Benefits of a loan system

The Government's decision to tighten the rules which allow people to study while drawing benefits is revealing. Further education colleges, like universities, are under-funded. Students have too little to live on, especially in further education where they do not qualify for grants and loans. Who can be surprised that colleges and students together have found a way to make out and are exploiting it?

Here is yet another example of the distortions which arise when government is too weak to tackle the main issue. Something must be done to reform further and higher education funding and student support for all categories of students.

The present situation is a scandal. It invites abuse. But the solution is not a large increase in welfare support for students.

On Wednesday, Shirley Williams, giving the annual IBM lecture on continuing education at Birkbeck College, drew attention to the changes which are taking place in the labour market and to the crucial role which education now plays in determining people's life chances. Those who have high-level skills which allow them to work in high value-added occupations are doing better than ever. Those who are falling behind are those who do not have the qualifications gained through post-compulsory education.

The lessons could hardly be clearer. People must get qualified, as many as possible of them to as high a level as possible. We therefore need the largest possible post-compulsory system: we cannot afford to exclude people through rationing. But nor can we afford to pay so many people for the privilege of getting ahead. Social justice demands rather that welfare spending go first to support those who are not able to compete in the changing labour market. Only that way will we avoid making the growing gap between rich and poor, examined this week in the Rowntree report, worse.

Tightening benefit rules is not the answer. It simply says to unemployed people "we'd rather you did nothing than re-equipped yourself to earn". We need a recast system of student support which provides everyone with the means to study and requires everyone who subsequently benefits - as most will - to repay later. That means repayable loans competently administered.