yorkshire, where there is the lowest density of those in higher education—19.7 per cent. That neatly flips the chart right round; it is an opposite equation. Those that would benefit from the amendment tabled by my hon. Friend the Member for Cambridge would be those from areas where the percentage of people entering higher education was highest, and vice versa. That is an important point.

I want to pick up on a couple of points that have been raised in an excellent debate. First, I want to chastise the hon. Member for Westmorland and Lonsdale who made the point that the Government's policy did not evolve smoothly, but through messy negotiation. It is right that my hon. Friend the Member for Cambridge, who by and large was not thrilled with variable fees, played a role in making representations about the issues of student support. However, so did my hon. Friends the Members for

Bury, North and for Nottingham, North and many other hon. Members who supported us and who would have voted with us all along on the basis of the principle of the Bill. They were continually raising points about the need to get the fee remission rolled in with the grant and to increase the grant. Therefore, we ought to set the record straight. Yes, there were people who were hostile to the whole concept, and they spoke to Government and persuaded us. However, others who were absolutely in line with the concept did the same thing. We listened to all sides of the argument, but this was a particular issue on student support that united everyone on these Benches.

James Purnell (Labour, Stalybridge and Hyde)

Will my right hon. Friend tell me whether the Conservative party's policy had a strong influence on his evolution of the policy?

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

In terms of how it evolved, it told me the roads not to go down. Conservative hon. Members, in particular the hon. Member for Daventry (Mr. Boswell), were telling me at one stage that I had a difficult hand to play. I think that the Conservative's policy is the most difficult hand to play.

The other point that I wanted to make was that the hon. Member for Newbury (Mr. Rendel) made a telling contribution. However, my hon. Friend the Member for Cambridge intervened and pointed out that the Liberal Democrats did not begin with a policy of a national minimum wage, and that is an issue. We have a national minimum wage, and the logic of going down this route is that we should not. The Liberal Democrats had a policy of a regional minimum wage, and they stood at the 1997 and 2001 elections on that policy. It was abandoned.

I had ministerial responsibility for the minimum wage and I remember the hon. Member for Twickenham (Dr. Cable) telling me that the Liberal Democrats had seen it work to such a degree that they admitted frankly and openly that they were wrong. I have every hope that the same procedure will be gone through by the Liberal Democrats on tuition fees and student contributions when the Bill goes through and that, after a couple of years, they will see, like a blinding flash, that that was the route to go down.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

The right hon. Gentleman is always so generous with his barbs. We changed our position on that, in exactly the same way as the Government have changed their position since 1998—the Teaching and Higher Education Act 1998 introduced up-front fees and so on—and, of course, since the manifesto of 2001.

The hon. Member for Cambridge needs some support on the legitimate issue that she has raised about regional variations. All political parties, with the exception of the Conservatives, are examining the matter, and whether we like it or not, the Chancellor is right to examine those regional indices. If one examines what has happened in Scotland and Wales as a result of the Barnett formula, they can do other things because they receive, in terms of their percentage of regional GDP, an additional sum of money. I do not think that it is fair to chastise the hon. Lady totally, because there is room for manoeuvre in using the region as a method of finding a different

solution to some of the problems. That has been proven in Scotland and in Wales, by the Welsh Assembly.

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

I am not chastising my hon. Friend the Member for Cambridge—quite the opposite. It is my duty to point out the flaws in approach. I support decentralisation and regionalisation. I believe that the answer lies in that, in improving the economy throughout this country and in ensuring that the success in some regions is reflected throughout our country. However, we in government will continue to reflect on these real problems, and we understand the concerns. However, the amendments would create more problems than they would solve.

James Purnell (Labour, Stalybridge and Hyde)

I should like to comment on the point about reflecting on regional variations, and the suggestion from my hon. Friend the. Member for Nottingham, North that perhaps the issue currently being discussed could be incorporated into a commission's thinking for further reflection. If the Minister goes down that route, will he assure those of us from northern constituencies that issues such as how to retain graduates in our constituencies in the north once they have been to university will be considered so that there is a balanced view of regional equality?

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

My hon. Friend raises an important point—and I think that another important point will come from another hon. Friend.

David Chaytor (Labour, Bury North)

No one is denying the significance of regional differentials, but any solution that depends on putting more taxpayer's money into making it easier for people to handle the effect of excessive house prices in certain regions will result in the opposite effect to that which is intended. That is pouring petrol on the fires of house price inflation. We must get to the root cause of the problem and shift the levels of collective investment in the regions, not compensate individuals for high costs in certain regions.

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

I accept my hon. Friend's point. The independent commission will report to Parliament on the success, or otherwise, of this policy three years after it is introduced. I am not trying to turn that into a forum to discuss the regional problem. I think that if there are specific concerns about this package, it makes sense for the independent commission to consider those problems, if they exist. However, the main aim of that commission will be to look at the effect of variable fees on the success of attracting widening participation and people not dropping out of university courses. That is the crucial element. The other issues are, to some extent, peripheral.

Anne Campbell (Labour, Cambridge)

Can I take it from what the Minister said that he would be prepared to refer this point to the independent commission, so that it can be asked to consider how regional variations have affected the intake of universities?

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

That sounds like a good idea, but I want to reflect before giving a positive response and I should like to consult my right hon. Friend the Secretary of State. I should be able to do that before the meeting with the delegation tomorrow. I hope to give a final answer then. I hope that my hon. Friend will withdraw the amendment.

Anne Campbell (Labour, Cambridge)

I want to answer a few of the points that have been made in the debate, which has turned out to be more interesting that I anticipated. Far from being born and brought up in the south and living there all my life, I was born in Dewsbury and brought up in Huddersfield. My daughter and two of my grandchildren live in Stoke-on-Trent, which is one of the cheapest housing areas. My family does not stand to gain personally from such an amendment.

I agree with those people who have said that regional discrepancies are not economically healthy. We need to ensure that there is a more even spread of jobs and prosperity. I hope that will, in time, lead to more equal distributions in house prices, but I am concerned that that may take some time with the sort of discrepancies that currently exist. I shall not stray far in this direction, Mr. Gale, and I know that you will not allow me to do so. However, it is important to say that one of the reasons for spending money in areas like mine is that we need more affordable housing. Not everyone can take the advice of my hon. Friend the Member for Bury, North and move out if they find it too expensive. Some have jobs and families. It is not always possible to move, and moving could make things difficult. It is bad enough now trying to recruit teachers, bus drivers, postal workers, refuse collectors and others on low pay in areas such as mine.

David Chaytor (Labour, Bury North)

I was not advising people to get on their bikes. I was pointing out that wealth comes in two forms—income and capital. Would my hon. Friend not agree that the worst thing that could be done to increase house price inflation would be to use more public funds to make houses more affordable in high-cost areas? That is the central issue. Raising the public

subsidy to enable people to buy excessively priced houses is the best guarantee of house price inflation, and regional differentials will thereby increase.

Anne Campbell (Labour, Cambridge)

That, of course, is not what is being suggested. Other Government policies have encouraged house price inflation. For instance, I was in favour of the starter home initiative, but it affects house prices. However, the amendment would not do so, because it would not contribute directly to housing costs. It would support students from those families who live in the high-cost housing areas, but who have low to modest incomes. It would not have the effect suggested by my hon. Friend.

My right hon. Friend the Minister said that the amendment would benefit those who live in areas that already have a high university uptake. Unfortunately, uptake varies. My constituency has pockets of severe social deprivation. I illustrated that earlier by mentioning two schools in my constituency that I visited during the autumn term. At one school, I asked 40 or 50 young people aged between 13 and 15 how many intended to go to university, and about 15 per cent. put up their hands. I asked the same question in the other school, only two or three miles away, and 85 per cent. of the children put up their hands. That illustrates the difficulty of trying to categorise and target young people.

We want to raise aspirations and to ensure that more people go to university. That brings me back to the point made by the hon. Member for Westmorland and Lonsdale: it is difficult to decide whether we should be talking about regions, areas, counties or wards. I can see difficulties with all of those. I hope that my right hon. Friend the Minister will take up the suggestion made by my hon. Friend the Member for Nottingham, North about an independent commission. That might be the best way forward. I beg to ask leave to withdraw the amendment.

[Part II]

Higher Education Bill

Roger Gale (Conservative, North Thanet)

Before we move on, I inform the Committee that there is a desire to reach clause 41. I am entirely in the hands of the Committee, but if we are to make that sort of progress, speeches will have to be shorter and interventions—some of which seem to have taken on a life of their own—will have to be appreciably shorter.

Graham Allen (Labour, Nottingham North)

I beg to move amendment No. 237, in

clause 40, page 18, line 36, at end insert—

'(1A) After subsection (2)(j) insert—

''(jj) prescribing the information to be provided to an eligible student about the financial value of any grant;''.'.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to discuss the following:

New clause 7—Educational subsidy—

'(1) All English and Welsh funding bodies shall present students with a voucher, redeemable only at an agreed course and institution, equivalent to the full support from the taxpayer for the fee and cost of that course.

(2) Such a voucher shall specify the amounts contributed by the taxpayer and by the individual graduate.'.

Graham Allen (Labour, Nottingham North)

I have tabled a number of amendments to the clause. Even if I move amendment No. 276 and new clause 9 briefly, I hope that the Minister will none the less take them seriously as they reflect a great deal of concern expressed by colleagues outside the Committee.

I mentioned the latest Ofsted report on one of my primary schools, Highwood Player nursery and junior school. I think I said that it had been awarded ones and twos, which are the highest points that Ofsted can give, on everything apart from attainment, which received a five, one of the lowest scores. In other words, it is a great school with a superb head teacher, committed staff, great involvement of governors and a super environment, but it underachieves. It does so because a lot of the kids are in child protection measures. In many cases, they arrive at school unable to string a sentence together and there is no parental support.

Admissions policy can urgently address that problem by getting youngsters into school in the September of the year when they attain the age of five so that they do a full year in reception. My local education authority does not do that; it cannot because of cost. It is a very effective, hard-working and dedicated authority with good people throughout, but a lack of money stops it doing the very thing that would be benefit those kids most throughout their lives.

When we talk about the situation of graduates or students, we should put that into perspective by reflecting on the amount of money that we put into the education of those people relative to the under-fives—reception classes, Sure Start and so forth. We can all regale each other with figures, but in essence a middle-class welfare system operates. More and more money gets poured down the throats of people who are able to go to university, whereas people from tough working-class areas cannot get their kids into a reception class.

A reception class is one fifth of that child's life because they are only five. To be in a reception class for that one year allows them to receive an education for one fifth of their life prior to school. We should consider the impact that addressing that might have on some of the problems that we have all talked about. We need to gain that perspective because the amount of money spent is important. One of the best ways that we as taxpayers can get an idea about that is to have transparency and clarity on education spending.

My right hon. Friend the Minister often says that even with the new fee regime, £13 out of £14 will be provided by the taxpayer rather than by the graduate through repayments. I do not know whether that figure still stands or whether it has moved or been finessed a little. However, bearing in mind the order of the expenditure involved, a massive amount of money goes to those individuals, even under the new fee payment regime.

I have tabled a probing amendment to bring some clarity to the matter. I do not contend that it deals with things in absolutely the right way, but its purpose is to get my right hon. Friend to examine a system similar to that which operates in Australia, where the Government, as the agent for the taxpayer, issue a cheque to the student that is only cashable at the university that they are going to attend. There is a symbolism in doing that; it shows the student that many thousands of pounds are rightly being paid towards their course and that they have to make an additional contribution.

I hesitate to say that the matter should be kicked into a commission or any other body, and I do not expect to get an answer on from my right hon. Friend on the hoof, but transparency should be introduced to show the generosity with which the taxpayer treats undergraduates relative to those in further education, secondary schools and primary schools, and children under five. That would be a great benefit to both the taxpayer and the student, who is the main beneficiary.

Tim Collins (Conservative, Westmorland and Lonsdale)

As you rightly said in your earlier ruling, Mr. Gale, there is a general wish on both sides of the Committee that we should reach clause 41 rapidly, so I shall be brief.

I want to place on the record the fact that although I do not support every word of the amendment, and it will be interesting to hear the Minister's comments on its technical qualities or otherwise, the hon. Member for Nottingham, North has made an important point. Clarity about how taxpayers' money is used is highly desirable. For that reason, my party advanced the

proposition at a recent general election that all households should receive an independently verified statement on how all Government spending is allocated.

In the context of the Bill, I am delighted that the hon. Gentleman should have lighted on the concept and phraseology of the voucher as a means of explaining the system to people. I waited with bated breath for him to go a tiny step further and indicate his full support for the Conservative proposal of pupil passports, which is merely half a step away from his new clause 7.

Whether one calls it a voucher or something else, the idea of bringing to the forefront of the student's mind exactly how much taxpayers' money is being made available for his education, and making it clear to the institution that it is receiving funding because that student has chosen to go there instead of somewhere else, is highly desirable and deeply commendable. It is one of the more elevating moments in our deliberations when the hon. Member for Nottingham, North so admirably embraces and expounds Conservative philosophy. I look forward to the Minister's reply.

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

I shall try to be quick.

Amendment No. 237 asks us to prescribe

''the information to be provided to an eligible student about the financial value of any grant''.

It is another amendment on which there is no problem in principle. My argument is that it is unnecessary.

The Education (Student Support) Regulations 2002 require us to inform eligible students about the financial value of the statutory support that they are entitled to receive under the regulations. Under the student finance delivery arrangements, applicants are sent a detailed notification letter, setting out their entitlement to all types of support provided under the regulations, including for those starting in 2004, when the £1,000 grant will be reintroduced, before it increases to £2,700 in 2006. Under the application timetable, those who apply by the prescribed deadlines will receive the letter in August, in advance of them beginning the course.

Even before the application process begins, we inform potential students through our websites, talks at local schools and promotional leaflets about the type and amount of support available for the forthcoming academic year. It is also worth mentioning that access plans, which must be approved by the director of fair access before institutions can charge higher variable fees, must show how the institution will make information on financial assistance available to students and prospective students. As we are already legally required to provide the information to applicants, and we have systems in place to do that, we see no reason to adopt the amendment. It is superfluous.

The hon. Member for Westmorland and Lonsdale took new clause 7 as my hon. Friend the Member for Nottingham, North proposing a voucher system, but it

is the opposite. We noted from Harrogate at the weekend that Her Majesty's official Opposition are developing a system that involves spending £3,500 to encourage people to leave the public sector and go into the private sector. In essence, that is not too different from top-up fees for six to 18-year-olds. However, my hon. Friend was right that we need to invest in state education, not in allowing people to opt out of state education and into the private sector.

My hon. Friend was talking about a voucher, but not in the way interpreted by the Opposition. I spoke about the matter at length with the Australian Education Minister, Brendan Nelson. I know that the amendment is a probing amendment, but the system that my hon. Friend proposed will not come about if we accept it. There will merely be lots of bureaucracy. In Australia, they ensure that every student going to university knows the proportion of money provided by the taxpayer and the proportion that they must provide through deferred fees. That is an important principle.

Brendan Nelson is not of our political persuasion; he is more a mix of Conservative and Liberal. However, he made the point that people welcome the system in Australia as putting into context the issue of a graduate contribution, with the lion's share provided by the taxpayer, as it will be in the UK. I will reflect on how we can do that, subject to Royal Assent, when we introduce the measures. Instead of legislating, there is probably a simple method that allows universities to do that, which is how it works in Australia. I will bear my hon. Friend's point in mind, but I ask him to withdraw the amendment.

Graham Allen (Labour, Nottingham North)

Until the last minute of my right hon. Friend's contribution, I was thinking of poking gentle fun at him as going native as a civil servant rather than thinking politically. He knows that his officials have drafted the Bill well and effectively. I want him, as a politician, to involve people in what we are trying to do so that they understand what is happening. I openly say that until the issue became political, I did not know the difference between a bursary, a grant and all the other terms that have been banded about with ease in the Committee. Some of us still do not. We have been in meetings in which colleagues have not realised that, for example, we are restoring the grant or abolishing the up-front fee. That is because MPs cannot be abreast of every issue.

There is a level of ignorance among the current student population, many of whom, when one sits down and explains our intentions, understand and welcome them, although they are annoyed that they are part of the middle generation that does not benefit from a grant, but has to pay up-front fees. We must explain the situation. Even now, when we talk to people, as I do with secondary heads in my constituency, there is a large amount of ignorance. Some of that is politically inspired through talk of debt and attempts to make party political points, but much is based on not knowing the basis of the proposed scheme.

I have pressed my right hon. Friend and his officials to produce facts, to be shared with all hon. Members, on the number of people in each constituency who

would benefit from a full grant, and that is proving extremely difficult. We must get such information and clarify matters for people. I have that figure, but other Committee members have not received it officially from the Minister. I know that it is difficult to produce those figures, but it can be done. I hope that we try to sell this good policy in clear terms to people of all political persuasions.

Patrick Hall (Labour, Bedford)

Does my hon. Friend agree that information about the financial package, together with a balance between the individual and the broader social contribution, should be directed not just at those who are about to become students, but at those of a younger age? We must find a way to get that information across, otherwise misunderstandings will continue.

Graham Allen (Labour, Nottingham North)

I am sure that that is the case.

My right hon. Friend has paid tribute to many colleagues in all parts of the House for their contributions to the Bill, and I think all Committee members will acknowledge that he has done an incredible job, particularly over the past four or five months, in broadening everyone's horizons and understanding of the Bill. He has been receptive to ideas on how to make progress, as he proved this afternoon. However, as he generously said that he would reflect on the issue, I ask him again to undertake to write to hon. Members, when appropriate, about how to get over a clearer version of what the policy means to the kids in our constituencies. We can then make our partisan points, but there must be a succinct way of explaining the policy. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Graham Allen (Labour, Nottingham North)

I beg to move amendment No. 275, in

clause 40, page 18, line 36, at end insert—

'(2A) After subsection (2), insert—

''(2A) Regulations under this section must make provision for the cancellation of a borrower's liability to repay his student loan when he—

(a) is a new eligible student, and

(b) has been liable to repay a student loan for a period which is equal to or greater than 25 years.''.'.

The amendment would put in the Bill the requirement for the regulations to include a provision to cancel outstanding debt after 25 years. I understand officials having reservations about including proposals that require updating and cross-referencing with different Acts, as it is a lot easier to put it all in regulations. However, we must ensure that the Bill does what it says on the can, as they say in advertising. It should state, with clarity, so that anyone can understand what it means, that if the Government want to abolish outstanding debt after 25 years, that is what will happen. That would make it easier to get the message across to colleagues, to people in education and, above all, to our constituents.

Tim Collins (Conservative, Westmorland and Lonsdale)

I shall be brief. The purpose of the hon. Gentleman's amendment is clear and understandable. He argues that it is desirable to have phrases on the tin—that is, in the Bill—rather than in regulations.

However, I am puzzled about the phrasing, especially the reference to a ''new eligible student'', because I would have thought that the purpose of the proposal could have been achieved without the proposed new subsection (2A). However, the Minister will no doubt advise us accordingly on the basis of the excellent advice he has received from his admirable officials.

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

There is nothing technically wrong with the amendment. It states ''new eligible student'' because the measure is being introduced for those who begin their university education in 2006. It does not apply retrospectively, unlike the higher repayments threshold, which will apply to all those taking out the student loan, whether or not they are subject to variable fees. One cannot run two different systems for deductions as that would be too horrendously complicated for employers and the Inland Revenue.

The proposal would apply to new students in 2006, and there was a reference to the gap-year argument. The reason for objecting to the amendment—''objecting'' is rather too strong a word—is that there would be no difference whatever in policy. I hope that my hon. Friend withdraws it.

The hon. Gentleman said that he hoped my officials would persuade me that they had serious concerns about the matter. I would have serious concerns about putting the precise figure in the Bill and I cannot understand the argument that regulations do not have an important role in legislation. We put things in regulations so that if we wanted to change 25 years to 20 years or 18 years—

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Or to 30.

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

Or to 30 years, we would not need to take up parliamentary time with primary legislation to do so. Governments of all political persuasions put such details into regulations. That does not mean that because it is not in the Bill, people will not know about it. I said in response to a previous debate that if anyone thinks putting things in the Bill makes it clearer, one has only to try to read a Bill to show that that is not the case.

My hon. Friend made a very important point. When the Bill receives Royal Assent—we cannot do it before then because it would be insulting to the parliamentary process—we will ensure that people understand the detail and know exactly what it entails.

My hon. Friend is absolutely right. The New Statesman carried out an important analysis. People were asked whether they were for or against the Bill: at first, the group was 2:1 against, then the people doing the analysis drilled down to find whether the group knew that up-front fees were going or that the grant was being reintroduced, and found that a large percentage knew neither of those facts. The people were asked whether they knew that the repayment system was income-contingent or that one would pay less than one would now. By the time those doing the analysis got down to the people who knew those things, 2:1 against had turned to 2:1 in favour.

The important point is that, once the Bill becomes law, we cannot afford to sit back and not explain the

detail of the rather complex package being offered. I assure all hon. Members that we shall ensure that people understand the terms of the Bill. However, I suggest to my hon. Friend the Member for Nottingham, North that the amendment will not help the situation, so I ask him to withdraw it.

Graham Allen (Labour, Nottingham North)

The Minister has touched on a very important question: what happens when, as I hope, the Bill becomes law? I shall not go into great detail, but leaving aside partisan politics, getting over what the Bill means to the kids who stand to benefit from it will be the most important part of the process. To be frank—I know that the Minister will listen carefully to this—Department for Education and Skills standard leaflets, good as they are, will not crack it. We are going to have to make a serious outreach effort, going to every school and getting the relevant information into the minds of everyone in the families whose kids can benefit from a £3,000 grant. The odd little advert will not do the job; pulling a sheet off a poster or having a photo call with my right hon. Friends the Minister and the Secretary of State will not be adequate. We shall have to do something far deeper if, as I know he is, the Minister is serious about getting the content of the Bill over to his constituents and everybody else's.

In view of what the Minister has said, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Graham Allen (Labour, Nottingham North)

I beg to move amendment No. 276, in

clause 40, page 18, line 36, at end insert—

'(2A) After subsection (2), insert—

''(2A) Regulations under this section having effect after 5th April 2005 may not prescribe a threshold for the repayment of student loans which is below £20,000.''.'.

Roger Gale (Conservative, North Thanet)

With this it will be convenient to discuss new clause 9—Increase in threshold for loan repayment—

'(1) The Education (Student Loans) (Repayment) Regulations 2000 (S.I., 2000/944) are amended as follows.

(2) In the regulations specified in subsection (3), for ''£10,000'', there shall be substituted the words ''£10,000 up to the year ending 5th April 2005, and £20,000 with effect thereafter''.

(3) Those regulations are—

(a) regulation 13(4);

(b) regulation 15(5)(a);

(c) regulation 15(5)(aa);

(d) regulation 29(2)(a);

(e) regulation 29(2)(b);

(f) regulation 56(4)(a).'.

Graham Allen (Labour, Nottingham North)

A few minutes ago, I warned the Minister against reading into my brevity in moving the amendment, which is imposed by the time constraints and the need to allow everyone to speak who wants to, that it is trivial. The amendment is probably as important as any that the Committee has considered, not because of the masterful drafting, but because of its symbolic meaning, not least to my hon. Friends in and outside the Committee.

The amendment deals with the serious question of where the income threshold for the repayment of student loans should be. The threshold now stands at £15,980 or so, which many colleagues think is relatively low. I listened to my hon. Friend the Member for Leeds, East (Mr. Mudie) talk persuasively about postmen, which is an occupation dear to the Minister's heart, and people with a second income coming into the family, who are by no means wealthy. Because of the way in which tapers operate, as they must in all systems relating to any sort of benefit, families just above the threshold could face quite a sudden taper.

Chris Grayling (Conservative, Epsom and Ewell)

Forgive me if I have misunderstood the hon. Gentleman's comments, but surely he is not seriously suggesting that postman should become a graduate career?

Graham Allen (Labour, Nottingham North)

Being a postman is a fine career, so I do not see why there should be any snobbery about it. I am surprised at the hon. Gentleman.

We must ensure that people outside understand what we are trying to do. A lot of people say, ''Well, we didn't have a grant last week, but now we've got a £3,000 grant, which we're going to pocket, thank you very much—but it is not enough.'' I am not representing that tendency, nor is any Committee member. However, there are problems. The reason why this matter is before the Committee is the justifiable fear that the taper slides off very quickly and will capture a lot of people who would benefit from a slightly higher threshold for repayments.

There is no magic in the figure of £20,000, although it is probably closer to the national average wage than the current threshold. Many colleagues have requested that that matter be put before the Committee for debate. I am sorry that, because of time, I cannot speak on the amendment at length, but I underline again that I would like the Minister to take the matter seriously, not least because of the serious concerns of colleagues who are not on the Committee about where the threshold is set.

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

My hon. Friend gives me an opportunity to explain briefly what we are doing by raising the threshold from £10,000 to £15,000. He would like us to go further, and increase it to £20,000 and to put that in the Bill, whereas the current threshold—or the proposed threshold that comes in to operation in the 2005–06 academic year—is dealt with by regulations.

Let me repeat that we cannot have two separate systems of threshold operating for an income-contingent payroll deduction through the Inland Revenue. All those who are on the current threshold for repaying their student loan—83 per cent. of students take out a student loan, so there has been an awful lot of them since we introduced income-contingent student loans in 1998—benefit from that. For new students from 2006, the fee loan gets rolled up with the maintenance loan, and it is paid back on the basis not of what they owe, but of what they earn.

By moving the threshold to £15,000, we make a substantial improvement, not only for future students, but for past and present students. Now graduates

earning £16,000 a year repay £10.38 a week. Under our proposals, that figure drops to £1.73. There are no tricks and no small print. It is a simple reduction in payment.

Chris Grayling rose—

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

The hon. Gentleman is itching to get in, but he will have to wait for just a second.

Those earning £15,000 a year currently pay £8.65 a week. That will drop to nothing, because people have to earn more than £15,000 to begin repayment. The average starting pay of a graduate is now £19,000, but last year's figure of £18,000 has been widely quoted, so let us focus on that. Someone on that income currently repays £13.85 a week; when the threshold goes up, that payment will decrease to £5.19. Finally, for someone earning £20,000 a year, the weekly repayment will halve—decreasing from £17.30 to £8.65 a week. That effect continues all the way up the salary scale. Graduates pay 9 per cent. of the difference between the threshold and what they earn. Someone on £60,000 a year currently pays £86.54 a week; that will decrease to £77.88 a week.

If we spent an awful lot of money—and it would be a lot of money—to raise the threshold to £20,000 a year, we would benefit not only graduates who are on low incomes, but those who earn such high salaries that no one would think that we ought to concentrate further student support money on them.

Chris Grayling (Conservative, Epsom and Ewell)

I have a lot of sympathy for the Minister's argument, but will he confirm for the record that the changes to payments made by graduate that he is describing will not affect the overall amount that they end up paying, but simply defer payment to later years?

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

Yes, they simply defer payment to later years. As we mentioned in a debate last week, more than a million students—I cannot remember the exact figure—are still paying back money under the old mortgage-type repayment scheme. There is nothing between any of the political parties on repayment of loans. It is the fee loan that is the issue. The previous system had the benefit of the money being paid back pretty quickly. When people were earning a penny more than average earnings, which, as the hon. Member for Daventry (Mr. Boswell) pointed out, would now be £26,000 a year, they had to pay the full amount over five or seven years. No account was taken of whether one's salary went down again or whether one left the workplace; one simply had to repay it.

All the changes do is defer payment. This is a considerable part of our argument. The words ''income-contingent'' do not send the blood coursing through the veins, but they are the central feature of our proposal. An argument has been made that we should use a different method—a graduate tax. With such a tax, a person would not know the amount that they would have to repay; they would repay for the rest of their life, and repay not just their contribution but that of others. Our provisions have all the beneficial features of the graduate tax—including payroll deduction, Inland Revenue implications, payments increasing and decreasing with earnings—

without some of the downsides that Dearing highlighted, one of which is that, with a graduate tax, if a person has the odd £50 or £100 lying around, he cannot make lump sum payments to pay off the loan more quickly, whereas he can with our system.

I have great respect for the views of my hon. Friends the Members for Nottingham, North and for, I think, North-West Leicestershire (David Taylor). [Interruption.] Sorry; if hon. Members are not on the Committee, I do not have their constituency. I doubt that, in the light of everything else in our student support package, my hon. Friends would want to spend at least £475 million more. If that money were around—it is not; there is no more money, as this is a very expensive package—I do not think that we would put it into raising the threshold. We would put it into a larger grant or something that focused the money on the students about whom we are concerned.

My hon. Friend the Member for Nottingham, North is absolutely right in everything that he says. Every piece of analysis indicates—I think that the whole Committee will agree on this—that the central thing that will encourage the young person none of whose neighbours, friends, siblings or other family have gone to university to apply to university is the help that that young person will get while he or she is there. In a sense, the state will be the proxy ''wealthier parent'' for poor youngsters. All of us, on our incomes, would step in if a child were in trouble. The grant is very important to poor youngsters, and the fact that they would not pay their fee back until they were at a certain income level is crucial to the whole package.

My final point is that if two or three years from now we decide, for whatever reason, that we can raise the income threshold to £20,000, the amendment having been made to the primary legislation will make that difficult to achieve. It is best to leave the matter to regulations, rather than sticking a figure in primary legislation.

Graham Allen (Labour, Nottingham North)

I wonder whether my right hon. Friend will help me in respect of the additional expenditure. He seems to infer that the repayments that under my amendment would start at £20,000 would be at the same level as those that are currently paid at £20,000—in other words, that we would forgo any repayment income in the £15,000 to £20,000 income bracket. I am trying to read the mind of my hon. Friend the Member for North-West Leicestershire, who was kind enough to suggest the amendment to me, but I think that the idea was that when a graduate reached an income of £20,000 they would start at a higher level of repayments, because they would be on the average graduate starting salary and would therefore be able to pay a little bit more. In other words, there would be no income loss. I do not expect my right hon. Friend the Minister to answer that off the cuff, but perhaps he will be kind enough to think about it, and perhaps his officials could reply.

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

That does not work. The amendment would still leave the 9 per cent. repayment over the threshold. The amendment would not work out as my

hon. Friend says. Not only would it not do so, but it is questionable whether it should. If we lose the 9 per cent. mechanism, which ensures that the amount of money brought in relates to movement in the retail prices index—there is no need for an RPI mechanism when the wages from which we are deducting 9 per cent. will go up—that would skew the system disproportionately.

I quoted the figure of £8.65. People earning £20,000 a year now pay £8.65 a week. They pay off some of the debt, but the burden is not onerous. The effect of the amendment would be that they would pay nothing when they earn £20,000 a year. Committee members have to be absolutely sure of that. That is another reason why I urge my hon. Friend to withdraw the amendment.

Graham Allen (Labour, Nottingham North)

I am prepared to accept that the amendment is technically defective. However, the overall aim is to regear repayments from a base of £20,000, which would net the same amount of fees. Will my right hon. Friend drop me a line to tell me how severely that would effect the repayments from £20,000 upwards?

Tim Collins (Conservative, Westmorland and Lonsdale)

The hon. Gentleman raises an important point. In the light of the fact that the Minister has placed it on record that the amendment as worded would cost about £430 million, does hon. Gentleman accept that that is probably a greater additional public spending commitment than he had hoped for or intended? Might he come back on Report with a slightly differently worded amendment that is designed to make progress along the line that he has set out, but at rather less cost? A lot of people would be intrigued if that were to be his view.

Graham Allen (Labour, Nottingham North)

I think it was Oscar Wilde who said, ''Advice is the most precious gift of all because it is normally given by those who need it most themselves.'' Rather than take policy lessons from the Conservatives—as they keep telling us, they do not have any policies at the moment—I will sit on the hon. Gentleman's suggestion. However, rather than table more amendments on Report—I am sure that the colleagues to whom I have referred will do that anyway—I will rest with leaving it with the Minister to see what the gearing effect would be. It would certainly be more than 9 per cent., but I wonder whether it would be way over the top in terms of repayments.

Chris Grayling (Conservative, Epsom and Ewell)

The hon. Gentleman may be swimming against the tide. Is he aware that the Government's policy, as set out in the small print of the regulatory impact assessment, is to shift the relationship between the threshold and earnings in the other direction, as one of the means of paying for the improvements made to the student support package in the rest of the Government's proposals?

Graham Allen (Labour, Nottingham North)

I am very grateful for that information.

To finish, I light-heartedly mentioned officials on a couple of occasion. I want to put on record that the officials who I have dealt with on the Bill have been very open and have been extremely helpful in helping

hon. Members come to terms with a difficult Bill. I thank them.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 40 ordered to stand part of the Bill.

Clause 41 - Transfer of certain functions to National Assembly for Wales

Chris Grayling (Conservative, Epsom and Ewell)

I beg to move amendment No. 287, in

clause 41, page 18, line 41, after 'to', insert

'the provision of higher education in'.

Before we kick off, Mr. Gale, I seek clarification about clause stand part. It seems to me that dealing with the essence of the amendment will bring us quite close to the subject area that would be covered in a clause stand part debate. I seek your guidance on that.

Roger Gale (Conservative, North Thanet)

The hon. Gentleman makes a fair point: this is the only amendment to the clause that has been selected for discussion. I am happy to accommodate a clause stand part debate as part of the debate on this amendment. That would seem to make eminent sense.

While I am on my feet, for the convenience of Members, I should inform the Committee that at 5.35 pm I intend to suspend the sitting until 6 o'clock. I suspect that that will accommodate a Division on the Floor of the House. I believe that there is likely to be one Division only, but if there is a second, the Committee will resume 15 minutes after its start.

Chris Grayling (Conservative, Epsom and Ewell)

Thank you for that clarification, Mr. Gale. I begin my remarks with an apology to the Minister. He is right to say that I cast false aspersions on him this morning. He rightly reminded the Committee about the important debate on Welsh issues that took place when we discussed clause 21. However, it is a shame that when I sought to raise the issue of fees in relation to Wales, the Chairman at that time, Mr. Hood, said:

''We are not discussing the levels of fees at present; we are discussing the plans. I ask the hon. Gentleman to stay in order.''—[Official Report, Standing Committee H, 12 February 2004; c. 126.]

When the Minister was questioned about a number of issues in relation to Wales, he said:

''That question has nothing to do with the amendments that we are debating. We are talking about the meaning of a plan.''—[Official Report, Standing Committee H, 12 February 2004; c. 138.]

The Minister is right: we have had a debate about the meaning of a plan in Wales. Sadly, however, I waited in vain to hear more of his eloquent contributions and to debate with him as we went through later clauses, including clause 25, which gave the Assembly powers to impose conditions around fees; clause 26, on conditions that may be required to be imposed by the Higher Education Funding Council for Wales; clause 27, on the actions that the Assembly can take; and clause 28, on the definition of ''the relevant authority'' for Wales. I continued to wait in vain as we discussed an amendment to prevent potential injustices affecting English students in Wales, Welsh issues

relating to clause 31, and Welsh regulations in clause 38. Perhaps the Minister understands why I am so disappointed not to have heard his views on those important issues, and why I welcome this belated chance to address at least some of the issues of student support in Wales. I simply regret that we have not been able to do more to debate the fundamental change that is taking place, which certainly deserves full consideration by this Committee.

Clause 41 deals with the provision of student finance support to students living in Wales. It is central to the future of student support in Wales, not least because the Secretary of State clearly stated on Second Reading that he considers the reappearance of grants, and the positioning of grants at the heart of policy in Westminster and the Assembly, as an integral part of the introduction of top-up fees and the package that we have been debating throughout this Committee. The devolution of grant finance—the right to set grants and the right to offer loans in Wales—is therefore integral to our debates and an integral part of the Government's decision to devolve those powers to Wales. The Secretary of State said of the grants:

''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.''—[Official Report, 27 January 2004; Vol. 417, c. 173.]

In debating this clause, it is extremely important that we understand the impact on students in Wales of the Government's proposals and the Assembly's current position on fees. We must also understand the effect on the financial position of Welsh students when the Assembly takes over the power to offer grants to students. There might be injustices on Welsh campuses if different cohorts of students are in different financial positions as they go through their studies. We might even see a situation similar to that in Scotland, where English students pay higher fees than their counterparts in Scotland. It is a completely unjust situation in which they must resource themselves much more substantially than students from Scotland who are studying at the same universities. What happens to students in Wales as a result of the Government's changes to the student support package is an extremely important matter that the Committee needs to consider carefully.

I look forward to understanding clearly the Under-Secretary's rationale for such changes. In the past 12 months, the hon. Gentleman and I have debated Welsh devolution on three occasions: in debates on the Health (Wales) Bill and on the Health and Social Care (Community Health and Standards) Bill, which introduced foundation hospitals, and now in connection with the Higher Education Bill. His views were well summed up by his comments in Committee on 12 February 2004 when, perhaps expressing a little exasperation at having to deal with such arguments, he said:

''In the interests of supporting devolution—God help us and protect my sanity''.—[Official Report, Standing Committee H, 12 February 2004; c. 138.]

The Under-Secretary's recourse in such debates is always to say that we must protect devolution and that

everything is about the devolution settlement. I hope, this afternoon, as we debate devolution of the power to set the student support package, that the hon. Gentleman will tell us why it will be of benefit to the people of Wales and how their position will be improved by such measures.

On many occasions, I have said that when they devolve powers to Wales, the Government create duplication, inconsistencies and, above all, cost. Undoubtedly, I will make a similar argument now. Will the hon. Gentleman explain what benefit this Bill will deliver to the people of Wales? Rather than base his argument simply on a theory of devolution and that being a good thing, will he say what tangible, practical benefits the measure will bring to Wales? Surely that should be the benchmark by which to measure whether the House should devolve a power to the Welsh Assembly.

Tim Collins (Conservative, Westmorland and Lonsdale)

My hon. Friend may care to note that one tangible benefit that arises from the transfer of such matters to the Welsh Assembly is that it has decided that top-up fees will not be introduced until 2007. Does he agree that it is unlikely that the Under-Secretary will cite that as an advantage?

Chris Grayling (Conservative, Epsom and Ewell)

That is indeed unlikely, and my hon. Friend makes an important point. The Welsh Assembly Government have made a virtue of publicly stating their determination to keep to their manifesto commitments slightly more clearly than others whom we have encountered during our proceedings.

When deciding whether it is appropriate to devolve a power to the Welsh Assembly, the Committee and the House should ask the fundamental question: what practical benefit will the people of Wales derive from such power? Will it genuinely improve their material situation, or is it simply being done for ideological reasons? Will the Under-Secretary set those questions at the heart of his remarks? In previous debates he has not dealt adequately with the practical benefits of change; I hope that he will do so today.

We are dealing with a set of changes that might create minefields in several areas. The most fundamental point is that we are not dealing with two separate systems of higher education. Suggestions have been made that that is what the Assembly Government aspire to, but the practical reality is that we are a single country that witnesses great flows of students. We just have to look at the mix of study patterns for Welsh students to realise that it is not a matter of saying, ''Well, this happens in Wales and that happens in England, so we will draw a line between the two and we will have two separate systems.'' In Wales, in 2001–02—the last year for which figures are available—there were 59,685 full-time students: 43 per cent. were English-domiciled, and 55 per cent. Welsh-domiciled. There were 43,055 part-time students attending higher education institutions in Wales: 81 per cent. were Welsh, as one would expect, given the nature of part-time study, but even in that sector, 18 per cent. of the students were English.

Let us consider individual institutions. I have referred before to the university of Wales, in Aberystwyth, where 68 to 70 per cent. of undergraduates are from England. The figure varies across Wales and is much higher at the university of Glamorgan, where 77.9 per cent. of students are from Wales and 12.6 per cent. from England.

That demonstrates that the situation is very fluid and that students exercise choice. Students from Wales do not see themselves as Welsh students for the purposes of higher education. Like any other students, they rightly look at all the available options and decide where to go without regard to whether an institution is in Wales. Interestingly, I suspect that the higher percentage at the university of Glamorgan reflects a pattern that is typical of some more modern universities. Even so, a substantial block of English students come to Wales, because they have that as the best option for them.

In the Bill, we are giving the Assembly the power to set different grant levels and to have a Welsh loan regime, so we must give full consideration to the implications of that.

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

The hon. Gentleman is making a point that he has made before. Such powers have been devolved to Scotland and Northern Ireland, and both have made their own arrangements as regards grants and other matters. Why does he think that there would be a problem in Wales, when, to all intents and purposes, none has appeared in Scotland or Northern Ireland? What is so peculiar about Wales? Does he think that Scotland and Northern Ireland should not have such powers?

Chris Grayling (Conservative, Epsom and Ewell)

The Minister helps me move on to my next point. I have no intention of moving too far from the issue of Wales, Mr. Gale, but you will understand that a comparison is necessary to explain why I have great concerns about the Welsh situation.

Scotland has an entirely separate regime and some extraordinary anomalies have emerged, which do a huge disservice to the United Kingdom as a whole. The Minister will be aware that an English student attending a Scottish university is liable to pay fees, whereas a Scottish student attending a Scottish university is not. That anomaly had led to what is, by any measure of common sense, a complete absurdity. European Union laws require us to provide comparable access—[Interruption.]

Roger Gale (Conservative, North Thanet)

Order. I am being as tolerant as I can, but I cannot have two hon. Members talking at the same time.

Chris Grayling (Conservative, Epsom and Ewell)

EU law requires Governments to provide people from any part of the EU with equal access to higher education. That has led to the absurd situation that it is less expensive for a student from eastern Europe to attend a university in Scotland than it is for a student from England. Whatever the aspirations of hon. Members who created the devolution settlement, I cannot believe that that was

an intended consequence. In considering the Welsh situation, therefore, it is important to understand what we are doing.

Tim Collins (Conservative, Westmorland and Lonsdale)

Does my hon. Friend agree that it is interesting that the Minister says that Wales should be treated the same as Scotland? If it had been, it would have its own Parliament and be responsible for the provisions before us, so we in Westminster would not be considering them at all.

Chris Grayling (Conservative, Epsom and Ewell)

That is absolutely right. My hon. Friend also highlights the fact that whereas we have the opportunity while considering the Bill to address the question of consistency of provision for United Kingdom students in United Kingdom universities, we no longer have the power to address that issue in relation to Scotland. We can still do something about it in Wales. That is why it is extremely important that we understand what we are creating here.

I have a number of questions for the Under-Secretary of State for Wales. First, what does he expect to be the eventual mix of the cross-border fund? What does he expect to be the situation for Welsh students attending English universities and English students attending Welsh universities in respect of the provision of grants and the fees charged, which the Government say those grants are designed to offset? What rules do the Government expect to apply? What financial support will be provided by the Department here to English students attending Welsh universities? What support will be provided by the Assembly to Welsh students attending English universities? What reassurances can he give the Committee that in setting up these new structures we will not see the anomalies that I have just described in relation to Scotland, which no hon. Member would consider sensible?

The second issue I want to touch on is funding and funding support. The Welsh Minister for Education and Lifelong Learning, Jane Davidson, made an interesting comment on 23 January when she said that there would be pros and cons to devolving more higher education powers to Wales. She is probably right. She said:

''As education minister I'm quite keen to have full powers over all aspects of higher education because we can take the decisions that are right for us in Wales''.

But, and the but carries with it significant issues for higher education in Wales, she added that she would not be happy to have the powers without the corresponding money from central Government that is currently provided for every student. There is a bill attached. Wales would like to have these powers, but it would also like some money to enable it to take over the responsibilities.

It would be helpful for the Committee to understand the financial implications for the Exchequer of making those changes and what the Ministers expect the balance of responsibility for funding to be after these changes are enacted. That is particularly important given issues in relation to grants. On 13 January, Jane Davidson said in her statement to the Welsh Assembly:

''More students would benefit from the HE grant to be introduced by DfES on an England and Wales basis from September 2004. Welsh domiciled students who begin their courses

in Sept/Oct 2004, and who would have qualified for the maximum £1,500 under the current ALG scheme,''—

the Assembly learning grant—

''would get the £1,000 HE grant plus an additional £500 ALG top-up. From the transfer of functions in 2006, only the ALG would be available in Wales.''

The implication is that there may be a funding gap between money that would come from the DFES under the current scheme and additional grant money that would have to come from the Welsh Assembly under the changes proposed in the Bill. Is there a funding gap? Will the switch in responsibilities that gives the Welsh Assembly the right to set its own grants and to take over the grant regime place a strain on other Welsh Assembly budgets? As the Assembly does not have the power to levy its own taxation, it cannot raise that money additionally from the Welsh taxpayer; it would have to take it from other budgets. It would be helpful to get the Under-Secretary's clarification on that point.

My next point on funding concerns the potential for a double whammy for the Assembly after the transition. To appreciate this double whammy, one needs to recall that the Assembly has said that it does not plan to introduce variable top-up fees until at least 2007. That will be at least one year on, and potentially more. By the time that it has legislated and introduced the fees, we could be talking about two to three years before a new fees regime was introduced in Wales.

The question of funding issues between English and Welsh universities therefore arises. In theory at least, the Assembly will face an issue with Welsh universities. As the Under-Secretary will be aware, they have raised concerns about the fact that although their English counterparts will be able to levy top-up fees after 2006, they will not be able to. They are concerned that their recruitment and investment as well as the quality of education that they can provide may be disadvantaged and that they will suffer relative to their English counterparts.

The Assembly has made suggestions, which the Under-Secretary could perhaps confirm, that it will seek to compensate the Welsh universities for the gap between their financial situation and that of English universities that will exist after variable fees are introduced. That is a potential funding issue. On top of that, there is the issue of Welsh students in England, who will have to pay top-up fees. Less well-off students will receive grants and the Assembly will have to provide a subsidy to the student loans system to enable those students to pay their fees. Additional grants and additional loan subsidies for students domiciled in Wales who attend English universities post-2006 will impose significant additional costs on the Assembly.

There is a danger that, on the one hand, there will be an extra bill for Welsh universities because of the disadvantage that they say they will suffer through being unable to levy fees and, on the other, that there will be the cost to the Exchequer in Wales of subsidising the loans to Welsh students to pay top-fees and providing grants to less well-off students. Will the Under-Secretary address that question?

As I mentioned a moment ago, the Welsh Minister for Education and Lifelong Learning has expressed concerns about whether financing will be made available for taking on responsibility for the areas set out in clause 41, or whether there will be gap. In a year in which public spending is under pressure, what does the Under-Secretary expect the Assembly's position to be? If it has to find additional money for grants and loan subsidies, what will its situation be?

The next issue that I would like to raise concerns the situation in 2006. The Welsh universities expect that when the new fee regime has been introduced in 2006, making it cheaper to go to university in Wales than in England, there will be a rush of students applying to Welsh universities. That creates a financial issue on the grant front.

My understanding—the Under-Secretary will correct me if I am wrong—is that the grant regime will be fully in place by 2006. Therefore, in theory there will be a significant cost to the Assembly budget and to that of the Department for Education and Skills because of grants made to students attending Welsh universities. The grants will leave them better off, because they will not have the additional burden of paying fees in that year. Therefore, is there not an extra cost to the taxpayer in paying grants in that year that are explicitly set out by the Secretary of State as having been introduced to compensate students for the introduction of top-up fees, when in Welsh universities there will not be any top-up fees in that year?

The grant goes straight into the students' pockets, which is nice for them, but because their student loan amounts will remain constant and they will receive the grant, those students will end up better off through their university years in cash terms and in terms of the availability of finance to them than their counterparts in English universities and those who attend subsequently. Can the Ministers address the issue of 2006 and set out for us what the position will be for those students?

The fourth point that I want to raise with the Minister is about bursaries in Wales. In a response to a question from the hon. Member for Cardiff, Central (Mr. Jones) in January, the Minister said:

''Fee deferment is an integral part of the new package of student support for which the HE Bill provides. English domiciled students studying in Wales will be eligible for loans for fees from the Department for Education and Skills on the same basis as English domiciles studying in England.

Bursary provision by English HEIs will be directly connected with the terms of access plans with the Director of Fair Access which permit them to charge variable fees. The Welsh Assembly has said that it will not introduce variable fees during the lifetime of the second Assembly, therefore Welsh Higher Education Institutions will not need to provide access bursaries on similar terms to those being provided in England.''—[Official Report, 26 January 2004; Vol. 417, c. 30W.]

The Government's proposed overall student support finance package is designed to mix together grants and bursaries in a way that provides compensation for the introduction of fees to those from less well-off families. However, the package is balanced by the introduction of the access regulator. Given that variable fees will not have been introduced

in Wales in 2006—although the core of the student support package is in place—if institutions do not need to provide access bursaries on similar terms to those provided in England, will the access regulator have a remit in 2006, or will that be introduced only later when bursaries and fees kick in?

The last issue that I want to explore with the Minister are the specific exclusions in section 22 of the 1998 Act referred to in clause 41. With regard to Welsh devolution, that clause specifically sets out a number of areas that are excluded:

''In relation to Wales, the functions of the Secretary of State under section 22 of the 1998 Act (arrangements for giving financial support to students) are hereby transferred to the Assembly, except so far as they relate to the making of any provision authorised by subsection (2)(a), (c), (j) or (k), (3)(e) or (f) or (5) of that section.''

Referring back to the 1998 Act, there are exclusions that relate to the criteria for determining an eligible student and the means-testing process whereby one decides which students are eligible for a level of student support. The relationship between grants and incomes is prescribed, and reference is made to the bankruptcy position and the collection process. All of those are excluded. Some of them make logical sense. Excluding the collection process is logical because that process for student loans is carried out through the Inland Revenue system, which applies to all parts of the United Kingdom. Why that element of the 1998 Act is not being devolved to the Welsh Assembly is logically explicable.

I listened carefully to the Minister's earlier comments about bankruptcy. It makes sense that the rule should apply across the United Kingdom. I am not sure about Scotland, but I see no reason why it should not be kept centrally. The Minister will understand that I am in favour of retaining common powers across the UK, and certainly across England and Wales, but it would help to understand the Government's reasons for deciding that some of the powers of section 22 of the 1998 Act should be devolved to the Assembly, and some not—including the determination of ''eligible student'' and means testing. I mention that particularly because Wales is distinctive in that it is a lower-cost part of the UK. In many ways it is also a lower-income part of the UK, although I do not have figures to hand for average incomes in Wales.

Sitting suspended for a Division in the House.

On resuming—

Chris Grayling (Conservative, Epsom and Ewell)

When we broke for the Division, I was in the middle of remarks probing the Minister about the exclusions set out in clause 41 to the various conditions in sections 22(2) and (3) of the 1998 Act. I had said that I was content with and fully understood the rationale behind the collections and bankruptcy systems. I had expressed my general approval that such powers were being devolved, and thought it would be helpful to the Committee to inquire about the context for retaining some of the clause's elements

at Westminster. In particular, I was interested to understand from the Minister what prompted the Government to retain centrally the power to determine an eligible student when it came to the power to issue a grant or loan. I was slightly surprised by that. I welcome common provision, but the risk is that inequalities will exist anyway through other provisions of the Bill.

On the question of means-testing, income levels in Wales reflect its particular economic situation. I was saying to the Minister when we suspended that, although I do not have the figures to hand, my understanding is that average incomes in Wales are lower than elsewhere in the United Kingdom. It is therefore valid to question the Minister about the decision not to have locally based means-testing of grant provision. It would be helpful to the Committee, as a matter of record, if he could explain his position on those issues.

I shall touch briefly on one of the issues that is being devolved under clause 41, which is the amount of money to be provided for loans and grants. That devolution is cited in section 22(2)(b) of the 1998 Act, which prescribes

''in relation to any such grant or loan and an academic year, the maximum amount available to any person for any prescribed purpose for that year''.

That is the actual amount of grant or loan that is set. I do not want to probe with the Minister the grant issue because that is clear: there is a budget to allocate to grants and payments to students. However, in the case of student loans and the subsidy to such loans, I should like to understand what the Assembly's position is in relation to the provision of loans, and especially the relationship of decisions taken about the provision of loan allocations to the overall student loan book. Clearly, the potential must exist for a decision taken about loan levels in Wales to have an impact on the loan book that would be different from the effect of decisions taken about different amounts in the rest of the United Kingdom. Is it the Minister's intention that the Assembly will simply be able to provide, for example, an extra £1,000 a year of student loans through the regional allocation budget structure, making budgetary provision for offsetting the cost of subsidising those loans?

In terms of cash provision, as I understand it the way in which the student book currently works—the Minister will correct me if I am wrong—is that the Government borrow a block of cash each year which is re-loaned to students according to the terms of the income-contingent scheme for student loans, and then repaid accordingly. My understanding is that that effectively happens outside the confines of the Government's balance sheet. Nevertheless, in lending the money, the Government have to meet a cash requirement. The Treasury must raise the money to lend to students in the first place.

If a decision were taken in the Welsh Assembly to increase significantly the amount of loan money that is available to Welsh students, what would be the relationship between such a decision and the public sector net cash requirement, which I would expect to remain within the Treasury's remit? In theory, the

Assembly could require the Treasury to raise more cash to lend to students. How will that process work and where will the decision-making powers rest, given that an Assembly decision about the amount of a loan has a direct impact on what the Treasury does—although probably not to a massive extent—and on the Treasury's cash flows?

I want to deal slightly belatedly with the detail of amendment No. 287, the purpose of which is to open a door to the issues that I have been discussing. It was intended to be a probing amendment and was designed to link the clause exclusively to the provision of higher education in Wales. Clearly, it is flawed, which is why it is a probing amendment; it would cause operational problems for the Assembly in the provision of student support to students in universities outside Wales. I am sure that the Minister will pick me up on that. He will understand that my amendment was simply intended to create an opportunity for the issues to be debated. In fact, it had an unintended consequence, which it is worth the Minister addressing in principle, because this is the Higher Education Bill.

On considering the amendments, Universities UK picked up on section 22 of the Teaching and Higher Education Act 1998, which allows regulations to be made on student support in both higher and further education. The effect of the amendment would be to transfer powers on student support in higher education to the Assembly in Wales, but not powers on further education. Universities UK is content with the devolution of powers in higher education as set out in the Bill. However, it is right in saying that the clause specifically transfers powers of student support in further education. This is pretty much the only time that further education is a central part of a Bill that otherwise deals entirely with higher education.

Perhaps the Minister could deal briefly with further education in Wales and with the changes that he envisages happening to the provision of student support in further education as a result of the measure. There has been a separate debate about the cost of and support to those in further education—those doing part-time courses and so forth. What does he expect to happen to the provision of student support to further education in Wales? Does he think that that will have a feed-through effect? Do the Government envisage changes to student support in further education across the board?

This is the one part of the Bill where the Committee may consider why the Government are choosing to devolve powers to Wales and what will be the benefits of the decision to do that. It is also the moment at which the Minister can set at rest some of the legitimate concerns about the potential for disparities between the provision of support to students domiciled in England and Wales, depending on the pattern of higher education that they choose to pursue. I hope that he can lay to rest some of those anxieties, particularly in the context of the obvious injustice that takes place in Scotland.

Simon Thomas (Plaid Cymru, Ceredigion)

Let me say that I agree completely with the hon. Gentleman's last sentences. He was right to say that this is the very point in our discussion where we consider why the

Government have chosen to devolve student support in Wales, the way they have chosen to do that and the implications of it. However, the conclusions that I draw will be somewhat different to those drawn by the hon. Gentleman.

I hope that the Committee will reject the amendment. When the hon. Gentleman set out its terms, he was right to explain its unforeseen consequences, which were that in specifying higher education, he removed some additional devolution of further education. The amendment is unfortunate, given that he said that he wanted it to limit student support to students in higher education in Wales. There is a cross-border higher education system between Wales and England, and we need to consider the amendment and the clause in the light of that. The higher education system is shared much more between students who go from Wales to England and from England to Wales than in any other part of the UK. In 2001–02, 53,548 full-time undergraduate higher education students studied at Welsh institutions, of whom 24,163—almost half—came from England. Some 28,671 students were from Wales, and only 714 came from other parts of the UK.

Wales has by far the highest proportion of non-domestic students of any nation or region in the UK studying within its own boundaries. The other correlation is also true: the largest group of non-English students studying at English higher education institutions are Welsh. Again, more than 20,000 Welsh students study in England.

Graham Allen (Labour, Nottingham North)

They are very welcome.

Simon Thomas (Plaid Cymru, Ceredigion)

As are the English students in Wales, particularly in Aberystwyth and Lampeter in my constituency. Clearly, any consideration of support for students in Wales and England must take into account the fact that many will go from England to Wales and from Wales to England. I therefore agree with the hon. Member for Epsom and Ewell. Plaid Cymru and the Liberal Democrats do not want fees, which is why we voted against them on Second Reading. We would prefer to fund higher education in England and Wales from taxation. That means, of course, the Barnett consequentials fully taking into account the hon. Gentleman's points on funding.

However, we did not win the Second Reading debate. If Plaid Cymru and the Conservatives had known just how much of Scotland was in this Bill, we might have viewed parts of it differently. Nevertheless, the Bill is as it is. Plaid Cymru Members are delighted to see the Minister here, as we are discussing Wales. We are called separatist, but the Under-Secretary of State for Wales is usually the only one who turns up for a discussion on the Welsh clauses: I have been here all along. It is fair to make that remark, because it is used against me whenever I turn up to discuss purely Welsh clauses.

The year 2006–07 is the one in which things could go very wrong for English students in Wales and for Welsh students in England. The Under-Secretary is probably here to talk about that year, because it remains part of his responsibilities before full devolution takes place. I have been in a quandary

for much of our proceeding because I have wanted to comment on many Opposition motions and amendments while knowing in my heart of hearts that they would not apply to Wales.

Clauses 25, 26 and 41 relate to devolution. It needs to be put on the record that clause 41 devolves powers, but that clauses 25 and 26 provide the detail of the devolution, and it is regrettable that we did not have the opportunity to debate them in detail. Nevertheless, devolution issues arise again under this clause. During the Committee's consideration of the implications of OFFA, including the regional variations to which the hon. Member for Cambridge referred and the remarks made by the hon. Members for Nottingham, North and for Leeds, East about widening participation, I was very aware that what was being said and passed in Committee related directly to England, but not to Wales.

We have to thank the Minister for the benefit of seeing draft regulations for England. They have allowed a more intelligent discussion and better decision making, which is welcome. I have not seen it in other Committees, but I recommend it.

The point is that there has not been a similar debate on regulations for Wales. The National Assembly decided to address the issue of tuition fees and maintenance grants post-2006 after a review of the effect of grants and fees on higher education in Wales. It will do so by reconvening the Rees commission, which will report to the Assembly on the effect of grants on student debt, on incentives, on participation and so forth. On her website, Teresa Rees makes it clear that

''Devolution of student support will potentially bring a wide range of benefits for Welsh learners. It will mean freedom to devise and implement a tuition fee regime and student support system to suit Wales.''

It is interesting that she is looking to tailor a tuition fee regime and student support system to suit Wales. She is not considering that Wales should not have tuition fees. That is a matter of regret to me and, I think, to Liberal Democrat Members of the Welsh Assembly. In other words, we will de facto have tuition fees in Wales post-2007. The only question is how and when, and in what shape they will come.

Chris Grayling (Conservative, Epsom and Ewell)

Does the hon. Gentleman not understand my concern that, as many young people choose to cross the border in both directions, the creation of a new fee and student support structure for higher education in Wales risks creating injustices on campus of the sort that I said existed in Scotland? That surely cannot be to the benefit of students in the United Kingdom.

Simon Thomas (Plaid Cymru, Ceredigion)

I understand the hon. Gentleman's perspective. I would not use the term ''injustices on campus''. I accept that a new system may lead to differences on campus—some students will be supported differently from others, and some will be paying under a different fee regime—but, as the hon. Gentleman said, that is true now under the Scottish

system. It will be more obvious in Wales because we have a greater number of English students, and a greater number of Welsh students go to England. I do not accept that that should be characterised as injustice, but until we have clarity from the National Assembly Government about what system they intend to introduce, students in Wales and England will be somewhat blind about where their future lies, what courses they may wish to undertake and how they may be sustained and maintained on those courses. The hon. Gentleman is right to highlight that point—a point to which the Minister should reply.

Chris Grayling (Conservative, Epsom and Ewell)

Does the hon. Gentleman support the fact that students from England pay a higher level of fee to attend university in Scotland, and could therefore do so in Wales, than students, for example, from eastern Europe?

Simon Thomas (Plaid Cymru, Ceredigion)

We have to justify that; that is what devolution means. As the hon. Gentleman is pressing me on the point, I must remind him that, in its submission to the Richard commission, the education committee of the National Assembly said that it wanted to see those powers extended to Wales. The Conservative members of that committee did not demur from that opinion. [Hon. Members: ''It is devolution.''] Exactly so. That is my point.

In the last National Assembly elections, the Conservative party welcomed the devolution of those powers to the National Assembly. It is this end of devolution that does not seem to be working so well for the Conservatives—they seem not to know what the Cardiff end thinks of such matters. I am sure the hon. Gentleman's views are genuinely held, but they should be addressed to the Conservative leader in the National Assembly, who until recently supported such moves.

There is a practical point that can be best addressed through a couple of questions to the Minister. I shall focus on 2006, when the new regime will come in. What will the situation be for a student living in Wales and choosing to attend an English university in 2006? That student might go to a university with an access plan agreed with OFFA that means that a full £3,000 fee can be charged. However, the National Assembly might not yet have agreed its student support system in the light of a full tuition fee system. Therefore, for at least one year, if not longer, that student will attend an institution where a £3,000 fee is levied under OFFA, because of the access plan, but there is no corresponding £3,000 to be paid to the student in support.

I hope hon. Members follow that hypothetical situation. For the purposes of argument I am assuming that the student would have been eligible in England for the full £3,000, which is the element of grant plus bursary that matches the £3,000 tuition fee. If the student comes from Wales, the £3,000 support will not be there to attract them to attend the English institution. That might deter Welsh students from going to places that offer the best courses for them, and persuade them to accept second best. As a graduate of a Welsh university, I am not saying that they are second best, but students want to go where the best courses are. Some courses are available only in

England or in Wales, and some are taught better in some institutions than in others. Students will choose to go where the best course is.

The converse can also be argued. What happens to an English student who chooses to attend a Welsh university in 2006? If they attend a course at an English university, they might pay full tuition fees of £3,000 under an access regime and receive the £3,000 support. However, by attending a Welsh institution, there will be no OFFA, no access plan, and nothing has been decided as to whether Wales will adopt that structure. The Bill devolves powers to enable a National Assembly to have access plans and a body such as OFFA in the Assembly, but no decision has been taken as to whether that will happen.

We must debate the matters on the basis of what we know today. An English student studying at a Welsh institution will be entering an institution without an access agreement. That institution might still charge the £1,000 tuition fee—it would have no right to charge more under the Bill—but what student support will the student receive? Will they be able to receive the full £3,000 support, even though they attend a Welsh university without an access agreement, or will they receive a minimum of support? What will that minimum support be? That is an important question for any English student seeking to study in Wales post-2006. Will the support match the tuition fee in England, or will it differ because Welsh universities will not have an OFFA-agreed access arrangement?

I would not call those examples injustices, but I would call them problems and anomalies that we must iron out. We need clarity. Throughout the Committee it has been constructive of the Minister to produce the draft regulations. They have enormously helped most members of the Committee to understand how students in their constituencies would be supported or otherwise as they enter further education. I know that the regulations have persuaded some Government Members to support the Bill. I remain against the Bill in principle, but I must ask the Under-Secretary of State for Wales what will happen to the students whose situation I described? Those matters must be explained.

One problem is that the National Assembly Government have not made a statement of principle or policy on the matter. They have kicked the business into the Rees commission and into a post-2006 situation. In principle, I support that. Of course it is right that the Assembly and Assembly Government should choose how to run the system, but that is bad decision making and bad public policy making. It is not helpful that we do not know what an English student studying in Wales or a Welsh student studying in England will receive in support or can expect to pay in tuition fees after 2006.

The simple fact is that at least 45,000 students—those domiciled in Wales and studying in England or domiciled in England and studying in Wales—do not know what the situation will be in 2006–07 because we cannot marry what is happening in England with what may happen in Wales. All that we can do is take a best shot and assume, as does the statement that I read out, that there will be some form of tuition fee system in

Wales and some form of student support grant alongside it.

I have two final points. First, I commend the National Assembly Government for what they have done to date on student support. As the Committee may know, they were the first to reintroduce a grant—in this case, a learning grant—which has been an example to the rest of the United Kingdom. In particular, I like to think that that decision has been useful in the Government's decision to reintroduce grants to England, and that deserves to be put on record.

Secondly, will the Minister explain why the devolution settlement has been approached in the way that it has? Members who have read the Bill and considered the statements made by Ministers will assume that the Bill devolves support for students in higher education institutions to the National Assembly, and in a broad sense, it does. However, if we consider the detailed architecture of the Bill, we can see that student support is devolved to the National Assembly in a particular context. It is not a full assumption of devolution over all student support and charging mechanisms. It is the assumption of devolution over a particular set.

In other words, if the Assembly decided to change the present system of tuition fees and support for students, it could do so only along the same lines as England. It may vary the amounts and elements of the tuition fees, and the access plans may be different, but all the elements of the Bill's architecture for England will have to be present in Wales. There will have to be variable tuition fees if anything happens to increase the basic tuition fee, and there will have to be student support linked to those tuition fees. There will have to be access plans and a version of OFFA, although it may be incorporated within the Assembly body or the Higher Education Funding Council for Wales—we do not know, as the Assembly has complete control over that. To continue the architecture analogy, the doors and windows may be in different places, but the basic infrastructure must be the same.

Matters could have been different. There could have been a simple devolution so that the Assembly was in complete control of a student support system and tuition fees. That may have meant that it would have followed a different path from that detailed in the Bill. As such, it is appropriate to invite the Minister to explain the thinking behind the method of devolution that the Government have chosen, compared with any other.

In conclusion, my party will support the element of devolution, but we feel that there are important questions, including those raised by the hon. Member for Epsom and Ewell, about the effects of the new system, particularly in the first couple of years when there is not a similar scheme in Wales running parallel to the scheme in England. As this is the first opportunity to discuss the subject, it is also important that the Minister takes some time to explain why the Government have chosen the system of devolution that they have.

Don Touhig (Labour/Co-operative, Islwyn)

We have had a lengthy and important debate with useful contributions and valid points from hon. Members. I shall deal first with the amendment and then the wider issues that have been raised.

The amendment would limit the powers transferred to the Assembly to those relating only to higher education. It would result in the Secretary of State retaining the power to provide financial support to further education students in Wales. That is a reason to resist the amendment.

The functions relating to student support that the clause would transfer to the Assembly are not new. They are currently exercised in England and Wales by the Secretary of State under sections 22 and 23 of the Teaching and Higher Education Act 1998. The hon. Member for Epsom and Ewell will be aware that the equivalent functions are already exercised in Scotland and Northern Ireland by the respective devolved Administrations. We propose a tidying up of the devolution settlement concerning higher education. The Assembly already exercises the majority of Executive powers in the areas of higher and further education and the transfer of the remaining functions will allow it to exercise power on a whole-system basis over student support and higher education functions. The only functions that will not transfer to the Assembly relate to the collection of repayment of tax, which rightly remains a reserved matter.

The amendment would restrict the transfer of functions to the Assembly to those under section 22 of the 1998 Act which relate to higher education, leaving the Secretary of State with the functions in relation to financial support for further education students in Wales.

Tim Collins (Conservative, Westmorland and Lonsdale)

I have been following the Under-Secretary's argument carefully and he said that this is a tidying-up exercise to bring the situation in Wales into line with that in Scotland and Northern Ireland. As he recognises, the Government legislated back in 1997–98 for a distinction between Wales and Scotland and Northern Ireland. Can he explain what has changed since 1998? Is there likely to be a continuing process of further transfers or is this a one-off?

Don Touhig (Labour/Co-operative, Islwyn)

If the hon. Gentleman were to reflect on what the Government have done in the past few years, he would find that there has been a continual progression of transfer of certain functions to the Assembly, all provided for under the Government of Wales Act 1998. For example, there has been a Bill to devolve responsibility for the fire service to the Assembly. That is not uncommon and is a practice that the Government have followed during the past few years.

The anomaly is that one element—responsibility for student support—has been retained in the Department for Education and Skills. We think that it is better to transfer it to the Assembly, which has responsibility for all other aspects of higher education, so that it will have the complete package and complete responsibility.

I cannot understand what use the Secretary of State would make of such a power if we accepted the amendment. It would not be logical. To separate in an arbitrary way certain of the Secretary of State's functions under section 22, transferring some to the Assembly while reserving others, would be inconsistent and impractical. Why should the Assembly not have the same powers over higher and further education as the devolved Administrations in Scotland and Northern Ireland? The amendment is ill-conceived and poorly thought out. I accept that it is an attempt to probe the Government's thinking and I urge the hon. Member for Epsom and Ewell to withdraw it.

On the wider issue of the clause, it is a milestone in the devolution settlement in Wales. It will put the Assembly on the same footing as the Northern Ireland Assembly and the Scottish Executive with regard to responsibility for higher education. The transfer of the remaining functions will allow the Assembly to exercise powers on a whole-system basis over student finance and further and higher education policy. Again, that will bring it all under one responsibility.

The clause allows for the tidying-up of the present devolution settlement. It will create a more streamlined and effective policy-making environment in Wales and should, therefore, be welcomed. As I said, the Assembly already has responsibility for most education services and the clause will transfer to it certain functions relating to student support. Those functions are not new and are currently exercised by the Secretary of State under sections 22 and 23 of the 1998 Act. The Bill provides an enabling framework of legislation that will give the Assembly powers to determine which student support and finance arrangements are appropriate to Wales, as the hon. Member for Ceredigion said.

As hon. Members will be aware, the Assembly has yet to decide whether to introduce variable fees. Its final decision will be informed by an independent review, which is to be undertaken by Professor Teresa Rees. The Assembly's Minister for Education and Lifelong Learning has invited Professor Rees to produce a report containing the relevant evidence to inform future policy decisions by the Assembly and the Higher Education Funding Council for Wales on student support and the financing of the higher education sector. The report is due to be completed by May 2005, with an interim report on variable fees in February 2005. It will make the necessary recommendations to the Assembly.

The rest of the debate is in Hansard.