The new Tory proposal on Higher Education is certianly imaginative – but it’s also grossly unfair

By David Lammy MP

Facing David Willetts, the Tory Higher Education spokesman, at the Dispatch Box is not a very uplifting experience. Perhaps it’s his reputed ‘two brains’ that cause him to spout twice the Tories’ usual level of cynicism and hysteria when he talks about Higher Education.

I always welcome any debate with the Tories on HE – because Labour has a strong record, and because HE always offers a stark illustration of the difference between our vision and that of the Tories.

So far, we have heard from the Tories a succession of sketched-out proposals that have vanished into thin air like smoke from the Bullingdon Club’s after-dinner parties. One of their recent ideas was to charge 8% interest on student loans. It’s hard to think of a more effective deterrent to ordinary working-class students than that.

But now the Tories have proposed what they are calling an ‘imaginative’ way of paying for their sudden conversion to 10,000 extra places in university: a discount in fees for students to repay their student loans early.

Where do we begin? This suggestion – which would set a precedent for those from more affluent backgrounds to enjoy preferential repayment conditions on their loan debt – is so obviously regressive. Which graduates are most likely to benefit? Those from poorer backgrounds, or wealthier graduates with family money to help them out?

Nor does the Tory proposal make economic sense. It is a zero sum game: for each graduate who takes up this offer from the Tories, either that graduate benefits and the taxpayer loses – or vice versa. A graduate with low lifetime earnings would be better off not repaying their loan early, yet it is exactly these students that the taxpayer would need to repay their debt earlier in order to make Willetts’ proposal financially attractive.

Furthermore, the Tories’ proposal would cost the Government an additional £240 million. Where would that money come from? What kind of a way is that to run the economy?

At Prime Minister’s Questions this week, David Cameron asked of Gordon Brown: “Doesn’t he understand that we won’t win the public’s trust unless we’re straight with them about the choices that we face?”

How, then, have the Tories failed to add up properly a policy that would actually plunge us into further debt? Their plan is based on a confused understanding of how HE works. The cost of student loans to the Government is not the same as the amount of money given to students. It’s actually the difference between the rate of interest charged on a student loan, and the rate of interest the Government pays to borrow the money for the student loan.

By asking for money to be returned early, all the Tories would succeed in doing is to take money that is owed to the bank, bring it into Whitehall, and give it back out again to students to pay for their higher education. This is borrowing extra money by the worst kind of smoke-and-mirrors – hardly the way to win the trust of the public.

So the Tories’ plan is certainly ‘imaginative’. But theirs’ is clearly an over-active imagination, if they think that the way to make access to HE fairer is to combine a regressive loans policy with a disingenuous way of funding it. Students deserve better.

Perhaps it’s those ‘two brains’ that allow Willetts and co to justify their doublethink – because there isn’t a single coherent strand to his policy.