Higher Education and Student Finance - Secretary of State for Business, Innovations and Skills Vince Cable's oral statement to the House of Commons on Higher Education Funding and Student Finance

"With permission Mr Speaker, I would like to make a statement on the future funding of higher education and student finance, in the light of the report published today of Lord Browne's independent inquiry.

Lord Browne was asked to undertake his review in November last year. The review was set up by Labour on a cross-party basis, and that is how we want to proceed.

I and my colleague the Rt Hon member for Havant want to thank Lord Browne and his Review Panel. The Government endorses the main thrust of the report. But we are open to suggestions from inside and outside the House over the next few weeks before making specific recommendations to Parliament, with a view to implementing the changes for students entering higher education in Autumn 2012. More detail will be contained in next week's Spending Review on the funding implications. But as a strategic direction the Government believes the report is on the right lines.

Browne acknowledges that "the current funding and finance systems for higher education are unsustainable and need urgent reform". The issue is how. And that question has to be framed in terms of how the higher education sector contributes to the deficit reduction programme.

There is also, I think, consensus around the idea that there should be no upfront tuition fees for students. That would seriously deter students from low and middle income families. This Government is strongly opposed to upfront tuition fees. Indeed it shares Lord Browne's conclusion that we should extend exemption from upfront tuition fees to part-time students, currently 40% of the student population, who have been unfairly discriminated against hitherto.

The question, then, is how much the graduate contributions for tuition should be.

We are considering a level of £7,000. Many universities and colleges may well decide to charge less than that, since there is clearly scope for greater efficiency and innovation in the way universities operate. Two year ordinary degrees are one approach. Exceptionally, Lord Browne suggests there should be circumstances under which universities can price their courses above this point. But, he suggests, this would be conditional on demonstrating that funds would be invested in securing a good social mix with fair access for students with less privileged backgrounds, and in raising the quality of teaching and learning. We will consider this carefully.

We believe it is essential that if the graduate contribution is to rise it should be linked to graduates' ability to pay. On average, graduates earn comfortably more than £100,000 over their lifetimes compared with non graduates. But not all graduates benefit in this way. Some choose socially useful but modestly paid or unpaid work which may include time spent bringing up a family. At present the graduate contribution acts like a poll tax, and is not fair .

Lord Browne has come up with persuasive proposals to deal with this issue. He suggests a £21,000 graduate income threshold before any payment is made, as against £15,000 at present, and to be linked to average earnings. And he suggests that a real rate of interest should be paid but only over that threshold. The effect is striking: 20% of graduates could pay less than they do now. The top third of graduate earners would pay more than twice as much as the lowest third. That is fair and progressive: the Government broadly endorses this approach and will examine the details of implementation. The principle of needs blind admission to universities must remain central.

The cost of university education to individuals and the state reflects living costs as well as tuition costs. The Browne Report makes some constructive suggestions, . We shall come forward with detailed proposals which will make it attractive for students from families of modest means to go to university and will be fair and affordable including exempting the poorest students from graduate contributions for some (or all) of their studies.

Lord Browne considered alternatives, including a graduate tax - as I believed new leader of the Labour Party favours. There are some key features in the current proposal for progressive graduate contributions which incorporate the best features of a graduate tax. It would be collected through the pay packet at a rate of 9p in the pound above the £21,000 threshold; combined with a real interest rate as Browne recommends, it would be progressive and related to ability to pay.

But Browne identifies serious problems with a 'pure' graduate tax. The proposal is unworkable; does not produce sufficient revenue to finance higher education until 30 years from now; weakens university independence; and is unfair to British graduates as opposed to graduates living overseas.

If there are any lingering doubts on opposition benches I would strongly commend a letter from the new shadow Chancellor to the new Labour leader 3 weeks ago, which reads thus: 'Oh, and for goodness' sake, don't pursue a graduate tax. We should be proud of our brave and correct decision to introduce tuition fees. Students don't pay them, graduates do, when they're earning [more than £15,000 a year], at very low rates, stopped from their pay just like a graduate tax, but with the money going where it belongs: to universities rather than the Treasury.'

I do believe, moreover, that we need to look beyond the graduate population. 55% of young people do not go to University. We must not perpetuate the idea encouraged by the pursuit of a misguided 50% participation target, that the only valued option for an 18 year old is a three year academic course at a University. An Apprenticeship can be just as valuable as a degree, if not more.

Finally, there is a challenge to all of us to promote a long term sustainable future for higher education. This has been a difficult issue for all parties in the House. Those opposite have ranged between being early advocates of a graduate contribution such as the member for Sheffield Brightside and the new shadow Chancellor, through to those implacably opposed to change - to the current labour leadership who remarkably have now embraced a graduate tax! The Conservatives initially campaigned against graduate contributions but reversed its position. The Liberal Democrats consistently opposed graduate contributions.

But in this current economic climate that policy is simply no longer feasible. That is why I intend on behalf of the coalition to put specific proposals to the House to implement radical and progressive reforms to HE based on the Browne report."

Related Links

• More information on the Browne Report including the full report