Enterprise and Lifelong Learning Committee, 07 Mar 2001

Meeting date: Wednesday, March 7, 2001

Official Report 186KB pdf

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Education (Graduate Endowment and Student Support) (Scotland) (No 2) Bill: Stage 2

We welcome Alasdair Morrison. Thank you for coming here this morning. I have agreed with the minister that, before we begin formal consideration of the amendments, there will be an opportunity for members to question him on the documentation that has been circulated: the letter on the cost of collection and the illustrative draft regulations.

However, I am disappointed about the timing of the publication of the draft regulations. We were promised them at the start of stage 2, which, technically, was 31 January. We have waited six weeks longer than promised for the documents. Given that the committee has gone out of its way to accommodate the Executive with regard to the original problems, it is disappointing that the Executive has not responded more quickly.

Two parliamentary committees, including this one, have recommended that the more substantive points should be in the bill rather than in the regulations. We had a commitment from the minister's predecessor that that point would be taken on board, but it appears that that recommendation has been totally ignored. That is disappointing. When you are answering questions, minister, perhaps you can explain why the recommendation appeared to have been accepted by the Executive but nothing has materialised.

Do you want to make any opening remarks on the cost of collection letter and the regulations, before I open it up to questions?

There was an undertaking to provide the information before last night. I can only apologise. It illustrates the complexity of the issue of the cost of collection. You have the information, and I am happy to respond to questions on the letter.

If I remember correctly, the first draft of the illustrative regulations was published in November. The regulations have been added to, but they have not changed direction. My officials tell me that gaps that were evident when the regulations were first published have been filled. The committee's comments on the draft regulations would be welcome.

Will you point out the key changes in the draft regulations since the original draft?

With your permission, I defer to the officials, as that is of a technical nature.

How would you like me to deal with it?

Just describe the key areas that are different from the original regulations.

The key issues that we have dealt with are to do with tightening up the regulations and trying to make them fair and reasonable for all the students that will be caught by them. We have made provision to ensure that we have defined a continuous programme of study, referred to throughout the regulations, which will ensure that students in higher education will not be caught by the regulations. For example, students on a continuous programme of study who start a higher national certificate or higher national diploma and move straight into a degree will not be caught by the graduate endowment regulations but, from 2001, people entering higher education for the first time will.

The date by which people will be liable to pay will be 1 April in the year following completion of the degree. We had left that space blank while we considered all the implications. The qualifying period of study was also left out of the previous set of regulations. It now rests on the fact that someone who is going straight into a degree course, for example, straight from school, will have to study for a qualifying period of three years on the degree before they are liable to pay the graduate endowment. The qualifying period for someone who has moved through a continuous programme of study, from an HNC or HND, will be two years of a degree. That is a new provision altogether.

We made some alterations to reflect the changes that we made to the bill, as the first set of regulations clearly pertained to the first draft of the bill. We had to make some consequential amendments. We have specifically exempted the postgraduate certificate of education in the regulations. That was not made clear, but it was always the intention to exempt it.

We have put in a new part, which provides for people who are liable for the graduate endowment to take out a loan, because we felt that it was more appropriate for the regulations to reflect the provisions of the Education (Student Loans) (Scotland) Regulations 2000 rather than simply referring to them. In that way, the whole picture can be seen in the regulations.

Those are the key issues. There are other provisions, which are to make the regulations more clear, especially on exempt courses and exempt graduates. We have made it clear that the exemption refers to students who are "eligible for" rather than "in receipt of" a disabled students allowance. Those were technical changes that we thought were appropriate.

That was very helpful. I will now open the meeting up for questions to the minister, either on the letter on the cost of collection or on the regulations.

Good morning, minister. I will restrict my questions to the letter, which I have read as best I can. Some disturbing features leap out at me. In the absence of knowing how many graduates will choose to repay by lump sum and how many will choose deferred repayments, it is difficult to make any decision on the level of administrative cost. Previously, I have registered my concern that no attempt was being made to provide an inducement to repay by lump sum. Repaying by lump sum would simplify the system and remove an administrative burden by reducing the volume of work being processed by the Student Loans Company. Your letter bears out the fact that my apprehension was correct. Not to offer some form of discount for repayment by lump sum, which would greatly facilitate the collection, is incomprehensible, sterile political ideology. I just do not understand it. One would not find such an approach in business. I would be grateful if the minister could comment on that.

How can we come to an informed judgment on the cost of collection when no attempt has been made to consider alternative means of collection? If, in this letter, I had detected some willingness to refer to external agencies—even just for general comment or estimated costs of collection—I might have been comforted that the present proposals were the most efficient and cost-effective way of dealing with this matter, but there is nothing. I will not be alone in saying that I was interested in South Lanarkshire Council's experiment in recovering council tax arrears. The council is doing that by contract procurement of a private agency.

Minister, I am deeply concerned by the omissions from the letter.

Miss Goldie suggests that the Executive is bound by sterile political ideology, but I can assure her that we are not. We consulted widely on the proposal to offer an incentive to those who would pay by lump sum. It was made clear to us that that was not a preferred option. It would have offered an advantage to students who were better off, but our concern, of course, is to widen access and to improve the lot of students who are worse off.

Could Miss Goldie remind me of her second point?

Your letter contains no sensible comparator. You tell us, as best you can, what you think the likely costs of collection will be. However, no attempt has been made to provide a comparison with any other agency that could provide a collection service.

We have referred to relevant agencies such as the Student Loans Company.

But I am talking about external agencies. As far as I can see, the only reference is to the Student Loans Company.

As members will appreciate, officers have been examining this issue in some detail for some time. The summary to my letter makes it perfectly clear that

"the establishment of a separate system dedicated to the collection of the Graduate Endowment would significantly increase the number of separate accounts".

As the letter makes clear, a number of issues would add to the complexity and cost of the collection of the endowment.

And your evidence for that is?

If the convener allows, I would be happy to let those who were directly involved in the consultation answer that question.

We spoke to the Student Loans Company because it is the agency with extensive experience—about 10 years' worth—of collecting repayments from students. It has more experience than anyone else of tracking students' repayments. It has always sought to use its systems in order to collect as efficiently as it deemed possible. We therefore felt that it was reasonable that the Student Loans Company should be the organisation from which we would seek advice on the committee's request for more costings of alternatives.

What other agencies were spoken to?

We spoke only to the Student Loans Company, because it is the organisation with around a decade of experience in the field.

So, minister, no external agencies were spoken to about costings other than the Student Awards Agency for Scotland and the Student Loans Company?

That appears to be the advice.

Some of my questions have already been asked by Annabel Goldie. I am intrigued by a sentence in the penultimate paragraph on page 2 of the letter, under the heading "Graduate Endowment Payment", which says:

"In addition, SLC estimates that non-recurring IT development costs of £1,100,000 over 2 years would be incurred."

Can you break that figure down? Is it for hardware, software or labour? If it is for labour, will the work be contracted out? Is the SLC figure the only one that has been produced, as Annabel Goldie has suggested, or have you considered asking other organisations, such as software consultants, to see whether they can provide a cheaper option?

These are the SLC figures and they show what the company reckons the cost would be if it produced a separate system. Gillian Thompson may want to talk about the detail of the software figures. However, we considered that the SLC was the expert agency to decide how to make up the figures. Obviously, development and contract costs are part of the figures. SLC is a company that operates on its own terms. We felt that it was appropriate to let it make up the figures, using its expertise.

I am glad that it has made these figures up and supplied them to you. Can you tell me what elements constitute the figure? How do we know that it is £1,100,000? Do we know just because the company has told you, or has the company been able to break it down into factors X, Y and Z?

We have more detail.

Yes, we have more detail, which we would be prepared to provide.

We do not have the information to hand, but I would be happy to respond in writing to Mr MacAskill, giving the kind of detail that he seeks.

I should perhaps remind the committee that, prior to the income-contingent loan scheme, we had a mortgage-style loan scheme. It was run through the Student Loans Company—indeed, that scheme is still in place for students who started their courses prior to the change to the income-contingent loan scheme. That scheme was the model for the costings for the alternative scheme that we were asked to produce.

The costs are therefore based on the SLC's experience of running the mortgage-style loan scheme, which required the company to keep in contact annually with students, to find out about their income, to deal with issues of deferment, to pursue students through the courts for non-payment, and so on. No other organisation in the UK collects repayments of student loans in that kind of way. We therefore decided that the SLC was the appropriate source of information.

I can certainly provide information on the breakdown of the costs that we have received from the company, which includes an estimate of staff costs. The company's assumption was that it would be contracting work out. The figure in the letter is a global figure for software changes.

Are there not organisations and companies that deal with such matters? Would it not have been possible to go to them, in addition to going to an organisation that, to be frank, has a vested interest?

We felt that the Student Loans Company had the expertise in the field, given the customer base that we are talking about. We were considering an alternative scheme comparable to the mortgage-style loan arrangements and we decided that the SLC was the appropriate source of information. I assume that had we tried to engage other external agencies that have experience in pursuing collections, it might have taken us longer than it has done to get to this position.

While the officials can provide factual information, general answers have to come from the minister.

I appreciate that, convener.

If I interpret the letter correctly, the analysis of the two models sets out clearly the implications for the Student Loans Company of adopting the two different approaches. Clearly, approach a) is preferable. If a mortgage-style company, or the kind of organisation that Annabel Goldie talked about which collects debt in South Lanarkshire, was able to do something cheaper in the longer term, presumably that could be examined. However, as I understand it, you are looking at the issue within the existing framework. These matters could be kept under review.

Mr McNulty is right on two counts. First, I agree wholeheartedly that option a) is the preferred model, and our letter sets out why. Secondly, we will keep under review whether efficiency savings can be made and whether the complexity of the collection system can be reduced. I am happy to give an assurance on that.

I welcome Brian Monteith to the committee.

Minister, on the final page of your letter, as opposed to the annexe, you comment that

"default rates are likely to be higher, the higher the threshold for collection"

yet I see no evidence in your paper to say why that is so. You do present evidence, which I am willing to accept, that collection through the Inland Revenue would produce a better collection rate and a smaller default rate. That is common sense, because contact with the Inland Revenue will already exist, unlike the situation if the Student Loans Company separately collects funds. But where is the evidence to link that to the point about a higher threshold resulting in a higher default rate? Common sense suggests that the earlier one has to pay, the more difficulty there will be in doing so.

Again, all I can do is refer Mr Monteith to the experience of the Student Loans Company. What it said is reflected exactly in my letter.

I hear what the minister is saying, but the experience of the Student Loans Company was that the default rate dropped at the same time as the system changed, so the Student Loans Company has no experience of a difference in default rate with the new system being run through the Inland Revenue. I cannot see the evidence that a higher default rate will result if the threshold is raised.

I repeat that that is the experience of the Student Loans Company. As the officials have said, no one in the United Kingdom has more experience in tracking student income than the Student Loans Company.

It may be helpful if we explain the background to the thinking. The default rate, which has been confirmed in our discussions with the Student Loans Company, is closely linked to how long one has to maintain contact with the student through direct and constant correspondence to track their income, which otherwise would happen through the Inland Revenue. The higher the threshold, the longer one has to maintain that communication and information before payment starts. That was the thinking, and the Student Loans Company agreed that we had made a reasonable and correct statement in the letter.

I have a couple of questions of my own. Obviously, this is an important issue, because we have been told all along that the threshold of £10,000, rather than the threshold of £25,000 that Cubie recommended, was predicated on the cost of collection. From the information that is contained in your letter, the direct payment model includes a cost of collection. The cost of collection should be the percentage of the cost over the revenue raised. These absolute numbers are important, but when the Inland Revenue, for example, measures cost of collection, it does not just give the crude numbers, it looks at the cost as a percentage of the revenue raised.

I have two points. First, I have information from the Student Awards Agency for Scotland on the cost of collection for 1999-2000. The total loan funding collected in Scotland was £186.4 million. The staff and administration cost was £4.5 million, so the cost of collection was 2.3 per cent. That is from the Student Loans Company and the SAAS. Your cost of collection, excluding capital costs in model b), is 1.75 per cent. Indeed, if you include the capital cost over a period of six or seven years, the cost of collection comes out exactly at the current cost of collection. Given that the cost of collection of model b) would be identical to the current cost of collection, does that justify the difference of £15,000 in the threshold?

We have discussed the practicalities of two different collection systems. In fact, we discussed it at the previous meeting of this committee, when there was a similar discussion around amendments. The fact remains that if there were a system of two repayments—one for the student loan element and one for the endowment—people would still be paying 9 per cent of their monthly income above the £10,000 to repay the student loan. As far as the technical aspects of your question are concerned, I am happy to allow Lucy Hunter or Gillian Thompson to come in.

With all due respect, that does not answer the question. The whole issue is predicated on the cost of collection. You have not given us the cost of collection as the Inland Revenue normally understands it, because the cost of collection is expressed as a percentage of the revenue raised. What is your estimate of the cost of collection?

For model b) we have been able to present an estimated cost of collection. There is a question about whether the income figure would be the same. With a higher threshold, clearly the estimated total income would tend to fall, so in coming up with a percentage, you would need to make that estimate. We have not tried to model in detail what various thresholds would mean for the absolute quantum of income—

With all due respect, that is exactly the information that Mr Lyon asked for two or three months ago, so why do we not have it?

We have the collection principles, the administrative costs and the—

No, we wanted to find out the cost of collection with a £25,000 threshold vis-à-vis the cost of collection by other methods. What we have here is nothing like that.

We had thought that providing the administrative costs and the guidance on default, which is a large cost in collection, would give the committee the comparison at the level that was required. I had hoped that that would meet the requirements.

The proposition is based on mortgage-style loans, rather than the income-contingent collection system. There is a problem, in that the evidence that we got from the National Union of Students and other student bodies fully supported the income-contingent loan system. They did not want to see a return to the mortgage-style loans system. We have had no evidence from students that they would like to see a collection system based on mortgage-style collection. Are you saying that it impossible to use a variable system with the Inland Revenue? Has that been looked at, because that is what we asked for originally?

The minister needs to answer the questions whether that system was considered and whether officials provided statistical back-up.

My officials are best placed to deal with that question, as they work on those matters daily and liaise closely with their colleagues at the Inland Revenue. Gillian Thompson has responsibility for that work.

Can you answer George Lyon's question? Was the variable system considered?

With all due respect, convener, I repeat that the person who is best placed to answer that question is Gillian Thompson, who is—

You are the minister. Was the variable system considered? If so, Gillian Thompson can give us the details.

My understanding is that it was not considered, and that—

Why not?

Convener, I am not able to answer that question. My information and my understanding are that the variable system was not considered. I will be happy to allow Gillian Thompson to explain.

Just a minute, minister. You are in charge of the department. Given that the committee asked for the variable system to be considered, why was it not considered?

Unfortunately, convener, I cannot give you an answer to that question. You will appreciate that Nicol Stephen was the lead minister at that time. I make no excuse, as the matter is now my responsibility, but I repeat that Gillian Thompson is the official who has been through the system and who has dealt daily with the officials at the Inland Revenue, both when Nicol Stephen was responsible and during my term.

Okay.

As I recall, George Lyon asked whether we had considered doing something different with the Inland Revenue system at a different threshold, which would create a separate relationship with the Inland Revenue from that created by the income-contingent loan scheme.

Yes.

As the minister made clear, in conjunction with other UK departments we have a relationship with the Inland Revenue under the auspices of the income-contingent loan scheme. The Inland Revenue does certain things on our behalf, but that is all dealt with under the UK scheme.

The Scottish Executive does not have the competence to form a relationship with the Inland Revenue outwith that UK scheme. Therefore, as matters stand, we are not in a position to strike a separate arrangement with the Inland Revenue.

The Inland Revenue charges the UK education departments for carrying out that function. I can only speculate that the information that is provided by the Student Awards Agency for Scotland relates to the Scottish share of that payment. I do not think that I can comment on the way in which the Inland Revenue presents its costs for the collection of taxes and so on. However, I could seek to provide some information to the committee on the basis upon which the Inland Revenue charges education departments for that service, if that would be helpful.

At the end of the day, the answer to the question about how much it would cost to collect the graduate endowment at different levels of threshold is that it would cost the same, assuming that we had an income-contingent loan scheme on a UK basis. However, there is no opportunity for the Scottish Executive to go its own way in using the Inland Revenue. I hope that that is clear.

Yes.

From the evidence that we have received from students, the costings that we have in front of us for a separate system of mortgage-style Scottish collection would not be supported. As I understand the position, students were fully supportive of the move to an income-contingent collection system, as that was the evidence that was given to the committee.

Convener, may I clarify that point? The mortgage-style scheme, on which members have costs in front of them, would look different from the proposal that the Executive has on the table, which is to handle the loan facility through the income-contingent loan arrangements. The mortgage-style arrangements would squeeze people who chose to take out a loan into paying over a shorter period of time. We would have to have a completely separate arrangement—we could not do anything through the Inland Revenue and we would have to find somebody to run the scheme on behalf of the Executive.

I am sure that members would welcome the additional information that you offered to provide, if you were to provide that information well in advance of the stage 3 debate on 29 March. That would allow us to have an informed stage 3 debate.

I will pick up on one or two of the points that have been raised, particularly the point on the Inland Revenue, because I want to be absolutely clear about what the minister and his department are telling us today.

The letter from the Executive says that

"collection through the Inland Revenue would not be possible".

Does that mean that such a system is not doable under the current arrangements, as opposed to its not being a better scheme?

The reality is that collection through the Inland Revenue is a reserved area.

Yes—that point has been made.

Later in the same paragraph, the Executive says that

"the SLC … would have to be in constant contact with graduates, seeking information on their earnings and pursuing repayments, until such time as … liability was discharged."

That quotation is from the third last paragraph of the second page of the letter, under the heading "Graduate Endowment Payment".

What is different from the current situation, in which constant contact with graduates takes place? Why would that scheme involve additional costs?

The difference is in the threshold. The SLC would have to be in contact with graduates over a longer period of time. As I said, that is a reserved area.

I speak as someone who is still in constant contact with the SLC, and my understanding of the current system is that the additional costs that would be involved would not be particularly substantial, on the ground that constant communication takes place anyway. Can you help me to understand why there would be additional costs?

That is a technical question and I am quite happy to allow Gillian Thompson or Lucy Hunter to provide the technical detail.

The loan scheme changed in 1998. Ex-students who are repaying loans that they took out under the previous mortgage-style scheme will be in constant contact with the SLC. A group of borrowers who are in the first year of the student loan scheme are in that precise position. Mr Hamilton was quite right, but—

So are you saying that the costs apply only to new students under the new scheme?

Yes. On the Executive's proposals that are on the table, the model that we are talking about is the new student loan scheme, which was introduced in 1998 through the Inland Revenue. Under that scheme, collection is done through tax coding, rather than through having to communicate with graduates year by year. That is the difference. The schemes have changed over the past two years.

I understand that.

On the continuing discussion on whether the figures are anything other than broad estimates, I think that you undertook to come back to the committee, not only on the £1.1 million that Kenny MacAskill spoke about, but on the other figures. If that were possible, it would be helpful—some of the figures seem to have been plucked from the air.

The first paragraph of page 3 of the letter says that the SLC based those estimates on what it calls

"a broad outline of the Executive's requirements".

It might be useful for the committee to have an understanding of the assumptions that were made by the SLC when it arrived at those estimates, because it would be easy to inflate or deflate costs based on whatever that broad outline was. Perhaps the minister could give us that confirmation.

I draw the minister's attention to the next sentence in the letter, which states:

"The Company has noted that the difference between actual amounts"

and the approximation

"could be as much as 40% higher or lower than the estimates here".

Does the minister accept that that is a fairly massive margin for error, and that the figures must be taken with more than a pinch of salt?

I agree with Duncan Hamilton that further refinement is required. We will be as open as we can be and I presume that our letter to Mr MacAskill will be circulated to all members. In that letter, we will give a technical breakdown of where the figures came from.

I repeat what was said previously; we deferred to the SLC, which has a decade of experience. No other organisation in the UK is better qualified—

I hear what you say, minister, but could you help the committee to understand why the figures that are presented in the letter as a clear explanation might be 40 per cent wrong?

As I said, further refinement is required and—

There is refinement and there is fundamental, root-and-branch review.

The letter makes it clear that the figures are not definitive. We will provide members with further refinements, which will be circulated as soon as possible.

I want to bring the discussion to a reasonable conclusion. Two members want to speak again. We will take one quick question from each, because we must proceed to the amendments.

I have a question that is also a point and a request. We are engaging in a huge waste of time. There is a difference between a relatively cheap and cost-effective system and one that we intuitively know would be extraordinarily expensive. Can an estimate be made of the time that was wasted on further specification of a fairly clear differential? The questions—particularly Duncan Hamilton's—do not seem to be eliciting substantive new information.

With respect, every member is entitled to ask questions. I always allow every member to ask their question, even if another member thinks that it is daft. I am sure that the minister would agree with that position.

I am happy to note Mr McNulty's request.

In the interests of scrutiny and accountability of the Executive, I will ask a final question. The minister and his officials explained that George Lyon's request for consideration of repayments at a different threshold, through the Inland Revenue, was not accepted because the Scottish Executive does not have the competence to administer such a system. Is that correct?

Yes. It is not within the Executive's powers to impose a different system on the Inland Revenue.

The explanation is that the Executive does not have the competence because that is a reserved matter, which I presume would require primary legislation. Although we are discussing primary legislation in the form of the bill, is not it the case that you have exposed the fact that, if the threshold were changed and the Inland Revenue collected the money, you would stray into reserved matters, which would illustrate that the graduate endowment is a tax? That difference in the collection system would show everyone, finally, that the endowment is a tax and not a charge for the benefits of higher education.

That issue has been well debated at stage 1, as I recall. The advice to me is that not primary, but secondary legislation, would be required at Westminster. That is a matter of technical detail.

I bring the question-and-answer session to a close. Given the late availability of the information, we had to have the session. I thank the minister and his officials for agreeing to answer the committee's questions. I am sure that they realise that the questions were asked in the spirit of scrutiny of the Executive; it was nothing personal.

We proceed now to consideration of the amendments. Nick Johnston sends his apologies; unfortunately, he is still ill. Elaine Thomson and Marilyn Livingstone sent and said that they would be late—they are now present.

Section 1—The graduate endowment

Amendment 2 has two purposes. By the manoeuvre of lodging an amendment to section 1—I happily accept that it is a manoeuvre—some consideration of the section is allowed. The process by which one would vote against a section—I cannot vote because I am not a member of the committee—requires lodging of an amendment to delete the section. Such an amendment would be considered a wrecking amendment and would not be accepted, so it is impossible to vote against section 1 in that way. Therefore, amendment 2 allows members to voice their opposition to section 1 and to the rest of the bill. Members might wish to take that opportunity, following my comments.

I also thought that it would be useful to frame the amendment in terms of the threshold. I took part in the debate at the previous committee meeting and read its Official Report, and it struck me that there was a paucity of argument about Mr MacAskill's amendment 1 and my amendment 1A to his amendment on raising the threshold.

To paraphrase the arguments simply, they were that there was

"as much logic to start repaying … as soon as possible."—[Official Report, Enterprise and Lifelong Learning Committee, 27 February 2001; c 1619.]

As was said, students will be able to pay the graduate tax as a lump sum. However, the evidence to the committee from ancient universities, student associations and the National Union of Students suggests that students think that the threshold is too low. No one addressed that point in arguing against my amendment 1A or amendment 1.

It was suggested that we should keep the system simple. We have received further information today about keeping it simple, but the jury is out on the veracity and worth of the minister's letter. Committee members mentioned a Dutch auction, and there was confusion that a party such as the Conservative party, which believes in a variable interest rate, should propose a fixed threshold rate that might be different. There is no inconsistency in that approach. Many financial packages are predicated on thresholds that trigger payments, repayments or benefits while the interest rates vary.

It was argued that changing the threshold would be more expensive. It should be remembered that I and other Conservative members oppose the bill. Removal of the bill would remove the expense. The deputy minister introduced a smokescreen about what my party proposes for loans and collection costs, but did not address whether £20,000 or £25,000 could be the threshold.

The only argument that has been made—and continues to be made—concerns the simplicity of the Student Loans Company collecting the money and the fact that, as the threshold for repaying a loan is £10,000, the threshold for the graduate endowment should be £10,000. No other argument has supported the position that £20,000 or £25,000 is not in the students' interests.

I oppose the bill and section 1—which is impossible to delete—and I ask the minister to reply to this question when he speaks. If the current loan system remained in place and the Government of the day raised the threshold for repaying a loan to £20,000, would the minister suggest that the repayment of the graduate endowment should be raised to £20,000 for simplicity?

I move amendment 2.

I remind everyone that the procedure is that I open the debate to all members, then call the minister to respond, before asking Brian Monteith to sum up.

I associate myself with the remarks that my colleague, Mr Monteith, made. I will not waste the committee's time by needlessly repeating the arguments that he expressed articulately. The essence of the argument is that all the evidence that the committee took showed a profound concern about the £10,000 threshold. Mr Monteith is absolutely correct; that is not being addressed in the committee's debate. It is right to debate amendment 2 to allow that discussion to take place.

By way of amplifying my concern about the proposed £10,000 threshold, I say that the evidence has shown that, far from assisting people from deprived backgrounds or those who want to pursue courses that might not be the top of the graduate world's earning pops, the threshold will deter them. That is a regrettable prospect. For that reason, I support Brian Monteith's remarks and amendment.

My position is the same as it was last week when, on behalf of the SNP, I proposed a threshold of £25,000. We would prefer that there were no tuition fees. However, if such fees are to remain, they should follow the logic of the Cubie report, which recommended a £25,000 threshold. If that logic is not to be followed, the £20,000 threshold that is proposed in amendment 2 is certainly better than the £10,000 threshold. Given the fact that we are moving apace, I want to hear what the minister has to say about whether the Executive has any proposals about the threshold at which repayments will kick in. Until I am satisfied that the Executive proposes a threshold in excess of £20,000, I feel that what amendment 2 proposes is better than what the Liberal Democrat-Labour Executive has suggested.

The evidence that was presented to the committee shows clearly that Cubie undertook one of the biggest ever consultation exercises into the feelings of students and parents on a range of issues. It is interesting that, according to the Cubie report and the evidence from witnesses from the Cubie committee, the issue of the £10,000 threshold for loan repayment was not raised with the committee in its travels the length and breadth of Scotland. The groups that gave evidence to the committee told us that they wanted a higher threshold for the endowment.

It is also interesting that, of the 106 responses to the Executive's consultation with all student organisations and those who are involved in further and higher education, only five said that the loan repayment threshold was too low. All the evidence suggests that this is not a big issue. There is a view that the loan repayment threshold should be reviewed at Westminster, as Nicol Stephen suggested in his evidence. Indeed, the Westminster Parliament is already considering a review of the £10,000 threshold for loan repayments.

However, we must consider the factual evidence that is before us. One of the members of the Cubie committee told us that

"the issue was not raised".—[Official Report, Enterprise and Lifelong Learning Committee, 14 November 2000; c 1308.]

That has been borne out by the Executive's consultation on the matter.

I am not quite sure why we are debating the matter again. Although I accept that the committee should be open to discussion, Brian Monteith has said that he has lodged the amendment because he faced a "paucity of argument" during last week's meeting. However, as I remember, there was one vote in favour of the amendment. If last week's arguments against his amendment displayed paucity, I am not sure what his incoherent ramblings achieved to ensure that there was only one vote in favour of his amendment. The current system is cheaper and simpler, and we should stick to our guns on that.

I feel again as if I am going over old ground.

In order for the proposal in amendment 2 to work, the Executive would need to create a whole new monitoring system for graduates to track them and their income until they reached the £20,000 threshold. Such a system would be expensive and messy, and would bring us into the realm of operating one system for living costs and another for the graduate endowment. The prime objective of the graduate endowment is to fund future generations of student support, not to create another level of bureaucracy. There would, no doubt, be higher default rates as we tracked graduates over a period of many years and, as members have made clear, the potential that some would slip through the net is far higher.

Regardless of Mr Monteith's intention, amendment 2 would mean that, once they were earning over the threshold, graduates would still be liable for payments of their student loan for the graduate endowment at 9 per cent of marginal income that was more than £10,000. They would then remain liable for income-contingent loan repayments whether they continued to earn in excess of £20,000 or their income fell to £10,000.

Our proposed system has no separate income threshold because the loans system has built-in repayment protection. The existing mechanisms are efficient and reliable and they avoid expensive systems and delays in collection.

As I have told the committee, the use of the Inland Revenue to collect income-contingent loans is both efficient and simple. The long-term default rate is estimated to be negligible because the Inland Revenue collects the majority of repayments. Although a few borrowers outside the pay-as-you-earn system might go into arrears, most of them repay later. The system is simple, easily understood and it is already in place. Indeed, as committee members are aware, the current income-contingent loan system was campaigned for as a fair alternative to the old mortgage-style system.

Although I understand that amendment 2 seeks only to delay liability for the graduate endowment, we have already rehearsed the dangers of raising the threshold for loans to a very high level. Very high marginal rates would be needed on income thresholds—much higher than the current 9 per cent. The existing scheme works on a gently gradated scale that keeps repayments manageable and avoids sudden step jumps in required payments.

Without amendment 2, our proposed scheme works in its own right because it is one system, not two. The graduate would make one repayment instead of two separate payments for their living cost loan and the graduate endowment loan. Graduates come on stream straight away and, if they choose to do so, they can take out an income-contingent student loan under the same conditions as living cost loans.

Our scheme is tied to the existing income-contingent loan scheme with no separate threshold. Because liability is tagged on to the end of the living cost loans, there will be no more debt for any student and, indeed, the package reduces debt for 99 per cent of young students. I note the comments that were made by George Lyon and Kenneth Macintosh, especially George Lyon's comments about the Cubie committee's investigation in relation to the threshold.

As I have said, we are listening to the criticisms that have been levelled at the threshold during the bill's progress. We think that there is a case for revisiting the threshold and we are considering the position with colleagues in other UK departments. I remind the committee—again—that no one will be making graduate endowment payments for a few years. I therefore invite members to reject amendment 2.

I will respond as briefly as possible to the points that have been raised.

On Mr Lyon's comments, I cannot speak for individual students, but the Conservatives' documents show that we raised the issue of the loans repayment threshold with the Cubie committee, because the figure had dropped from £17,000 to £10,000. I welcome Mr Lyon's suggestion that it might be worth while to raise the threshold for loan repayments. If committee members are arguing that simplicity is king and that the thresholds should be the same, I urge them to ask their MPs to support the Conservative private member's bill that is currently going through the House of Commons, which would raise the threshold to £20,000. I noticed that the minister did not respond to my question about whether he would support a £20,000 threshold for student loan repayments. He will no doubt have to give that proposal deeper consideration.

In response to Mr Macintosh, I say that the purpose of debating on thresholds yet again was not so much to go over old ground to see whether any new arguments could be found that might say that £20,000 to £25,000 was an incorrect threshold, but to express opposition to section 1, in the knowledge that we cannot vote against it. If we were to lodge an amendment, it would be deemed to be a wrecking amendment and if there is one thing that the Conservatives in the Scottish Parliament are not, they are not wreckers.

In conclusion, I thank the convener for giving me time to speak to amendment 2 and give notice that I do not wish to press amendment 2 to a vote.

Amendment 2, by agreement, withdrawn.

The question is, that section 1 be agreed to. Are we agreed?

No.

As there is no amendment to delete section 1 of the bill, it is not possible for members to vote against the section.

It seems that members do not have much choice on the matter, as section 1 must be agreed to.

Section 1 agreed to.

Section 2 agreed to.

Section 5—Short title and commencement

We have previously approved sections 3 and 4, so we move to section 5. I call Kenny MacAskill to speak to and move amendment 3, which is grouped with amendment 4, also in his name.

I will speak to amendments 3 and 4, as they are interlinked. To some extent, what I have to say repeats what was said earlier.

The SNP's position is that we stand for Cubie plus. However, as that is not possible at the moment, we believe that the principles of the Cubie report should be implemented. Amendment 3 seeks to take us back to the first principles of Cubie. The report made it clear that the impediment and disincentive to those studying was not simply the imposition of a graduate tax, paid before, during or after graduation, but the other factors that are involved. Members of the Executive parties spoke about those matters at length and they were referred to by almost everybody who gave evidence to the Cubie committee. Indeed, it was pointed out that the concept of poverty was a significant disincentive to study. Evidence showed that it was not only the debt that a student accumulates—as a result of a graduate endowment or tuition fees—that acted as a disincentive, but the continuing, grinding poverty that may occur because students do not have enough money to put themselves through their courses and because they also have body and soul to look after.

The SNP is aware that members of the Executive parties criticised the Conservative Government with great fervour when it took away students' ability to claim benefits. We heartily endorse the sentiments expressed by numerous people in the Labour and Liberal Democrat parties when they criticised that action many years ago. We are aware that, because of the reserved powers, we cannot seek to ensure that benefits are made available. However, we can at least strive to ensure that the Executive—of whatever political hue—at least attempts to ensure that benefits are restored to students. The low grant levels being made available will not necessarily cover students' expenditure outwith term time.

It is clear from the evidence given by the National Union of Students and others that one of the major problems for students is that—if they are unable to obtain employment during Christmas, Easter or summer vacations—they are unable to keep body and soul together. That results in people not entering higher education and in a significant number of people falling out of higher education. We believe not only that those people lose as individuals, but that we collectively, as a nation, lose.

Amendments 3 and 4 seek to stick to the principles of Cubie by trying to ensure that the Executive—whatever its political hue—makes representations to the British Government and that we see the Government's logic. It would be ironic, for example, if a Labour Government were in power and argued that student benefits should not be reintroduced, given the arguments that Labour used in respect of student benefits when in opposition. The Government's responses should be laid before the Scottish Parliament to give it an opportunity to consider them.

I move amendment 3.

Like Annabel Goldie, I support everything that Mr MacAskill said. However, I want to make two additional points.

I want to clarify, convener, that I did not support everything that Mr MacAskill said.

I meant that, like Annabel earlier, I do not want to waste anybody's time.

The first part of each amendment, irrespective of the current constitutional position, tries to do what is best for students, as Mr MacAskill has outlined. There has been a temptation this morning to abdicate some of the Scottish Parliament's responsibility, whether on the issue of what we are unable to do with the Inland Revenue or on the issue of thresholds, for which we will have to wait for a lead from Westminster. Leaving that to one side, the amendments provide an opportunity to put in place social security arrangements that would be of massive benefit to students. Mr Lyon has mentioned that the committee listens to what student organisations say. Such arrangements have been suggested by those organisations.

The second part of each amendment ensures that Parliament understands its responsibility to scrutinise. Despite some of the comments that we have heard today, the committee and the Parliament have a clear role in ensuring that representations are made on behalf of Scottish students and that, when those representations are made, the response is properly scrutinised. The amendments are entirely appropriate and should be made.

The matter is reserved. The best way to proceed is to pass it to our MPs, particularly those who turn up to do their job at Westminster and put forward the case. Changes can be made at Westminster.

The amendments are misplaced. They have no bearing on the bill and they deal with reserved powers. I find it strange that the SNP is trying to make the passing of an act of the Scottish Parliament dependent on something happening at Westminster. That, however, is up to the SNP.

There are concerns about benefits. I think that all MSPs share concern about the difficulties experienced by students, particularly in relation to housing benefit.

I suggest that, as George Lyon said, the SNP and all members should make representations to their MPs so that the issue can be looked at in the proper forum at Westminster. The bill is not in any way the proper forum.

During the inquiry into lifelong learning, I hope that further work will be done on the difficulties experienced by students. Issues, such as student benefits and social security, that are reserved to Westminster should not be introduced to complicate matters in which we have a genuine concern.

I want to say roughly what Ken Macintosh said. People face barriers when they come back into higher or further education. The committee has explored those barriers, which include child care. Housing benefit is an issue, but not one for the Scottish Parliament to deal with, although we have made representations. We should make representations to MPs on housing benefit. The matter is not relevant to the bill.

It is important, as Nicol Stephen said, to remember that pilots are going on throughout the country, examining the barriers to learning, such as child care support. We await the lifelong learning review for the results of those pilots.

I would like to look at the whole package of support, not just one part of it, which is picked out in an amendment that is not relevant to the bill. We should note concerns about the barriers that people face to learning—whatever those barriers are—but we should look at those barriers in the round rather than come up with an amendment on a matter that is reserved to Westminster.

No one else has indicated that they want to speak, so I call on the minister to respond.

As all members appreciate, the payment of benefits is a reserved matter. Amendment 3 seeks to force the hand of Scottish ministers to take a policy line on a reserved matter. Frankly, I am absolutely astonished that Kenny MacAskill and Duncan Hamilton are suggesting that legislation passed by the Scottish Parliament should be dependent on the actions of UK departments. It is not appropriate that the Scottish Parliament should delay its legislation, pending action by the UK Government in a reserved area, but that is what Kenny MacAskill and Duncan Hamilton are requesting. It is tantamount to giving the UK Government a veto over legislation passed in the Parliament—in effect, passing back powers to Westminster.

If SNP members want to raise the matter, as Mr Lyon so delicately put it, they should do it through the appropriate channels, by lobbying Westminster directly on reserved issues and not by using consideration of the bill as a vehicle for political point scoring. I invite committee members to reject amendments 3 and 4.

I am surprised at the minister's statement, given that it was the Executive of which he is a member that asked Andrew Cubie to carry out his inquiry. The Cubie report crossed the divide between reserved and devolved matters and made reference to dealing with both. Cubie did not say that he would address only those matters that are within the domain of the Scottish Parliament, which is why he addressed the problem caused by poverty. Indeed, Ken Macintosh made a related point about housing benefit, which is tied in with social security.

With regard to George Lyon's point, all that I can say is that I have no doubt that, as we approach the election, candidates for the Scottish National Party will look back with interest at what the Liberal Democrats have done at Westminster on this matter. I doubt very much that they will come across a great deal that they have done.

Marilyn Livingstone talked about there being a whole package. That is the fundamental point; it is a whole package. That is why Andrew Cubie said that we could not consider matters in isolation. He said that we could not simply consider tuition fees or the graduate endowment—call it what you will. The reason why students—particularly those from disadvantaged backgrounds—are leaving college or are not going into higher education is not a simple matter of graduate tuition fees. It is a broader matter. The logic is therefore that it is incumbent on us, when dealing with such a matter, to address all avenues, even though they may not be specifically within our domain.

I thought that the whole purpose of establishing a Scottish Parliament was not to have a cap-in-hand, begging-bowl mentality to going down to Westminster, asking UK ministers to deal with matters. We are trying to lay down parameters for what we want and what we think is necessary for higher education in Scotland, and we seek to deliver that. If and when tuition fees are introduced, we should be able to say at least that endeavours were made to address the problems in higher education, especially for people from disadvantaged backgrounds.

The question is, that amendment 3 be agreed to. Are we agreed?

No.

There will be a division.

For

Hamilton, Mr Duncan (Highlands and Islands) (SNP)
MacAskill, Mr Kenny (Lothians) (SNP)
Neil, Alex (Central Scotland) (SNP)

Against

Butler, Bill (Glasgow Anniesland) (Lab)
Goldie, Miss Annabel (West of Scotland) (Con)
Livingstone, Marilyn (Kirkcaldy) (Lab)
Lyon, George (Argyll and Bute) (LD)
Macintosh, Mr Kenneth (Eastwood) (Lab)
McNulty, Des (Clydebank and Milngavie) (Lab)
Thomson, Elaine (Aberdeen North) (Lab)

The result of the division is: For 3, Against 7, Abstentions 0.

Amendment 3 disagreed to.

Amendment 4 moved—[Mr Kenny MacAskill].

The question is, that amendment 4 be agreed to. Are we agreed?

No.

There will be a division.

For

Hamilton, Mr Duncan (Highlands and Islands) (SNP)
MacAskill, Mr Kenny (Lothians) (SNP)
Neil, Alex (Central Scotland) (SNP)

Against

Butler, Bill (Glasgow Anniesland) (Lab)
Goldie, Miss Annabel (West of Scotland) (Con)
Livingstone, Marilyn (Kirkcaldy) (Lab)
Lyon, George (Argyll and Bute) (LD)
Macintosh, Mr Kenneth (Eastwood) (Lab)
McNulty, Des (Clydebank and Milngavie) (Lab)
Thomson, Elaine (Aberdeen North) (Lab)

The result of the division is: For 3, Against 7, Abstentions 0.

Amendment 4 disagreed to.

Section 5 agreed to.

Long title agreed to.

That completes consideration of the Education (Graduate Endowment and Student Support) (Scotland) (No 2) Bill at stage 2. I thank the minister and his officials. I am sure that he enjoyed the session enormously.

Enormously.

Meeting adjourned until 11:37 and continued in private thereafter until 12:26.