Cameron fails to rule out rate rise on university loans

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19 Jun 2013

David Cameron failed today to rule out increased interest rates on previous graduate loans, as the Government moves towards privatising the student loan book.

Challenged at Prime Minister’s Questions by Newcastle’s Labour MP Paul Farrelly, the Prime Minister dodged the question, instead extolling the - as yet untested - virtues of the Government’s ‘free school’ programme in pushing university entries.

A Government report, prepared by investment bank N M Rothschild and dubbed ‘Project Hero’, sets out the option of increasing rates on loans millions of graduates have already taken out as one way to make the privatisation more attractive to investors.

The review, obtained in redacted form by campaigners under the Freedom of Information Act, has yet to be officially published and the controversy comes hard on the heels of fresh research showing top universities still strongly preferring pupils from private schools.

That report, published this week by former Labour Cabinet Minister Alan Milburn on behalf of the government’s Social Mobility and Child Poverty Commission, showed that the proportion of people from disadvantaged backgrounds attending the top Russell Group  universities has now dropped compared with a decade ago.

Speaking in the House of Commons at Prime Minister’s Questions today, Mr Farrelly said:

‘On Monday, the Milburn Report showed that the proportion of students from state schools at elite Russell Group universities is now lower than a decade ago.

‘Meanwhile, another report – ‘Project Hero’ – is secretly considering lifting interest rates on previous graduate loans.’

‘After £9,000 tuition fees, does the Prime Minister think such another breach of faith is more likely to encourage students from less wealthy backgrounds to apply to university, or to discourage them?’

In response, the Prime Minister side-stepped the secret report, prepared for Liberal Democrat Business, Innovations and Skills Secretary Vince Cable, whose brief includes universities.

‘The number of children from disadvantaged backgrounds going to university is higher than it has ever been so that is a good step forward,’ Mr Cameron said.

‘But the second thing is, if we want to get more children from disadvantaged backgrounds into universities, we should be supporting things like the academies programme and free schools,’ he added.

The Milburn Report showed that the number of state school pupils attending university has risen by 1,464 over the last decade, a rise of 2.6%, but that was eclipsed by a 7.9 % rise (1,426 a year) in take-up by pupils at private schools.

As a result, the proportion of state school undergraduates at Russell Group universities in 2011/12 dropped to 74.6%, from 75.6% in 2002/3 – and the proportion of students from less advantaged social backgrounds along with it.

In fact, the report showed that there were 126 fewer students from disadvantaged backgrounds at Russell Group universities in last academic year than a decade ago.

Still today, ‘the most advantaged young people are seven times more likely to attend the most selective universities as the most disadvantaged,’ the report concluded.

Speaking after Question Time, Mr Farrelly said: ‘After the general election, the coalition tripled tuition fees to £9,000, when the Liberal Democrats had campaigned not just for the £3,000 cap to be kept, but to abolish them entirely.’

‘As if that breach of trust was not enough, it is remarkable that the Government is considering changing the terms of loans already taken out, just to keep the City of London happy.’

‘It’s just like retrospective taxation. It would be unjust and what message would that send out to less than wealthy students thinking of going to university – that they might be clobbered in the future by even higher charges than they’re already being asked to pay?’.

‘That can only discourage people even further and I’m disappointed that David Cameron didn’t use the opportunity to rule it out today,’

To view a copy of the Milburn Report, click here

To view press coverage of ‘Project Hero’, click here

The universities which are members of the Russell Group are: Birmingham, Bristol, Cambridge, Cardiff, Durham, Edinburgh, Exeter, Glasgow, Imperial, King's, Leeds, Liverpool, LSE, Manchester, Newcastle, Nottingham, Oxford, Queen Mary's, Queen's Belfast, Sheffield, Southampton, UCL, Warwick and York.