I am grateful for the opportunity to move new clause 2 and to speak to the other new clauses concerning student finance.
Millions of people across the UK have been mis-sold loans and will end up paying thousands of pounds more than expected as a result. The perpetrator of the mis-selling scandal is not an unscrupulous high street bank or a payday lender; it is our own Government. The victims are current students and graduates who were sold student loans on the basis of false assumptions and broken promises.
For the vast majority of students in England and the rest of the United Kingdom, Government-backed loans are an essential source of financial support to cover the cost of their tuition fees and the substantial costs associated with their studies, such as the rising cost of university accommodation, food and subsistence, course materials, and making the most of their student experience. In England, students are able to take out a tuition fee loan of up to £9,000 a year and an additional maintenance loan to cover living costs of up to £11,000 a year. As a result, English students now graduate with the highest levels of debt in the western world. Following the Government’s decision to axe non-repayable student grants for the poorest students, those from lowest-income households, scandalously, graduate with the most debt. It is a terrible iniquity in the system and one that I am glad to see the Opposition Front-Bench team addressing this afternoon.
Many students will not have forgotten that the decision to scrap student grants was not taken in this House, but down the corridor and up the stairs through a statutory instrument in a Committee of which most people have never heard. That is not how the Government should take major decisions on student finance. Students and their families were sold loans on the basis of a series of simple promises from Ministers: loans will be repaid only once students have left university; they will be repaid only after graduates start earning over £21,000 a year; graduates will repay 9% of everything earned above £21,000 a year; and the £21,000 figure will be uprated each year in line with average earnings from April 2017.
Around this time last year, however, buried in the fine print of the previous Chancellor’s autumn statement was an announcement that the repayment threshold will remain frozen at £21,000. As a result, graduates will end up paying more each month and thousands of pounds more over the 30-year lifetime of their loans. Worst of all, the change will affect not only future students, who can consciously decide to sign up to those repayment conditions, but thousands of existing students and graduates who took out their loans in good faith on the promise that the repayment threshold would increase from 2017. Not only does that retrospective change fly in the face of the principles of good governance, but it is deeply regressive. It is estimated that around half of graduates will never pay off their loans before their debts are written off by the Government. Such graduates, by definition on lower and middle incomes, will end up paying back thousands more over the lifetime of their loan, whereas the richest graduates will be able to repay their debts more quickly and accrue less interest.
Financial experts and advisers are rightly furious. In an astonishing performance in a Bill Committee evidence session, Money Saving Expert’s Martin Lewis described
the Government’s decision to break their commitment to students as “abominable and disgraceful”. The Government will argue that the small print of student finance regulations makes the change entirely permissible and reasonable, but as Martin Lewis told the Committee:
“Looking at students as consumers, if they had borrowed money from a commercial lender, the Financial Conduct Authority would have struck out in a second the idea that, five years after announcing that the repayment threshold would go up from £21,000 in April 2017 with average earnings, that would be frozen.”––[Official Report, Higher Education and Research Public Bill Committee, 6 September 2016; c. 38, Q55.]
It is important to bear in mind that the Government’s promise to students and applicants was not just in the marketing material of Government and of universities, which understandably assumed that the commitments would be lasting, but written in black and white by the former higher education Minister, now Lord Willetts. Having worked with Lord Willetts over a number of years, I have no doubt that he made that undertaking in good faith. He could not have possibly known that a future Chancellor, or a future Government, would not only break that commitment, but apply it retrospectively.
Banks would not get away with mis-selling on this scale, and neither should our Government. I have teamed up with Martin Lewis to put forward amendments to the Bill. The amendments, which I am delighted to say have cross-party support, will prevent Ministers from making retrospective changes to student loans that would penalise existing students and graduates.
New clause 2 would put in place some architecture through the appointment of three independent advisers, who would look carefully at any proposals that, retroactively, make changes to student loan repayment conditions. They would apply a number of tests: is it to the benefit of the majority of graduates; do the Government believe that to be the case as a result of consultation; have the Government made a case that the proposal would be progressive in effect; and would it help some of the most disadvantaged students or graduates? If those conditions are passed, the Government might be able to proceed, because, clearly, this House would not want to prevent the Government from making positive changes that would benefit graduates. What those tests would do is prevent Ministers from behaving as the previous Chancellor did, which was to make changes in the small print of the autumn statement and apply them retrospectively after commitments have been made in good faith.
New clause 3 would also bring student loans within the scope of the Financial Conduct Authority. Despite the existence of an independent student loans company, Ministers have still found ways to flout regulations for the benefit of the Treasury and to the detriment of students and graduates, which is really quite appalling.