The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Henley)
My Lords, I beg leave to repeat a Statement being made in another place by my right honourable friend Mr David Willetts.
“With permission, I would like to make a statement on the higher education White Paper. It sets out how our reforms will build on the changes to student support announced last year. We will put higher education back on to a sustainable financial footing. We will put students at the heart of the system, improving the academic experience, with universities and colleges more accountable to their students than ever before. We will also take steps to improve social mobility without compromising academic excellence or institutional autonomy.
We inherited an enormous deficit which required difficult decisions. We could have reduced student numbers, or spending per student, or provided less help with living costs. However, these options would have been unfair to students, to universities and to the country. Instead we are introducing a pay-as-you-earn system that provides more support for students, does not require reductions in student numbers and increases the cash flowing into higher education. We estimate there could be a cash increase in funding for higher education of around 10 per cent by 2014-15. Our reforms ensure that no first-time undergraduate will have to pay fees up front and asks them to contribute to the cost of their education only once they earn more than £21,000.
This increase in the repayment threshold—up from £15,000 under the current system—means that graduates will benefit from smaller monthly repayments than under the current system. For example, someone earning £20,000, the median starting salary for graduates, repays £38 a month under the system we inherited from the previous Government. In future they will pay nothing. At the moment, a graduate earning £36,000, the median salary for all graduates, pays £158 a month. Under our scheme, that falls to £113 a month. Our reforms also recognise that for many people higher education does not mean a full-time, residential degree. Some students want to work or take care of their family while studying. To support them, many part-time students and distance learners will become entitled to loans to cover their full tuition costs for the first time.
I can announce today that my right honourable friend the Secretary of State for Health and I have agreed that, for undergraduate medical and dentistry students starting their course in autumn 2012, the NHS bursary will be increased in years 5 and 6 to cover the full costs of tuition. For graduate entrants starting in autumn 2012, access to student loans will be made available so that there are no additional up-front tuition costs. We will consider arrangements for subsequent years. More information is being placed in the Libraries of both Houses.
These changes to higher education funding enable us to put financial power in the hands of learners. To make that effective we need to liberalise the system of quotas we inherited from the previous Government so that more students can go to universities that offer a good-quality, good-value student experience. The White Paper therefore proposes unconstrained recruitment of the roughly 65,000 high-achieving students who score the equivalent of AAB grades or above at A-level. Quotas for these students will be abolished and funding will go to whichever university offers them a place they accept. In addition, we will create a flexible margin of about 20,000 places to reward universities and colleges that combine good quality with value for money and with average tuition charge, after waivers, at or below £7,500 per year. This adds up to around 85,000 student places—roughly one in four places for new entrants—contestable between institutions in 2012-13. We aim to expand this further year after year.
We will also extend the scope for employers and charities to offer sponsorship for extra places, provided they do not create a cost liability for government and provided, of course, there is fair access for all applicants, regardless of ability to pay, and no sacrifice of academic standards.
These reforms put students in the driving seat. Putting this power to best effect means not just liberalising the quotas regime; prospective students also need to know far more about the academic experience on offer. We will therefore transform the information available to them about individual courses at individual institutions. Each institution will make available key items of information such as contact hours and job prospects. Information will also be available to outside bodies such as Which? to produce their own comparisons. It will lead universities to match their excellence in research with a high-quality academic experience.
We also want our universities to work with business to improve the job prospects of their graduates by providing the knowledge and skills that employers value. The sandwich course, which gives students practical experience of work, declined under the previous Labour Government. We want to reverse that. We have therefore asked Professor Sir Tim Wilson, who made the University of Hertfordshire one of our most business-friendly universities, to review how we can make England the best place in the world for university-industry collaboration. We want our universities to work with business across their teaching and research activities to promote better teaching, employer sponsorship, innovation and enterprise.
Student choice is more real if, as well as liberalising quotas and transforming information, there is a greater diversity of institutions to choose from. We will therefore remove the barriers to more provision from the Open University, further education colleges and private providers. We will simplify the regime for obtaining degree-awarding powers. We will also review the artificial barriers to smaller higher education institutions taking the title “University”.
We want students from a wide range of backgrounds to benefit from these reforms. We are increasing maintenance grants and loans for nearly all students. We are introducing a national scholarship programme and we will strengthen the Office for Fair Access to make sure institutions fulfil their outreach and retention obligations for people from disadvantaged groups. This will not be at the expense of institutional autonomy. The Director of Fair Access will continue to have a duty to protect academic freedom, including an institution’s right to decide who to admit and on what basis.
In order for universities and academics to focus on educating their students, we will strip back the burden of excessive regulation and form filling. We will explore whether it is possible to reduce costs associated with corporation tax returns. HMRC has today announced its consultation on the possibility of introducing a relief to remove some of the VAT barriers which currently deter institutions from sharing costs. We will reduce burdens from information collection. We will give power to students to trigger quality reviews where there are grounds for concern, yet cut back the burden of automatic review for high-performing institutions. The Higher Education Funding Council for England will be the lead regulator, taking on a new role as consumer champion for students and promoter of a competitive system.
We are now inviting people to comment on our proposals as part of a broad consultation. Subject to parliamentary time, this will be followed by a higher education Bill next year, to make the necessary legislative changes to deliver these reforms. This White Paper offers universities the prospect of more funding provided that they attract students. At the same time it saves money for the Exchequer by asking graduates to pay back more as their earnings increase.
Our universities already transform people’s life chances, and we expect them to do even more. We will protect their autonomy and reduce the regulatory burdens they face. Above all our proposals benefit students by driving universities to focus on the student experience. They will have real choice, with better information and a wider range of institutions to choose from. I commend this White Paper to the House”.
My Lords, that concludes the Statement.
Lord Henley
My Lords, that address by the noble Lord on behalf of the Opposition was rather extraordinary. He started off by making allegations that this White Paper was allegedly “hastily put together”—I think that those were his words. I can assure him that it took a considerable amount of time, and haste certainly did not come into it. As the noble Lord will know, we were hoping to get this out somewhat earlier but, in our desire to get these things right, it was delayed until this day. That is often the way with these things.
The noble Lord then made allegations of cuts to higher education. Yes, we have had to cut the amount of money from the public purse going to higher education. We have had to make reductions in a large number of other departments, but again, as my noble friends and my right honourable friends in another place have done on many occasions, I have to remind opposition Members: whose fault is that? We inherited a deficit of quite stupendous proportions and we had to address that before we could even begin to start—we had to tackle the debt. We therefore had to find some sustainable way of funding higher education, which is a public good, and we have come up with a scheme that in effect, as was made clear in the Statement, will by 2015 increase by some 10 per cent the amount of money available to higher education.
That must be a good thing, but we have to ask the serious question as to who should be paying for higher education as a whole. I got the impression—and I should be very interested to hear from the noble Lord or one of his noble friends whether this is the case—that it is now the policy of the party opposite that all the funding should come from the taxpayer and none from those who benefit from it. Under the scheme that we are proposing, a great deal of money will come from the students who benefit from the higher education they receive. However, in addition—because in the end we will get back only a certain amount of the money—a great deal is coming from the public purse. There is a balance between the public benefit we get and the private benefit that the individual students get. I was rather surprised by the tone of the noble Lord’s response, which seemed to suggest that all funding should come from the taxpayer. That was how I understood it and I imagine how it was supposed to be understood by most people listening to it. The noble Lord’s party did not do that when it was in government and I would be interested to know whether that policy has changed.
The noble Lord then asked a number of detailed questions. I will look at those in due course but I will comment on one or two of them. He pointed out regional differences in terms of access to universities. That is unfortunate. We have to look at the schools. Again I am grateful for everything that my right honourable friend Mr Michael Gove is doing in the Department for Education to improve education. It is by improving education before students get to universities that we will improve access to the universities. It is not by magically saying, “You must take in X, Y or Z, however badly educated they have been”. We must get it right at an earlier level, and that is exactly what my right honourable friend is addressing in the various reforms that he is bringing to education.
The noble Lord then talked about plans to allow universities to attract more of the AABs or equivalent. I think he slightly misunderstood what was set out in the Statement. We know that most people who achieve AAB or above, or the equivalent, will go to university, but we want the universities to be able to compete as to how many they can get. There should be no artificial cap on the numbers, and that is what the White Paper sets out.
I was rather saddened by the noble Lord’s attack on the private sector within education, which includes principally the private universities but also other institutions offering degrees. They offer a valuable service and we should not back away from that. We should continue to support them and I am very glad that my right honourable friend has found a means of doing that.
Lastly, the noble Lord alleged that the whole scheme was designed to depress demand for access to higher education. That is not the case. The Government are still committed to encouraging as many people as possible to go to university within the current restraints on the public purse—and we know whose fault that is. The noble Lord will know that things have changed a great deal over the years since he and I were at university, when about one in eight of us went to university. If we go back to our parents’ generation, the proportion was probably about 2 per cent—of course, it depends on the age of your parents. Now the percentage is in the high 40s. We believe that is a good thing, but obviously it does change the way one has to think about how university should be paid for.
There are other, more detailed points that the noble Lord put to me. I will look at precisely what he said later and, if necessary, write to him.
Baroness Sharp of Guildford
My Lords, I thank my noble friend for repeating the Statement, which has been extremely useful. It clears up a degree of uncertainty that there has been around universities for a very long time. As the noble Lord said, it has taken a long time for the White Paper to come to us, rather than a short time. I also welcome a number of other aspects of it. The opening up of the university system and the creation of a far greater diversity of routes for higher education are thoroughly good things for this country. As many noble Lords around the House will know, I have for a long time advocated the facilitation of the part-time route so that those who want to earn and learn can do so and have access to support equivalent to that for full-time undergraduates. That is extremely important. The Minister will know that one or two minor issues arise here and I will raise them with him in due course. However, on the whole I think that this is a thoroughly worthwhile development. I also welcome the reintroduction of sandwich courses.
Can the Minister provide clarification about the AAB issue, which the noble Lord, Lord Stevenson, raised? At the moment, as I recall, we provide somewhere in the region of 350,000 undergraduate places every year. As I understand it, 65,000 of those places are going to be put into a pot to be bid for by any university, according to what students want to do, and a university will then be allowed to exceed its quota if an AAB student wants to attend. The other 20,000 places are for institutions that charge less than £7,500 per year. This is not creating new places; they are existing places. In effect, as I said, 65,000 places are being taken out of the pot at one end and 20,000 at the other end. I worry about that slightly. The noble Lord is quite right that the problem is that our secondary schools perhaps do not produce enough AAB students. However, there is a real problem here. There was an experiment by King’s College in which medical students worked with local secondary schools in south-east London, bringing forward pupils who were not achieving at that level. However, by the time those pupils had been through the degree course, they achieved just as highly as the others, which shows what potential there is. Universities need to have flexibility in that sense. There is a danger that we shall expand the universities taking the top-achieving students, thus depriving some of the lower-achieving students. I confess that that worries me.
Finally, the noble Lord, Lord Stevenson, referred to the cost. As the White Paper says, the Government reckon that by 2014-15 the scheme is going to cost more. As the Minister will know, the cost of loans is going to be very considerable, and it looks as though the Government may well end up spending more on the loan scheme than they are putting in at the moment in direct grants.
Lord Henley
My Lords, I am very grateful for the comments of my noble friend Lady Sharp, particularly regarding the fact that the White Paper has cleared up uncertainty, and for her emphasis that we—or, rather, my honourable friends in another place and in BIS—have taken time over it. I am also grateful for what she said about the need for diversity in higher education. We should always remember that higher education is not just hallowed colleges in Oxford or Cambridge but a whole range of different things. I was grateful that she mentioned part-time students at the Open University and matters of that sort. I think that something like a third of all students are part time, although I shall have to check that figure. I was trying to find it in my briefing pack but could not. I was also grateful for what she said about the fact that we want to put more emphasis on sandwich courses. We will certainly look to see what Sir Tim has to say about that.
On the AAB cohort which we were talking about and which I mentioned in the Statement, the figure that I have is of the order of 300,000 students coming in each year, not 350,000, but we will not quibble about 50,000.
Lord Henley
Well, we will try not to quibble about 50,000 but I can see the odd accountant sitting opposite me. Of those, 65,000 are AAB students. We are not creating new places for them but we are allowing the HE institutions to compete for them. Therefore, the University of X might want to expand certain courses by bringing in more of those students, but that would mean, by definition, that the University of Y might lose out. However, we think that it is necessary to bring in that element of competition. The 20,000 places that I added to that are not for AAB students but for those where universities offer value for money with their courses coming in on average, after waivers and so on, at or below £7,500. Again, it will be open to universities to compete for those places. It is not a question of creating new places at this stage. However, if matters were to become more contestable, we would certainly want to look at that in the future, and, as I made clear in the Statement, we aim to expand the scheme further year after year.
I noted what my noble friend said about the cost of loans. Obviously loans are expensive but they would be considerably more expensive if they were not arranged by the Government. The Government can, after all, borrow at considerably cheaper rates than individuals.
Lord Wills
My Lords, I am grateful to the Minister for repeating the Statement made in the other place. He will be aware of widespread concerns about the damage that these reforms pose to the position of the humanities in higher education. I wonder whether he shares those concerns and if so, what he will do about them. If he does not share those concerns, why not?
Lord Henley
I simply do not accept those concerns, as was made clear in the debate we had some six months ago when we debated the original announcement about student loans. It will be up to the universities to attract the right students. Those students will bring the money with them that will pay for the courses.
Lord Krebs
My Lords, I thank the Minister for introducing the Statement. It will obviously take time to absorb the details. I declare an interest as the principal of Jesus College, Oxford, and say that from the perspective of those of us in the higher education sector the Government’s approach seems slightly schizophrenic. On the one hand we hear about creating a market, liberalising the university sector and deregulating, but on the other hand we hear of increasing constraints imposed on us in reporting, access and the level of fee that we can charge. As I said, there is a slightly schizophrenic approach.
I have a particular question to ask the Minister. If, as he has indicated, the aim is to place the student in the driving seat to create a market where student choice and wishes determine the outcome, that leaves open the question of where the university sector will end up. We know from the report from the Royal Society a couple of years ago that this country suffers from a serious shortage of students educated in engineering, the natural sciences and mathematics. Do the Government have a view on what proportion of students should study STEM subjects? If so, why are they leaving it to the market and student choice? Students may well choose to study subjects that do not require such a rigorous entry as mathematics, physics, chemistry and engineering, and universities may well choose to teach subjects that are cheaper to lay on. Do the Government have any view about the provision for STEM graduates, or is that simply a matter for the market?
Lord Henley
I accept what the noble Lord, Lord Krebs, said, and obviously much in this White Paper needs to be discussed. After all, it offers up the idea of consultation on a number of subjects, which is a matter that we will take on board. He then suggested that we had a slightly schizophrenic approach. I remember being castigated on many occasions by my late noble kinsman Lord Russell on the question of academic freedom and attacks that the previous Conservative Government were allegedly making on institutions. We are very anxious, as we make clear in the Statement, to preserve academic freedom and to leave the decision-making to universities. Obviously, when public money is involved—and considerable amounts are involved—it is right that we should make our views known.
The noble Lord then talked about the STEM subjects. He gave an example of the shortage of engineers and asked what our approach should be. We have to be very wary of government setting down specific targets for this or that number of engineers. The noble Lord will remember that the former Soviet Union produced a very large number of engineers, no doubt at the sort of central direction that some noble Lords opposite might like—but look where it got them. I seem to remember the expression, “Upper Volta with rockets”. That is not a route that we would want to go down. What we are setting out is probably a better approach.
The Lord Bishop of Wakefield
My Lords, I, too, thank the Minister for his Statement and for the further thinking that the Government are clearly doing following the earlier Statements and papers on higher education. Perhaps I should begin my question analogically. In honour of the millennium, I was offered finance to pay for a stained glass window in the cathedral over which I then presided. Alarmed that I had already commissioned an artist, the donor asked me whether I had gone for three competitive quotes for the window as he had done in the previous year when he was repairing his garage roof—in other words, economics came before creativity. Value for money in higher education is obviously crucial, but can the Minister assure us that the pursuit of enterprise, competition and, indeed, a focus on business will not lead to utility triumphing over a liberal education, removing breadth of curriculum and marginalising not only the arts and humanities but other less obviously utilitarian disciplines?
Lord Henley
My Lords, in the debate before this Statement, the noble Lord opposite castigated my right honourable friend Mr Pickles as a Gradgrind figure. We obviously want to be wary of aiming just for value for money, but we have to be very careful to make sure that public money is spent appropriately. I do not think, bearing in mind what I said about preserving academic freedom and the ability of higher education institutions to decide for themselves how to do things, that the approach we are setting out does that in any way at all. We want to make sure that any public money is spent appropriately.
Lord Lucas
Does my noble friend agree that the practice of cross-subsidisation must now end? It may have been acceptable, when it was just government money, to take £5,000 from the money provided for a humanities course and give it to a student doing an engineering course. Now, when we are asking a humanities graduate to pay £9,000, it is surely totally unacceptable to take half that money and spend it on an engineering student.
Lord Henley
Again, I want to leave this as a matter for the higher education institutions themselves. It is up to them; they do not have to charge the same amount for each student if those students are doing different courses. If students are doing a humanities subject, there is no reason why the institutions should not charge less than for other, more expensive subjects. It must be a matter for them.
Lord Young of Norwood Green
I, too, thank the Minister for repeating the Statement. I will respond to a couple of points that he made in reply to my noble friend Lord Stevenson. We do not deny the deficit; our counteraccusation to Her Majesty’s Government is that they are dealing with the deficit too far, too fast. Of course, we have not retreated to the position that all funding should come from taxpayers; we recognise the challenge of expanding higher education—indeed, we introduced student fees. This is about the level of them. I share the welcome given by the noble Baroness, Lady Sharp, to support for part-time students, and I hope that we will see an expansion of sandwich courses—and that response from business.
In the beginning, when the Government responded to the Browne report and put the figure of £9,000, there was a lot of confidence that not all universities would rise to that figure. Yet currently more than 80 per cent of universities have indicated their intention to charge £9,000. I was interested in the response to the previous speaker that there might be a variation, but the current public position is charging £9,000. Will that be a deterrent to potential graduates when they see the potential size of their loan increasing so much—figures of £40,000 are not exaggerated? I know the response will be that there is no upfront payment. Nevertheless, people will see a loan that eventually has to be repaid.
Lord Henley
I am very grateful for the noble Lord’s admission on behalf of his party that it does not deny the deficit. I am also grateful that he has recognised that funding must come from the beneficiaries of education as well as from the taxpayer—from both sides.
The noble Lord turned to the Browne report which, as noble Lords will remember, did not recommend a maximum. However, we felt that it was probably right to fix it at £9,000, particularly as the noble Lord, Lord Browne, suggested that he did not see why universities could not provide a good education for a figure of, I think he said, round about £8,000. The noble Lord, Lord Young, says that the reports are that virtually all institutions are going for the maximum of £9,000. We will not know the final figure until it has all been confirmed next month, but I can assure him that although a lot of them are going for £9,000, that does not mean that everything in that university, that institution, will be £9,000. There might be different rates for different courses and, as the noble Lord knows, there are a number of waivers, and they will be offering bursaries and other things that will help to bring the cost down, particularly for some of the less well off.
The noble Lord also asked the very valid question: are we worried that the perceived level of debt might put off a number of individuals because they see themselves ending up with a debt of £27,000-plus? That is a genuine fear and we must address it. That is why only last week my right honourable friends Vince Cable and David Willetts sent a letter setting out what we are doing to get information across. They have set up a new independent task force on student finance information, headed by Martin Lewis and Wes Streeting, a former president of the National Union of Students, to try to get the information over that it should not be looked at as a debt but, in effect, as a sort of graduate tax, except that it is not a graduate tax; you start paying only when you start earning above a certain amount and you pay at quite a low rate over a long period of time. It is not the burden that people have when taking on other forms of debt.
Lord Butler of Brockwell
If I heard the Minister aright, he said that the purpose of strengthening the role of OFFA would be to ensure that the universities fulfilled their obligations about outreach. That will create no difficulties for the universities because I am convinced that all the universities I know want to widen the area of society from which they draw children of talent. However, he also said, if I heard him correctly, that there will be no interference in the academic freedom to make that selection on the basis of merit. Can he therefore assure us that the quotas that have been talked about for students to be drawn from different areas of society or different backgrounds in education will not now be pursued?
Lord Henley
My Lords, I am very grateful for that intervention from the noble Lord, who speaks with considerable authority as a former master of University College, Oxford. I must add that I have enjoyed his hospitality there on a number of occasions; I declare that as an interest. I am also grateful that he welcomes the fact that there is encouragement to fulfil greater opportunities for outreach, which is what all institutions should be doing. I also stress that there will be no interference in academic freedom. As I said earlier, I bear on my back scars from the late Lord Russell about alleged attacks on academic freedom, and I do not want to reincur them. Quotas are not the right way to set about this. Each institution in discussions with OFFA, after it has proposed a level of fees above £6,000, should look at what it can do to try to improve fair access to all areas of society.
Baroness Brinton
My Lords, I, too, thank the Minister for the Statement. I want to ask two specific questions. The first is on simplifying the regime for obtaining degree-awarding powers and making sure that the qualifications and assessment process for FE colleges and private providers will be the same as it is for universities. One of the strengths of the sector at the moment is the qualification assessment basis, and it would be a shame if it were lost in a diversification of the sector. Secondly, I declare an interest as I was bursar of a Cambridge college for a decade. I am delighted to hear that HMRC is consulting on changing the VAT regime. I am slightly concerned that the Statement refers to “some of the VAT barriers”. That has been a considerable issue to higher education institutions over the years. It has cost them a lot in administrative terms, and the accountancy profession has earned an enormous amount of money by advising universities. Can we be assured that there will be real change in the VAT regime for universities?
Lord Henley
I shall be very brief, bearing in mind the time. I think I had better write to the noble Baroness about what we want to do about simplifying degree-awarding powers. As for HMRC’s consultation on VAT, I am always very wary of ever making any commitment that involves the Treasury, so again I think it would be wise if I wrote to my noble friend on that matter.