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Lord Krebs
That this House takes note of the current challenges of higher education funding.
Lord Krebs (CB)
My Lords, it is a great privilege to introduce this debate. I thank my fellow Cross-Benchers who voted for it. I particularly thank my noble friend Lord Tarassenko, who has chosen to give his maiden speech during the debate; I very much look forward to hearing what he has to say, alongside the contributions of other noble Lords.
When I proposed the debate, my title was “The Crisis in Higher Education Funding”, but the Table Office, in its wisdom, preferred the more neutrally worded Motion we are debating today. While recognising the importance of all HEI providers, I will talk particularly about universities in England. As I started to think about today’s debate, I wanted to begin with a fact, so I asked myself: how many universities are there in England? I contacted the Higher Education Policy Institute, and its chief executive said to me:
“That is a fascinating question and almost impossible to answer”.
His best guess is around 150. I checked with the Higher Education Statistics Agency—HESA—which said that, unfortunately, its open data does not list universities. However, it tells us that there are 285 HEI providers. The Office for Students has 121 universities in England on its register. There are 141 members of Universities UK, most of which are in England. Can the Minister, in her response, tell us how many universities there are in England? She is quickly texting to find out.
Regardless of the precise number, we should be in no doubt that our universities are facing a funding crisis. This is not a case of “Crisis? What crisis?”. The interim chair of the Office for Students, Sir David Behan, has referred to a “significant” funding crisis and has said that universities “can’t just carry on”. In its insight briefing of May this year, the OfS notes that 74 of England’s universities will run a deficit in 2024-25 and that the forecasts of recovery in future years made by universities are based on overly optimistic assumptions, so that by 2026-27 nearly two-thirds are likely to be in deficit. The OfS concludes:
“The current financial climate could mean that some universities and colleges face closure”.
It refers to
“the unplanned closure of a university, perhaps in the middle of an academic year, without arrangements in place to support students to complete their courses”.
The OfS clearly takes this seriously, as it has launched a £4 million tender for auditors to analyse what the document describes as “market exits”. Universities themselves are responding to the crisis. Estimates suggest that about 70 universities have in place redundancy programmes or are closing courses or departments.
The main factors leading to this funding crisis are well known and include the following. First, the student fee has not increased since 2016 and therefore has been eroded by about 30% in real terms. The Russell group estimates that its members lose £2,500 per year for every home student they teach. Secondly, most if not all universities have become dependent on income from overseas students to subsidise the rest of their activities. Thirdly, the number of overseas applicants for taught master’s courses has dropped following changes in the visa rules that prevent them bringing families with them.
In addition to these three core reasons, there are other factors. Many universities, for example, have ageing buildings that require upgrading to meet net-zero requirements. Government grants to universities have gone down from 30% to a mere 13% of income in the past 10 years. In my own university, Oxford, out of a £1.6 billion income, 11% comes from government grants. Furthermore, research funding from the Government and from charities does not cover the full costs so, paradoxically, the more successful a university is at winning research grants, the further into deficit it goes. The Russell group estimates that only 69% of full economic research costs are funded. UKRI has said there is a £5.3 billion black hole in research funding. Does the Minister agree with that number? If so, does she think it matters?
Given that we know the main causes of the crisis, what are the options for responding to it? Should the Government take the view that universities are independent institutions that manage their own finances, and that the crisis will be resolved by market forces, or should they take a strategic view of the future shape of universities in this country? So far, the signals have suggested that the Government are inclined to the first of these, a laissez-faire policy, but I hope the Minister will tell us that that is not the intention.
Discussion in recent months has concentrated in particular on whether the Government would allow individual universities to go bust. For instance, on 15 August on “Channel 4 News”, the Minister was asked:
“Are you willing to see a university go bust? Because there are some institutions – you’ll know where they are – that are at that point now”.
The Minister replied:
“Yes. If it were necessary. Yes, that would have to be the situation. But I don’t want that to be necessary. I want us to find a way for there to be financial stability for universities, and most importantly, for the students that they are serving into the future”.
The Minister says that she wants to secure financial stability for universities. How might this be achieved? One answer would be simply to spend more public money on universities. Figures on the Statista website show that our public expenditure on higher education, as a proportion of GDP, is lower than any other country in Europe apart from Luxembourg, about half that of the United States and under half that of France and Germany. Nevertheless, I doubt whether the Minister will tell us that the Government’s response to the crisis is to inject more public funding.
A second option might be to reverse the visa restrictions and encourage more overseas students to come and participate in taught master’s degrees, and allow them to bring their families. According to HESA and the OfS, one in six universities earns more than a third of its income from overseas student fees, and it has been estimated by one source that at least a quarter of the total income for the sector comes from international student fees. There is the question, however, of whether it is appropriate for our universities to be dependent on the cash cow of overseas students. That is worthy of debate, and other noble Lords may wish to raise it. I do not have time to go into it, but I hope the Minister will tell us whether it is the Government’s view that dependence on this cash cow is central to their strategy for the future of the university sector.
A third option, raising the student fee from £9,250 to over £12,000, in line with inflation, would be highly unpopular and might well deter UK students from attending university. The average student debt on graduation is said to be £45,600, and the Sutton Trust reports that, for students from the poorest families, this rises to over £60,000. According to government figures, graduates pay 9% of their income once they are earning over the threshold for starting to make repayments. This is really a swingeing tax on young people. Indeed, if one considers the student loan fee as a graduate tax, those who have done introductory economics will be familiar with the Laffer curve, which might suggest that revenue to universities might actually go down rather than up if fees were increased.
However, I want to suggest that, while the Government should act to help solve the short-term crisis, there is a longer-term question: is the university sector as a whole fit for purpose? Could the crisis be turned into an opportunity to rethink the size, shape and role of the university sector? Once we know how many there are, we might be able to ask, “Is that too many or is that too few?”
The Secretary of State for Education herself has said that it may be time to “reform the system overall”. We know from history that universities are very adaptable. They have adapted in the past and, if government policy changed, universities would adapt to whatever change the Government produced. I very much hope that the Minister will tell us that the Government intend to take a strategic view of the university sector, instead of leaving it entirely to the market.
If she does, perhaps I might make one suggestion—one among many possibilities. A key objective should be to encourage greater diversity of purpose among universities. The current funding arrangements for universities tend to drive them towards convergence. They are essentially competing to climb up the same ladder and I question whether this is desirable. There is of course already considerable diversity of mission among universities and government policy could be deployed to support and encourage greater diversity.
We all know, because it is often said, that the UK has some “world-leading” universities in research and teaching. The Minister said in her Channel 4 interview:
“We’ve got world leading universities in this country. We’ve got four out of the top ten universities in the world. We’ve got 15 out of the top 100 universities”.
I believe she was referring to the recent QS rankings in which Imperial, Oxford, Cambridge and UCL were in the top 10. We are the only country other than the United States to have four in the top 10, and the 15 in the top 100 include two Scottish universities, which is not relevant to today’s debate but nevertheless a very important mark of distinction.
But, even if you take a generous view of what “world-leading” means and go further down the ranking list, a majority of English universities would not be counted as “world-class” or “world-leading”. That does not, however, diminish their importance. Some may be world-class in particular subject areas, while others might be fulfilling important roles such as technical and vocational skills training for the economy and providing training for professional qualifications such as nursing. We should celebrate and encourage this diversity of mission and ensure that government policy supports and steers it.
Suppose, for example, that we were to accept that England could afford to support a relatively small number of research-intensive universities—I put a number in my speech notes but I will not give it because that is a hostage to fortune—with global aspirations for attracting talent, being at the forefront of research in many fields and spinning out companies that will create wealth in the future. Suppose that, at the same time, we were to agree that many other universities should have, as a major part of their mission, training and skills for the local economy, working in partnership with business and complementing the excellent work of FE colleges, to build sustainable skills-based jobs in the area, alongside providing professional qualifications. This initiative could be a genuine contribution to economic growth and to supporting disadvantaged communities. Of course, the reply will be that some universities are already doing that. So what I am calling for is nothing radically new but a more overt recognition of the diverse role that universities can play and the development of government policy to support this diversity.
In summary, my proposal is that the Government should not simply stand back and allow market forces to determine the future size and shape of our university sector. Education is a public good and therefore should be shaped by what the country needs and shaped by the Government rather than by the random exigencies of the market. I have put forward one idea. There may be others for encouraging diversity of mission.
As an aside, some noble Lords may be aware that in the United States, facing declining student enrolment numbers, universities including Stanford have diversified into becoming retirement homes—university-based retirement communities. I just float the possibility that we might be able to solve the social care crisis and the university funding crisis with one manoeuvre. I am not being too optimistic there but just floating a thought.
I look forward very much to hearing what other noble Lords have to say on this and to the Minister’s reply. I beg to move.
Lord Howarth of Newport (Lab) [V]
My Lords, the Government are readying us for grim times ahead, though my noble friend the Minister remains genial and I am so glad to see her in her place.
I gently submit that we cannot afford not to refund our universities. It was an extraordinary dereliction on the part of the previous Government, by freezing fees for years on end, to allow the present crisis in the funding of higher education to develop. An extensive and thriving university sector is crucial to our economic, social and cultural progress. The new Government should not contemplate institutional bankruptcies, market exits or enforced mergers. These would be too damaging for students, staff, the academic enterprise, host communities and local and regional economies. The Government should treat investment in the HE system—and schools as well—as capital investment. Human capital, intellectual capital, is the capital that is most valuable in the 21st century. If the accounting conventions do not permit this, disregard them. The markets will not mind.
In those relatively carefree days of opposition back in March when she delivered her Mais Lecture, my right honourable friend the Chancellor distinguished between the then Government’s indiscriminate constraint on all government borrowing and Labour’s willingness to allow a greater freedom to borrow to invest. She spoke of the virtues of supply-side policies to enhance human capital and spur innovation, and of the wastefulness of excessive austerity. Her vision was of a smart and strategic state which would identify sectors in which Britain could enjoy comparative advantage in a global marketplace. Higher education is an obvious instance. Investment would be fostered in partnership with business and the OBR would report, as indeed it already has, on the long-term benefit of capital spending decisions. She said:
“Investment matters not just for what it can physically build, but for the ideas it can nurture”.
She praised the part played by our universities in enabling Britain to rank in the top five countries in the Global Innovation Index and made the point that innovation must be nourished with reliable sources of funding. To grow our economy, she also noted, we cannot rely on just a few pockets of the country but must mobilise the human potential in every town and city.
So the Chancellor herself has provided the clear rationale for borrowing now to invest in a rescue package for our HE system. Of course, it must be a well-designed package, drawn up not only with Universities UK but with business leaders and others, and not a bailout of poor academic leadership and weak management.
As for the ongoing funding of university teaching, there is now nothing for it but to bring in a graduate tax. It would be less of a deterrent to young people contemplating university-level education than student loans at their present atrocious rates of interest, and it would have the merit of being what it said on the tin. I would prefer HE, being a public as well as a private good, to be funded from general taxation, but that has been ruled out for the foreseeable future.
Domestically generated funding must be sufficient to end the distorting and demeaning dependence of our universities on charging exorbitant fees to foreign students. When the Government turn their attention to alleviating poverty in our society, they should not omit to consider the hardship faced by some students.
As for the funding of blue skies research, the Government should not stint in providing funding via the research council to the ablest academics in all fields of inquiry. What will transpire can never be predicted, but the Government should not hesitate to invest in the brilliant academic talent that, somehow or other, we still have in our universities. The cost is trivial; the potential benefits are immense.
Lord Willetts (Con)
My Lords, I congratulate the noble Lord, Lord Krebs, on calling this debate and thank him for his exciting vision for our universities as the care homes of the future. I declare my interest, especially if we are talking about care homes; I am a visiting professor at King’s College London. His speech correctly identified the pressures that universities face, on both their research funding and their teaching funding. They are linked in various ways, including because overseas student fees, which used to help subsidise the cost of research, are increasingly being used to subsidise the cost of teaching, which puts extra pressures on research funding. The DSIT capacity to do research is being cut because the DfE will not increase teaching fees for undergraduates.
I think it is important that we tackle the pressures on the cost of teaching students through an increase in the fees that they pay. This is important, above all, because of the interests of students themselves in a well-funded higher education. It is also in the interests of the wider economy to have well-funded, effective higher education, with good-quality teaching.
I particularly draw the Minister’s attention to an excellent piece of research showing the economic benefits of universities, and of creating more universities, by two academics at the London School of Economics, Professor John Van Reenen and Anna Valero, who now both happen to be in the Chancellor’s Economic Advisory Council—a very useful place for them to be located.
If we are to increase funding for teaching in universities, the Minister has a mechanism available to her—fees. There may be arguments for more selective funding of research. The UKRI budget is already allocated in a pretty selective way; a very high proportion of current research funding goes to the most prestigious, elite, research-intensive universities. More research funding could be allocated, if that is what the noble Lord, Lord Krebs, wants, but it would not tackle the underlying need to have better-funded teaching across the entire sector.
There is no brilliant alternative. Of course, if fees go up, it is right to expect clear evidence that this will mean better quality teaching. My noble friend Lord Johnson of Marylebone, who increased fees from £9,000 to £9,250, did so in association with that much more rigorous assessment of teaching quality in universities.
Most depressing is the belief that this mechanism is somehow no longer available for us, despite the fact that almost every party represented in this House now has in the past used precisely such a mechanism to fund higher education. It has been the cross-party agreed basis for funding higher education over the past 20 years. I have heard people say that students cannot afford it because of the cost of living crisis, but we know that students do not pay upfront. We also know that it does not affect the amount that graduates repay; there is a repayment formula for that, which is highly progressive. Rightly or wrongly, there are no longer interest rates on graduate debt. It is reasonable to expect a prosperous middle-aged person to pay back for a couple of extra years if it means that the university education of the younger generation is properly funded. I very much hope that the Minister will accept that this is one mechanism at her disposal to tackle this financial crisis.
Baroness Garden of Frognal (LD)
My Lords, UK universities are a source of national pride. Their reputation for research and teaching attracts not only the brightest and best of UK students but those from all parts of the world. However, they are, as the noble Lord, Lord Krebs, set out so brilliantly, currently under severe financial pressure as they face challenges on multiple fronts.
I think it was Lord Dearing who commented that the beneficiaries of higher education are the individuals, the state and employers. Should these not also be the people who contribute to our universities? We are well aware that the income from students has not kept pace with inflation, but successive Governments have been reluctant to raise student contributions, knowing the hardship that many students face. Government contributions are essential, of course. Perhaps we might look to employers to increase their funding, not only for teaching, which is troubled and has seen the cutting of some important programmes, courses and provision, but for research, where funding has also faced limitations.
Our woeful decision to leave the EU has seen a huge decrease in EU students studying here. It is to be welcomed that we have seen a partial about-turn on funding from Horizon, which made such an impact on our research through both collaboration and funds. We hope that the EU will welcome our return to fully participating in a programme to which UK researchers contributed so greatly.
Anti-immigration policies have had a dangerous effect on the UK’s reputation for welcoming overseas students. Those students provided not only much needed income but, perhaps more importantly, diversity and international friendships, which greatly enhanced the experience for home students. The changes to immigration policy have sent out messages that the UK does not welcome those from overseas. These damaging moves include the hit on dependants. Students and their dependants are not permanent residents—the vast majority will return to their home countries after their period of study—so why such a vicious policy?
Our lack of welcome is a boost to other countries which open their doors more readily and cream off many of the high achievers who would otherwise have studied here, enjoyed living in the UK and become British friends for life. Given how many international leaders have studied in the UK, this soft power can be enormously beneficial to future international relations.
The British Academy has major concerns about the impact on the social sciences, humanities and the arts for people and the economy—SHAPE, as it is calling it. These are essential programmes if we are to grow the people who will lead our institutions. Of course we need to remain leaders in science, engineering and technology, but the arts play a critical role in life, growth and productivity. The creative industries are one of the jewels in the UK crown, making a major contribution to the economy and to our well-being.
Increases in the cost of living have a disproportionate effect on students, who are traditionally strapped for cash, and we hear horror stories of some student accommodation that is not fit for purpose but is often all that students can afford. What is being done about student accommodation?
The Labour Government have committed to reviewing HE funding but must act fast if we are not to see some fine institutions damaged beyond repair. As one who went to university many years ago when we paid nothing, I would be happy to pay a graduate tax late in the day. But why not target those of us who had free university education? Has thought been given to restoring grants, implementing the lifelong learning entitlement from 2026 and, as a first step, introducing credit-based fee caps to facilitate growing demand for accelerated part-time study? Valuable organisations, such as the Open University and Birkbeck, have done much to bring HE to those who might not have considered it. They deserve a boost of this sort.
It is tough on young graduates to have to embark on adult life with eye-watering debt around their necks. As the HE situation grows grave, what measures are the Government considering to rescue these institutions of which we are so justly proud, to ensure that they not only survive but flourish?
Lord Rees of Ludlow (CB)
My Lords, the UK’s whole post-18 education system surely needs not only a greater funding stream but more institutional variety, and increased flexibility in its offerings.
There is currently a systemic weakness. The missions of individual institutions are not sufficiently varied. They nearly all aspire to rise in the same league table. Most of their students are between 18 and 21, are undergoing three years of full-time, generally residential, education, and are studying a curriculum that is probably too narrow even for the minority who aspire to professional or academic careers. Even worse, the school curriculum is too narrow as well.
Students should be able to choose their preferred balance between online and residential courses, and to access distance learning of higher quality. We need a blurring of the damaging divide between technical and university education, and a consequent shift towards the attitude that a vocational diploma has the same status as a degree. We should abandon the view that the standard three-year full-time degree is the minimum worthwhile goal. The core courses offered in the first two years are often the most valuable.
Moreover, students who realise that the degree course they have embarked on is not right for them, or who suffer problems of various kinds, should be enabled to leave early with dignity, with a certificate to mark what they have accomplished. They should not be disparaged as “wastage”. More importantly, they—and everyone else—should have the opportunity to re-enter higher education, maybe part-time or online, at any stage in their lives. This path could become smoother if there were a formalised system of transferable credits across the whole system, as urged in the Augar report supported by the previous Government, and a flexible grant or loan system.
Admission to the most demanding and attractive courses is naturally competitive, but the playing field is still far from level. Many 18 year-olds of high intellectual potential have had poor schooling and suffered other disadvantages, often dating from their pre-school years.
It will be a long slog to ensure that high-quality teaching at school is available across the full geographical and social spectrum. In the meantime, it would send an encouraging signal if UK universities whose entry bar is dauntingly high were to reserve a fraction of their places for students who do not come straight from school. They could thereby offer a second chance to those who were disadvantaged at 18 but have caught up by earning two years’ worth of credits at other institutions or online. Such students could then perhaps advance to degree level in two further years.
What about graduate-level education? In the US only a minority of universities have strong graduate schools. That is a model which, as other noble Lords have said, the UK should move towards.
I shall say a word here about foreign students. We should surely welcome talent at graduate level, especially from the global South—and not just for the money those students bring in. Indeed, we should foster international north-south collaborations in advanced teaching and research—in food science, health and clean energy, for example. This could prevent a widening gap and resist brain-draining of the talented students to the north, so that they can pursue careers that narrow their own nations’ gap with the north.
Universities are currently one of the UK’s distinctive strengths, but we should not be complacent. The sector must not be sclerotic. A rethink is overdue if we are to sustain its status in a changing world. It needs to be responsive to changes in needs, lifestyles and opportunities. It will then be able to offer springboards to the long-term prosperity not just of our nation but of the world.
The Lord Bishop of Sheffield
My Lords, I am grateful to the noble Lord, Lord Krebs, for focusing the attention of the House on the HE crisis and for the opportunity to contribute to this debate. I look forward to the maiden speech of the noble Lord, Lord Tarassenko.
As the Bishop of Sheffield I have close ties with both universities in the city, the University of Sheffield and Sheffield Hallam University. I am told that those two institutions support more than 19,500 jobs and generate more than £1 billion annually for the local economy. I know at first hand that they bring a rich cultural diversity to our city. What is true in Sheffield is true across the country: universities are generally hugely beneficial to the communities within which they are situated.
The Church of England believes that higher education should be in the service of the common good—that is to say, not merely the private good of personal enhancement but the public good of benefit to the community and society that it derives from the education of its citizens. For example, working together, Sheffield University and Sheffield Hallam University support communities across South Yorkshire in a variety of ways, and I would like to celebrate just three. First, they have partnered with local and national government to create the South Yorkshire investment zone, bringing jobs and billions of pounds in private investment to the area. Secondly, their students volunteer and work on placement years across health, education, social care, law and other areas, directly impacting the experience of local people of these essential public services. Thirdly, their HeppSY partnership supports those at risk of missing out on HE to make informed and inspired choices about their future.
Civic activities such as these are seriously threatened by the financial crisis in HE and the perfect storm currently battering the sector. In the past few years, as noble Lords have mentioned, there has been a drastic drop in EU students while international students from further afield are facing visa restrictions. UK students have been poorly placed to cope with the cost of living crisis, and I gather that a lower birth rate in the early 2000s means that there are reduced numbers of young people in the cohort currently in sixth-form and FE colleges. As a result, there has been increased competition between institutions for the same smaller pool of students, and the pinch has been felt most keenly by the smallest of our HE institutions.
Among these are the universities that belong to the Cathedrals Group, 14 church-founded universities committed to higher education for the common good. These 14 institutions make higher education disproportionately available to underserved communities, such as rural and coastal areas. They typically have a higher proportion of students who progress to university when they are older and who are the first in their family to make that step. I mention the Cathedrals Group simply by way of illustration. Our HE sector as a whole is under threat, and what is at risk is not just the private good of students and potential students, whose opportunities to study and to enhance their prospects have been eroded, but the common good that universities bring to the communities in which they are set.
Baroness Wolf of Dulwich (CB)
My Lords, I add my congratulations to the noble Lord, Lord Krebs, on securing this debate and declare an interest as a professor at King’s College London, a trustee of the Council for the Defence of British Universities and a member of the Augar review of post-18 education and funding in England.
We are all very aware of the declining value of student fees, but I also emphasise to noble Lords the precipitous decline in direct government top-up funding for high-cost subjects. A university gets little more for a home student in chemistry or bioengineering than for one studying business or law, with horribly distortionary effects. We highlighted this in the Augar review with, I have to say, minimal effect. We have some special problems in this country, but this is a global issue, and that is what I shall say a little about now.
Countries everywhere have expanded student numbers, often at speed. They recognise citizens’ aspirations and the importance of graduate skills, but the background is sluggish growth. University is still a route to most of the best jobs, but the average return for a degree inevitably falls and government budgets are under increasing strain. The simplest response to this is always to reduce per-student funding. At the moment, England has higher levels of support per home student than any other part of these islands. Scotland has student number controls and has recently reduced the number of places it funds, and still spends markedly less per student than England. Northern Ireland has lower fees and lower funding. The Republic of Ireland is committed to demand-led enrolment without student fees, although it levies a so-called contribution. Its enrolments have risen, but its spending per student has gone down substantially. The European University Association confirms that this is the modal pattern: enrolment up, total government spending often up, spending per student down. In the USA many states are cutting funding for their public systems, and if you talk to Australian or Canadian vice-chancellors it feels like you are still at home. The challenges, the worries, the difficulties and the solutions that are not quite as attractive as they seemed are all the same.
So, with no easy answers on finance to be borrowed from elsewhere in the world, I agree with the noble Lord, Lord Krebs, that we really need to turn our thinking around a bit. We should start to think not just about how to top up funding but about what it is that we want to fund, and therefore how much and how we want to fund the different parts. What does it take to deliver what we recognise as high quality in engineering or law? When we look across the world at everybody cutting funding, cutting per-student funding, increasing class sizes, abolishing most personalised feedback in many of our institutions, what does this do? What happens? What do our students learn? How far are we charging students and taxpayers for what economists call “signalling”—which in this case is having letters after your name—rather than a transformative experience?
I do not think we know nearly enough about this and I do not think we know nearly enough about what makes different institutions more or less efficient in how they use their funding. With the current model running into the sand, not just in England but everywhere, we should be thinking much harder about what we want university education to be and what universities should be doing in a mass system where we want to respond to the desires and aspirations of the entire citizenry, and then we should think about what the different components cost and how we might best pay for them.
Baroness Bennett of Manor Castle (GP)
My Lords, the parlous state of our universities—extending far beyond, although deeply interrelated with, their funding crisis—was a subject of considerable discussion at Green Party conference last weekend, so I thank the noble Lord, Lord Krebs, for securing this timely debate.
I am going to focus on the deeper and broader problems of which the funding crisis is a symptom rather than a cause. The University and College Union (UCU) fringe, at which I spoke at Green Party conference, summed it up with “Cancel the Market”. The chair of the Office for Students recently claimed that the “golden age of universities” could be over. That is not how recent decades look to growing numbers of academics and other workers in universities, to students or to the communities that house them.
Forced by neoliberal ideology to become competitive businesses, with control taken from communities of scholars and put into the untender hands of business managers, universities have certainly grown their shiny, glass-fronted buildings—and their debt loads. They have added to GDP with massive student fees that weigh —unpayably—on their graduates for decades. They have presided over growth in staff numbers—increasingly, low-paid workers on zero-hours and other insecure contracts. Universities have bulged across disadvantaged communities and then risked dumping them deeper in the financial mire. I was in Hull last night, where one in 10 academic staff faces the chop and the city faces a significant economic blow.
The neo-liberalisation of the university is a trend that has progressed, to varying degrees, around the world. It has been accompanied by the meteoric rise of the work of the website Retraction Watch—exposing fraud and error at startling levels—and the replication crisis, a growing area of literature and of great concern. This is not an accident. It is what the market—what publish or perish—demands: volume and rankings, not innovation and sense.
Visiting universities, I often see that the most celebrated academics are those who have produced a spin-out company, a marketable product. That attitude has seen, particularly from the former Government, a drive against the humanities and creative subjects, dismissed as luxury, unnecessary items, “More STEM, more STEM—there’s money in it.”
At the Green Party conference at the National Education Union fringe, a despairing student from a fast-expanding and hopelessly overstretched aeronautical engineering course asked, “What do we do when the universities collapse?”
Positively, I would say that this direction of travel has come not from within universities but from ideological forces here in Westminster, but universities, students, academics and communities want something different and they have lots of ideas. We have to look to them for the ideas for how to repair this situation.
I also note the Slow Knowledge movement, as charted by Cal Newport. His model of slow productivity has three principles: do fewer things, work at a natural pace and obsess over quality. How do we create institutions that do that? How do we take this crisis of funding and turn it into an opportunity—as the noble Lord, Lord Krebs, said—to change direction?
The world needs our universities to generate knowledge and wisdom to reshape our broken economic, social and environmental systems, not just debt and new profit opportunities for planet-wrecking products. To quote the Australian academic Tyson Yunkaporta, founder of the Indigenous Knowledge Systems Lab at Deakin University:
“I’ve been chipping away all the bits of the Age of Reason that contain world-terminating algorithms and I have to tell you it’s getting a bit thin”.
Lord Trees (CB)
My Lords, I thank the noble Lord, Lord Krebs, for securing this important debate.
There are two major problems converging now on the higher education sector: first, a level of underfunding, with an estimated 40% of institutions likely to be running a budget deficit this year and, secondly, an eye-watering amount of accumulating student debt, which in England alone is approaching £236 billion. It is increasing exponentially and much of it will be unpaid. There is no doubt that our best universities are world-class and a jewel in the UK’s crown, and our objective should be to ensure their financial sustainability. However, I question if we need all the universities that exist.
The seeds of this crisis lie in the policy of the then Prime Minister Tony Blair in 1999 to have 50% of 18 to 30 year-olds attend university. Following this, the number of UK higher education institutions rose by 45%—according to the numbers I have been able to get—up to 2021, with, sadly, an attendant fall in further education colleges by 40% over the same period.
The introduction of fees paid by students was meant to introduce market choice, but virtually all institutions that became universities have charged the maximum fee, irrespective of the quality of programmes offered, and many young people have been encouraged to pursue expensive degree programmes of questionable worth. The Augar report in 2019 concluded that too many students were being recruited to poor-value higher education courses, with both poor graduate retention and poor graduate outcomes. Many students may have been better served by vocational programmes preparing for employment and a defined career path.
In expanding the numbers of universities and university students, we have reduced their unit of resource, such that we are not now properly funding those quality institutions providing the academically and technically demanding qualifications that we need in certain key sectors. At the same time we are underfunding the FE sector, which provides the skills training we are desperately short of.
An example in the HE sector with which I am familiar is veterinary education. Our UK vet schools are world-class, with five in the global top 20. The funding for a veterinary degree programme is about £20,000 per student per year, but the estimated true cost to provide that education is £25,000. To compensate for this shortfall, many vet schools are admitting substantial numbers of overseas students, who pay £30,000 to 40,000 a year in fees. Currently, over 20% of our veterinary graduates from UK vet schools are overseas students who are less likely to work in the UK, yet we are desperately short of vets.
This pattern is repeated in many other degree programmes that provide high-quality graduates urgently needed for our strategic sectors, and direct government support for these programmes needs to be adequate. I am not sure whether increasing top-up fees can be the solution, because presumably that will mean increasing student borrowing and further escalating the massive total of student debt. At the same time, greater investment in more vocational college and work-based programmes, including apprenticeships, will help provide the skills training we need so desperately.
I suggest that we are currently failing the country’s needs and the capabilities of our young people throughout the spectrum of tertiary education. Let us focus the finite resources we have in an evidence-based way to address the strategic needs for our economic and intellectual development.
Baroness Clark of Calton (Non-Afl)
My Lords, let me declare an interest: I benefited from the expansion of university education in the 1960s and received free tuition and generous means-tested maintenance grants, at both undergraduate and postgraduate level. This was the only reason I was able to pursue a career in law. Over the years at different times I have been privileged to be a member of the court at three universities: Edinburgh, Edinburgh Napier and, more recently, until 2022, the University of Dundee. Drawing on my experience at Dundee, I will illustrate some economic benefits of one university in one community—that is in Scotland, of course.
A recent economic impact assessment for the University of Dundee, which has an outstanding research record, concluded that directly or indirectly the operation contributed £449 million and 6,760 jobs to the city of Dundee’s economy. It contributes £975 million and 9,410 jobs to the Scottish economy, and it makes an enormous contribution to both the UK economy and to the international economy. The University of Dundee has an outstanding research record. It is a modern university and noble Lords may agree that it is perhaps not given the same research funding and opportunities as some of the older universities, so it has made that enormous contribution despite that.
Looking more generally, a study for Universities UK in 2023 found that, in 2021, the university sector directly or indirectly supported 76,800 jobs and added £71.3 billion of value to the economy. Educational institutions all over the UK contribute in many and varied ways to the economy, at both local and national level, and noble Lords have given us some examples today.
It is true that higher education, including university education, is a devolved function, for which the Scottish Government have responsibility. However, the economy of the UK and UK government policies have a great impact in all parts of the UK, including Scotland. An example of this impact is the immigration changes to family visas and post-work visas, which we had have heard about from other noble Lords. I point out that, in Scotland, these policies may have even greater impact because of the different model in Scotland, where we have no tuition fees but cap the number of students. These are serious problems for Scotland.
The wider issues relating to the purpose and funding of higher education, which noble Lords have touched upon, have been too long neglected by successive Governments, who have made piecemeal changes and short-term solutions which sometimes exacerbate the problems. We have heard about the problems: inadequate and short-term funding, high inflation, Brexit, Covid, incoherent government policies of internal competition—I exclude the present Government from that—heavy-handed regulation and sudden policy changes, structural inequalities, and long-standing pension and staffing issues, particularly low-paid short-term contracts. These can all be added to this unhappy picture.
Much as we have praised the research functions of our universities, there is constant underfunding in virtually all our methods of research funding. Our greatest problem is to face up to some fundamental questions. What is the public good that we want universities and other higher education institutions to achieve? How best can that be achieved and funded for the future?
The purpose of my contribution today is to say that I recognise that the new Government have many problems to deal with, and I sympathise. But higher education is so important to public good in its widest sense, as well as integral to the Government’s policies of economic development, that the Government must take action. I urge the Government to work actively and urgently with the devolved Governments and the regions to bring people together to find the short-term solutions to the many problems we have. But much more is required.
Royal commissions appear to have fallen out of favour, but we need some research. We need evidence-based solutions and cross-party consensus to consider the purpose, future and funding of higher education, and how the public good can best be served. We have heard many ideas put forward today, some of which I agree with. The Government need to push this forward. Sorting out the higher education system is essential if the Government are serious about economic revival, fairness and justice in opportunities.
I think a royal commission would be a way forward. There are obviously other models, but I urge the Government to plan now for a long-term solution. The provision of creative solutions and investment in higher education is one of the best ways to help this Government achieve their economic ambitions, and it will also transform lives and communities. That, perhaps, is just as important.
Baroness Warwick of Undercliffe (Lab)
My Lords, looked at objectively, the crisis facing universities seems inevitable, given that the two key elements of their income have been undermined. Government grants have been cut by 78% over the last 12 years, and the level of fees paid for tuition in 2012 has not been revalued since then, so inflation has reduced £9,000 to £5,942 in real value. It is scarcely surprising that the sector regulator expects at least 40% of providers to be in deficit this year. As the noble Lord, Lord Krebs, and others have highlighted, research excellence is also at risk, as the funding method for our universities’ world-class research has been undermined as well.
Fees from international students, who pay the full cost of their tuition, have been the mechanism for trying to bridge these ever-increasing gaps in funding, and this helped while the numbers remained buoyant. But the numbers are inherently unstable and subject to, among other things, political changes in immigration policy. The drop in numbers this year reinforces this. I hope that the Minister today will undertake to change the previous government rhetoric on international students to restore confidence that the UK will be an open and welcoming place for them.
Recent independent scenario-planning shows that a significant proportion of universities are vulnerable to reductions in international student numbers, increased expenditure, and reduction in growth of undergraduate students—what UUK has called “a perfect storm”. At the same time, it is important to recognise that students, too, have been directly hit. Frozen household income thresholds and inadequate maintenance increases mean that the maintenance loan falls £582 short of covering living costs every month. Pressures on staff are leading to demands for pay increases to mitigate rising living costs.
Universities have not yet sunk under these pressures. Most have introduced restructuring and efficiency programmes. Some very unpalatable course closures have been made, which will inevitably restrict student choice; estates are being neglected; and carbon reduction plans are stalled. This cannot continue without irreparable damage being done. I am glad to say that our Government have recognised this; they have said that they are committed to a sustainable funding model which supports high-value provision. They are not short of suggested approaches as to what that funding model should look like, including from Members of this House.
The Secretary of State has said that she intends to “reform the system overall”, which may be eminently sensible, but it will inevitably take some time, possibly considerable time. In the meantime, all the pressures on higher education will continue, to the detriment of students, institutions at risk, and
“powering opportunity and growth and meeting the skills needs of the country”,
to quote Minister Janet Daby.
I urge the Secretary of State urgently to talk to Universities UK to ensure that her longer-term ambition does not mask the need to stabilise the system now. UUK has proposed measures that will
“create … space for a wider review of university financing”,
and I hope that my noble friend will ensure that the Government respond speedily.
I have focused on universities, but we have received some telling evidence from the FE college sector, where higher education is a relatively small but strategically important part of the provision. It, too, is facing increasing financial pressures. I refer specifically to the fact that demand in key areas such as construction, engineering, and health and social care is outstripping the funding that it has available to provide them. I hope that my noble friend the Minister will refer to this in her response as well.
Lord Johnson of Marylebone (Con)
My Lords, I congratulate the noble Lord, Lord Krebs, on securing this important debate. As ever, I find myself in very strong agreement with my noble friend Lord Willetts, who I note incidentally may not be the only candidate in this House for the role of Chancellor of the University of Oxford but is the only one who, day in, day out, demonstrates his commitment to the future of the sector and would be absolutely splendid in that role, were he to be successful in that campaign.
I turn to the issue at hand. I want to say right at the outset that I truly welcome the change in tone from the new Government towards the university sector. It is a wonderful breath of fresh air not to have the negativity and university-bashing that has characterised too many of the airwaves from the previous Government.
In particular, I warmly welcome all the positive messages that the new Government have been sending out about international students, who make such a huge contribution to the success of our higher education system, society and broader economy. That said, I of course agree with others, including the noble Lord, Lord Krebs, who have pointed out that we should avoid an excessive dependency on the fee income from international students. We need to put in place a funding system that is sustainable and does not leave us exposed as a country to volatility and factors well beyond the control of the sector itself.
However, I do not think we need a long, two-year review to come to a conclusion as to what a sustainable system is. My view remains very much that the current model, as Winston Churchill might have put it, is the worst imaginable—except for all the others. There is essentially nothing wrong with it. It does the job you need a funding system to do in three key respects: it maintains the unit of resource, potentially, for what we need to have a world-class HE system; it is fair to the taxpayer; and it removes barriers to access because, as my noble friend Lord Willetts said, fees are not paid upfront by the student but underwritten by the Government in the form of a loan. There is nothing structurally wrong with the model we have, except for two flaws, which are fixable: first, it is not inflation-proof and, secondly, there is no link to quality. We fund volumes—bums on seats—rather than outcomes; clearly, that is unacceptable.
The Cameron Government tried to address those two flaws and, in 2017-18, we allowed a system whereby fees were indexed with inflation, but only for institutions that were able to demonstrate high-quality outcomes as assessed by the teaching excellence framework. I strongly think that we should return to that model. Had we continued with that system over the past six years, many of the institutions that are now forced to make these rationalisations would not be doing so. A mid-sized institution such as Teesside would have £30 million a year of additional tuition fee income, had we continued to upgrade tuition fees in line with inflation over recent years. Such a system is, frankly, the only game in town and everybody needs to get real and recognise that, given the current fiscal environment.
There is not a chance in hell that we are going to return to a system of funding tuition fees through the teaching grant. There is a political window now, early on in the Parliament, for the new Government to put in place a progressive ratchet of fee uplifts with inflation over the next few years, and I urge them to do so.
Lord Tarassenko (CB) (Maiden Speech)
My Lords, it is a great honour and privilege to address this House for the first time. I must first thank noble Lords for their warm welcome, and the officials and staff for their guidance and advice. Everyone has made great efforts to pronounce my name correctly. It may be a very common name in Ukraine—my paternal grandfather was born in Kharkiv—but it is much less common in these parts. For the record, I should add that my maternal grandfather was born in a small village in northern Brittany. I also thank my two supporters, the noble Baronesses, Lady Blackwood and Lady Royall, each of whom does much to ensure that the University of Oxford maintains its excellence in research, teaching and innovation.
Within five years of arriving in this country from France, aged 13, I was privileged to be offered a place at that very same university to study engineering science. Ten years after leaving to work in industrial R&D, I became a professor in the same department. Looking back, I value the freedom I was given to pursue research into machine learning before it was even called machine learning. Sceptical colleagues would tell me that learning from data using neural networks had no future; today, machine learning research in our higher education sector is world leading, especially in its application to fields such as healthcare, with access to uniquely valuable datasets.
The exam question before us today is how we address the current challenges of higher education funding. As already noted by the noble Lord, Lord Krebs, according to the QS rankings, the UK has four of the top 10 universities in the world and 15 of the top 100. It is from the perspective of these research-intensive universities that I will tackle the exam question.
I have had the privilege of supervising 70 PhD students during my academic career. For the first 25 years, 60% of my research students were British; in the last 10 years, 20% were. We should of course be wary of small-sample statistics, but other data from Russell group universities confirms this trend: there has been a clear decrease in the percentage of UK-domiciled graduates going on to doctoral studies since 2017, when the first home students to have paid £9,000 per annum in fees were graduating from English universities.
We should not be surprised: which English student with a first-class degree is going to want to stay at university for a doctorate and accumulate further debt when they already have £50,000 of debt at age 21 or 22? For STEM subjects, the stipends to support PhD students are much lower than the sums a bright student can earn for doing almost anything else. The reduction in the number of UK-domiciled students studying for a doctorate as an unintended consequence of the introduction of the £9,000 tuition fee in 2012 should not be ignored in any discussions about increasing the tuition fee beyond £9,250.
To help ensure that the UK still has 15 universities amongst the top 100 in the world in 10 years’ time, we should promote further the culture of innovation and entrepreneurship within our research-intensive universities. In March this year, the previous Government welcomed the Independent Review of University Spin-out Companies and accepted all its recommendations. Much of the report was about sharing best practice in the setting up of spin-out companies and attracting seed and growth capital. Less noticed was the recommendation that all PhD students funded by UKRI should have the option to attend high-quality entrepreneurship training. The world famous Martin Trust Center for Entrepreneurship at MIT is unequivocal: entrepreneurship is a craft that can be taught.
The first employees of spin-out companies set up by university professors have often been their PhD students, but there is now a growing trend of spin-outs, with university IP, or start-ups, where there is no university IP, being founded by PhD students. The annual survey of Oxford students for the last three years reveals that between 20% and 22% of them now see entrepreneurship as a career path.
The competition for talented students is global, and we need more graduate scholarships to recruit not only the best international students but also those talented home students from lower-income backgrounds. The few graduate scholarships that are available are highly competitive, and there are many UK students with excellent first degrees who miss out on them and are unable to accept a PhD offer; the maximum doctoral loan available to them is insufficient to cover the cost of doing a graduate degree, being lower than the sum of the tuition fees and living expenses.
Growth in innovation activities can make a major contribution to the long-term viability of our higher education sector. It requires a growing population of students with a PhD, from whom many of the innovators and entrepreneurs of tomorrow will come.
Lord Mair (CB)
My Lords, it is a particular pleasure to follow the excellent maiden speech of the noble Lord, Lord Tarassenko. As a Cambridge engineer, I speak on behalf of the whole House in extending a very warm welcome to an Oxford engineer. The noble Lord is a distinguished electrical engineer and a world-leading expert in the application of signal processing and machine learning to healthcare. His many achievements include being a founding director of the Institute of Biomedical Engineering at Oxford, which was awarded a Queen’s Anniversary Prize for new collaborations between engineering and medicine, delivering significant benefit to patients. This House does not have enough engineers, so we are very fortunate to have the noble Lord as a new Member. We look forward to benefiting from his considerable engineering and academic expertise and to his many contributions to the activities of the House.
I am grateful to my noble friend Lord Krebs for introducing this important debate and congratulate him on his thoughtful opening speech. I will briefly comment on tuition fees and international students, declaring an interest as an emeritus professor of engineering at Cambridge University.
On tuition fees, the current higher education funding model is based on sharing the financial burden between student and taxpayer. However, the value to English universities of the maximum home tuition fee has been steadily eroded by inflation. The current level of £9,250 is worth only £6,000 in 2012 prices—2012 being when the £9,000 fee was introduced. Analysis by the Russell group shows that the average deficit universities incur for teaching each home undergraduate student was £1,750 in 2021-22 and will increase to around £4,000 in 2024-25. This is clearly unsustainable and is already causing serious financial difficulty for most English universities. Indeed, in many cases it is causing a crisis.
Under the present system, the Government may therefore have no choice but to allow universities to increase tuition fees in line with inflation. This would, of course, be unpopular and have a regrettable effect on student debt. However, to minimize the impact, the forthcoming review should consider the key conditions of the student loan: the repayment threshold, the period of repayment and the effective interest rates. Importantly, any increase in tuition fees should be accompanied by an increase in maintenance grants for students from disadvantaged backgrounds, to offset any increase in debt for the poorest students.
On international students, from January this year, those on master’s courses are no longer able to bring their dependants with them for the duration of their studies. Postgraduate research students continue to benefit from an exemption to this rule; it is to be hoped that this permission continues, as it is immensely valuable for universities to recruit postgraduate research students against international competition. The Russell group calculates that a single cohort of international students generates a £37 billion net economic impact for the UK. It is therefore crucial that the UK’s visa offer to international students can compete with that made by other major higher education destinations—the US, Canada, Australia and Germany. The level of fees, the length of post-study leave and dependants’ rights are all important factors in a student’s choice.
The UK punches well above its weight in global research rankings. Our outstanding research plays a key role in attracting investment and boosting the economy, especially in science, engineering and technology. International postgraduate research students play an increasingly vital role in achieving this, as outlined by my noble friend Lord Tarassenko; they and all other international students also play a key role in funding our universities. It is therefore essential for the prosperity of the UK and of our universities that our visa offers remain competitive globally.
Lord Watson of Invergowrie (Lab)
My Lords, we are indebted to the noble Lord, Lord Krebs, for securing this debate and for his thoughtful and thought-provoking opening speech. I also very much enjoyed the very well-engineered maiden speech by the noble Lord, Lord Tarassenko; I look forward to his future contributions in your Lordships’ House.
As the right reverend Prelate the Bishop of Sheffield said, universities bring a massive input to local economies. The average across each constituency in the UK is some £58 million, which is an enormous contribution to the general well-being in their communities. According to the Higher Education Statistics Agency, tuition fees account for 53% of higher education institutions’ income. With fees capped since 2017, as the noble Lord, Lord Krebs, told us, it is hardly surprising that by 2026-27, two-thirds are expected to be in deficit. For that reason, international students have become increasingly important to universities, and whether or not that is a good thing, it is a fact of life as we are at the moment. Yet the latest Home Office data, in July, showed a 15% decline in total international student visa applications compared to the same time last year. As the noble Lord, Lord Mair, has just said, the reasons for that are very clear.
It was a bit disappointing that a letter sent to all noble Lords two days ago by my noble friend Lord Hanson, the Home Office Minister, outlining a number of changes to immigration rules, did not have anything to say on the question of the dependants of international students. Of course, immigration rules are not the responsibility of my noble friend the Minister, but Ministers and officials from the Department for Education and the Home Office meet from time to time, and I hope she can indicate that discussions on this important issue will soon take place.
Arguably, the most straightforward option for the Government in addressing the sector’s creaking finances would be to end the cap on tuition fees. The Secretary of State stated this week that she did not want to do so, preferring instead to reform the system overall. I welcome that, but it is going to take considerable time. In the interim, allowing the cap to expire at the end of this academic year, and then increasing fees in line with inflation, would be welcomed by the sector.
I want to highlight a part of the higher education sector whose role is too often undervalued: part-time higher education. It is most notably delivered by the Open University, although Birkbeck also has a long tradition of offering courses to working Londoners. Part-time distance learning is critical to widening access and supporting social justice by allowing adults from higher education cold spots to access higher-level qualifications in their local area. That is evidenced by the Open University, where more than half the students begin their studies without the traditional entry qualifications demanded by other universities.
The lifelong learning entitlement will offer a real opportunity to tackle many of the barriers to people studying flexibly in England. It is not due to be introduced until next year, and I hope my noble friend can clarify the Government’s intentions regarding its rollout. The positive impact of the lifelong learning entitlement could be enhanced by extending maintenance support to all part-time students, including distance learners, through either an extension of maintenance loans or the introduction of targeted maintenance bursaries. The Government should also protect the value of part-time student premium funding in real terms to enable the continued viability of part-time provision.
I endorse the comments of my noble friend Lady Warwick, who recognised the role that further education colleges play in the delivery of higher education. There are more than 100,000 students of higher education at colleges, and often this is the only option for mature students with families and dependants, as well as those looking to reskill or upskill locally. Despite the fact that FE funding has historically compared very unfavourably with both school and university funding levels, the vast majority of FE colleges delivering higher education do not charge the maximum tuition fees. That in itself is a strong reason for the new Government to examine FE funding, as well as that for the HE sector.
Ensuring that the country has a sound base of the skills needed for the demands of an ever-evolving economy should not be seen as a cost. It is, as my noble friend Lord Howarth said, clearly an investment in the future and an essential component in driving economic growth.
Baroness Fox of Buckley (Non-Afl)
My Lords, I welcome this debate, but will perhaps challenge its focus. When the Education Secretary Bridget Phillipson halted the Higher Education (Freedom of Speech) Act only a week before its commencement, she insisted that the Office for Students should instead “be more sharply focused” on the financial stability of universities. To me, this rather implies knowing the price of everything and the value of nothing. When we discuss the challenges of a sector struggling financially, it worries me if government or university senior management think that academic freedom is a dispensable lower priority and is valued less than propping up higher education institutions as businesses.
I rather regret the marketisation of education that we have seen over recent decades. It has long since caused problems, undermining the core role of universities in intellectual freedom, and academics are told to treat students as customers who need to be kept satisfied, rather than offended or challenged. Students are educated to see degrees as commodities that can be bought and assessed via value-for-money metrics. I regret such philistinism and its consequences.
I am heartbroken, for example, to see the closure of many arts and humanities courses and to see wonderful academics lose their jobs. They are often told that, because they do not tick the production of job-ready graduates box, they are not relevant for 2024. What is the good of all that useless knowledge associated with philosophy, classical music, medieval history and so on?
Realistically, I think that we need to ask whether we should keep universities, departments and courses open at any cost and have that conversation. The question has to be asked: what price academic freedom in that context? When vice-chancellors and higher education NGOs, which lobbied the Government to smother the free speech Act, said they were worried that the legislation could lead to universities being sued at a time when they were facing crippling costs, surely the Government’s reply should have been, “Well, you won’t get sued if you promote and protect free speech on campus stridently”. The Government should also say, “You aren’t a university worth its name if you don’t understand that free speech is a core value, more valuable than anything else, and totally valuable to your existence”.
When the Free Speech Union sent a pre-action protocol letter to Ms Phillipson threatening a judicial review for the failure to commence a free speech Act, it was shocking when we found out that government lawyers noted that concerns had been raised by university managers and senior managers about the consequences of the law on doing business with authoritarian countries that have restrictions on free speech. How grubby that, because some British universities operate overseas students and do not want to lose out on the money, they are prepared to compromise on free speech. The fact that English universities want to boost opportunities for lucrative research partnerships means that they do not want a piece of free speech legislation that might upset China, Dubai or Singapore.
As for attracting more international students, I do not, in any way, do anything other than endorse that. But the self-congratulatory tone that we have heard worries me, because, too often, international students are cynically treated as cash cows rather than welcomed here as some act of philanthropic generosity. Many of the overseas students I have worked with over recent years have noted that they came here imagining that they would find free speech on campus as a value, but actually, having left China, they found it even more restrictive to face some of the cancel culture on campus. I ask for a different set of priorities here.
Lord Thomas of Cwmgiedd (CB)
I thank the noble Lord, Lord Krebs, for his excellent introduction, after having secured this debate. I want to turn to one aspect of what he said: the need for us to consider this in the long term and in the wider interests of the UK economy. It may be surprising that I want to take this from the vantage point of law, which is not necessarily seen as an important industry—but it is, as well as a significant contributor to the economy.
One can see two aspects of the current lack of a coherent policy in what has happened recently. The first involves overseas students. As the chancellor of Aberystwyth University who has travelled to visit lawyers and the judiciary in overseas countries, I have seen the enormous advantage of training overseas lawyers here. In Aberystwyth, a huge number were educated in the 1960s, 1970s and onwards who now have important positions in the law in other countries. The noble and learned Lord, Lord Irvine of Lairg, brought in an excellent programme for teaching judges from countries such as China and elsewhere.
This is not soft power; it has real benefit to the UK economy. The muddled thinking of the previous Government on visas shows that there was no strategy for how you relate universities to the greater benefit of the economy.
One can take this analogy with the subject of law slightly further, in that you not only learn law at universities but you gain hugely from doing a short amount of practical work. Therefore, not thinking through the restrictions imposed on working thereafter was a grave mistake. The other mistake in this respect was to fail to realise the intense competition other nations have in law and other fields.
There is a second aspect of the lack of strategy, which law illustrates. Law is a very cheap subject to teach, and cheaper now than it has ever been because you do not even need a library. Therefore, it is often referred to as a cash cow—I am sorry to use such a cheap and vulgar expression in such a place. It is important to realise that this has a detrimental effect—unlike the example that the noble Lord, Lord Trees, gave—on the way the UK works. We are teaching people law when we do not need them, but we are doing it to drive the universities’ finances.
Therefore, I entirely support the noble Lord, Lord Krebs, and others who have spoken. We need a proper long-term strategy, and there are three points about that. First, it must safeguard university independence, because that independence is almost as important as the independence of the judiciary—I hope noble Lords do not mind the word “almost”. Secondly, it seems to me that we must look at this on a UK-strategic basis. I am a huge supporter of devolution—many may be surprised to hear that—but you cannot do this without the strategy of a union Government, so that all have the same purpose. Thirdly, I fear that there probably is no alternative other than looking to fee income.
Viscount Hanworth (Lab)
My Lords, during the so-called Robbins expansion of the university sector in the 1960s, there was a clear understanding between the Government and the universities. Whereas the Government would provide the necessary funds for the sector, the universities would be left largely to their own devices. However, there was strict control over the numbers in the student intake, so as to match the provision of funds. Nowadays, matters are quite the reverse. There is a severe shortfall in the funds available to universities. The direct subventions from the Government and the income from student fees have not kept pace with inflation. Recently, there has been a dramatic loss of income from overseas students.
Brexit and the state of Britain’s international relations have been factors in discouraging overseas students from joining universities. The policies of the previous Government, which was keen to discourage even the most temporary immigration, have worsened the situation.
The interference of the Government in running universities has led to an unbridled expansion of the administrative staff, whose numbers typically exceed those of the academic staff. The administrators have been given the tasks of academic quality control, the adjudication of degree classes, the award of degrees, the corporate publicity, and much else besides. Latterly, they have taken control, in many instances, of the academic syllabus, on the grounds that it is necessary to ensure that what is taught is popular with the students. This is the consequence of the National Student Survey, which is also an imposition of the Government. There is ill feeling between academics and administrators. Recently, an academic colleague of mine described the relationship as an old-fashioned conspiracy of the management against the workers.
Leaving these matters aside, the most immediate concern is for the financial viability of the universities. The largest item in their current expenditure is the salary bill. There may be enough leverage over this item to ensure that there will be only a handful of bankruptcies in the short term. In the past, when academic staff had the guarantee of job security by virtue of what was described as academic tenure, the salary bill would have been a fixed cost. Nowadays, the bill can be reduced quite readily by reductions in the numbers of staff. Most universities are now pursuing programmes of voluntary and compulsory retirement. This is greatly facilitated by the fact that most academic staff are nowadays employed on short-term or time-limited contracts. In some cases, they have been dismissed and partly re-employed on new and lower-paid contracts.
Staff redundancies are affecting the academic subjects to differing degrees. The arts and some of the sciences have been suffering, while more worldly studies, such as business studies in its various guises, including accountancy, have been prospering. There is an abundant student demand for these subjects.
I have a sorry story to tell regarding the mathematics department of the University of Leicester, of which I am an emeritus professor. The pure mathematicians have been dismissed and the department is now calling itself the School of Computing and Mathematical Sciences. It is to be devoted mainly to teaching job-focused degrees, including actuarial science. Some of the staff were spared the sack; they were downgraded to assistant lecturers and teaching fellows, and their salaries were cut. Most of those remaining quickly resigned from the university.
This experience is being repeated throughout the university sector at a time when we are becoming increasingly conscious of the need for mathematicians in industry, and for those who can teach them. The problem is affecting particularly those universities that would be expected to train the mathematicians who will enter the teaching profession. Our schools will be unable to teach mathematics effectively, since the task will have to be undertaken by those who are not trained in the subject.
The Duke of Wellington (CB)
My Lords, I declare an interest as a former chairman of King’s College London, where my neighbour on these Benches is a distinguished professor.
It is surely clear to everyone—it has been stated many times today—that the situation with university funding is now unsustainable. The coalition Government bravely increased student fees to £9,000 in 2012, against massive opposition at the time, but there was probably no alternative at that moment. They then lost their courage and, in the following 12 years, the only increase was a further £250 in 2017. Whenever a Government, in effect, freeze fees of this nature, there eventually comes a moment of reckoning. I feel very sorry for students who now leave university with a debt of £40,000 or more. Fortunately, the latest iteration of the student loans scheme now charges an interest rate equivalent to the retail prices index, but previously it was very much higher, which in my opinion was shameful. But although the interest rate is lower, so is the threshold above which the loans are repaid, currently £25,000 a year. This seems far too low, and I suggest to Ministers that they ought to raise this threshold and, as others have said, from now on they must consider small annual increases to the student fee.
However, the real problem is that universities are running at a deficit. In 2022-23—the latest figures I have seen—a government agency has estimated the loss by the universities from teaching at £1.5 billion per annum and the loss from doing research at £4.5 billion. In fact, very few, if any, universities make a margin on their research, yet most universities undertake research. Although it would be very much against the culture of many universities, we must at least consider whether the country can afford for so many universities to do research.
The other major difficulty for universities is the reduction in overseas students, as many have said. This year, there has been a considerable decrease in foreign postgraduate student applications. This is a very important source of revenue for most universities and the decrease is a direct result of the previous Government’s decision to restrict visas for families. But as the average age of postgraduates is 25, they are likely to have families, and it does not seem reasonable to place such a harsh limit on family members accompanying postgraduate students.
I could never understand the previous Government’s hostility towards overseas students, although of course they always claimed otherwise. The fact is, it is very much in this country’s interest for overseas students to come to our universities. I therefore suggest to the Minister—apparently she has tried and not yet succeeded—that she must try again to persuade the Home Office to issue more visas, not fewer, to foreign students. The alternative is to put more taxpayers’ money into the university system, and I cannot believe she is able or willing to do that.
So, although it is a somewhat overused word, I agree with the original wording of this debate from the noble Lord, Lord Krebs, that there is a crisis in the funding of our universities, and, regrettably, Ministers will have to do something about it.
Lord Wallace of Saltaire (LD)
My Lords, in welcoming the Minister to the Lords, I remind her that I have often thought that the academic lobby is the most powerful lobby in this place. If you add up the chancellors, chairs of councils, former professors and others, it certainly is overrepresented in the Lords and its voice is always quite loud. I welcome the maiden speech of the noble Lord, Lord Tarassenko. It reminded me that when I was a graduate student working on some of the most advanced computers available, you fed punch cards in at one end, got reams of paper out of the other and typed up the result on your typewriter afterwards. The world has moved on a great deal in the last 40 or 50 years.
I disagreed strongly with the interpretation of free speech in universities of the noble Baroness, Lady Fox of Buckley, just as I disagreed with the article by her former colleague Frank Furedi in the Times the other week, but that is a debate for another time. On the whole, the question of freedom of speech in universities is very complex.
We all know that our university sector is one of the jewels of our global reputation and our economy. The global rankings show that. I am particularly proud of having a child who is now on the staff at Imperial, which rose to second in the QS global rankings this year. My son works in another of the top 20 universities in this country. However, we must remember that universities do not necessarily stay at the top of the list. I am always conscious that 120 years ago, German universities were dominant in the world, far better than British universities and much better than American universities at the time. Of course, German universities collapsed when the Nazis came into power. Many of their best staff left to colonise British and American universities, which led to the dominance of American universities for some time.
Our universities have improved considerably over the last half-century. The quality of teaching in our universities has improved a great deal since I started out, without any training at all in how to teach at university, in a research university which often regarded teaching as an interference with the serious work of academic research. I therefore have mixed views on students as customers. We now have to pay more attention to our undergraduate as well as our graduate students, which we certainly did not do in universities that thought they were important in the 1960s, when I was first appointed to one.
We do not need a major restructuring of the current system or a royal commission. It is far better to promote a gradual evolution towards an even more varied higher and further education sector. We need to take higher education and further education together and to recognise that if we talk about the challenge to higher education funding, the challenge to further education funding is even more acute. The intermediate skills which we need in this country—construction, nursing, social care—we are desperately short of. That is part of what drives high immigration into this country: the Ghanaian nurses, the Latvian builders and others. Getting further education right is as important to improving the British economy and the quality of our society as getting higher education right.
We often underestimate the sheer diversity of our higher education sector. I have worked in three research universities, but I am very conscious in the north of England of the extent to which regional universities play a very important part in the regional society and the regional economy. I often hear people say that students who come to study in a particular place often stay on after graduation, which reinforces the local economy and society.
Therefore, we absolutely must go on supporting teaching universities as well as research universities. I look at Huddersfield University as an example: the quality of the classical and pop music it teaches its students becomes an important part of a different part of our economy, as does the quality of its teaching of textiles and other useful vocational elements. So I hope we will come back to talk about the further education sector in more detail; it is one we should never neglect.
The previous Government were incoherent about and often hostile to universities. I heard someone yesterday talking about the “war on universities” hopefully now being over. We are all conscious that the Home Office has done its best to push back against the Department for Education and those concerned with research in imposing the appallingly high visa and health charges on staff and students visiting Britain. I hope the Minister will take up with the Home Office the sheer damage that these charges do to international staff and staff exchanges.
My son is a systems biologist working on joint projects with academics in Germany, France and the United States. If you say to someone, “We would like you to come and work in our lab for 12 months but, if you want to bring your wife and two children with you, it may cost you £20,000 or more up front to arrive in Britain”, you are blocking academic exchange and academic quality. Good universities are unavoidably international universities and movement is a very important part of how they all behave. Getting universities right and having a coherent policy across Whitehall, with a sense that universities are again valued, is an important message which I hope this Government will get across.
Let us also recognise that there is a substantial problem in maintaining the quality of our universities in pay. Academic pay, as with teachers’ pay and even more so with further education pay, has sunk very badly over the last 20 years. My son has just been given a permanent contract, 14 years after he finished his PhD. On promotion, his salary is now larger than his mother’s professorial pension. I note that as an example of just how poorly academic scientists in key areas—he is a systems biologist—are paid now. That is another part of the funding challenge for our universities because, in a highly international world, we will not keep our academics. They will take jobs in the United States, Berlin or elsewhere unless we do something about pay.
Research funding has been mentioned, as well as research buildings and computers. The decision to review the Edinburgh exascale computer is extremely worrying, because we need to maintain global quality by maintaining the quality of resources for our research. That is all part of a very broad challenge to funding.
We are now at peak international student flow. Nearly a quarter of students in our universities come from abroad—almost too many from China, and I suspect more at the present moment than there will be in three or four years. That means that we need to think about other ways in which to fund our future universities. I would like to see our university and higher education sector moving towards a model that I saw when I went to the United States, to Cornell University. It is a comprehensive university that has a Nobel Prize winner teaching in its physics department, but also faculties of home economics, hotel administration and labour relations. I would like to see universities run from top to vocational, if you see what I mean.
We should have more part-time degrees, apprenticeship degrees and continuing education. I strongly agree with the noble Lord, Lord Rees, that we should think about two-year degrees as well as three-year degrees, and taking your higher education in bits as you move on. It is important to be more flexible and less snobby about that dimension of higher education.
We agree with the Quality Assurance Agency paper, which said:
“It is increasingly apparent that the current funding arrangements in England are unsustainable in the long term”.
They are unsustainable and they need to change. That probably means we have to increase student fees to some extent. We certainly need to increase research funding and we must also fundraise for bursaries, scholarships, endowments and buildings.
Baroness Barran (Con)
My Lords, I too congratulate the noble Lord, Lord Krebs, on securing this important debate. I add my warm welcome to the noble Lord, Lord Tarassenko, and thank him for his maiden speech—in particular for his insights into the impact of the student finance system on the number of home students doing PhDs in his field.
As we have heard, the challenges facing our higher education institutions are not isolated. They are interconnected with the challenges facing students, taxpayers and, more broadly, the economy. We are rightly proud of our universities and need them to thrive as part of building a path to higher economic growth and prosperity in terms of undergraduate and graduate degrees, and of research.
I was struck by the comments of the noble Lords, Lord Krebs and Lord Rees of Ludlow, and the noble Baroness, Lady Wolf, suggesting that we should perhaps consider a more intentional split between research and teaching. In preparation for this debate I read the paper Triangle of Sadness, produced last year by the vice-chancellor of King’s College London, Professor Kapur, which many of your Lordships may have seen. He made the contrast—I hope I reflect this accurately—between a state such as California, which has a GDP of similar size to the UK and a similar number of universities which are split very much between research, teaching and state institutions. I would be interested to hear the Minister’s reflections on the potential for that in this country.
The last Government tried, in a different way, to encourage collaboration between business, the further education sector and the higher education sector through the institutes of technology, which I hope the new Government will encourage and develop further. I also hope they will build on our record of access and participation for students from disadvantaged areas.
I attempted to make a point in a debate last May—clearly completely unsuccessfully—when we debated the excellent report from the Industry and Regulators Committee on the Office for Students on the risks of making sweeping statements about the financial health of the sector. Despite having failed in May, I will make another attempt today. Both in that debate and today, a number of your Lordships cited the figure of 40% of the sector being in deficit. To put this in context, this is a sector that has grown 50% over the past few years. The OfS report projected a surplus of £2.1 billion for the sector for 2026-27 and a margin of 3.9%. Average borrowing in the sector is 30%. That is not a typical picture of a sector facing impending collapse.
The point I am trying to make is that some universities remain financially very solid and successful. The aggregate deficit of providers in England, referred to in the recent report from the OfS, was just over £330 million, the aggregate surplus of those in surplus was £3.3 billion, and 50% of the aggregate deficit was accounted for by 10 providers. We need to focus on the institutions that are financially fragile, but not to paint the whole sector that way. None the less, obviously, there is a risk that an individual institution could get into serious financial difficulty. I, along with other noble Lords, would find it interesting to hear the Minister’s plans to address that, and in particular, how they plan to protect student interests if it does happen, to ensure that students’ education is not disrupted.
As for the pressures on students from the affordability of their university education, I absolutely recognise your Lordships’ comments and criticisms of our policy to freeze fees for the last seven years. But, looking forward, I am interested in whether the Minister can update the House on the Government’s plans, and whether they intend to keep the student loan system as we have it today. I cannot quote my noble friend Lord Johnson of Marylebone accurately—but I am referring to the Churchill version.
In her speech to the Universities UK conference last year, the now Secretary of State mentioned
“modelling showing that the government could reduce the monthly repayments for every single new graduate without adding a penny to government borrowing or general taxation”.
I wonder whether the Government still hold that view.
The Minister will be aware that there are Muslim students who have been excluded from higher education because of the nature of the student loan system. Can she confirm that she will continue to meet stakeholders quarterly to ensure that alternative student finance is delivered in a timely way?
We have seen an extraordinary expansion in the number of students in franchised provision, and in universities offering foundation years. I would be interested in the Minister’s reflections on whether those students are getting value for money, and how the Government will ensure that.
I echo the questions from other noble Lords about international students, given that the Office for Students projects that international students will account for 48% of university income by 2026-27. What is the Government’s assessment of the risk to universities from volatility in international student numbers? Obviously, we have seen the depreciation of the Nigerian currency, and the impact on students from that country.
This House has often debated the need for more qualifications at levels 4 and 5, as well as level 6, and of course our further education colleges play an important part in the delivery of those. I wonder what the Minister’s response is to the Association of Colleges report which says that almost a quarter of colleges have waiting lists for qualifications such as engineering, which the economy so badly needs.
The previous Government very much appreciated the support that the current Government gave us when in opposition with the introduction of the lifelong learning entitlement. That is obviously a huge opportunity both financially for universities, because there is a cohort of potential students who could benefit from additional qualifications, and for our economy. I know that the Open University has been calling for those entitlements to be able to be used more flexibly to facilitate the growing demand for accelerated part-time study, and I would be grateful if the Minister could comment on that.
Before I close, I want to pick up very briefly the comments made by the noble Baroness, Lady Fox of Buckley, on the issue of academic freedom and freedom of speech, because that is clearly one of the challenges that our higher education institutions face. I know the noble Baroness committed recently to looking at the Secretary of State’s decision further, but I wonder whether she will take this opportunity to withdraw what felt like an ill-advised statement describing the Act as a hate speech charter, since obviously, as she knows, it does not change people’s rights to free speech under the law but rather gives them easier redress.
We have heard a thoughtful and well-informed series of speeches in your Lordships’ House today, and I look forward very much to the Minister’s reply.
The Minister of State, Department for Education (Baroness Smith of Malvern) (Lab)
My Lords, I too am grateful to the noble Lord, Lord Krebs, for bringing to the House’s attention today the important matter of higher education funding. I also very much welcome the noble Lord, Lord Tarassenko, his maiden speech and the considerable expertise as both a student and an academic that he brings to our debate today. I thought I was relatively new, but I am pleased that there are now those who are even newer to this House than I am. I feel confident that he will make a strong contribution.
Our higher education sector is one of the very best in the world, and we are rightly proud of it. I have been very pleased with the tone of the debate today in which that fact has been largely recognised, not least, as the noble Lord, Lord Wallace, said, because a large number of Members of this House have considerable expertise in this area. I think I mentioned that in my maiden speech when I said how much I was looking forward to learning from it, not realising that I would be brought to the House on a very early Thursday afternoon to respond on that. Nevertheless, I welcome the contributions made today.
I welcomed the contribution of the noble Baroness, Lady Barran, in which she talked glowingly about the university sector. I wholly understand that that has been her long-term approach. It is just a shame that it was not so much the approach of the previous Government, who tended, particularly towards the end of their time in government, to see higher education as an opportunity for political point-scoring rather than the enormous benefits it brings to the country.
The noble Lord, Lord Krebs, challenged me on the number of higher education institutions. I have to say to him, “It’s complicated”. The UK higher education sector comprises different types of providers, including universities and university colleges as well as HE providers without university titles, and there are also FE providers offering HE courses. In 2022-23, there were 291 HE providers in the UK reporting student number data to HESA. These figures do not include further education providers that offer HE courses as they report data to the Education and Skills Funding Agency. I hope that has brought some clarity to the debate.
I return to the contribution of higher education. UK higher education creates opportunity. It is an engine for growth in our economy, and it supports local communities. As the Robbins report set out over 60 years ago, and as I believe today, universities have a broader role to play as well in shaping and enriching the society we live in and the culture we enjoy—not just for each of us but for all of us. For that reason, I disagree with the noble Lord, Lord Trees, that we have too many students and too many universities. I do not believe that we should cap student numbers or the number of universities, because of the contribution to individuals and to our society as a whole, and, of course, because of the crucial role they play in promoting economic growth. Universities will have a key role in developing the growth that is so important for this country. For these reasons, I assure noble Lords that this Government are committed to creating a secure future for our world-leading higher education providers, so that they can ably serve and benefit students, taxpayers, workers and the economy.
Several noble Lords emphasised the significant contribution that higher education makes. My noble friend Lord Howarth, the noble Lord, Lord Willetts, and his campaign manager, the noble Lord, Lord Johnson, and the noble Baroness, Lady Clark, are all right that the higher education sector has a huge role to play locally, nationally and internationally in driving growth. Teaching and research activities are estimated to generate £158 billion total economic impact for the UK, with a further £37 billion in value from education exports.
The right reverend Prelate the Bishop of Sheffield and my noble friend Lord Watson identified the substantial contribution made throughout all regions and locally in the UK, and although economic and employment impacts are the largest, in absolute terms, in London and the south-east, the sector’s proportional contribution to employment is between 2% and 4% in all individual regions and nations. It is an integral part of our landscape at a local level as well. Why do so many people—colleagues in the other place, for example—campaign for university campuses in their constituencies? It is because they understand the economic, social and cultural power they can bring to the communities that they represent.
I did not agree with everything that the noble Baroness, Lady Bennett, said about universities, but where I do agree with her is that they are a public good as well as autonomous organisations and that they owe a duty to students and staff. Given this enormous contribution, we may ask ourselves—as the noble Lord, Lord Krebs, did in introducing the debate—why we are facing such a very worrying financial position in the higher education sector. I agree with him: whether or not we call it a crisis, it is enormously challenging for our higher education sector.
The Office for Students has identified that 40% of higher education institutions will be in deficit this year. For that reason, I understand why the noble Baroness, Lady Clark, and my noble friend Lady Warwick urged speed in addressing this issue. This Government did act quickly: we refocused the Office for Students on to the issue of financial sustainability; we brought in the interim chair, David Behan, who is helping to ensure that we have that focus through the Office for Students; and we have already started reviewing options to deliver a more robust higher education sector. It will take some time to get right but I do not believe that it will take as long as some people fear. We are determined that the higher education funding system delivers for our economy, for universities and for students. I look forward to bringing further information about this to this House.
I also recognise, as noble Lords have identified, the impact of the current situation on both courses and staff, although I say to my noble friend Lord Hanworth that I think that is an impact on all staff. Trying to create a distinction between academic staff and those who support them to deliver their work is not particularly helpful.
The noble Lord, Lord Krebs, suggested that I was relaxed about higher education providers closing. I am most certainly not relaxed about that, but I recognise the autonomy and independence of higher education institutions. That is the point that I was making.
The noble Baroness, Lady Barran, asked what we would do in the event that a provider was at particular risk. We would work enormously closely with the Office for Students, the provider and other government departments to ensure that students’ best interests were protected in those circumstances. Students will always be our priority.
Several noble Lords, particularly the noble Lord, Lord Willetts, have identified the range of funding that needs to be part of a response to this challenge: the contribution of tuition fees, the importance of research funding, the grants that the Government provide and of course the contribution of international students. I will talk briefly about each of those.
The noble Lords, Lord Mair and Lord Johnson, my noble friend Lord Watson and the noble Duke, the Duke of Wellington, all identified the challenge with student fees and the fact that in real terms they have reduced in value in funding the teaching that they are aimed at helping to provide. That is of course a challenge as part of the funding arrangements that the Government are thinking about, but we also recognise that students have been particularly badly affected by the cost of living crisis. It will be important to find a funding arrangement that is fair to both institutions and students. That is at the heart of the very hard thinking that, I assure noble Lords, the Government are doing.
The noble Baroness, Lady Barran, asked about progress on alternative student finance. I assure her that we will be restarting the work on that and bringing together the stakeholder group to make progress. She also mentioned franchising, which for some higher education institutions is a source of funding and provides high quality, but she is right that in some cases there are concerns. We will monitor that very carefully.
The noble Lord, Lord Krebs, and the noble Baroness, Lady Garden, talked about the challenge of research funding. The noble Lord referenced a deficit in research funding of £5.3 billion, and that is a number that I recognise. The Government recognise the importance of research and development to our national success. We are determined to work with the sector to transition to a sustainable research funding model, including by increasing grant cost recovery. Of course universities will also need to take their own steps to ensure that they are working as efficiently as possible and, where necessary, make difficult choices. Across all the areas that we are talking about, we need to find a suitable balance that provides stability for our higher education sector.
On the point about the Government’s strategic priorities grant, raised by the noble Baroness, Lady Wolf, I recognise her concern about the levels of government funding, but the strategic priorities grant is particularly focused on those subjects that are expensive to deliver, which she identified. The Government will keep that under review in order to support teaching and students in particularly expensive subjects such as medicine, science and engineering. That is important in terms of the contribution of HE.
Several noble Lords spoke about the importance of international students, sometimes as contributors to the finances of higher education. I have to say I do not accept the use of the expression “cash cow” that was used by several noble Lords. Some have feared that international students are somehow displacing domestic students but, actually, international students have made a very important financial contribution to the teaching of domestic students. They make a broader contribution than that, and we recognise the vital contribution that they make.
I want to make the Government’s position clear, as my noble friend Lady Warwick asked. We are committed to a UK that is outward-looking and welcomes international students, who make a positive impact on our higher education sector, our economy and our society as a whole. Our top universities benefit from strong international ties, as many of our universities do—so much so that, as noble Lords mentioned, we have we have educated 58 current or recent world leaders. As the noble and learned Lord, Lord Thomas, identified, we have educated top lawyers as well.
International students enrich our university campuses. They forge lifelong friendships with our domestic students. They become global ambassadors for the UK and for too long international students have been treated as political footballs, not valued guests. This Government will take a different approach and we will speak clearly about that. Noble Lords should be in no doubt that international students are welcome in the UK.
Several noble Lords challenged me on the position of the Home Office with respect to international students. I do have the benefit, although it was some time ago, of understanding some of the challenges and interests of the Home Office. On the cost of student visas, the Home Office keeps fees under review. It also does not, as some have suggested, make a profit from fees. Any income from fees set above the cost of processing is utilised for the purpose of running the migration and borders system.
There is, of course, despite some threats, the maintenance of the graduate route to enable students to come to this country and stay after their period of study. This is an important way of recognising and welcoming international students, but I have to say that the Government do not have any intention at this time of removing the restrictions on dependants that were introduced by the last Government.
Several noble Lords identified the range of provision and different ways of learning. That is important for both our higher education sector and its relationship with further education. I do not see a distinction. I do not think it is helpful to see a university education and a vocational contribution of the further education sector as being in conflict. We will be successful when we manage to find the successful links between them, not least because it will provide better access and give different routes depending on the strength of the students and it will be good for the economy. So we will continue to support degree apprenticeships, which we know can deliver excellent outcomes.
We are working to ensure that the approach to lifelong learning will be as effective as possible, enabling people to gain the skills that they need to support their careers, and to do that in a way that enables them at different times in their life to benefit from education. I want to come back to this House to update it on the issue of the lifelong learning entitlement. I hope noble Lords are in no doubt that we consider the objective of lifelong learning to be a very important one. That was an important point raised by the noble Baroness, Lady Garden of Frognal, and my noble friend Lord Watson.
On the subject of freedom of speech, I have to say that the noble Baroness, Lady Fox, wholly misrepresented the position of my right honourable friend the Secretary of State for Education. In actual fact, she said at Questions in the other place earlier this week that of course, it was a Labour Government who enshrined freedom of expression in law. The recent decision to pause further implementation of the freedom of speech Act at this point was made precisely because we believe in the importance of freedom of speech and academic freedom, and it is crucial, therefore, to make that legal framework workable. My officials and I are meeting with a range of stakeholders, including academics concerned about their free speech being protected, and their views will form part of our consideration of options for protecting freedom of speech and academic freedom in future. On that too, I shall want to come back to the House to update noble Lords on our proposals.
The noble Lord, Lord Krebs, asked us to take a strategic approach. He is absolutely right, but stable funding has to be at the heart, and the basis going forward. Many of the things that noble Lords have argued for—considering the diversity of the sector; better access; ensuring progression for students; the contribution of our higher education sector to growth, skills and innovation; the local and regional contributions; and the quality of teaching and the student experience—all require that stable funding basis; but we are also committed to making progress on all those areas.
I close by thanking noble Lords for their contributions. I assure them that the Government will consider many of the excellent points made in this debate. As I said in my maiden speech in this House, our higher education sector is one of this country’s greatest enablers. It provides opportunities for people to follow their passions and expand their horizons; through research and teaching, it enables us to challenge our understanding and develop new ideas. In many communities, higher education provides a vital anchor for wider economic development and progress. That is why this Government are committed to creating a secure future for the sector.
Lord Krebs (CB)
My Lords, I thank all noble Lords who have participated in this debate. I particularly thank my noble friend Lord Tarassenko for his excellent maiden speech and thank my noble friend Lord Mair for confirming that you cannot have too many engineers. I was beginning to worry about the balance on the Cross Benches but, fortunately, another newly appointed Cross-Bench Peer, my noble friend Lady Freeman, is, like me, a zoologist; she tells me that I taught her when she was an undergraduate at Oxford. So the balance is maintained, and I am grateful for that.
With the level of expertise in the contributions, we have been very fortunate to have the wisdom and experience of two excellent former Universities Ministers —thank you very much—as well as many other noble Lords who have worked in the higher education sector and have direct personal experience.
I do not intend at this late hour to summarise the many points that were made, but I turn to the Minister’s response, for which I thank her very much. Partly it was “wait and see”, because she said that the Government are reviewing the options for dealing with the current crisis. We have to hold our breath and hope that they come up with a solution. In the here and now, I hope I understood correctly that, on the question of research running at a deficit, the Government are minded to look for ways to increase cost recovery, so that the black hole that UKRI has identified can eventually be filled in. That I welcome very much.
I think the Minister said that she agreed with me that the time is right to take a strategic view of the higher education sector, rather than simply leaving things to the vagaries of the market. I very much welcome that. The third point I picked up was that, although the Government want to be welcoming to overseas students —in my academic career I have taught and supervised graduate students from many different countries, and they have hugely enriched my academic experience and the quality of work that goes on in this country, so I am all in favour of them—they do not intend to change the cost of visas or the current visa restrictions. It will be interesting to see how the message, “We welcome you, but actually we are not removing some of the barriers stopping you coming here”, plays out.
At this point, I simply once again thank all noble Lords who have participated, thank the Minister for her reply and close the debate.