Cabinet Secretary for Education & Lifelong Learning
Fiona Hyslop
Scottish Parliament
June 13, 2007
-------------------------------
Presiding Officer, I am delighted to be given this opportunity today, to announce to the Parliament details of a proposal from the new Scottish Government, which will benefit graduates, their prospective employers and the Scottish economy in the widest sense.
As Cabinet Secretary for Education and Lifelong Learning, I am committed to taking a holistic approach to lifelong learning, focusing on:
- Education in our children's earliest years
- Supporting children and families
- Improving learning in schools
- Developing skills for, and in, work
- Promoting excellent teaching and research in our colleges and universities
Together, these policies will all contribute to ensuring that learning will be lifelong for everyone.
This Government's pledge is to create a more successful country that will flourish through increasing sustainable economic growth. That is our overriding purpose and we will work towards that in Government. To do so, we must ensure that a modern Scotland is one where everyone can fulfil their economic, social and personal potential to the fullest possible extent and that any barriers which prevent them from doing so are removed.
That is why Presiding Officer I am today announcing our determination to honour our manifesto commitment and abolish the graduate endowment fee.
Subject to other parties in this Parliament agreeing to legislate:
- Students about to graduate this summer
- Students currently at university
- Students about to enter university this autumn
- And all subsequent students
- will no longer have to pay the graduate endowment fee.
Around 50,000 students will no longer be asked to pay a graduate endowment fee of over £2,000. This is good news for them, their families and for Scotland. This will only happen if other parties who already have commitments in this area support us and I am hopeful of persuading others that this is not only in the national interest but also in the interest of the public purse.
The cost of abolishing the graduate endowment fee is approximately £15 million net, after allowing for administration and accounting charges. However, I can still guarantee that the amount of money distributed to students through bursaries and grants this year will not be adversely affected by our proposal. We will continue to fund them directly.
Some 10,000 people a year are liable to pay the graduate endowment fee. The amount, set at the beginning of their course, currently stands at just under £2,300.
The background to the graduate endowment fee is well known. It was introduced by a previous Government in 2001 as part of a new system of student support based on the principles established by the Cubie Committee - that student support should promote social inclusion and enhance civic society, and that barriers to widening access and participation should be removed. Sound principles which apply just as much today as they did when Dr Cubie published his work.
However the graduate endowment fee is a tool which has failed to deliver those aims in a modern Scotland.
I believe that the basic principle of Scottish education is that it should be based on the ability to learn - not the ability to pay. My announcement today is a critical step towards achieving this vision not just for today's students, but for tomorrow's, as well as for their families, our society and the whole of Scotland. Opening up access to higher education for everyone irrespective of their location, background or personal situation is a key component of fully releasing the potential of Scotland's people.
Our country's demographic challenges over the next 20 years mean that we must make the most of the opportunities for all of our people and we must give everyone the chance to make the fullest possible contribution to economic and civic life.
Our vision of a smarter Scotland is one in which the benefits of education are spread widely and equitably. This will only be possible within the context of higher education if access to higher education is driven by ability and ability alone. For some who have the ability to succeed, the existing structures act as barriers to their future success. The graduate endowment fee is one such barrier. We cannot let it stand in any young Scot's way.
Presiding Officer, the graduate endowment fee is an example of policy where parties with different views adopted a compromise which has benefited no one.
This policy has clearly failed.
- It has failed our graduates and their families by burdening them with excessive debt
- It has failed our most vulnerable youngsters by creating financial barriers to accessing higher education
- And it has failed the Scottish taxpayer by not raising the levels of income initially projected
The graduate endowment fee is clearly an inefficient way of raising income. In the three years it has been in operation, two-thirds of all those who were due to pay the fee, have not paid it back directly but have simply added the fee to their student loan. The costs associated with the resulting interest rate subsidy means that the taxpayer loses around one third of all the income collected. One third.
In fact Presiding Officer, the taxpayer only recoups the income in real monetary terms after 13 years as this is the time it takes for the money to be repaid in full to the Government. As well as being inefficient, the graduate endowment fee is also difficult to collect. From the graduates who were liable in April this year, over 1,400 are still to respond to payment letters from the Student Awards Agency for Scotland. This is equivalent to almost £3 million in potential income.
Three cohorts of graduates are liable to pay the graduate endowment fee, their liability having arisen on April 1, 2005, 2006 and 2007. £12.7 million at the very most has been paid back in cash, with over twice as much - £26.3 million - having been added by students to their loan. Of this £26.3 million, in three years the princely sum of only £47,000 has been returned to the tax-payer. £47,000.
It is clear to me that the graduate endowment fee is a very complicated and inefficient way of generating money for student support. Not only does it impact on graduates as a 'back-end' tuition fee, but the law on this actually states that not one penny of the fee can go towards paying for learning or teaching at university. This is the worst of both worlds.
With the taxpayer losing out, graduates losing out and Scotland losing out it is difficult to see, Presiding Officer, who this arrangement has ever actually benefited. Abolishing the complicated and inefficient graduate endowment fee is the smart thing to do.
Fear of debt is a real and growing concern for many prospective students. The average amount has increased to around £13,000. Many people, including members of this Parliament who have benefited from access to higher education, may not have participated if faced with the fear of such debt, particularly at a young age.
The age participation index - which measures the proportion of young Scots engaged in higher education - has fallen since the graduate endowment fee was introduced from 51.5 per cent in 2001-02 to 47.1 per cent in 2005-06. Believe it or not, for the first time since the Reformation there has actually been a drop in the share of the population studying in higher education in Scotland. Given that participation had risen each year, the fear of debt is real and is clearly a factor in the choices young people are making when leaving school.
Evidence also shows that young people from low income backgrounds are the most debt averse. Our system should be founded on the basis that it contains the widest possible incentives, so that as many people as possible with the ability can enjoy and participate in the higher education experience.
Young people from areas of multiple deprivation should have wider access to higher education and, although efforts on this have increased recently, the proportion of entrants to university coming from deprived areas of Scotland has still not changed significantly over the past five years.
Fear of debt can and does act as a brake on the aspirations for those from our poorest and most disadvantaged communities and moves us away from a Scottish education system that should be based on ability to learn.
It must therefore be wrong to burden our graduates with debt and deny them every possible opportunity to contribute to a wealthier and fairer Scotland. It is wrong that they begin their working life encumbered by financial pressures and it is a wrong this new Scottish Government intends to put right.
By reducing the burden of debt, graduates start gaining the full benefits of employment as soon as they leave university, getting on with their lives freely, making the type of ambitious career decisions which will help power Scotland's economy and the type of personal choices which will allow them to lead a fulfilling life in this country. Much better their money goes towards buying their first home or indeed starting their first business than being lost and spent instead on the first of many debt repayments.
Presiding Officer, I now want to turn to how and when we plan to deliver the abolition of the graduate endowment fee.
The graduate endowment fee was introduced by the Education (Graduate Endowment and Student Support) (Scotland) Act 2001 and we will be introducing primary legislation to repeal the relevant parts of this Act.
We want as many people as possible to benefit from this change, as soon as possible. That is why, Presiding Officer, I am announcing that with, and only with, Parliamentary approval:
- Students about to graduate this summer
- Students currently at university
- Students about to enter university this autumn
- And all subsequent students
- will no longer have to pay the graduate endowment fee, relieving those who become liable to pay the fee on April 1, 2008 and all those students graduating in subsequent years.
To achieve this, we will introduce legislation which we hope will come into force by April 1, 2008. I am aware that this is a tight timescale but I believe this is the most effective way of abolishing the graduate endowment fee. It will give the Student Awards Agency for Scotland enough time to notify students who graduate this summer and notify people who will be entering university this autumn of our plans, subject to Parliamentary approval.
I look forward to support from across the Chamber for what I have announced today and I would ask parties who may not have called for abolition previously to consider the compelling public finance arguments in favour of our proposals.
I intend to consult on the principle of abolishing the graduate endowment fee this summer, seeking the views of all those involved on the benefits it will bring. Following that consultation, and subject to the views which come forward to me, my intention is to introduce a Bill in the autumn. With Parliamentary support, we have an opportunity to make a real and important difference for students currently at university many of whom are sitting their final exams now or are waiting on their results as we speak.
I have no doubt student loans and the graduate endowment fee act as a disincentive to our youngsters considering higher education.
We have three central proposals to reform the current student support arrangements.
- The abolition of the graduate endowment fee
- Replacement of student loans with means tested grants
- Relieving the burden of debt repayments by Scottish students
In my first few days as Cabinet Secretary I began working with my officials immediately on the options for the second and third of these proposals. This work is actively continuing. Detailed proposals will be considered as part of the Spending Review. Abolishing the graduate endowment fee is an important first step for us in delivering those commitments and I am pleased to announce our intention to do so today.
I look forward to working with parties across this Chamber to deliver a package of student support that delivers the smarter, wealthier and fairer Scotland this Government seeks.
Presiding Officer we live in a global economy and our key economic resource is our people. Graduates from Scottish universities are amongst the brightest and the best in this global pool of talent and are contributing enormously to the economic and social lifeblood of our country and other countries right across the world.
Reducing graduate debt is therefore an investment in our future, our people and our economy. It is a statement of belief in Scotland's people, a recognition that in order to compete we need to remove obstacles that hold people back.
We need to take active steps to ensure that in the future, the Scottish economy is supplied with the graduates that it needs in order to prosper and we need to take active steps to ensure that everyone who has the ability, has the opportunity to be involved in the higher education experience.
We made it clear in our manifesto that we would cut student indebtedness - and I believe that abolishing the graduate endowment fee will show the people of Scotland that we are committed to this - and that we are making progress in the early days of this Government.
Abolishing the graduate endowment fee as soon as possible is an integral part of realising our vision of:
- A smarter Scotland
- A Scotland in which educational and academic achievement throughout life are possible
- A Scotland - renowned through the years as a "learning nation" - where people learn for their and our future, inspiring a competitive, sustainable economy for a wealthier and fairer Scotland.
This is why Presiding Officer we want to move and move quickly, and why I call on the support of the Parliament. We need that support to do what we know will make a real and measurable difference to our people, our society, our economy and the future of Scotland.