Lifelong Learning (Higher Education Fee Limits) Bill (Second sitting)

(Limited Text - Ministerial Extracts only)

Committee stage
Tuesday 21st March 2023 Public Bill Committees

[The Chair]

The Minister will start the questions.

[The Minister for Skills, Apprenticeships and Higher Education (Robert Halfon)]

Q76 Thank you for coming today. Thank you also for the CBI’s constructive support for the principles of the lifelong loan entitlement. How do you think employers will respond to the LLE? There was some discussion about that in this morning’s sitting. Do you think they will respond positively and work with employees to make sure that they have the benefits? Some of them will actually support the cost of the LLE courses.

Matthew Percival: We are obviously in a situation that is very well documented at the moment—the extent of skills shortages combined with labour shortages in the economy. The topic is right up there in terms of the labour market as a business issue. One reason we have been strongly supportive of the principles that are looking to be embedded into the LLE is that they go with the grain of a number of the changes we see in the economy—in the nature of learning, in who learners are and what their needs are.

The way we see technology changing jobs now is more often evolving a job rather than replacing a job. The stock of learning needs in our economy is increasingly adults rather than just young people, and it is increasingly about incremental changes in a role rather than a fundamental retraining to shift occupation. There will still be people who fall into that category, but an element that we are particularly welcoming in the approach of the LLE is that it is taking a broader understanding of what quality is—that it is not just about whole qualifications but can be about keeping your learning topped up as well.

You asked about how employers will respond. We have a lot of work to do to improve employer awareness about the scheme. When we surveyed on it last year, 80% of businesses said that they were not aware of it. There is an extent to which that is not so surprising because it is largely a policy that considers the interaction between the state and the individual learner, rather than the employer being an integral component. We are all thinking about how we design the policy—not what is on the face of the Bill, but the policy—to minimise the risk that this becomes a transfer of things that employers used to pay for and now get funded through the LLE. We then need to have a positive vision for how this can leverage more business investment.

I would love to see adopted as an objective for the policy that we measure success also by the extent to which it leverages additional business investment. I am not sure that is an objective at the moment. This could have a really positive impact. Our last estimate work with McKinsey said that one in six people will need to retrain by 2030, but in only 25% of those instances of retraining will there be a return on investment for an individual employer to pay to get the learner from where they are today to where they need to be to make that transition. We either respond by saying the state or the individual has to step in and fund the entire gap to get somebody ready for the job, or we can be a bit more flexible, which is what I hope the LLE will allow us to do. How do we get somebody ready enough, to the point where there is now a return on investment more often for employers, and then get the employer to step in, and where we expect more of the employer—to step in and hire people with training involved?

[Robert Halfon]

Q How do you think it will be distinct—going back to part of your answer—in terms both of the normal training of an employee, and of an employee separately taking out a lifelong loan entitlement?

Matthew Percival: A couple of things could go on in parallel. We could see a situation where somebody is employed full-time by their current employer, but they want to be able to switch careers. It would be unusual to expect their current employer either to be funding time off to train, or to be funding the cost of their training, so that person will be able to leave the employer and go somewhere else. But you can see how some people could use the LLE in that kind of way to help them navigate through the labour market while having a job, and that more flexible approach helps them to do it. Personally, I do not see the LLE as a massive tool for employers to upskill and evolve their current workforce for the jobs they are already doing. Normally, that is where you would be trying to create a skills environment where you could leverage the business investment into that already, rather than the LLE doing it. We are talking about quite a small amount of a large amount of investment, but, in terms of the grand cost across somebody’s lifetime—what their total training cost is likely to be—this will be a smaller element of it. You could use three quarters of it in a single undergraduate degree here.

[The Chair]

Shall we bring in Simon?

[Robert Halfon]

Q Yes. I want to put my final question to Simon. Simon, I again want to thank you for the AELP’s constructive support for the principles of the Bill. It would be helpful to understand what you think the impact of the Bill will be on your members. We have done a lot of work on further education and higher education this morning, but it would be good to understand the impact on your members and how they see it going forward.

Simon Ashworth: As you say, we are broadly in favour of the principles. We need a better mix between employer, state and individual investment in skills. For our members in the FE space, I guess awareness of the LLE is still underdeveloped. Probably the biggest impact for a lot of our members will be on those who already did not deliver advanced learner loan provision. That is a programme source that has diminished over the past few years as a result of the challenges around cost of living, and the free courses for jobs offer negating the need to take out a loan. We were particularly excited to see the move to offer a third pathway for regulation through the Office for Students. That is a really important move to ensure that our members are part of the landscape, and this does not just include an HE-provider dominated landscape; it is a true mix of FE and HE providers. Obviously, there is more work to do on what that registration process looks like, and to move more of our members to be recognised and regulated by the OfS outside the full degree-awarding powers piece.

[Matt Western (Warwick and Leamington) (Lab)]

Q Thank you both for joining us. Matthew, I have a couple of quick questions for you, and then I will come to Simon in a second. In the current economic environment, do you foresee a situation where a lot of employers, particularly small and medium-sized enterprises, will be cutting back on training? If that is so, what are the risks of this being very much individualised, by which I mean the training being left to the individual as opposed to the business? Obviously, what happens in most recessions—not that we are in a recession, but we are facing difficult times—is that training gets cut back.

Matthew Percival: We are certainly not meeting anybody’s growth ambitions. It is a difficult economic position. Added to that, we are seeing some squeezing of training budgets, but there are two factors to that. It is not just the traditional case of, “If there is a slowdown in the economy, do we see some cutbacks there?”—often it is about protecting jobs in those sorts of recessionary situations. The current one is a lot of pressure being put on employers’ budgets by things such as trying to do everything they possibly can to support employees with basic pay. I know a number of employers who have squeezed their training budgets and other discretionary costs like that in order to do everything they possibly can to support with a higher basic pay settlement at the moment.

From our own indications, the same survey I mentioned on our measurement of the extent of skills shortages still reports more businesses saying they intend to increase their spend on training than saying they would decrease it, and significantly so. But there is a weaker balance than the year before. The one bit of context I would add is that last year we saw a big spike to record levels of intent to increase, because the 12 months people were referring to previously was the heavily-disrupted period of the pandemic, and therefore that was a big increase.

Now we are back to levels in our surveys of similar intent as previous years, but I also note that our survey tends to end up being more optimistic of employers telling us their intentions for the following 12 months than official measures of skills spend would show. It feels like we are in a similar environment to the five years before the pandemic rather than a different position at the moment.

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[The Chair]

Thank you.

[Robert Halfon]

Q As the key architect of the lifelong loan entitlement, are you happy?

Sir Philip Augar: Thank you, Minister. I am not actually the architect. The panel that I convened were very much as one on this, and we built on the work of the Sainsbury review and the review of skills and vocational education written by Professor Alison Wolf, who was a member of the panel. I think, however, that all of us involved would indeed be very happy with the progress that has been made. There is clearly a lot of work to do to make this happen, but it has the potential to be a game changer and to address a lot of the issues raised by the previous witness and others.

[Robert Halfon]

Q Are you content that the approach in the Bill—as you know, it is in essence a technical Bill with three clauses—is the right one?

Sir Philip Augar: The approach looks sensible. It is clearly important to establish a mechanism whereby learners taking modules do not end up overpaying, and this Bill sets in place the framework to ensure that a fair price is set.

[Robert Halfon]

Q Finally, in terms of the phased approach, starting off at levels 4 and 5 and moving on to level 6, are you happy with the direction of travel and the timing?

Sir Philip Augar: I think this has to be an incremental approach. It would be a bad thing if this got off on the wrong foot. We have seen that with previous attempts to address the skills gap. I am very much in favour of starting small and rolling out. This may take several years to really kick in, but by the end of this decade, when the demography—the number of 18-year-olds—starts to fall away, there will be an incentive for providers to step up to the plate. By then, I think the awareness on the part of learners, schools, colleges and, indeed, employers ought to be much greater. I think we could have a real flier then.

[Robert Halfon]

Thank you.

[Matt Western]

Q Sir Philip, thank you for joining us and for all your work on this subject with your panel members. I am interested to know whether you have any thoughts about or concerns over the financial ramifications of what this might mean for institutions—as we currently have funding within this £37,000 budget. Do you have any views on financial sustainability?

Sir Philip Augar: I missed a word there. Is your question about the impact on institutions?

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[The Chair]

Good afternoon. Minister, would you like to start with questions?

[Robert Halfon]

Q Thank you. David, when I have met you in the past, you have often said, “What about the colleges?” That is the catchphrase you shout frequently, and I agree with you. The previous witness, Sir Philip Augar, said that this measure would benefit further education quite significantly. Do you agree with that? What do you think the impact of LLE will be on FE in general?

David Hughes: I was listening to Philip, and I agree with everything he said. I think it is an opportunity for colleges, but you will not be surprised to hear me say that more needs to be done. The LLE can be a real game-changer as part of a suite of changes that are needed. We need to understand what the LLE is for. It goes back to Philip Augar’s report, which said that we have a tale of two halves: half of young people are going into higher education by the age of 30, and half are not. It seems to me that the LLE is about particularly trying to help the other half who have not been into HE to have a higher education experience. That, almost always, will need to be local, will need to be flexible and will need to be affordable. The LLE helps enormously with that, and colleges should be at the forefront of delivering particularly modules at levels 4 and 5 and sometimes level 6 and beyond. We need to think about what is happening below level 4 and the investment needed to get more adults to level 3, because about 62% of 25-year-olds have a level 3, but we need more of the ones who have not to be able to get a level 3 as an adult in order to use the LLE.

[Robert Halfon]

Q There is an issue that 10% of the adult population have levels 4 and 5, so there is a concentration on that. Earlier, we heard about the collaboration between Nottingham Trent University and the college in Mansfield in terms of delivering the LLE. Do you think there will be a lot more collaboration between HE and FE once the lifelong loan entitlement has come through?

David Hughes: I hope so. The Nottingham Trent and West Nottinghamshire College example is a really good one. There are others—London South Bank University has some really good work going on, and Derby University has. Around the country there are good examples, but sadly, there are also examples of colleges and universities not collaborating effectively, and there are not really the incentives to do so. I would like to see more work carried out to try to get better links, particularly to give young people the option of doing one or two years in a college, getting their level 4 and maybe their level 5 without having to go residentially to get their bachelor’s degree, but perhaps topping up with an extra year or two at university. We need to help colleges and universities to collaborate better. The system needs to help, and we need to look at the regulation and the metrics of achievement, because some of it militates against that collaboration.

[Robert Halfon]

Q Finally, we have talked about credit transfer in terms of HE. What do you think the response of colleges will be to credit transfer? Do you think they will embrace it, or do you think some colleges will do it more than others?

David Hughes: Again, I think it will depend a lot on their relationships with universities in particular. There is a lot of potential for young people and adults to do some of their higher education in their local college and perhaps transfer that credit to a university somewhere else, if that is what works well for them, but that needs individual relationships to be good. In some parts of the country we will definitely see that. It would be great—wouldn’t it?—if there was a much more open sector in which those options of credit transfer became quite normal and part of what we offered to every adult of every age, but I think it will take some time to get there.

[Robert Halfon]

Thank you.

[Matt Western]

Q Thank you for joining us, David. I am concerned that, although there will clearly be some advantage in terms of driving and hopefully improving the numbers who access FE and HE through this route, there are, as we heard from previous witnesses, costs associated with delivering this proposal, in terms of the administration not only for students but more widely. Given the financial circumstances of colleges, to which you alluded, what should be the concerns? Does this idea need much more funding to make it viable?

David Hughes: The problem colleges have is that they do not have any of what the private sector might call risk capital: they cannot set up new courses unless they are absolutely certain that those courses will be successful. I think that will make them cautious, and when you are trying to introduce a very different type of higher education, caution is a real barrier. I would love to see the Department for Education supporting colleges to share some of the risk and to pilot courses.

One of the things that colleges do really well is work very closely with local employers. It would be lovely to see some more work, in specific sectors of the economy where there are skills shortages, to pilot colleges and employers working together to develop modules that are attractive to individuals and that help them to get into those skills-shortage jobs. To imagine that will happen just by chance is stretching reality; I do not think it will require tens or hundreds of millions of pounds, but it will need investment to make sure the risk is shared. If we do that, we could really get the ball rolling and show it works, and then more organisations—more colleges and employers—would engage. It is incumbent on the DFE to really start with that investment and risk sharing.

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[The Chair]

We now hear evidence from Dr Elizabeth Norton, policy adviser from Coventry University, and Professor Sue Rigby, Vice-Chancellor of Bath Spa University. Please can you start by introducing yourselves?

Dr Norton: Hi. My name is Dr Elizabeth Norton. I am a policy adviser at Coventry University and I specialise in Office for Students regulation.

Professor Rigby: I am Sue Rigby. I run Bath Spa University. As a member of the board of the Quality Assurance Agency for Higher Education, I rewrote the credit framework in 2021.

[Robert Halfon]

Q Do you think that introducing the fee limit method based on credits is sensible from a higher education and university perspective?

Professor Rigby: In theory, it makes lots of sense. Nearly every university uses credits, with the exception of Oxford, Cambridge and medical schools. The exceptions in the Bill allow for that. I am worried about unintended consequences, and they focus on students who may fail a course or who may need to resit.

At the moment, the failure and the resitting is bound up within the fees for a year. We have clarity from the Department for Education that, in the provisions in this Bill, students would be responsible for paying for both the course they have failed and for the resit course.

The premise of the LLE is that the minimum fee quantum will be 30 credits. Most students will fail subsets of that—we run 10s, 15s, 20s. I think there may be some unintended consequences to explore to make sure that students are not disadvantaged.

Intellectually and theoretically, this measure will work beautifully, but in practice, I would love to see a risk analysis on unintended consequences for my students.

[Robert Halfon]

Q On the OfS, there will be registration for new providers. What is your view of that? Is that the right way forward?

Dr Norton: It is absolutely right that there will be a third category of registration—if a new entrant to the OfS provider system is only doing modular provision, it will need to be regulated separately—but the OfS will need to consult the sector widely on how it integrates monitoring student outcomes, progression and completion of modules to really ensure that standards, in terms of access, student experience and value for money, are maintained.

[Robert Halfon]

Q What is your view on the provisions working for FE providers who are fairly new to this system?

Dr Norton: I think a lot of FE providers have already joined the OfS register. I cannot speak for them entirely—we are a university—but I think the main barrier for them, from my point of view, might be that there is a lot to be done to keep up with OfS regulation and to keep up with compliance. I worry about the amount of bandwidth that FE colleges have to do that—it is its own little cottage industry. That would be my main concern: do they have the capacity to integrate these new regulation challenges?

[Robert Halfon]

Q Professor Rigby, you talked about unintended consequences. What is your view on how they should be dealt with?

Professor Rigby: Probably, in this Bill, the solution resides in that course year. If one could identify a course year with a loose allocation of credit—let’s say, plus or minus 20 or 25—that would not break the intent of the lifelong loan entitlement being a 30-credit minimum, but it allows 18-year-olds to fall over once or twice during a year and to be picked up in-year, rather than getting another £3,000 taken off their lifelong loan entitlement.

[Mr Perkins]

Q You will be aware that the legislation envisages moving from an academic to a course year, which can start at any time and run for 12 months from there. Universities, like colleges, are traditionally much more used to a big intake at the start of the academic year, checking out later on. Often, they have monetised their facilities over the summer, encouraging foreign students in that period. What sort of challenges will moving to the proposed approach pose for universities? In practical terms, do you see a lot of courses starting at other times of the year or, as it is broadly up to universities what they choose to run, will they end up choosing to run in line with when they do currently?

Dr Norton: Coventry has multiple start dates throughout the year already—we have six, I believe—so the volume of applications may increase throughout the year, which would cause some capacity issues, but overall I think it is a positive.

Professor Rigby: Most universities currently have multiple start dates, even the research-intensive ones, mainly because a lot of international students start their master’s courses in January. In the Bill as written, this is a technical realignment, which means that instead of someone starting partway through a year and their fees running through four years if they are on a three-year course, their fees will run over three years but in practice they will start and end in the same month. It is a technical change.

Throughout the Bill, I have identified a multitude of technical changes that will affect the provision of probably a couple of million existing students in order that, in ’27-28, we will start to see the roll-out of the LLE. Intuitively, I wonder why form does not follow function, in that we should design the LLE and then make sure that the funding system will permit it, rather than changing the funding system ahead and precluding some of the design opportunities that would otherwise reside in the LLE.