BBC On The Record - Broadcast: 27.01.02

Film: DAVID GROSSMAN Outlines the Government's thinking on student finance and asks whether the changes they are considering will overcome the hostility of middle class parents or encourage less well off students to go to university.

DAVID GROSSMAN: Stephanie Fulford arrives in Leeds with her parents to check out the university. The journey from school to college is daunting, Stephanie plans to study Geography so it certainly wouldn't do to get lost. How her time in higher education will be funded is rather uncharted at the moment, the government's reviewing the system, not least because it wants to make sure that by 2010 half of all young people find their way into college. The government has a problem in trying to expand higher education - it's going to cost. Especially since many of the students it's trying to attract, are from low income backgrounds, who could potentially need far more financial support. The introduction of loans and tuition fees has helped to pump more money into the system, but has also upset a lot of middle class families who have to bear the brunt of the expense. In announcing this review, the government's hoping to steer a course through these competing concerns, but almost any policy change they can come up with seems to risk upsetting somebody. BARRY SHEERMAN MP: It seemed to me a great shame that we should immediately start unpicking that because it was a bold decision. Many of those decisions have to be painful, but they were right and it seemed to me, you know getting it wrong to go back on it and say, oh well we've made a mistake, there was no mistake, you had to change the basis of student finance, no modern, modern government who wanted a first class, world class Twenty First Century university system, could afford to go on the old way. ACTUALITY: "Can I just say a big welcome to everybody here, who's come to the open day". GROSSMAN: With more students than ever streaming into universities, Tony Blair's concerned that they and their parents don't feel put upon. Stephanie's parents already have a son at university and the costs are adding up. BARRY FULFORD: If Stephanie goes away for a three year course - then we'll be looking at somewhere in the region of three or four thousand pounds to fund Stephanie plus the thousand pounds a year to fund Andrew at Birmingham. So in a very short period over five years, we'll be looking at something in excess of twenty thousand pounds, possibly, to fund them through university. GROSSMAN: You can forgive today's students getting a bit nostalgic abut the way their predecessors were funded. Up until 1990, students received a means tested grant towards their living expenses. Today though grants are just a memory, replaced by the Tories with loans. Students now also get handed a bill for part of their tuition fees - although the poorest fifty per cent are exempt. This whole system though is now under review. MARGARET HODGE MP: We want to ensure that we've got the balance right. There were concerns expressed and there are continuing concerns expressed over the balance. Are we asking, particularly people from lower income backgrounds to pay too much towards their living costs. GROSSMAN: Students have always wanted more money, but since the introduction of loans the issue of graduate debt is of real concern. Students can now borrow up to �3,815 a year from the government's scheme, a bit more for students in London. Barclays estimate that last year's graduates have an average total debt of �10,000. That's hardly small beer and say some a powerful disincentive to staying in education beyond school. GORDON MARSDEN MP: Perception is all important and if you come from a background where no one in your family has been to university and none of your peer group are going to university, then the perception of piling up a lot of student debt, even if in fact that doesn't translate in to reality with repayments, is very important. GROSSMAN: The government though is believed to be looking at options that stop well short of reintroducing universal grants. One possibility is targeted bursaries, perhaps expanding the current Opportunity Bursaries Scheme worth �2,000 each to six and a half thousand students from poorer backgrounds. MARSDEN MP: The benefit of the Opportunity Bursaries Scheme is first of all that it's there already and therefore there is a bureaucratic structure which wouldn't have to be reinvented. Secondly, it would relieve substantially the concerns of students coming from first generation or disadvantaged or working class backgrounds about debt. CONNOR RYAN: Well you still have something like three times as many people from professional families as from blue collar families going to university, so higher education is still to an extent a subsidy of the middle classes. If you want to see greater participation from working class children, as well as seeing improved standards in schools you need to have some sort of targeted support at those students, rather than having some blanket reintroduction of the grant. GROSSMAN: As Stephanie explores Leeds University, the government's got to consider not just how she and other students are to be supported, but how they can fund their ambitious plans for the expansion of higher education itself. DR NICHOLAS BARR: Thirty years ago we still had an elite system, where only 5% of 18 year olds went to university. Now, it's easy for the tax payer to finance a small high quality system. Today we've got 35% of young people going to university with an aspiration of a 50% participation rate and that is huge enormous staggering progress, very warmly to be welcomed, but one of the implications is that the tax payer cannot be the sole source of finance for a mass system. GROSSMAN: More or less everyone agrees that student finance urgently needs a boost. But who should pay for it and what form should it take, that of course is the difficult bit. The debate on the answers to those questions is raging at the heart of government. With the Education Department, Number Ten and the Treasury all desperate to make sure that when it's published the review reflects their own individual agendas. MARSDEN MP: The Treasury obviously are concerned to avoid open ended commitments to future expenditure which will cause them enormous problems. Number Ten obviously are alert to the sensitivities politically, broadly of the issue. Not least because students and their parents are a vocal political force. And the department, while taking those points on board is also acutely conscious of its broader objectives, which Number Ten shares, of widening participation in higher education, so there's bound to be conflicts of view points. GROSSMAN: One possible solution that the government's been looking at to raise money for higher education is an extra tax on graduates. SHEERMAN MP: Personally I think there's nothing wrong with a system that said look, those people that benefit from higher education have benefited and you know got much better incomes because of the education they got should, should pay something back and I think if that's a good principle it should apply to anyone, whether they're.. whether they're twenty- five or thirty- five or sixty- five. Then you know let's have a graduate tax where something flows back into the system. If it was ring fenced for higher education investment, I think that would be a wonderful thing GROSSMAN: But for the prospective students looking round the Geography department, having to pay a graduate tax after university isn't something they should get worried about just yet. Although at one time keen on the idea, the government is believed to have reconsidered after an getting an unfavourable reaction in focus groups. RYAN: I think the problem with a graduate tax is that once the middle classes start calculating what the repayments would be, they would find firstly that they're significantly more than would be repaid under any loan system and fees system combined, and secondly that there would be no way of paying all the money up front, so one would have to continue making those payments for a period of perhaps a quarter of a century. UNNAMED WOMAN: Hi, I'm Ellie, I'll be taking you round the campus, I'll show you all the main bits. GROSSMAN: As most students will admit the odd hangover is unavoidable but a financial hangover that lasts forever could make many think twice about taking up a place at university. The Scots have opted for a limited form of graduate tax, where instead of up-front tuition fees students have to pay back a fixed amount - two thousand pounds after they graduate, so long as their income reaches a certain threshold. BARR: Higher education is then free at the point of use, so then you have free higher education for everybody and it's repaid by an income related graduate contribution, that's eventually switched off. That looks very much like free higher education paid for out of taxation and that's not froth and bubble and spin, that is real. Higher education would be free at the point of use, no student would have to pay tuition fees up-front, they would go to university, they would sign a bit of paper, it would all be free, they would get their degree and once they started earning more than a certain amount there would be an add on to their income tax which would last until they'd paid their agreed contribution. GROSSMAN: There's plenty to learn too for Stephanie's parents as they get to grips with student finance. It seems we're unlikely to move to ANY form of graduate tax soon because, quite simply the Treasury doesn't like the idea. MARSDEN: The main problem in terms of finance is that it would take a very long time for that money to feed back in to the higher education system, unless the Treasury were able to or were prepared to give a sort of advance against it, which I think unlikely, but I think there are other problems with it as well, with the move to people being in self employment, with greater graduate mobility, with all of these factors I think you would find in effect it would be a lot more difficult to collect than people have sometimes thought, and we could end up with the same problems that we've had with the Child Support Agency, GROSSMAN: There is an idea that would actually save the Treasury money. At present student loans just keep pace with inflation - so what about getting graduates to pay them back at a more realistic interest rate? BARR: If the interest rate that students paid went up by two or two and a half per cent so that it was equal to the government's cost of borrowing that would close a huge fiscal black hole at the heart of the present loans scheme. Next year, the student loans company is going to lend about two thousand five hundred million to students. Of that amount seven hundred million will never come back because of the cost of the interest subsidy, so to put it another way, if next year students paid a slightly higher interest rate, equal to the government's cost of borrowing, it would be possible to spend seven hundred million pounds on grants or on other measures to promote access and the same would be possible the year after that and the year after that. GROSSMAN: But would reform of student finance on its own make any difference - some Labour politicians argue that the whole review is something of a distraction when it comes to attracting more students to university particularly those from poorer backgrounds. They argue that the real barriers to higher education are well before aged eighteen and it's these problems that urgently need attention and finance. SHEERMAN: All the evidence my select committee took in the last year in terms of looking at access to higher education and retention in higher education could not find hard evidence that students on lower incomes were being put off coming in to higher education. Now a lot of people said you will see it soon, the statistics will start showing, but I have to say still today I haven't seen convincing evidence that this has been a bar. HODGE: We've got to intervene when people are very young to encourage them to come in to higher education and to raise their aspirations. There is this terrible statistic that I always quote from some research that was done which showed that over 40% of young people from the lower socioeconomic groups never think about university as an option for them, during their school years. That means their teachers, their friends, their family, all the influences on their lives don't put university as an option for those individuals, because of their background RYAN: I think the issue here is can they successfully introduce the sort of reforms that are necessary in order to increase opportunities, in order to allay some of the concerns about the existing system, but at the same time make sure that there is sufficient money for higher education? GROSSMAN: As Stephanie and her family head home it's an uncertain time for her - she's got exams to come and has still to decide which if any university place to take up. The review of student finance probably comes fairly low down her list of worries at the moment but what the government eventually decides could have a lasting impact on her and thousands of other young people for many years to come.
NB. This transcript was typed from a transcription unit recording and not copied from an original script. Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, the BBC cannot vouch for its accuracy.