Universities: Financial Sustainability

Tuesday 21st May 2024 Lords Chamber

Question

15:03

Asked by

[Lord Young of Cookham]

To ask His Majesty’s Government what assessment they have made of the financial sustainability of universities in England.

[The Parliamentary Under-Secretary of State, Department for Education (Baroness Barran) (Con)]

My Lords, the Government recognise that the sector’s financial position has become increasingly challenging. The financial health report from the Office for Students makes clear that the business models for a significant number of providers must change to ensure that they are financially sustainable. Indeed, all providers must continue to adapt to uncertainties and financial risks. Ultimately, providers are independent from government and, as such, it is for them to decide how they manage their finances.

[Lord Young of Cookham (Con)]

I am grateful to my noble friend. As she says, the universities are independent, but the Government set the framework within which they operate—freezing student fees for seven years and controlling student visas. Government has an overall responsibility to make sure that students get a good-quality education at universities and that they remain competitive internationally. What is my noble friend’s response to the rather worrying report from the Office for Students last week, which basically said that we need to review the business and funding model of universities if they are to continue to maintain their quality?

[Baroness Barran (Con)]

The Government recognise the importance of having a thriving higher education sector which is responsive to the needs of the economy and funded in a way that is fair to taxpayers. We have demonstrated that commitment via our £1.3 billion of capital funding that was announced in this spending review, which is to support universities with teaching and research in key STEM areas and supporting roles in the NHS. As my noble friend said, the Office for Students was clear that providers need to review their business model and that there are very different business models across the sector.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, has the Minister seen that even the Foreign Secretary contacted the Prime Minister to say that a curb on graduate visas could be devastating for universities? Next time she bumps into the Foreign Secretary, could she whisper in his ear that it is easier to cross the Floor of this House than it is down there?

[Baroness Barran (Con)]

I think the noble Lord is aware that the Government do not comment on leaks.

[Lord Cromwell (CB)]

If the Minister is not too busy whispering on the Front Bench, could she confirm whether, if a major university—say, one of the Russell group—were to fall over financially, it would be too big to fail, or would the Government bail it out?

[Baroness Barran (Con)]

If the noble Lord looks at the recent data that has been produced on the financial health of our universities, he will see that larger universities, such as those in the Russell group, are in very good financial health and continue to show significant surpluses. Of course the Government have a role to play in making sure that student interests are protected in the case of a university failing.

[Baroness Royall of Blaisdon (Lab)]

My Lords, does the Minister agree that international students have a positive impact on our skills base, future workforce and international influence? Businesses recently said that they agree. If this is the case, why do the Government want to axe the graduate visa programme? Could it be that they are pandering to the right wing of the Conservative Party rather than thinking of the greater good of our country?

[Baroness Barran (Con)]

The Government recognise the value of international students and are very proud of our international education strategy and what it has achieved. However, the Home Secretary commissioned the Migration Advisory Committee to write a report, which it published very recently, and the Government are considering its recommendations with care.

[Baroness Bloomfield of Hinton Waldrist (Con)]

In light of the recent report from the Migration Advisory Committee—itself no pushover—can my noble friend reassure us that the Government will allow recent changes to postgraduate visas to work through the system before they make further changes, such as severely restricting graduate visas to particular subjects or universities, either of which could severely impact the already precarious financial status of some of our universities?

[Baroness Barran (Con)]

I recognise my noble friend’s concerns. We are committed to retaining the prestige and brand of UK higher education, which has been so successful in attracting international students. I repeat that the Government are reflecting on the findings of the MAC report. However, I point out that it found no widespread abuses of the system but pointed to specific concerns, including the use of recruitment agents.

[Baroness Wilcox of Newport (Lab)]

My Lords, the system is not working for students or universities. The issue with the Office for Students is clear, and the Government have worn down relationships with universities by ignoring this impending crisis. Does the Minister believe that there is a clear duty on the Government to step back and look at the approach that they have been pursuing?

[Baroness Barran (Con)]

I just cannot agree with the noble Baroness. Our universities are tremendously successful. Student numbers, both domestic and international, have risen year on year and funding has increased—for English universities by 50% since 2015-16. Clearly, the report was very helpful, constructive and nuanced in the way that it set out some of the risks for the sector, which need to be worked through.

[Baroness Smith of Newnham (LD)]

My Lords, I declare my interests at Cambridge and the Oxford International Education Group. Could the Minister explain to the House how the Government can say that they feel that higher education and its reputation is very important, and yet the Home Office keeps changing policies? Does that not send mixed messages to potential international students? Could UK plc not be doing a rather better job in terms of international higher education?

[Baroness Barran (Con)]

I remind the noble Baroness that our international strategy has been incredibly successful and hit its targets several years early, with 679,970 students in 2021-22. We have made some changes to the graduate route, for reasons that I think have been well articulated.

[Lord Grabiner (CB)]

My Lords, does the Minister not think that perhaps the time has come to increase the cap? The £9,250 has been in place now for many years, and the only way that many universities are able to make it work is by charging some extortionate fees at the graduate non-regulated level.

[Baroness Barran (Con)]

I appreciate that, but the noble Lord will also understand the pressures that students face. We also have a responsibility to students to make sure that university is affordable.

[Lord Johnson of Marylebone (Con)]

My Lords, I declare my interest as a visiting professor at King’s and chairman of FutureLearn. If the Prime Minister goes ahead with curbs to the graduate visa, would my noble friend the Minister say how we will replace the £12 billion in economic benefits that international students bring to priority category 1 levelling-up areas, including towns such as Stockton, Middlesbrough and Darlington, which receive £240 million of benefits every year from international students at Teesside University?

[Baroness Barran (Con)]

With respect to my noble friend, he makes a very speculative statement, which makes it pretty hard for me to comment on it.

[Viscount Hanworth (Lab)]

The Minister is doubtless aware that the pension fund of university lecturers is mainly invested in Thames Water. Traditionally, the munificence of the university pension scheme was regarded as a compensation for penurious academic salaries. Is the Minister aware of how difficult it will now be to attract people of talent into the profession, given the collapse of the pension scheme?

[Baroness Barran (Con)]

Obviously, the pension scheme is an element, but I am not aware that the entitlement of university lecturers is changing. Clearly, it is up to individual institutions to make themselves as attractive as possible to academic staff.

[Baroness Andrews (Lab)]

My Lords, the noble Lord opposite asked a legitimate question—how poorer areas, which are benefiting hugely because they have universities in their midst, are likely to be affected if the number of overseas students drops and the university becomes in a more precarious and even more fragile state. This morning, on the radio, one university was cited as having a drop of 40% in its overseas students over the past year. How will that affect the university and the community it serves?

[Baroness Barran (Con)]

I think that the noble Baroness, on one level, knows the answer to her question, which is obviously that if there is less money going in, it will have a negative effect. But that is not the real question. The real question is: what are the Government doing to make sure that there is significant investment in those areas? There absolutely has been significant investment in all of the areas the noble Baroness cites, not just in relation to universities but also in colleges and institutes of technology, building the skills pipeline of the future.