Student and Graduate Debt
Good morning. The first item of business is consideration of business motion S2M-2875, in the name of Margaret Curran, on behalf of the Parliamentary Bureau, setting out a timetable for stage 3 consideration of the Prohibition of Female Genital Mutilation (Scotland) Bill. However, as no one is available to move the motion, we will have to move on. I will take that motion later.
The next item of business is a debate on motion S2M-2866, in the name of Fiona Hyslop, on student and graduate debt.
We are approaching graduation season, so it is fitting that we should begin the debate by acknowledging the academic talent and hard work exhibited by this year's graduands in earning their degrees. We congratulate them and wish them well for the future. They leave university determined to be all they can be and to achieve. They are Scotland's indigenous fresh talent and the people who epitomise a smart, successful Scotland. They are also the people most likely to leave Scotland, according to the registrar general for Scotland—Scotland's fresh talent off to make another country smart and successful. I am glad that they have the opportunity to spread their wings and travel the world. I only hope that they are not being forced out in an attempt to pay off mounting debt more quickly.
The Scottish National Party has brought the motion to the chamber today in the hope that, cross party, we can examine the very real problems facing students, graduates and Scotland in general. We want the Executive to acknowledge a problem and be prepared to examine all the options—even the Conservative one, but also the SNP proposal to replace loans with grants. At the very least, we must agree to have research on the table and some options to examine. The Executive amendment mentions research into student poverty and graduate debt. That research was expected in January this year. I understand that it has been delayed at the request of the researchers, but we desperately need it. We should note that the National Assembly for Wales, where the Opposition defeated the Labour Executive only this week on top-up fees for Wales, is ahead of us in having a standing committee and research provided on student and graduate debt. I wonder whether the minister will be kind enough to give us a date for the publication of the research and to confirm that it will contain graduate debt information.
We need some common determination from the Scottish Parliament that the issues need to be addressed, and I hope that we can secure that in the debate. I look forward to hearing contributions from other members. We need to examine the public purse bill of more than £100 million annually for the Scottish Executive simply to service the debt on the loan. The prospects for the sustainability of that burden, should interest rates rise, are grim. Replacing loans with grants of the same value would save the public purse money, because of the perverse but extensive debt servicing and loan subsidy legacy. The Executive has the chance to step off the conveyor belt of debt before it becomes completely unmanageable. The damage to the Scottish economy that is caused by that massive aggregate personal debt needs to be acknowledged and tackled.
This year, around 48,000 Scots will graduate from Scotland's universities. After four years of study, they will be making their way in the world. They may be looking to buy a house and get on the property ladder, they may want to start a family, or they may want to borrow to start up a new business, although such borrowing is becoming increasingly prohibitive. They will do all that with a millstone of debt hanging round their necks from the student loans that they took out when they were studying.
Does Fiona Hyslop acknowledge that the problem of student debt is primarily not one of students borrowing from the Student Loans Company but one of students borrowing from other providers, on credit cards and on overdrafts from banks? Does she accept that extending the student loans system would remove some of the problems that she is concerned about?
This is where I disagree with the Conservatives. I acknowledge that credit card debt is highly significant, but if there is state-sponsored debt to start with, that makes the credit card debt worse. The Conservatives' idea of commercialising all debt would compound the debt problem and make it worse, rather than resolving the situation.
Eighty per cent of students take out the full loan. That means that, this year, if we add in the £2,000 graduate endowment bill, their total debt will be £19,000. Students would have to graduate and earn almost £22,000 in their first year just to pay off the annual interest on that debt. Below that amount, they will just be whistling against the wind of interest on the debt and will not even begin to pay off the debt itself. There are two thresholds in the system: one at which students earn enough to service the debt and one at which the payments that they make will have an impact on their indebtedness. The average salary for a graduate who is recruited by a member of the Association of Graduate Recruiters does not reach either of those thresholds. The Executive's own graduate recruitment programme does not pay enough—not even for fast-stream graduates, who also come in below both thresholds.
Graduates will start having to pay 9 per cent extra tax on all earnings over £15,000. That tax is regressive, not progressive, because the less one earns the longer one has to pay it and the more one will pay in the long run. Some graduates will never clear that debt, which will continue to grow in spite of the payments that they are making. One graduate put it to me rather well. She said, "This is just like the private finance initiative. When I retire, I'll still be paying for the lunch that I had in first year." She was not laughing. There is a growing consensus that the student loans system has failed and cannot be rescued and that it is, in essence, a flawed system.
I note the United Kingdom Conservative position, which admits that the system is costing the UK £1 billion each year in loan subsidy alone. I disagree with the replacement that the Conservatives intend, as it would compound debt on commercial rates, but I believe that we should debate the issue. On selling off the debt, I say to the Conservatives that the Scottish Executive has already shelled out £77.5 million in interest subsidy for the £200 million tranches of debt that Gordon Brown sold off in 1998 and 1999, and we are still paying. Selling off the debt still costs, but I believe that we should debate the matter nevertheless. It is interesting to note that the Conservatives would use the savings from scrapping the current loans system in England to abolish top-up fees. With no top-up fees in Scotland—as yet, although they have been legislated for—the SNP argues that the savings should be used to reintroduce grants.
Just as interesting was the Liberal Democrat commitment in the recent Westminster election to return to student grants, in England only. I am glad to hear both contenders for the Liberal Democrat leadership talking about ending the graduate endowment bill, and I think that there is scope for debate in that area. The current Labour Executive pledge is to keep the system, but I urge ministers to reconsider that pledge in the light of the research that is due and to appraise with an open mind all constructive suggestions—from the SNP, from the Conservatives and even from Mike Rumbles.
This year's Scottish graduates alone will be carrying on their backs a debt bill of £731 million. The current graduate debt for all of Scotland's students is £2 billion. The debt, the interest on it and the repayments are damaging us all. Deferrals are huge and repayment periods are hitting 14 years. It is unsustainable. Loan money goes out faster than payments come in, and the taxpayer picks up the tab. The removal of so much disposable income is a massive drag on the economy. Whether members supported the student loans system or not—and the SNP was agin it—I urge the Parliament to acknowledge the potential problems of that scheme for the economic prospects of the country. For the sake of our students, present and future, for the sake of our graduates and for the sake of our economy, we have to end the debt. Let us unshackle the debt and liberate the future wealth creators of Scotland.
I move,
That the Parliament notes with concern growing student and graduate debt in Scotland, which not only hinders opportunities for the individuals concerned, but also damages society and the wider economy generally; further notes the spiralling cost to the taxpayer of the expensive and bureaucratic student loan system and the growing consensus that it is unsustainable, and calls on the Scottish Executive to come forward with a constructive review, incorporating a number of proposals to address this growing problem and encompassing an assessment of replacing student loans, including the graduate endowment repayment, with a universal system of grants.
I agree with Fiona Hyslop in that I am glad that we are having the debate, as I welcome every opportunity to debate Executive policy in the chamber. I would argue that we have a record on student support and funding for higher education that is beyond comparison with other parts of the world. The debate gives me an opportunity to remind members of the significant steps that the Executive has taken to establish student support arrangements here in Scotland that are both fair and affordable.
The Executive is doing a great deal to tackle student debt. We want to ensure that young people have equal access to higher education, regardless of their background. We are acutely aware that debt or, perhaps more accurately, the fear of debt, can be an inhibiting factor when prospective students are deciding whether to undertake higher education study. Of course, before devolution we were faced with a system that included the payment of annual fees. It was argued that that was a major barrier to access for many potential students from underrepresented backgrounds—even with concessions to those from lower-earning families. It was by agreement between the Labour and Liberal parties—the first and second parties in Scotland—that we undertook to abolish the contributions to fees for Scots studying in Scotland.
I listened with great interest to what the minister said about the removal of fees. Was it not the Labour Party that brought in fees in the first place?
It was indeed the Labour Government. I seem to recall that I stood on precisely that platform in 1999 and was elected to the Parliament. We established the Cubie committee as part of the partnership agreement between the Labour and Liberal Democrat parties, which are, I repeat, the first and second parties in Scotland. We then abolished the contribution to fees for Scots who study here in Scotland. We recognised what I think everybody—perhaps even Murdo Fraser—would agree is the powerful principle of free tuition. As a result of that, our higher education system now has open access for students from all backgrounds and is the envy of many countries. Last week I spoke to Jane Davidson, the Welsh Minister for Education and Lifelong Learning, on this subject. She was very complimentary about the system of student support and higher education funding that we enjoy here in Scotland.
Devolution has given us the opportunity to introduce changes to the student support system for Scotland. It allows us to remove barriers to higher education by targeting resources where they are needed most. I will remind members how we do that. We introduced the young students bursary to encourage young students from less well-off backgrounds into higher education. The bursary is non-repayable. It replaces part of the student loan and therefore reduces the amount of debt that graduates will have.
The Deputy First Minister announced that from 2005-06 we will increase the maximum bursary that is available to these students to £2,395. That means that the overall number of students who are eligible to receive the maximum bursary will increase by no less than 63 per cent. We also increased the family income ceiling, which allowed the number of students who are eligible for some sort of bursary to increase by more than 10 per cent.
According to the latest statistics, the number of students from working-class backgrounds throughout Scotland is now 17 per cent. That is a 3 per cent drop in the past two years. Does the minister accept that the Executive is failing to encourage youngsters from working-class backgrounds into higher education?
I do not accept the basic charge that Mr Sheridan makes. As I said, we have introduced a number of important initiatives to broaden access for people from underrepresented groups. We have a good record in broadening access more generally and are increasing the total number of students who study in Scottish higher education institutions to record levels. Although much has been done, I accept that there is more to do.
One of our priorities is to take steps to broaden access to higher education for students from underrepresented backgrounds. Part of the process of policy development, to which I will refer again in the wake of the publication of the information on student income and expenditure, will be designed to do precisely that.
Will the minister give way?
I would like to make progress.
We provide hardship funds to every publicly funded institution to help students who, as a result of undertaking a course, face particular financial difficulties that may prevent them from starting or continuing their studies. As I said in response to Mr Sheridan, we are continually looking at ways to improve the system to ensure, given that there are limits on the amount of money that is available, that we target financial support where it is needed most.
We have not stopped there. Since we first started paying loans, many colleges and universities have changed the lengths of their terms or moved to semesters. Most students now appear to need to have more of their money available to them in their first term or semester. We have just finished an extensive consultation process to consider changing the payment pattern of living-cost student support. We recognise that the current system of paying three equal instalments may not be appropriate. We will make it easier for students to budget by changing the payment pattern of the student loan and bursary. We will make a further announcement on that later in the summer.
We will establish, from 2005-06, the higher education child care fund. In doing that, we will simplify the package of support that is available to higher education students who have child care needs.
Fairness and affordability are the key criteria for any system of student support. I argue that the Executive is delivering on both counts.
I move amendment S2M-2866.2, to leave out from "notes with concern" to end and insert:
"agrees that the support arrangements for students ordinarily resident in Scotland should continue to be based on fairness and affordability; agrees that such a system should include free tuition, regardless of family income, and bursary support for those from less well-off backgrounds; welcomes the increased level of the Young Students' Bursary and its extended eligibility; notes that liable graduates pay the graduate endowment in respect of the higher education benefits that they have received with the payments adding to the fund to pay support bursaries for students from poorer backgrounds, and recognises that the publication of the survey of Scottish students' income and expenditure, later this year, will allow for a better understanding of the situation facing students and the continued development of policy to meet their needs."
I welcome the opportunity to debate the important issue of student debt. At the outset I commend Fiona Hyslop for the constructive and consensual way in which she moved the motion. I am sure that in these exciting post-election times we are all interested in new ideas and we should encourage debates on such subjects.
Fiona Hyslop is entirely right to raise the issue and point out the concern about the growing levels of debt among graduates. The figures show that there is a serious concern. In 2004, 1,541 graduates declared themselves bankrupt—that is almost 50 times as many as did so in 1997. Sadly, some students see bankruptcy as a way of getting out of the high levels of debt that they have accumulated. Those stark figures do not necessarily reflect the difficulty that many other students have in repaying the loans that they have accumulated.
The British Medical Association's briefing for the debate points out some facts about debt for medical students. The average debt for medical students in Scotland is more than £11,000. One in five Scottish medical students has more than £20,000-worth of debt. It is not surprising that the BMA is concerned about the impact that those figures have on recruitment to medicine as a profession, particularly given that students of medicine study for longer than students do for the average profession.
We must recognise that there is a difference between borrowing via student loans and borrowing via other means. When I went to university in the 1980s, I was fortunate enough to receive a full grant due to my parental circumstances. Of course, that was under a Conservative Government.
The Conservative Government of the day massively increased the number of university places and, in order to fund that increase, it introduced the student loans scheme. I have no difficulty with that concept. I supported it at the time and I support it today, because I believe that students should be prepared to make a contribution towards their own upkeep during their education. I do not support the idea of students paying towards the provision of that education, but I support the idea that they should contribute towards their upkeep. The student loans scheme allowed a whole new generation of youngsters, whose parents would never have had such an opportunity, to access higher education.
I listened with interest to what the minister said on fees and specifically about fees deterring those from underrepresented groups accessing higher education. Of course, it was the Labour Government—to be fair to him, he was gracious enough to acknowledge this—that introduced those fees in 1997. I accept that they have now been removed and replaced with a graduate endowment, but I will not take any lessons from the Labour Party on the cost of higher education.
I will return to the SNP motion. The problem with student debt is not primarily to do with the debt of student loans. Contrary to the assertions that Fiona Hyslop made in her saltire paper on student finance, the percentage of those who defer student loan repayments has fallen from more than 24 per cent in 1997 to 13 per cent in 2004. The figures do not indicate that students are struggling to repay their student loans. As we know, students start to repay their loans when their salaries reach the threshold of £15,000, so there is no evidence that student loan repayments represent a huge burden on most graduates.
Is the member aware that of the people who graduated in 1997, the year that Labour came to power, 34 per cent have yet to start repaying their loans? Some 34 per cent of graduates are deferring payment, which is a significant number.
I accept that there are graduates in that position. There are problems in the economy. Many graduates have not been able to find jobs that pay the salaries that they expected to earn, and their salaries have not reached the threshold for repayment. That is a difficulty.
The borrowing that students take on above and beyond their student loans, through bank overdrafts or even credit cards, is of far greater concern than is borrowing through student loans, because it incurs higher interest rates. We must consider ways of expanding the student loans scheme, to allow more students to access student loans rather than borrow at more expensive rates. I disagree with Fiona Hyslop on the matter; the expansion rather than the replacement of the student loans scheme offers the way out of the problem.
The Conservative amendment calls for a change in the student loans system and proposes that loans would be repaid at a
"low, but commercial, rate of interest".
Will the member be more specific about what is meant by "commercial"?
We envisage a system in which a market rate of interest, instead of a subsidised rate, would be paid. We accept that the market rate would be higher than the rate that is currently paid by students and I will expand on that.
Because the Student Loans Company is an efficient provider of loans, the cost of administering student loans as a percentage of the total loans bill of £15 billion is negligible. Given the low running costs of the company, the SNP's claim that it would be cheaper to remove loans entirely and replace them with grants is dubious. I would be interested in seeing the SNP's figures in detail.
The Conservatives would, first, scrap the graduate endowment, which is no more than a tuition fee by the back door. Despite the trumpeting of the Liberal Democrats, tuition fees have not been abolished but exist by another name. We should remove that burden from students. Secondly, we should increase the repayment threshold for student loans to £20,000 and we should make available greater sums in loans by increasing the amount that can be borrowed to £5,000 or more per annum. Eligibility for a loan should not be subject to a means test. To pay for that approach, student loans could be transferred to independent providers and, instead of paying a discounted rate of interest, students would pay a commercial rate. However, in a scheme that was backed by a Government guarantee there would be no need for excessive rates of interest.
As a result of those measures, the average student would be better off, because they would receive money from student loans schemes and no longer have to build up bank overdrafts or credit card debts. Extra sums would be available to fund higher education, but there would be no additional burdens on the taxpayer. Our proposals are mature and sensible and would go a long way towards addressing the problem of student debt. Our plans are costed and can be afforded.
I welcome the debate and take pleasure in moving amendment S2M-2866.1, to leave out from "further" to end and insert:
"calls on the Scottish Executive to end the graduate endowment which places an increased debt burden on students; recommends that the student loan repayment threshold be raised to £20,000 and that the loan value be increased to £5,000 per annum at a low, but commercial, rate of interest, which will remove the necessity for students to resort to expensive overdraft and credit card borrowing, and calls on the Executive to transfer all or part of the loan book to independent providers so that higher education can expand without extra and undue burden being placed on the taxpayer."
I start by formally apologising to members for being late. That was unlike me and I am sorry to have missed Fiona Hyslop's speech. However, I read her saltire paper with great interest.
I am delighted to have rejoined the Enterprise and Culture Committee, as my colleagues on the committee know—it is a joy to be back.
Hear, hear.
Despite Murdo Fraser's comments about the Liberal Democrats, it is a pleasure to join him on the committee.
As a result of the Labour-Liberal Democrat coalition, we have made strides in supporting Scottish students. Scottish students do not pay fees or top-up fees; they can access grants if they need them; they can receive extra help with child care; and they can get additional support if they are disabled or in extreme hardship. The fact is that students who are domiciled in Scotland save around £5,000 by not paying fees and £9,000 by not paying top-up fees and they can receive up to almost £10,000 in grants. They also benefit from the guarantee that in real terms the amount that they repay on their student loans will not be more than the amount that they borrowed. I ask my friends and colleagues in the SNP to reflect on those figures, because facts are chiels that winna ding.
Will the member give way?
I will give way in a minute or two.
It is a mistake to talk down those achievements and members should beware of doing so. That seems to have been accepted in the consensual spirit of the debate so far. The Scottish Executive's policies have brought more people into higher education. Our participation rate is better than that of the rest of the UK and it is better than the average rates in the European Union and the Organisation for Economic Co-operation and Development countries. There is record funding for Scottish universities, to ensure that they can compete effectively in the UK following the introduction of top-up fees—Fiona Hyslop assured us that that would not happen.
Entry to higher education from state schools has increased at a faster rate in Scotland than it has elsewhere in the UK. Our intake of people from the most disadvantaged backgrounds far outstrips that of England and Wales. We cannot deny that our higher education system brings huge benefits to the Scottish economy, by creating a highly skilled population and attracting high-skill employment.
The member said that individual students should never have to pay back more than they borrow in student loans, but is he aware that graduates who earn less than £22,000 are paying more in interest than they are in debt repayment? Many such graduates are paying nothing towards the repayment of their debt and unless their earnings increase significantly over the piece they will end up paying more in interest than on debt repayment.
There is some validity in Fiona Hyslop's comment and the matter will probably be considered by the Enterprise and Culture Committee in due course. I have done the sums for my three children, two of whom are at university—one will graduate in a few days' time. The situation can be considered from a different perspective and it is not as clear as it might be, but I suggest to Alex Neil that the Enterprise and Culture Committee might consider the matter. It might be worth approaching the Executive in a constructive and consensual way, with a view to tweaking the arrangements—we will find out in due course.
About half of all adults but only a third of young people are financially literate, which is a worrying statistic that we should remember—I engage with my children on that front. Student accounts offer competitive incentives such as music vouchers, mobile phones and train tickets. More often than not, the banks also offer automatic overdraft facilities and credit cards, which encourage students to get into debt. Murdo Fraser correctly highlighted that point—I have witnessed the dreaded mobile phone bills at first hand.
A quarter of young clients of citizens advice bureaux cite easy access to credit and the high interest rates and charges attached to such credit as significant factors in their debt problems. Student debt must be considered and work must be undertaken on money advice for students—that recalls my previous work on the Enterprise and Culture Committee. I have met advice officers from a selection of universities, but there are not enough such officers and they are overstretched. Perhaps the Enterprise and Culture Committee should consider the possibility of establishing a Scotland-wide student money advice service, in a co-ordinated approach across all universities. I accept that that might be difficult to agree with vice-chancellors and principals.
I am running out of time. I welcome the minister's commitment to consider alternatives to the three-instalment pattern of student payments, to help students to budget. That is vital if students are to avoid debt.
Around 40 per cent of Scottish students work while they study, but over the border in England the figure is 58 per cent. Again, facts are chiels that winna ding. The figures are surely indicative of what is happening on our side of the border; they demonstrate that our system is better. Those of us who have children at university, or who have friends and neighbours with children at university, know that students are voting with their feet. The enthusiasm for our approach in Scotland is manifest in the student population.
This is a short debate, so we will have four-minute speeches.
I will widen the context of the debate by considering not just the narrow issue of student debt but the broader policy objectives that we are trying to set. A major objective of the Executive's lifelong learning and education policy is, quite rightly, to increase the proportion of people from working-class backgrounds who go to university. Despite the fact that the percentage of 16 to 19-year-olds who enter higher education has increased from 1 per cent in 1950 to about 50 per cent in 2005, the proportion of students who come from working-class areas has remained static, by and large. Some years it goes up a bit and other years it goes down a bit, but the 55-year graph shows that the percentage of students from manual-working family backgrounds is more or less the same as it was 55 years ago.
I am the first to admit that the problem is not just financial; there are other reasons why people from poorer backgrounds do not go to university. One of the major demotivating factors is that people know that they will not get the financial support that they require. The minister was quite right to say that fear of debt is as important as debt itself. Rightly or wrongly, the fear of debt among people from poorer backgrounds is a major contributor to why they do not go to university.
I agree that financial issues are key to participation rates. Alex Neil is quite right to point out that the participation rates from the 1950s until now are not good enough. Grants were introduced in 1962 and they seem to have been neutral in respect of participation in higher education. Do we need to consider issues other than financial support, which affect participation rates?
I have already said that I do not believe that financial support is the only factor and that there are other, more complex factors. Nevertheless, it is important.
I have two points to make on participation rates. First, there is a lot of criticism of our having such a high participation rate in Scotland. However, some countries have participation rates as high as 70 per cent and there is a clear link between the level of economic growth in a country and the percentage of its people who participate in higher education.
Secondly, this year we have seen a 3 per cent drop in the participation rate from 51 per cent to about 48 per cent. One of the reasons for that is funding, but another is job prospects for graduates. According to one survey, only 36 per cent of all graduates end up in a job that is relevant to their degree and many of them end up being paid nothing like £15,000 a year until they have been in the workforce for 10 or even 15 years, which makes a significant contribution to post-university poverty.
I say to the Executive, do not take a narrow party-political approach to our proposal, but examine carefully whether grants would be a far better investment than loans for society as a whole. Perhaps then we could achieve the other objectives of our wider education policy.
It is always a pleasure to attend Opposition debates on a Thursday morning. We rush into the chamber full of enthusiasm, listen to the opening speech and get the same old story. My God, but we have had the violins out this morning. SNP members have wailed about debts that never seem to be paid off despite generous incomes. With tears in their eyes they have pleaded for us to do more for the lucky individuals whose wallets and prospects are enhanced by their time at prestigious Scottish institutions. At one point I thought that they were talking about Scottish football, which has its own problems. However, there are enough problems with the SNP motion to be getting on with. For a start, the basis of its argument is false. The motion states that the system of student finance
"hinders opportunities for the individuals concerned".
Are they sure? More than 50 per cent of young Scots are at university—a higher proportion than anywhere else in the UK. Graduate endowments do not deter entry to university. If a person is unable to grasp the concept that going to university is good for their financial prospects, they are probably not cut out for the world of higher education.
The real problem with the motion is not that it is inaccurate—I expect nothing less from what passes for the Opposition in this place. What I find offensive is the hypocrisy and the dressing up—yet again—of self-interest as concern for the poor.
Will the member take an intervention?
No. Sorry.
Today's topic is poor students. With the heart-rending sentimentality of a television movie, SNP members tell us stories about gifted urchins starving to death as they struggle to put themselves through university. They say that we must bring back universal grants, but the reality is that the poorest students get the most state help and end up with the least to repay. Grants would not be much use to them, but would be of use to the comfortable better-off families which—by pure coincidence I am sure—are a bit like the SNP's own and already take disproportionate advantage of higher education. There is nothing new in that.
SNP members try the same con trick with pensioners. They shed crocodile tears and wail about poor pensioners being forced to sell war medals, grandchildren and kidneys to pay their bills. They say that we must let all pensioners off paying their council tax. The reality is that the poorest pensioners do not pay council tax; they receive council tax benefit, so scrapping the tax would not be much use to them. Wealthier pensioners—a bit like SNP members' relatives—would find the extra cash very handy indeed. That is not social justice; it is feathering their own nests.
Of course, there is nothing inherently wrong with acting from one's self-interest; the human race would not have evolved if we had not learned how to do that. However, it is unforgivable to dress up self-interest as concern for the poorest people in our society. Poverty is an evil to be stamped out, not an opportunity to be used for one's own ends or electoral advantage.
The right thing to do is to give the poorest students the most help; giving more disadvantaged young people the chance to go to university is the right thing to do and focusing on the poorest pensioners is the right thing to do. I accept that that will involve some redistribution of wealth from the haves to the have-nots, but anyone who calls themselves a socialist should be comfortable with that. That might not be politically expedient, but it is right and I am happy to debate the issue honestly. Sadly, the same cannot be said about the SNP and others until they stop hiding behind the poor.
On a point of order, Presiding Officer. It just occurred to me that I should have declared an interest at the start of the debate but omitted to do so, for which I apologise. I am a member of the board of management of the University of Dundee's students association.
Thank you. That is helpful.
Duncan McNeil spoke about self-interest. I sometimes wonder in debates like this whether self-delusion is a worse sin than self-interest. He also spoke about honest debate, but he should sometimes allow facts to interfere with his rhetoric: for example, the fact that poorer students—working-class students—owe 15 per cent more on graduation than do students from higher-income backgrounds; the fact that three quarters of working-class young people who decide not to pursue higher education cite lack of money and fear of debt as the main reasons for that; the fact that more than half of lower-income background students have to work an average of 15 hours a week while they are studying, which puts them at a disadvantage when it comes to essays, exams and dissertations, because they are trying to grapple with the debt that they are in; and the fact that 57 per cent of students who work do so to cover basic essentials and 11 per cent do so to cover tuition fees. Those are the facts. Debt is a barrier to education for people from working-class or lower-income backgrounds, because we do not have a generous enough student finance scheme. That is the fact. If Duncan McNeil wants to speak on behalf of the working class, I wish that he would take up that clarion call.
When I was at university, we used to boycott Barclays Bank because of its links with South Africa. Today, I have to refer to Barclays Bank's recent study, which says that average student debt, which is currently £16,000, is on track to double by 2010. In five years, the average debt for graduates will be £33,000. If a graduate starts on £20,000 and can secure a 4 per cent increase in their salary over a 20-year period, it will still take them 21 years to pay off their student debt. People who graduate at 20 or 21 will be in their early 40s before they pay off their student debts. I am in my early 40s, as are many people here. We all had an opportunity to access education without taking on the burden that we now impose on working-class kids. People who were at university at the same time as me, including Jack McConnell, Susan Deacon, Frank McAveety and others who are not in the chamber, managed to get grants, housing benefit and supplementary benefit, which we call income support today, and did not have to pay any tuition fees upon graduation.
Of course, we are told that the fact that we now have such a great number of students means that we cannot afford to give them housing benefit, social security benefits and universal grants. However, the people who make that argument are also the people who come to this chamber to tell us how wonderful and miraculous our economy is and how wonderful it is that we have low unemployment rates, interest rates and inflation. They cannot have it both ways. If what they say about the economy is true, why cannot we afford the same educational support package that we were given even by the Tories in the 1980s? We used to march against cuts in the grant, but now we have to march for grants. That is the situation that we are in under the new Labour—Tory—Administration.
Education should not be paid for by the people who specifically benefit from it because society as a whole benefits from an educated workforce and, therefore, society as a whole should pay. General taxation should be increased so that the high earners about whom Duncan McNeil was talking pay more tax in order to give us a system of universal grants and proper support for education. At the end of the day, people who think that education is expensive should try ignorance.
In law, the ending of debt results in the legal status of "satisfaction". Would that things were so simple beyond the reach of the law in real life. Debt is the most powerful of slaveries. It is little wonder that the money lenders were the first people to be thrown out of the temple.
However, without debt, the modern world would not exist. The folding green stuff in our pockets represents a debt—the nice kind, which is the kind that the bank owes us. The notes tell us that the banks
"promise to pay the bearer".
Further, does not the slang phrase, "money in the bank" bring a warm glow to the heart of the beneficiary?
This Government, however, views provision of education not as a societal duty but as a commercial transaction. Because the individual benefits from education, the Government believes that the individual should buy that benefit. That attacks the roots of our society. Implementation of the Government's policy has had what I hope are unintended consequences.
The issue that we are discussing is a women's issue. I take this opportunity to congratulate two of the members who have so far spoken in this debate on the fact that they are not wearing dark suits. Every one of us, apart from Fiona Hyslop and Tommy Sheridan, represent a small and privileged minority and, with one exception, are men. To further illustrate the ways in which this issue is a women's issue, I will give some examples. By the time she retires, the debt of a female dentist—more than half the dentists who graduate are women—who works half-time for 25 years of her working life will have risen from the £18,000 that she started with to £40,000. The interest keeps racking up and, at 9 per cent under £22,000, the debt increases rather than decreases. Similarly, the debt of a female part-time primary teacher who works for 22 hours a week for 25 years will have risen to £40,000 by the time she retires. However, a person who gets elected to the Scottish Parliament at the age of 30 after having been a political researcher will have paid off their debt by the age of 40.
I must also encourage Duncan McNeil to be more accurate. Only one third of school leavers go to university; half of school leavers go into further and higher education combined. We must use language carefully.
We like to believe that, when we pass on our knowledge and skills to the next generation, we benefit society as a whole, not just the individuals whom we have entrusted with our futures. Are we to become the only mammals on the planet who transmit our inheritance to our offspring conditionally, who refuse to equip our children with the skills that they need to forage, hunt and survive in the modern world unless they pay us, post hoc, for the privilege? I prefer morality to utility and a moral duty to educate over a commercial transaction. I choose liberation from want, freedom from ignorance and the avoidance of state debt for our next generation.
I should declare an interest as a life member of Edinburgh University Union.
I was going to start in the consensual manner in which Fiona Hyslop spoke and say that we all agree that a highly educated society is a good thing and that as many people as possible, young and old, should be encouraged to enter higher and further education. However, Duncan McNeil rather ruined that consensual spirit. In Duncan McNeil's world, education is purely about the individual maximising his or her future income. That attitude is what has led to everybody going to university to study accountancy and business studies, while nobody studies art, philosophy or social policy. However, people go to university to be educated, not simply to improve their economic status, and society benefits from the fact that universities function as places of learning rather than career enhancement.
Putting aside Duncan McNeil's comments, there are serious questions to be asked. Does the loan system work? Does it provide socially beneficial outcomes? Is it right that students end up with £33,000 of debt? What is the impact on students of the requirement to start paying back state debt as soon as they start earning £15,000? What is the impact of the further threshold of £22,000, which Fiona Hyslop talked about? What do we do about the problems of non-state debt, such as credit-card debt and overdrafts, which the Tories talked about? Is the system that we have created the right way to finance students' participation in higher and further education?
I agree with the Tories that we must reform the system to make it more like the one that Cubie proposed. We need higher levels of loans and a higher repayment level. I believe that the Cubie report suggested that that level should be £25,000. However, I cannot agree with the Tories' belief that the private sector would be better than the public sector at holding the debt.
I agree that tuition fees should be abolished, whether they are payable in advance, as is the case in England and Wales, or in retrospect, as is the case in the system that the Labour and Liberal Democrat Executive imposed on Scotland.
Ultimately, the SNP motion is correct. We need a system of universal grants to reflect the fact that further and higher education is a good thing for society.
Like Murdo Fraser, I went to university on a full grant and was part of the generation that was studying when the Tories abolished the full grant. The parents of many of my friends at school were in better circumstances than my parents and had higher incomes, but did not think that their children should go to university. Their children were denied the chance to get the university education that they wanted because they were means tested not on their income but on their parents' income. It makes no sense to have a system in which we means test people based on their parents' income.
If we believe that further and higher education are good, we should support them for everybody. We should remove the disincentives for people from working-class backgrounds and disadvantaged backgrounds, but we should do so as part of the process of removing barriers for all students. It is nonsense that we still means test adults based on their parents' income.
It is important for us to have this debate. We must take forward our vision of a Scotland that maximises its potential by relying on the creativity that tertiary education helps to foster. Parliament's responsibility is to break down the barriers in order to allow all who want to benefit from education to do so. That is why I support the SNP motion.
The Government's highest priority should be to increase participation of young Scots in further and higher education—I agree with Alex Neil about that. The Government's key priority should be to tackle the reasons why the poorest people in our communities are underrepresented. However, if members want to criticise the Government, they should do so for the right reasons. We are failing in some areas, such as medicine, law and dentistry. It is in such professions, in which graduates have the potential to earn the most, that some of our poorest communities are underrepresented. In a recent debate, we discussed some of the things that we need to do about that.
There has been Government financial support for students since the 1950s, but it seems to have been a fairly neutral factor in determining whether people from working-class backgrounds aspire to further and higher education. We need to be clear about the reasons for that; they might be financial, but they are probably about aspirations and expectations. Many working-class people do not see themselves earning at the top of the tree. They do not aspire to that and they do not have the qualifications. We must take the right approach to secondary education because a person's school qualifications are fundamental to their chances. If they do not have the qualifications and we do not have the right entry systems, working-class people will not get into further and higher education in the first place.
The member stresses the importance of secondary education, but all the research shows that the vital element is early-years education in primary schools. The fact that we spend only about 80 per cent of the OECD average in the early years is one of the reasons why we are failing.
I cannot deny that early-years education, particularly from the ages of three to five, is crucial. We know that, and I am not trying to detract from it. However, I point out another key factor. A person who does not have the appropriate qualifications will not get to university in the first place, which explains some of the figures that we are talking about today. There are children whose parents do nothing to encourage them. We must address parenting, which is fundamental to a child's life. My point is that there are so many factors that we have to get our heads around.
I do not accept the idea that the smart, successful Scotland policy is all about graduates. If I thought that that was the case, I would not support it. A smart, successful Scotland is also about people who are not graduates. The entrepreneurial spirit in our society has never been greater, but we need to do more for children who see themselves as having great earning potential but not necessarily through higher education.
One minute.
Goodness me. I wanted to talk about student debt and student hardship, but I will try to summarise what I wanted to say.
Student debt is a serious issue that should not be ignored by any member of Parliament. To that extent, I am happy to step into a cross-party consensus. I ask the Government for some scientific research and analysis on the effect of student debt on life chances. Perhaps Allan Wilson could comment on that when he sums up. I want to know the answers; I do not want to be held to ransom with sporadic figures. I want the Government to take the matter seriously. If student debt is causing student hardship, the Government must address that and reform the system.
I support the young students bursary scheme, although its value is not high enough and I would like it to be increased. I seek reform for mature students and people who have child-care needs. The problem with the SNP's position is that the system that it proposes would be costly, so something in the Scottish system would have to give. I want the SNP to say where the money would come from.
This has been a good debate. It started off constructively, although there have been one or two blips on the way. There is general consensus that it is worth our while to debate student and graduate debt and to feed in some constructive views on how we can build on the student support system in Scotland.
The production of more graduates and upskilling of our workforce lie at the heart of the Executive's policy of building a smart, successful Scotland. The abolishment of tuition fees and reintroduction of grants was one of the first actions of the Liberal and Labour coalition Government in the first year of devolution and I argue that the policy has been a success. Scottish participation rates have doubled in the past 10 years; some 52 per cent of Scots between 18 and 30 have obtained a higher education qualification or are studying for one, a figure that is 7 per cent higher than the OECD average and 5 per cent higher than the figure for the rest of the UK.
George Lyon says that the smart, successful Scotland policy is a success, but can he tell me what percentage of Scottish students we have retained in Scotland since the policy's inception? How is that monitored?
I disagree with the policy that Mr Mather supports. He would handcuff students in Scotland and prevent them from leaving.
Scotland now has one of the most skilled working populations, with more people in graduate-level jobs than in the rest of the UK. We are widening access faster than the rest of the UK although, as many members have pointed out, we need to make quicker progress on that.
We have built on our successful policies. This year, the young students bursary has been increased by 11 per cent to £2,395 and the student loan repayment threshold has been increased from £10,000 to £15,000. As a result of the spending review, funding for our universities and colleges has increased by 30 per cent. Of course, student debt is important, which is why the Executive is surveying student debt so that it can feed into the spending review in 2006. We will make decisions in the light of the information that is generated by that review.
The important point that I am trying to make is that the coalition Government's track record is one of record investment in our students, our universities and our colleges. I believe that our track record is second to none and that the coalition should be proud of it. However, that is not to say that more cannot be done; the survey of student debt will facilitate a debate on what needs to be done.
I compare the coalition's track record with that of the SNP—the recently relegated Opposition party. The SNP has had seven different policies in the past seven years. It has flip-flopped around from one policy to another, but its latest position, which we heard this morning from Fiona Hyslop, is that grants would replace loans. It claims, rather bizarrely, that that would have no financial implications for the Executive. The reality is that every £1 of student loan costs the Executive 31p, but every £1 of student grant would cost the Executive £1. If Fiona Hyslop wanted a constructive debate, she should have had the good grace to admit that significant costs would be associated with the SNP's plans.
In conclusion, the subject on which the SNP has secured a debate is important, but the debate is premature. If we had the Scottish student income and expenditure survey before us, we could have debated the information that it revealed to us. I look forward to a future debate when that information is available to us. And when we can properly discuss the actions that the Executive might need to take to build on the successful policies that have been pursued in the past six years.
I am glad to have the opportunity to close on behalf of the Conservative group. The debate has been vigorous and has encompassed a large number of views on issues relating to student and graduate debt. I attended two universities and have four sons who attended university, so the subject is of more than mere academic interest to me, as it no doubt is to many members—I accept what Duncan McNeil said about that.
My colleague Murdo Fraser set out our proposals for addressing the challenge of funding the welcome increase in the uptake of further and higher education. The Conservatives and the SNP would abolish the graduate endowment tax, but we would replace it with saltire scholarships, which would not be means tested and would be available to all students who met their chosen course's entrance requirements. We would ensure that the scholarship was valid for Scotland-domiciled students at any British university and that it would cover the full cost of tuition. As funds would follow the student, the choices exercised by students would shape the provision of higher education.
On student loans, the Conservatives would allow students to borrow a higher amount—up to £5,000 a year—on a low but commercial rate of interest and we would raise the repayment threshold to £20,000. Such a package would be more attractive than the current package and would relieve students of having to resort to expensive credit card and overdraft borrowing. We encourage the Executive to transfer all or part of the loan book to independent providers so that higher education can expand without extra or undue burdens on the taxpayer. We have held discussions with the Student Loans Company, which has assured us of the feasibility of our proposals.
The fact that the member is calling for an expansion of higher education is interesting. Previously, the Conservative spokesman, Murdo Fraser, said that the Conservatives would abolish tuition fees and save money by aiming to have fewer university students. Lord James Douglas-Hamilton and Murdo Fraser seem to contradict each other.
No. We must be realistic. The enormous expansion of higher and further education must be paid for, but an expensive grants system might reduce access. We believe that the overall package that we offer is a great deal more generous than the package offered by the Executive, which is still standing by the graduate endowment tax. We are whole-heartedly opposed to that tax.
There is no doubt that our policy would be far more attractive to students. I accept the point that Duncan McNeil made—if a student can stick things out at university and gain qualifications, they will be in a stronger position to earn a higher salary. However, we propose a more attractive loans system and the abolition of the graduate endowment tax.
There have been undertones to the debate suggesting that students are either enormously privileged or have an extremely harsh, difficult and troublesome life. However, circumstances vary from case to case. We must provide the most attractive overall package that is possible in the circumstances and we believe that the abolition of the graduate endowment tax would be a major step in the right direction.
This has been a good debate. I value the constructive contributions that my colleagues Duncan McNeil and Pauline McNeill made. They put the issue in perspective, as James Douglas-Hamilton also attempted to do. I agree with what my colleague George Lyon said about our joint approach. In the partnership agreement, we made it clear that we would review bursaries, which we have done, and that we would increase the student loan repayment threshold, which we have also done. We will continue to deliver.
Pauline McNeill made an important point, which I would like to address. The Scottish student income and expenditure survey, which will be published shortly, will give us an accurate picture of students' financial position and will allow us to gain a better understanding of the difficulties, which members have mentioned, that students in Scottish institutions face. We will use that information in continuing to develop policy in the area.
Will the minister confirm that graduate debt and its impact on the wider economy will also be considered, as Jim Wallace promised?
I will deal with the point that the member's colleague made about the wider economy, as I was interested in what he said, unclear as it was.
The point of the survey is to develop a more coherent and structured system that tailors help towards those who need it most.
Two principles underpin our approach: fairness and affordability. I repeat that those principles are key criteria for any student support system. Duncan McNeil was right to shoot a number of foxes that were running around the chamber—I refer in particular to what Tommy Sheridan said about halcyon days of student support in the 1960s and 1970s, when working-class kids flocked through university portals and their education was paid for through taxation. Those days did not exist. The proportion of young people, especially working-class kids, who entered higher education institutions in that era was much lower than it currently is. The working class paid for the higher education of people from the middle classes and the upper classes, many of whom came from the private education system. The facts should be repeated.
As I said, through the introduction of the young students bursary in 2001-02, we have taken substantial steps to help to ensure that young students from low-income backgrounds—who are more likely to be discouraged from applying to university because of the fear of debt—will have less debt than they would have had under the previous support arrangements. In January 2005, we announced that, from 2005-06, the young students bursary will increase by 11 per cent to a maximum of £2,395. The parental income threshold has also been increased, with the maximum bursary being available at £17,500 and the minimum being available at £31,000. That means that approximately 3,000 additional students will be able to receive the bursary and approximately 20,000 students will receive the maximum bursary. Those are significant statistics and bear out our overall approach, which is based on fairness, affordability, expanding access to higher education and ensuring that higher education is more available to students from disadvantaged backgrounds.
Under the student loans income-contingent repayment scheme, which Fiona Hyslop mentioned, borrowers repay at an affordable rate only after their earnings have reached £15,000. That, too, is an improvement on previous arrangements, under which borrowers repaid over a fixed period. The period over which a loan is repaid and the amount of the monthly payment will be longer or shorter depending on the borrower's earnings, but the amount that is repaid will be no more in real terms than the amount that is borrowed.
Alex Neil talked about the economy. The fact is that cost sharing is becoming the rule rather than the exception and students' overall contributions towards tuition fees and maintenance are comparatively less in the UK than they are in other countries. Total spending on tertiary education tends to be higher in countries that do not rely solely on taxes and that pull in additional resources from other sources—I refer to countries such as New Zealand, Australia, Canada and the Netherlands.
It is entirely legitimate to argue, as the SNP has, for grants and not loans, but we must be honest. The SNP's saltire paper is not honest because, as George Lyon said, the policy that it proposes would cost money—£231 million, which includes a £70 million subsidy. It would therefore cost the Executive approximately £180 million to provide grants for living costs support, if we assume that loans would be repaid at the same rate as they currently are. Unless taxes were increased in order to raise that £180 million, there would have to be cuts in health services or in other parts of the education budget. We must be honest about that.
Our basic proposition this morning is that the current student support system is in need of urgent reform because it is creating a mountain of debt, which is placing excessive burdens on individual graduates and on the public purse. We offer a radical, back-to-the-future solution: abolish student loans and replace them with student maintenance grants. That system provided lasting benefits for most members who are in the chamber this morning.
As Fiona Hyslop detailed, all the published research shows that the loans system is unsustainable. The introduction of the graduate endowment scheme is merely exacerbating the situation, adding £2,000 to the average student loan debt, which currently stands at £18,764. To service the interest on that debt, graduate salaries need to be in the order of £22,000 a year, although, as we know, salaries as high as that for graduates are the exception rather than the rule.
A third of students who graduated in 1997, when Labour came to power, are still not earning enough to start paying off their student loans. On average, it is taking people 13 years to pay off their debt, rather than the five years that was envisaged when the Tories introduced the current system. There is no doubt—for Duncan McNeil's information—that that debt burden is blighting lives, affecting career choices and delaying young people getting on to the property ladder and starting families. Graduate bankruptcy figures are truly shocking and surely signal that enough is enough for a system that is acting as such a drag on our young people, who are the driving force of our economy and society.
I would appreciate it if Adam Ingram would explain how the SNP would fund the cost of reintroducing grants and abolishing loans. As the minister made clear, the cost would be £180 million. Will Mr Ingram tell us where that money would come from?
Yes. The system would be self-funding. The Executive is currently paying out around £270 million a year on the loans scheme. Part of that goes on loans, but part of it is spent on servicing the interest of the debts. If we transferred most of what we are paying out in loans to grants, we could abolish the debt interest burden, the cost of the Student Loans Company and all the rest of it. We would end up paying less for grants than we do for the current loans system.
The current system is building in powerful disincentives for young people to choose higher education and it is restricting access for students from less affluent backgrounds. Pauline McNeill accepted that and Alex Neil and Tommy Sheridan articulated the point well. What we are doing is akin to cutting off our nose to spite our face. The cost should be met from the public purse. Switching from loans to grants would save the Executive around £65 million a year, according to the latest figures.
Let me finish this point.
In 2002-03, the cost of the student loans system was £292 million for the delivery of £227 million in loans. The question is surely a no-brainer, although not to our esteemed Executive or the Tory architects of the scheme, as we have heard this morning.
The Tories—or the Scottish Conservative and Unionist Party, or whatever they prefer to call themselves—provide some analysis with which we can agree about the problem of individual debt, if not its make-up, and the cost to the public purse that the loans scheme represents. Nevertheless, we cannot agree with their prescription to expand the student loans system through what would effectively be privatisation. I understand how the public purse would benefit, but I fear that the individual debt problem would expand along with such a loans system.
Jamie Stone, who has left the chamber, made a rather shame-faced contribution for the Liberal Democrats. He looked to the Enterprise and Culture Committee to bail him out of the obvious difficulties that he had in arguing for the Executive's policies rather than for the mainstream Liberal thinking that Mike Rumbles articulates well. Jamie Stone argued that a measure of the Executive's generosity was the fact that more students south of the border work through college, but that completely ignores the point that it is harder to find work here than it is south of the border. That is a fact that winna ding.
For Labour, the minister acknowledged that fear of debt is a barrier to access and accepted that the Executive could do more to support students. However, all that he is offering is an extension of means testing for bursaries and tinkering with payment patterns. Frankly, that is not good enough. The Executive is letting down our young people. I commend the motion.