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Baroness Barran (Con)
My Lords, after relative silence in the Budget about the higher education sector, we on this side very much welcomed yesterday’s Statement from the Secretary of State for Education, but it raises a number of questions. I appreciate that the noble Baroness may want to write on some of them, but I hope that others require just a yes or no.
In the Statement, the Secretary of State talked about being “crystal clear” with students that their monthly repayments, once they graduate, will not increase. She was less than crystal clear about the fact that their total repayments will typically go up over the life of the loan. Can the noble Baroness confirm that I have understood that correctly? Have her officials calculated how much more the average student will repay once they have graduated?
The Secretary of State also talked about how she will
“secure the future of higher education so that students can benefit from a world-class education for generations to come”.
In his recent blog, Nick Hillman of the Higher Education Policy Institute took figures from the Institute for Fiscal Studies on how much the income of universities will increase as a result of the changes announced yesterday and the increase in the national insurance contributions they will need to make as a result of the changes announced in the Budget, as calculated by the Universities and Colleges Employers Association. He estimates that the net benefit to universities will be about £18 million, or £45,000 per institution.
The noble Baroness said earlier today that we on this side of the House need to understand that you have to raise money to fund public services. I assure her that we understand that very well, but the serious point is whether the two decisions the Government have made in recent days will make a material difference to universities or not. It would be helpful to be clear on that. There is also the impact of cutting fees for foundation-year courses. Is there a figure for the impact of that? Can she clarify what this means for undergraduates who have already started their course, as there was some confusion in Wales when fees were increased recently and it played out differently in different institutions? It would be helpful to know whether this will be applicable to those already part-way through their studies. The Statement was also silent on how this impacts postgraduate student fees and the disabled students’ allowance. It would be helpful to understand those changes.
In the Statement, the Secretary of State spoke of her ambition to spread opportunity to disadvantaged students, which every part of this House will firmly agree with. However, she then asserted that:
“The gap between disadvantaged students and their peers in progression to university … is the highest on record”.
I looked at the data that the department helpfully published recently and, while she might technically be right, the spirit of what has happened and the reality for disadvantaged students is very different. I am not quite sure why she chose to use free school meals as the definition of “disadvantaged” rather than the POLAR4 quintiles. Leaving those technicalities aside, if we look at what has happened in access to higher education between 2013-14 and 2022-23 for disadvantaged students using the Secretary of State’s definition, there has been a 43% increase in the percentage going to higher education compared to 25% for their peers. For high-tariff universities, the numbers for those on free school meals are up 109% compared to 48%. The percentage of more advantaged students is much bigger than that of disadvantaged students, but opportunities for disadvantaged students, which we all care about, have really improved. I hope the noble Baroness will acknowledge that.
The Secretary of State talked about a “renewed drive for efficiency” and said that the Government will not accept “wasteful spending”. We agree in principle, but can the noble Baroness give the House a sense of where the Government see waste in the sector and whether they have an estimate of what it amounts to. Can she reassure us that this will not threaten the independent status of our universities?
The Secretary of State talked about an uplift of £414 on maintenance loans. I would be grateful if the noble Baroness could confirm that this was calculated on a maximum loan for a student studying and living in London and that the average will be closer to £223 per student or 61p per day.
Looking to the future, the Secretary of State promised a policy paper on HE reform. Can the noble Baroness confirm what colour it will be—white, green or neither? Can she give the House any sense of the Government’s thinking on improving access to universities for those who have worse access today? Will it be a positive focus on particular groups or through new penalties?
Given the delay in the introduction of the lifelong learning entitlement, it would be good to hear that the Government remain committed to that, and to the work on sharia-compliant finance.
As my remarks have shown, the Statement left many unanswered questions, and I hope we see more in the forthcoming policy paper. However, despite the rhetoric in the Statement, the bottom line is that the net financial impact is hard to see for universities, so the policy paper will need to come quickly and tackle the real issues they face.
Lord Storey (LD)
My Lords, we welcome the Secretary of State’s Statement on universities in the Commons yesterday. Labour introduced student loans, and in opposition Keir Starmer wanted to abolish them. No doubt he cannot because of the £22 billion black hole.
We know that in 2015, the Liberal Democrats paid the price for making a pledge on tuition fees that we could not keep, but our reforms at least made the system fairer by giving more support to pupils on low incomes and ensuring that the least well-off graduates repaid the least.
Now, our universities are crying out for government to look at their funding, which has remained frozen for eight years. The Conservative Government, while espousing their importance, did nothing but abolish the maintenance grant, so that living costs became a barrier to university learning for disadvantaged students. The previous Government also cut the repayment threshold to £25,000, so that today’s students have to repay hundreds of pounds more per year than older graduates on the same salary. They lengthened the repayment period from 30 to 40 years, so today’s students will still be paying back their loans in 2066.
Does the Minister agree that the crisis in funding must be addressed, and have the Government considered how to support universities without raising fees? Will the Minister look at the benefits of international students and give universities stability in this area of policy? Finally, will the Minister look at how universities spend their allocation of £10,000 per student, so that students get value for money and a good university education experience, and the money is spent as efficiently as possible?
The Minister of State, Department for Education (Baroness Smith of Malvern) (Lab)
My Lords, first, I welcome the positive response to yesterday’s Statement and announcements. I think we all understand that this country is blessed with a world-class university sector whose teaching, research, contribution to the staffing of our public services, international reputation, earning and impact are significant and something we want to defend and ensure continues into the future.
Sadly, on coming into government we feared that the crisis in the funding of higher education put all these things at risk. That was the reason for taking the action we announced yesterday: to increase tuition fees by 3.1% and to reflect the challenge that students have faced, particularly from the cost of living, by increasing maintenance loans as well. We were also very clear that alongside that increase in investment that students will make in our higher education sector, we also expect to see considerable reform, which I will come on to in a moment.
Let me respond to the points raised by the noble Baroness, Lady Barran. First, on repayments, she is right that the way in which both tuition and maintenance loans are repaid means that no student will pay more per month. Of course, no student pays anything, up to £25,000-worth of annual income. The total amount a student pays depends on whether they repay within the 40-year time limit for the loan. Any student who currently would not repay within the 40 years—because they were on a low income or had gaps in work—will not pay any more with the increase in tuition fees. It is of course right that anybody who would have repaid during that time period will now have a larger debt to repay; but to reiterate, that is no cost upfront and no higher repayment per month after graduation.
On the impact of both the national insurance contributions and the changes to foundation degrees, we will publish an impact assessment alongside the statutory instrument that will bring about the increase in the fees, and we will spell out the analysis at that point. Regarding students who have already started, the intention is that the tuition fee increase will apply to new and existing students, but that could depend on the contract and arrangements made between the university and the individual student. We will make further announcements on the changes to postgraduate support and the disabled students’ allowance in due course.
The noble Baroness also raised the issue of the gap in respect of disadvantaged students. I think she conceded, as my right honourable friend stated yesterday, that this year the gap between those who are more advantaged and those who are more disadvantaged has widened. Although there are more students, both advantaged and disadvantaged, going to university now, it is not good enough to rest there: not only have we been incapable of closing that gap, but it has widened in the last year. That is why, as the first of the elements of the reform programme, we will undertake serious work with the sector, with those who support students in applying to higher education and with schools, and think about what more we can do to support anybody who could benefit from and wants to take part in higher education, so that they can access it.
We are determined to close—
Baroness Barran (Con)
Before the Minister moves on, first, I would be grateful if she could confirm that since 2013-14, the percentage of disadvantaged children going to university has grown faster than the percentage of those from advantaged homes. Secondly, while the free school meals measure has shown an increase in the gap, if we take the POLAR4 quintiles—I am sorry to be, as the noble Baroness, Lady Sherlock, would say, a wonk about this—the gap has decreased. Does the Minister agree with her department’s data on that?
Baroness Smith of Malvern (Lab)
I am sure that my department’s data on that is correct, but I stick with the point made yesterday, which is also correct: if we take the free school meals measure in the most recent year, in contrast to what happened previously, we have seen the gap widen. My broader point was that, frankly, it does not matter which measure you take, we have not seen a sufficient closing of that gap. It is still wrong that students from disadvantaged backgrounds who could benefit from higher education are not getting that benefit. That is why we will take action, alongside the sector and others, to make sure that we can improve both access to higher education and the measures of continuation and progression out of higher education. In those figures, we have seen a differential between those who are disadvantaged who come into higher education and those who are advantaged. Not only is it more difficult to get in but it is more difficult to continue in their courses and to succeed. That is where we need to take action to improve the situation.
On efficiency, we are absolutely clear that providing additional funding for higher education brings with it a responsibility for the sector to spend that money as efficiently as possible—to provide the quality of experience that students have the right to expect, and in a transparent way—and we can use appropriate metrics to measure that. We will want to do that work alongside the sector itself, but we are clear that we need to see improvements in efficiency in exchange for the increase in investment, and that that is non-negotiable.
On the maintenance loan, the important point is that the maximum loan for any student will be going up by 3.1%.
On the other areas of reform, access is very important, but we have also made it clear that universities need to play a crucial role in the Government’s growth mission. We need to see them working alongside Skills England. We need to work with them to see what more they can do to contribute to growth in the economy. They already play a crucial civic role; we want to see that strengthened so that all those who argue for universities in their areas—quite rightly, because they understand the social, cultural and economic benefit—will see that maximised. We recognise the quality of what is provided in English higher education, but we want to ensure that where there are pockets of bad quality that is tackled, and that everywhere there is an emphasis on improving the quality of teaching provided for our students.
On the alternative financing mechanism, we will make progress on that, building on the work of the previous Government and the noble Baroness in particular—she knows that we are reconstituting the working group on that because she will be invited to be a member of it, so she will share in the responsibility for the progress that I hope that we are going to make.
The noble Lord, Lord Storey, asked whether other methods of funding universities had been considered. We have given considerable thought to the options for how we can help to bring some stability to the financial position in HE and to support students. Given the current financial situation and the constraints on spending, this was the most appropriate way to provide some additional income and certainty for HE. As a matter of principle, it is right that students who benefit from higher education—it is still the case that a degree or a qualification through a university will give you on average higher lifetime earnings—make a contribution to that through repaying their loans, alongside the contribution made by the taxpayer and the Government more broadly, particularly for those students who do not end up paying off all their loans, and the strategic priorities grant and other forms of support for higher education.
I agree with the noble Lord and hope that he has seen a very different tone towards international students from this Government than was the case previously—universities tell me that they have seen that. We will continue to welcome international students, not only because of the finance that they bring but because of the benefits to students and our role in the world that come from that. I think I have already covered the point about value for money, which we are absolutely committed to ensuring.
Baroness Morris of Yardley (Lab)
My Lords, it is difficult to be pleased that fees will have to be raised, but I acknowledge the parlous state that HE finds itself in, and I welcome that the Government have taken as much early action as they can to try to make the situation better.
I will put just two points to the Minister. First, can she clarify what I think I just heard in response to a previous question, that for students who are already at university—that is, not becoming first-year students from the start of the next academic year—whether they are charged the increased fees may vary from university to university depending on the contract? If I heard that correctly, when might that be announced, so that we have certainty as to what will happen for the majority of students in September?
Secondly, I very much welcome what the Minister said about looking to do more to widen participation. In the work that she and the department carry out on that, will she have a look at the statistics for students from less advantaged backgrounds who are already at university to see what the dropout rate is? I know that it has been higher than for other groups. One challenge is getting those young people to university, but if they then drop out, we have not achieved a great deal. I would be grateful if she could confirm that that could be part of the considerations.
Baroness Smith of Malvern (Lab)
I thank my noble friend and wholly agree with her. It has been a difficult decision to ask students to pay more to safeguard the future of higher education, but I think it was the right decision. On the point about students who are already there, yes, it is the case that the increase in tuition fees will cover students who are already studying. In some ways it is not for the Government to clarify the position. Higher education institutions are autonomous and will need to be clear with their students about the impact on them of the increase in fees. I will correct myself if I am wrong but for most, the assumption would be that the increase in tuition fees will go ahead in the way we have described. My noble friend is right that there is a big differential in those who drop out of university, with more disadvantaged students being more likely to drop out, less likely to continue and less likely to have good outcomes at the end of their time at university. As well as widening access, that is another area where we want to make progress with the sector.
Baroness Fraser of Craigmaddie (Con)
My Lords, I declare an interest as the mother of a third-year undergraduate student at a Scottish university. I support the Government’s determination to break down barriers to opportunity and agree that higher education is central to this. I also welcome the promise of a wider review and hope that despite education being a devolved issue, this Government will carefully consider what influence they can bring to bear to address the now even greater funding gap between universities in Scotland and those in England.
The Minister will be aware of the shameful record of the Scottish Government in promising free tuition but not giving universities the funding to deliver it. But I am also concerned that a consequence of this will be that the brightest and best Scottish students are not able to take advantage of the wider opportunities that are offered within higher education across the whole of the UK. In 2023, Scotland had the lowest Cambridge acceptance rate of any UK region, at just 14.1%. Only 45 students were admitted to the university from the entirety of Scotland, compared with 844 from Greater London. Will the Minister do all that she can to ensure that talented Scottish students are not forgotten?
Baroness Smith of Malvern (Lab)
The noble Baroness makes an important point about honest policy-making. While sometimes it is politically easy to make extravagant promises, what is important is that you are actually able to deliver them for the good of both students and universities. She makes a strong point there.
The work that we will do alongside universities—and to be fair, this will include universities in Scotland—to broaden access and ensure that students have a successful experience when they get into university will also benefit Scottish students, whether they are studying in Scotland and or at English universities. I very much share the noble Baroness’s objective of ensuring that students can get the very best possibility of the very best university option for them. That is something that I think all of us want to see from the system.
Baroness Hodge of Barking (Lab)
My Lords, I refer noble Lords to my interests in the register. I welcome the Statement. It is high time the Government recognised the financial challenges that face the higher education sector, which were, I am afraid, ignored and swept under the carpet by the previous Government. However, responding to these challenges by raising fees risks making it even more difficult for young people who are eligible for free school meals. They are the ones who we are most interested in seeing go to university, but they are simply petrified by the debt they will incur. I know, as a Member of Parliament before the general election, that I had really talented young people in my constituency who were getting three As at A-level but turning down university places because of the fear of debt. This will add to that.
Can the Minister assure me that when she undertakes the review that is being proposed by her department, she will focus on ensuring that both the Government and the sector prioritise widening participation and bringing more people who have received free school meals into higher education, and that this becomes something that is measured by the Government and the universities?
Baroness Smith of Malvern (Lab)
I understand my noble friend’s point about young people, particularly those from less well-off backgrounds, being worried about their student debt. We all, therefore, have a responsibility to continue pointing out that this is a very different type of debt to a credit card or another form of loan. There is no upfront payment for their university education, and their repayment is dependent on their level of income; and if that is not paid off at the end of the period of the loan, it will be written off completely; that is a very different category of debt. I understand her point, which is why I can give her the commitment that we will prioritise, as part of the reform programme we will work on, how we improve participation, how we close that gap, so that disadvantaged students can achieve the ability to go to university when that is something that they want to do and they have the ability, and we will ensure that their experience when at university makes them more likely to continue and be successful.
Lord Lucas (Con)
My Lords, I too welcome the Statement and look forward to the ideas that are coming forward over the next few months. The Secretary of State said:
“I heard too often from students of the gap between the course they were promised and the experience they had”.
In that context, will the Government encourage universities to give much better information to students about what courses lead to and what jobs and careers their students go on to from each course? At the moment, it is extremely thin, and it is very hard for a student, who will after all invest a large amount of money, to see whether a particular course actually does lead on to the career that they hope to follow.
Secondly, the Secretary of State said she had heard from international students that they felt “neither valued nor welcomed”. Will the Government, therefore, put their weight behind the British Council’s excellent Alumni UK initiative, which would give international students a real and lifelong sense of belonging to the UK, with real, lifelong practical benefits and connections? It would considerably benefit this country, but it seems to me that universities are being very slow to sign up at the moment.
Lastly, in deciding to increase fees, did the universities provide evidence of why it costs them 50% more than a sixth form college to educate a student when universities provide less contact time and less pastoral care by a considerable margin? If they provided that information, will the Government share it with the House?
Baroness Smith of Malvern (Lab)
The noble Lord is right in his demand and his expectation that universities need to improve the information that they provide for students about the course and about potential progression. That is an important area that we will want to work with the sector on improving.
On international students, I would strongly support anything that enables international students to maintain their contact with the university and with the country. One of the big benefits of our ability to attract international students is precisely that, for example, nearly 60 world leaders are former students at UK universities. That is an enormous amount of soft power, as well as very strong relationships that have been built up, and I would support any initiative that ensures that continues.
On the noble Lord’s final point, one of the first things that we did in government was to ask the Office for Students to focus more clearly on identifying the financial situation of universities. I cannot say that, at this point, we have the metrics around the value for money that the noble Lord is asking for, but that is one of the areas where, in terms of the efficiency work, we need to have much better transparency within the sector about how money is being spent, how it is being allocated, for example, between research and teaching and how that then results in student experience. That will be one of the things we expect to see.
The Earl of Effingham (Con)
My Lords, the Statement said:
“We have paused the commencement of the last Government’s freedom of speech legislation”.
It also said that
“universities must be home to robust discussion and rigorous challenge”.
How will the Minister guarantee appropriate freedom of speech, robust discussion and rigorous challenge in those universities?
Baroness Smith of Malvern (Lab)
Yesterday’s Statement was less about freedom of speech than about the funding of universities but, to reiterate the point I made when we covered this issue previously, I and the Government are absolutely committed to ensuring freedom of speech and academic freedom within our universities. That is why we continue to consider the way forward, to ensure that this can happen without some of the disproportionate burdens and impact on minority groups that the Act in its totality would have brought to our higher education sector. I will return to the House with a way forward on that in the near future.
Baroness Pinnock (LD)
My Lords, I have an interest as a vice-chair of the University of Huddersfield, which takes on a considerable number of young people from poorer backgrounds. The finances of the university sector as a whole are in a fairly parlous state—I have to make it clear that the University of Huddersfield’s are not. The Minister has said that the increase in tuition fees is a stopgap to stave off the worst consequences of the very serious financial pressures that some universities are facing. I would like to hear from her whether this relatively small amount of additional funding for universities will indeed stave off quite drastic actions being discussed in the sector, such as mergers between some universities. Can she give us assurance that the additional funding will achieve that? If not, what actions is her department intending to take?
Baroness Smith of Malvern (Lab)
I have it on good authority that the University of Huddersfield has a very good reputation for its work to provide access and opportunity for students, and it should be congratulated on that. The noble Baroness is right, however, that the financial situation for all universities is serious. The Office for Students identified that, this year, 40% of universities would be in deficit. That has already had an impact on courses and on staff being made redundant. The decision that the Government made yesterday about this year’s inflationary increase in tuition fees is a measure to stabilise the system at this point in time. While we have not made decisions about the future, we are committed to the reform package that I have outlined. Alongside that, we will think further about what we need to do to maintain the world-class higher education system that we are so proud of in this country and to ensure that institutions can continue to do excellent work. That might not necessarily mean that they continue to do that completely unchanged as institutions; there are some challenges that should be recognised about the business model and the organisation of higher education, and we will want to consider that.