House of Lords
Personal Statement
Lord Balfe (Con)
I rise briefly to supplement the explanation given by the Chief Whip yesterday as to why I was not able to ask the fourth Oral Question. There was, I am afraid, a bit of a mix-up; I put down to ask the fourth Question today. Yesterday I was lecturing in Cambridge and could not possibly change the lecture. I discovered far too late that I was expected to do the Question yesterday. This was no one’s fault. I am blaming no one, but I would like the House to accept my apology for my part in this mix-up.
Voter Registration and Participation
(2 days, 12 hours ago)
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Baroness Winterton of Doncaster
To ask His Majesty’s Government what steps they are taking to increase voter registration and participation.
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Lord Khan of Burnley) (Lab)
My Lords, as set out in our manifesto, this Government are committed to improving electoral registration and democratic participation. We will lower the voting age to 16 for all UK elections to widen democratic participation and encourage a lifelong commitment to voting. We are also exploring options to improve registration, including using data and online services to facilitate registration and increase registration rates. Changes will be informed by evidence and user research.
Baroness Winterton of Doncaster (Lab)
I thank my noble friend the Minister for that Answer, especially regarding data sharing. Can he assure me that he will give serious consideration to the Electoral Commission’s recommendation that there should be a requirement on public bodies to share data with electoral administrators? Will he also look at allowing young people to use, for example, student cards and travel cards as ID when voting, following the very welcome change to the use of veteran cards?
Lord Khan of Burnley (Lab)
My noble friend makes an excellent point. We are exploring options to utilise data held by public bodies to encourage electoral registration, including what more can be done to enable electoral administrators to obtain local data. We are working with the Electoral Commission on this. On voter identification documents, as part of our commitment to expanding the voter franchise to 16 and 17 year-olds, we need to consider whether the requirements and patterns of ownership of identity documents for identification differ for younger voters. If we find that the list of accepted identification documents needs to be revised, the Government will bring forward proposals in due course.
Lord Forsyth of Drumlean (Con)
My Lords, does the Minister not acknowledge that one way to increase participation in elections is for Governments not to break the promises they make in the run-up to a general election—in particular by imposing taxes on working people, which they said they would not do?
Lord Khan of Burnley (Lab)
My Lords, we are delivering on our manifesto. On voter registration and increasing participation, the Government are committed to encouraging democratic engagement among all electors, including young people. That is why we will bring forward legislation for 16 and 17 year-olds to be able to vote in UK elections. This Government believe that by building a strong foundation for democratic participation among young people, we can establish voting habits that will continue as they grow older.
Lord Patel of Bradford (Non-Afl)
My Lords, I congratulate the Minister on all his efforts to ensure participation from local communities in Burnley. However, what are the Government doing in rural areas, where people have to travel long distances and transport and polling infrastructure are poor. How do we get young people there to vote?
Lord Khan of Burnley (Lab)
My Lords, the noble Lord makes an excellent point on the difference between urban and rural participation. My department, MHCLG, is working with other government departments to explore the potential use of their data and online services to help improve voter registration across all areas. Continued collaboration is essential to deliver the Government’s electoral reform agenda. We will work with academics, civil society groups, the Electoral Commission and the electoral sector across the country, particularly with local communities.
The Lord Speaker (Lord McFall of Alcluith)
My Lords, the noble Lord, Lord Campbell-Savours, is participating remotely.
Lord Campbell-Savours (Lab) [V]
My Lords, have we not wasted millions on a national scheme of individual registration to deal with a problem of fraud confined to only a few inner-city areas? Was not the real reason for the scheme’s implementation no more than a deliberate attempt by the then Government to suppress the vote in disadvantaged, transient communities in Labour inner-city areas? Ministers should read the debate of 8 September 2020 on the Parliamentary Constituencies Bill, where deficiencies in electoral registration were fully exposed. We need to increase the vote, not spend money decreasing it.
Lord Khan of Burnley (Lab)
I note my noble friend’s important points, but I assure him that the Government are committed to improving electoral registration and addressing low registration rates among various groups in society. We will examine different approaches and use the experience of other countries to inform our decisions.
Baroness Scott of Bybrook (Con)
My Lords, we welcome the inclusion of the Armed Forces veteran card for use as voter ID but note that there will be a further review. Can the Minister assure the House that the integrity of the ballot box will be maintained in any future changes that the Government make?
Lord Khan of Burnley (Lab)
I thank the noble Baroness for making the point about the addition of the Armed Forces veteran card to the list of accepted documents for voter ID. On her very direct question, yes—it is in our manifesto.
Lord Rennard (LD)
My Lords, only 65% of 18 to 25 year-olds are registered to vote, compared with more than 95% of the over-65s. Will the Government now act urgently on the unanimous cross-party recommendation of this House’s Select Committee on electoral administration in 2013, and begin the process of automatically registering young people to vote when they are issued with their national insurance numbers and the DWP has checked on their nationality?
Lord Khan of Burnley (Lab)
My Lords, the noble Lord makes an interesting point and I have had the great pleasure of working with him on various SIs and, in particular, on the Elections Act 2022. The Government will explore all options to ensure that we increase voter participation. We believe that, by building a strong foundation of democratic participation among young people, we will establish voting habits that continue as they grow older. It is about delivering long-lasting, positive consequences for our democracy and building an informed and engaged electorate for the future. In the meantime, we are working on these issues and will bring proposals to the House.
Lord Wigley (PC)
My Lords, on voter participation, does the Minister recognise that a gross disservice to democracy has been perpetrated by all political parties—I am afraid I include my own—that base their election canvassing on so-called voter modelling algorithms and social profiling? They aim at getting only identified party supporters to turn out and leaving other voters undisturbed. Is it any surprise that there is a cynicism towards politics? Will the Government give serious consideration to adopting the STV system, in which every vote counts, to encourage inclusivity in our democratic processes?
Lord Khan of Burnley (Lab)
My Lords, there was a lot stacked in the noble Lord’s question, but he makes an interesting point. I single out that turnout at the 2024 general election was 59.7%, which was the lowest since 2001. It was 7.6 percentage points lower than in 2019, so there is an issue with increasing voter participation but also an apathy with politics. The Prime Minister was very determined, as he started his premiership, to make sure that we reach out across all parts of our electoral system to ensure that people feel confident to get involved and participate in the system.
Lord Reid of Cardowan (Lab)
My Lords, in this digital age, is it not a disgrace that we depend on displaying rail cards, bus cards, Armed Forces cards and all sorts of other cards to combat fraud? Is the answer not staring us in the face? In this digital age, we should have digital ID and digital ID cards, without which we will not be able to tackle voter fraud, far less black employment, immigration or counterterrorism. Will the Government finally at least consider the use of digital ID?
Lord Khan of Burnley (Lab)
I thank the noble Lord for making that very important point. He alludes to the use of technology and the digitalisation of the process, but I remind the House that technology already plays a part in the smooth running of the UK’s election registration infrastructure. The noble Lord is talking about ID to help voting, but there is a range of ways in which technology could be part of measures to improve the whole process. The Government will thoroughly explore the viability of every avenue to achieve that goal. Any new measures will be rigorously tested and will take the accessibility and diverse needs of different groups of people into account, so that all those eligible to vote are able to register.
State Pension: Age Increase
(2 days, 12 hours ago)
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Lord Davies of Brixton
To ask His Majesty’s Government what preparations they are making to inform people born on or after 6 April 1960 about the increase in their state pension age from 66 to 67 which will be implemented over the period 6 April 2026 to 5 April 2028.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, the Government recognise that information about the state pension age is crucial to retirement planning and are committed to communicating planned state pension age changes effectively. The department undertakes a range of activities, including awareness campaigns, digital tools such as “Check your State Pension age” and sending personalised letters. We are developing our strategy to communicate information and assessing the most effective ways to raise awareness about state pension age changes.
Lord Davies of Brixton (Lab)
I thank my noble friend for her Answer. I remain concerned that we are only 17 months away from when people discover that they are not able to retire at the date that they thought they would. We know where this ends up: a finding of maladministration by the ombudsman and mass discontent. I urge the noble Lord, the noble Minister, the Baroness, to make sure that a mass campaign is initiated soon. Many people have an aversion to opening brown envelopes; we need this to be highlighted in the press for the next 17 months.
Baroness Sherlock (Lab)
My Lords, I answer to anything really. The Government have already used an array of methods to communicate state pension age changes, including leaflets, advertising campaigns, digital tools and directly writing to everybody affected. Between December 2016 and May 2018, DWP wrote to all those in the group my noble friend is talking about—that is, those born between 6 April 1960 and 5 April 1961, which includes me—who have state pension ages between 66 and 67. In 2016, DWP launched a tool “Check your State Pension age” on GOV.UK and also “Check your State Pension forecast”. More than 31 million digital forecasts have been done plus another 1.5 million paper forecasts. I think it is working. The 2021 Planning and Preparing for Later Life survey talked to exactly those people and found that, of those with a pension age between 66 and 67, 94% either correctly identified their state pension age or overestimated it.
Baroness Meacher (CB)
My Lords, with the increase in life expectancy in recent years, will the Government consider increasing the state pension age by more than one year in order to limit the tax burden on those of working age?
Baroness Sherlock (Lab)
My Lords, life expectancy is increasing, but the rate of increase is slowing. Built into the Pensions Act 2014 is a requirement on the Secretary of State periodically to review the state pension age, taking into account life expectancy and a range of other appropriate factors. There have already been two of those reviews. The next one has to happen by March 2029, I think. I have no doubt that the Secretary of State will take account of precisely those matters.
Lord Palmer of Childs Hill (LD)
My Lords, does the Minister agree that we do not want a repeat of the WASPI women scandal? We have been here before. If individuals are not properly informed about the change to their state pension age, will the Government consider introducing a clear appeals process or a safety net to ensure that no one is financially disadvantaged due to a lack of information? From past experience, we know that there will be many people who fall through the net, and we need to have an appeals process in place.
Baroness Sherlock (Lab)
My Lords, it is crucial that everybody gets to know their state pension age, but the reality is that there are a lot of different ways in which people do that. I already knew that my state pension age was increasing. A lot of that was simply from information in the news and on television. One of the ironies is that, when I was first briefed about this, I was told that the department had written to everybody in that age category. I said that I had no recollection of receiving such a letter, but I was assured that it had happened. Last weekend, I moved house and, when I opened a folder of unfiled papers, what was sitting on the top but a letter dated February 2018 telling me that my state pension age would be 66 and two-thirds. The point is that different people receive information differently. I am of an age where I get most of my information on my phone, from which I am rarely parted, and from news consumption. We have to use every possible means of communicating to make sure that people get the information out there.
Baroness Bryan of Partick (Lab)
My Lords, is the Minister aware that average life expectancy is highly variable depending on many factors, including class? There are parts of Glasgow where people die in large numbers before their pension age, so I hope the Minister can reassure me that the idea of extending it will not be adopted when the people who suffer most are those who need the pension most.
Baroness Sherlock (Lab)
My noble friend raises an important point. One of the requirements on the Secretary of State when she comes to do the statutory review of the state pension age is to look at issues such as life expectancy. Every now and again, someone comes up with the idea of varying the state pension age by, for example, location or profession. The reality is that, whereas there are differences between regions or professions, in some cases the differences within them are as great as or greater than the differences between them, so trying to find a way of doing something that would be fair, other than a simple state pension age, is challenging. The real challenge for this Government, as for everyone, is that we should not have these regional variations in our country. We are one country, and we should be tackling those kinds of regional inequalities so that we do not end up in this position.
Lord Watts (Lab)
My Lords, is it not the case that we should move to when people start paying national insurance? People often start work at 16 in construction and other jobs, while others do not start work until 23 or 24. Should there not be some understanding about the different types of people, how long they are in work and what jobs they do?
Baroness Sherlock (Lab)
There are variations. One of the challenges is that, now we want to keep young people in education, training or employment until 18, we find that fewer people leave school and start work early. My noble friend is raising an underlying point that is really about fairness. We want to see everybody having the opportunity to study for as long as is genuinely helpful and suits them, then to move into fulfilling work and to be able to progress in it over time. I return to one of the challenges. The Secretary of State will consider all factors, but if we look at how difficult it is—and we know how hard we have had to work—to communicate a single state pension age, trying to communicate variable state pensions ages risks complicating it. But my noble friend raises an important point, and we will keep it under consideration.
Lord Evans of Rainow (Con)
My Lords, the Chancellor has announced that she is going to merge 86 public sector pension funds into eight megafunds. We have been talking about that for quite a long time. Will the Minister update the House on how and when that will happen?
Baroness Sherlock (Lab)
My Lords, information will be coming forward. We are doing a pension review at the moment. Stage 1 is coming to an end and stage 2 is coming through. There is also a pensions Bill coming through, and when that comes through, all the details will be made available.
Lord Rooker (Lab)
My Lords, why is it that those who are above the state pension age, whatever age it is, and still working and contributing to society are not required to pay national insurance? We are missing £1 billion-plus to the Treasury. National insurance is a tax; it does not pay for anything. It should be paid by all those who are working, irrespective of age.
Baroness Sherlock (Lab)
My Lords, of all the weeks when I am not going to start making up national insurance policy on the hoof, this is most definitely one of them. However, I hear what my noble friend says, and I will pass that along.
Baroness Stedman-Scott (Con)
My Lords, what assessment have the Government made of the impact on employment, particularly for older people, of increasing NI contributions for employers, bearing in mind that the winter fuel payment has been withdrawn?
Baroness Sherlock (Lab)
My Lords, to separate those two out, the Treasury has published documentation on GOV.UK relating to the Budget and an impact assessment of different aspects of the Budget. On the question of the winter fuel payment, the noble Baroness will know that the vast majority of people who will be entitled to it are being encouraged, if necessary, to apply for pension credit or other benefits. For most of the rest, many of them will not be in employment and will not intend to be in employment. The winter fuel payment is aimed at people of pension age, so I do not see the connection between the winter fuel payment and national insurance, but if the noble Baroness wants to speak to me about it afterwards, I am happy to talk to her.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, does my noble friend agree that one of the best ways to get these kinds of messages over to older people is through the network of voluntary organisations, particularly Age UK, Age Scotland, Age Cymru and Age Northern Ireland? Will she and her department mobilise that network to get this message across?
Baroness Sherlock (Lab)
My noble friend is a great advocate for Age UK and its counterpart organisations, and they welcome his advocacy. We have a good relationship with Age UK and other charities in this sphere. They have been very effective at getting messages out, but I come back to the fact that we have to get messages out across the piece. Messaging about the state pension age is aimed at people who are not yet retired, including me, so we need to get messages out everywhere people get their information. One of the ways of doing that is through family and friends—spread the word. Please make sure that everyone is aware of this: go on GOV.UK to “Check your State Pension age” and “Check your State Pension forecast”.
BBC World Service
(2 days, 12 hours ago)
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The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office (Baroness Chapman of Darlington) (Lab)
My Lords, the BBC World Service provides impartial, accurate news and journalism in 42 languages to 320 million people globally. It remains the world’s most trusted international news broadcaster. The Government recognise the World Service’s value as a soft power asset and its contribution to countering disinformation and ensuring access to free and impartial news. We value the emergency response services stood up recently in Gaza, Ukraine and Sudan to provide vital safety and security information.
Lord Dubs (Lab)
My Lords, I am grateful to my noble friend for that Answer. It is welcome that the Government have improved funding of the BBC World Service in the coming financial year, but is the Minister aware that in the past, cuts in the World Service have led to frequencies being withdrawn and immediately being taken over by the Russians and the Chinese in order to push out their propaganda? Surely, the BBC World Service is source of great strength to this country. Could we not have a long-term funding arrangement to secure what is, after all, one of Britain’s greatest assets?
Baroness Chapman of Darlington (Lab)
I agree with my noble friend. Although decisions about where to operate and what channels to use are clearly for the BBC to make—it is independent of government in that way—it is a service that we have insufficiently valued and promoted over the years. I am pleased that we have been able to improve the situation somewhat so far, but I completely agree with my noble friend that a long-term solution is what is really needed.
The Earl of Courtown (Con)
My Lords, in her Answer to the noble Lord, Lord Dubs, the Minister mentioned the issue of disinformation, which is of prime importance and obviously a threat to democracy around the world. What steps is she taking further to promote the BBC World Service as a trusted source of information?
Baroness Chapman of Darlington (Lab)
My Lords, that is a very good question. At the moment, 75% of those who listen to the World Service live in places that do not have good levels of media freedom, so we need to work with the World Service to promote what it does, both around the world, as the noble Lord says, and here in the UK. I think more people would benefit from and feel pride in knowing what the World Service has done to counter disinformation around the world.
Lord Birt (CB)
My Lords, I declare an interest as a former director-general of the BBC. For nearly a century, the BBC World Service has been a key element of the UK’s soft power globally. For almost all of that time it was directly and completely funded by the FCO. Can the Minister articulate any justification at all for the World Service being funded in whole or in part by the UK licence fee payer?
Baroness Chapman of Darlington (Lab)
That is not a decision that this Government made. Looking back, it was a mistake to put that burden entirely on the licence fee payer. We are looking at long-term solutions and we are open-minded about what they might be, but I repeat: the important thing is that we preserve all that is good that the World Service does for us around the world, but it needs to be on a much more secure footing so that we do not have the annual discussions we have had to have. It needs to plan, and it needs security to enable it to continue to do the amazing work it does.
The Lord Bishop of St Albans
My Lords, there is a tension here between having an independent BBC, which we are all grateful for—indeed, that is part of its integrity—and it being part of our strategic soft power. Could the noble Baroness tell us a little bit more about the strategic approach His Majesty’s Government are taking to thinking about the key places we need to engage with, not least in countering the deliberate disinformation coming from China and Russia, which is fundamental to the future of our democracies?
Baroness Chapman of Darlington (Lab)
It is vital that we maintain the independent position the BBC has, so that it makes its own decisions. However, this Government want to refresh the approach to soft power. We are establishing a soft power council, in which I hope the World Service will take part. From my point of view, it is absolutely legitimate for the Government to say that we are worried about these circumstances in these places and to share our understanding of situations around the world, and it is for the BBC to tell us to back off and to make its own decisions. My aim is to have a collaborative, respectful relationship with the BBC, preserving at all times its independence and ability to make its own choices.
Lord Purvis of Tweed (LD)
My Lords, I agree with the comments the Minister just made and thank the Leader for her response to me two weeks ago, when I raised concerns about World Service cuts in Lebanon. Does the Minister share my concern that, although the BBC World Service is critical for supporting civil society in many conflict areas, the more recent government development cuts of £2 billion—a reduction from 0.58% of GNI to 0.5%—could put at risk the very kind of programmes that support civil society resilience in many conflict areas? I welcome the extra support for the BBC World Service, but will the Minister make sure that there are not cuts elsewhere to programmes that support civil society in these critical vulnerable areas?
Baroness Chapman of Darlington (Lab)
We are reviewing development spend, as noble Lords would expect. We do not have the luxury of limitless funds to spend. We are spending a lot of our development money on housing people who arrive here in the UK for 12 months after their arrival. We need to get that spend down so that we can spend it much more wisely on preventing conflict, educating women and girls, supporting freedom of religion and belief, and all the other really positive, important work that we want to do in country. That is our aim.
Lord Grade of Yarmouth (Non-Afl)
My Lords, I draw attention to my interests, past and present, as listed in the register. The Minister referred to a long-term strategy for the World Service. Such a document exists. I chaired a group commissioned by the then Foreign Secretary, Jeremy Hunt. This report got lost in one of those infrequent reshuffles of the last few years, but it stands today as a blueprint for enhancing the BBC World Service’s influence in exercising the great soft power that exists for Britain’s foreign policy. Will she dust it down and read it?
Baroness Chapman of Darlington (Lab)
I am grateful to the noble Lord for bringing that to my attention. I was not aware that there was a strategy dating back to that time, but I commit to finding it and reading it.
Baroness Coussins (CB)
My Lords, will the Minister undertake to conduct and publish, before any future funding formula for the BBC is agreed, a dedicated impact assessment for the World Service which takes into account criteria such as the value of soft power and the need for built-in budgetary flexibility, so that the World Service can respond to geopolitical situations in times of jeopardy, which is part of what the charter says it is there for?
Baroness Chapman of Darlington (Lab)
The key thing is that we reset the relationship we have with the World Service and stop using the BBC as some kind of political football. In recent years, and without the knowledge of many people, BBC Monitoring and the World Service have provided the most accurate assessment of the Russian war dead in Ukraine. They are educating women and girls in Afghanistan who have been excluded from education. They are the most reliable source of information in areas of conflict, where there is very little else available that can be trusted. We call what they are doing soft power; I think that is the wrong name for it, frankly. Other nations are investing heavily in their propaganda. We do not do that. We allow the independent, high-quality journalism of the World Service to speak for us and to support people in country. I am immensely proud of it and we need to work long term to support it.
Baroness Blackwood of North Oxford (Con)
My Lords, we have already heard today of the importance of the BBC World Service as a voice for accurate reporting in many conflict states and politically restricted states, but just this week we had a Question about the risks journalists face in order to do this reporting. Can the Minister say what support and measures the Government are offering to ensure the safety and security of journalists and staff in hostile environments?
Baroness Chapman of Darlington (Lab)
It is vital that journalists be able to go about their work in telling the truth, often in the most difficult of circumstances. They have full consular support from us. We are a member of several multilateral organisations supporting media freedom and the rights of journalists to do their work. We will continue that. I am proud of what the UK has done over many years in this space. We will continue to do that as a new Government.
Probation Services: Prisoner Early Release Scheme
(2 days, 12 hours ago)
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The Lord Bishop of Gloucester
To ask His Majesty’s Government what assessment they have made of the impact of the prisoner early release scheme on probation services.
The Minister of State, Home Office (Lord Hanson of Flint) (Lab)
An impact assessment was conducted ahead of laying the necessary legislation. The SDS40 scheme now has an eight-week implementation period, allowing the service to better prepare and put release plans into place for offenders. The service has taken steps to meet growing demand by focusing on early engagement, and plans to onboard 1,000 new trainee probation officers across the year 2024-25.
The Lord Bishop of Gloucester
I thank the Minister for his Answer. Given that we need to be looking long-term, and in the hope that the sentencing review will promote alternatives to custody, will the Minister say what the Government are doing not just to recruit more probation staff but to retain and develop staff so that they are respected and recognised as highly valued professionals?
Lord Hanson of Flint (Lab)
I thank the right reverend Prelate for her work as the prison lead in the Church of England and for her comments and support for the Probation Service. The 1,000 probation officers who are going to be recruited as trainees will receive top-quality training, but we also need to look at how we retain the expertise of probation officers, value their experience and ensure that they are part of the Government’s mission to reduce reoffending. Once the sentencing review is complete, we must look to put in place effective sentences that reduce reoffending as well as punishing individuals.
Lord Bird (CB)
My Lords, a third of all people who leave prison have nowhere to go. Are the Government taking that into account and ensuring that the people they are letting out are not going to fall homeless in the period immediately after?
Lord Hanson of Flint (Lab)
The noble Lord, Lord Bird, makes a valuable point. As part of the planning for the early release SDS scheme that is in place now, the Government are ensuring that there are prison leads, employment leads and housing leads, working eight weeks before release to ensure that individuals have support in order to—as far as possible, though there will always be areas where this does not happen—put in place a proper release plan, to ensure that people go into the community and do not face the pressures that lead to reoffending.
Lord German (LD)
My Lords, if we look at the position of the recruitment of probation officers, as the Minister said, we see that all the inspectorate’s reports show a dire need for new recruits in that area at the first and second levels. Why is it that we are already unable to recruit sufficient people to the Probation Service, which now faces the additional work of having to work with local authorities—which are poorly stretched for housing—and health services? We need these people right now, and that is the problem that we face. The recruitment of the 1,000 officers will occur some time in the future, but how are the Government going to solve the problems immediately?
Lord Hanson of Flint (Lab)
The noble Lord should know that the 1,000 are going to be in place by March 2025, and he can hold the Government to account on that figure. We are recruiting now; it is currently 14 November 2024, and, from memory, by March 2025 the 1,000 will be in place. We have improved support for probation staff and increased the pay level from 1 October to 1 April this year, to recognise and, I hope, retain people who are in post.
Lord Sandhurst (Con)
My Lords, the Chief Probation Officer said in September that they expected up to one-third of early release prisoners to reoffend. What steps have the Government taken to ensure that victims of early release violent offenders are first informed and then supported?
Lord Hanson of Flint (Lab)
The initial assessment by officials of the early release scheme has indicated that there has not been a significant change to the number of recalls that have taken place—although that is always potentially an issue with anyone, at any time, who leaves prison with the remainder of their sentence in place. Victim liaison is extremely important. I assure the noble Lord that, in the event of breaches taking place, recalls happen quickly and individuals are recalled to prison as a matter of emergency.
Lord Paddick (Non-Afl)
My Lords, a magistrate recently told me that he is resorting to short-term custodial sentences because he has no confidence in the non-custodial alternatives. For example, people are being sentenced to unpaid work but the Probation Service is saying there is no unpaid work for that person to do, so the sentence is written off. Does the Probation Service really have the capacity to do what it is being asked to do?
Lord Hanson of Flint (Lab)
The Probation Service is asked to do an awful lot. Its first and foremost duty is to protect public safety, and to ensure the rehabilitation of people through community sentences or release mechanisms. The noble Lord will know that a sentencing review has been commissioned by the Lord Chancellor. That review is looking at long-term sentences, at short-term sentences and their effectiveness, and at the strengthening of community sentences. It is extremely important that community sentences are strong, that they are implemented and that people attend them. I hope that, further down the line in our policy development, the sentencing review delivers for victims, reducing reoffending and helping the rehabilitation of those individuals who have been convicted.
Lord Keen of Elie (Con)
My Lords, the early release scheme excludes prisoners serving a sentence for sexual offences, domestic abuse, terrorism and serious violent offences. Will the Minister explain why the Government do not regard all crimes of violence as serious for these purposes?
Lord Hanson of Flint (Lab)
I am grateful to the noble and learned Lord for his question. I think that, on reflection, he will know that, had he been at this Dispatch Box after 4 July, he would have been introducing a similar scheme to the one that the Government have currently introduced, though perhaps without the exceptions that we have made on sexual offences, domestic violence offences and serious offences. A line has to be drawn, and the Government have done so. Our prime objective is to free up prison places while ensuring that there is probation support, as indicated by the right reverend Prelate the Bishop of Gloucester, to ensure that we protect individuals on their release. I hear what the noble and learned Lord says but he knows—and the smile on his face tells me he knows—that he would have introduced a very similar scheme in this place had he been the Minister.
Lord Laming (CB)
My Lords, we are all familiar with the reasons for the early release scheme having to be established, but does the Minister agree that, if we are to reduce recidivism in this country, there needs to be a proper system in place for the planned discharge of prisoners—not for when they are discharged but for a long time before then—so that essential elements in their lives, such as accommodation and the like, can be established before the discharge takes place? Letting people go out from prison without those elements in place just encourages recidivism.
Lord Hanson of Flint (Lab)
That is an extremely important point. The issues of housing, potential employment, family contact, a bank account or access to finance, and the establishment of benefits prior to release if the person is qualified for them, are key building blocks in preventing an individual reoffending. I will draw the noble Lord’s comments to the attention of the Minister for Probation, who I am deputising for today. I am sure he will find common cause in those objectives.
Lord Foulkes of Cumnock (Lab Co-op)
Come on, it is Labour’s turn. We have not had a question.
Lord Kennedy of Southwark (Lab Co-op)
It is the turn of the Labour Benches now.
Baroness McIntosh of Hudnall (Lab)
My Lords, I think my noble friend would agree that the role of a probation officer is complex and requires a high level of skill. He has talked about recruitment. Can he share with the House a bit more about how that recruitment process is being conducted, where the search is going on and what the minimum requirements are for people who might apply for it?
Lord Hanson of Flint (Lab)
I am grateful to my noble friend for that question. If I may, I shall reflect on that and raise those points with the Minister, my noble friend Lord Timpson; he will have the detail of the recruitment exercise, which I do not have before me today. I ask her to rest assured that the 1,000 new officers are on track for March 2025, and quality is key to the delivery that those probation officers are seeking to ensure.
Lord Swire (Con)
My Lords, will the Minister confirm that no foreign national offenders are being released under the early release scheme?
Lord Hanson of Flint (Lab)
I am afraid I cannot give the noble Lord a direct answer on that, but I will examine the list of offenders who are being released. However, foreign national offenders per se will in some cases be subject to deportation on release, will be subject to the same issues of recall in the event of any further offending and will be subject to probation management accordingly. I will look at the figure because I do not have it in front of me, for reasons that I hope he understands, and I will return to him shortly.
Arrangement of Business
Lord Kennedy of Southwark (Lab Co-op)
My Lords, we now move on to three repeats of Urgent Questions asked in the House of Commons. Each set of questions is for 10 minutes. We want questions, not speeches, and short replies from Ministers.
Defence: 2.5% GDP Spending Commitment
(2 days, 12 hours ago)
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Baroness Goldie (Con)
My Lords, the Prime Minister and the Chancellor’s continuing dithering on when the Government will spend 2.5% of GDP on defence has caused stasis in the MoD, which does not know what it can spend and when, a stagnation of the order book and disgruntled industry partners. What orders are currently being withheld, what is their value and to what extent are other customers overtaking the United Kingdom in the queue for supplies?
The Minister of State, Ministry of Defence (Lord Coaker) (Lab)
I do not agree with that caricature of what is happening. The Chief Secretary to the Treasury said at the weekend, and it has been repeated since, that we will reach 2.5% at a future fiscal event in the spring. The defence review is looking at what capabilities we need and we will then set that in the context of the 2.5% as we move forward. That sequencing is the proper way for us to go ahead. As it stands, no major projects are being disrupted as a result of the review.
Baroness Smith of Newnham (LD)
The Minister’s answer was very clear, but at the weekend the Chief Secretary to the Treasury suggested that the Government were waiting for the SDR to report. However, one of the provisions of the terms of reference of the SDR is that there is a cap of 2.5%. Who is setting the agenda—the SDR or the Treasury—and should we be worried?
Lord Coaker (Lab)
Of course the Treasury sets the context of the budget within which defence operates. The 2.5% commitment is cast-iron; the discussion is about the timeframe. The Chief Secretary to the Treasury announced at the weekend that the 2.5% will be announced at a future fiscal event in the spring. The sequencing is everything. If we decided to spend billions of pounds on a project now and the defence review suggested that that was not the best use of money to meet future threats, the noble Baroness would be asking me why we had spent the money before knowing what those threats were.
Lord Stirrup (CB)
My Lords, the Minister knows that defence requires 2.5% of GDP now if it is to avoid cuts in capability and will require even higher spending in future. When the men and women of our seriously underresourced Armed Forces are required to confront the increasingly perilous situation in Europe and beyond over the next decade and their lives are on the line, how much consolation does he think they will take from repeated protestations about a £22 billion black hole?
Lord Coaker (Lab)
The noble and gallant Lord raises a serious point. The Government have given a cast-iron guarantee to reach the cap of 2.5%. As he knows, I meet the forces all the time, and I would give them the reassurance that we are seeking to ensure that they have the capability they need to meet the future threats that will be identified by the defence review. We make that commitment.
Lord Reid of Cardowan (Lab)
Does the Minister agree that the elevation of the President-elect of the United States, who, among his many unpredictabilities, has at least one predictability—that he will insist that Europe pays more towards the defence of the West than it has done hitherto—makes it only more important that we take the lead in Europe by implementing the 2.5% at a minimum? Would that not also help us in our relationship with the incoming presidential Administration of the United States in, to put it crudely, a transactional manner?
Lord Coaker (Lab)
I thank my noble friend for his question. As he knows, we can say to the President of the United States that we will meet the cast-iron 2.5% commitment and will set that out in due course. We understand that European countries need to increase their defence spending; 23 of the NATO nations are now spending 2.5%, so that is a very real commitment. The American President will also be pleased to hear that this country is leading a carrier strike group into the Indo-Pacific—as we know, China is of particular interest to the incoming President as well as the current one. We will work with them to deliver that capability.
Lord Robathan (Con)
My Lords, there is already a bloody war being waged on the continent of Europe. Putin is waging war on us through cyberattacks and Litvinenko, the Skripals, et cetera. Does the Minister, for whom I have a great deal of respect, agree that 2.5% is not enough?
Lord Coaker (Lab)
The Government have made a commitment to 2.5%; the previous Government made a commitment to 2.5% by 2030. We will see what happens, but we commit to look at the 2.5% at a future fiscal event in the spring. We also want to ensure that we have the capability to meet the threats we face. Let us be clear about this: the UK is the leading nation in Europe, along with the United States and our European allies, standing up against Putin’s illegal invasion of Ukraine. The message needs to come from this Chamber that this country will stand with Ukraine for as long as it takes to deter Russian aggression.
Lord Alton of Liverpool (CB)
My Lords, even in advance of the strategic defence review, the noble Lord, Lord Robertson, has made it clear that we face a deadly quartet of China, Russia, Iran and North Korea. Yesterday we discussed with representatives of the Republic of Korea who were in London the opportunity of reaching some of the 10,000 North Korean soldiers now in Europe to fight in Putin’s war. Will we redouble our efforts to reach over the heads of the despotic leaders in North Korea to break the information blockade and encourage those soldiers to walk to freedom in the West?
Lord Coaker (Lab)
The noble Lord makes a very important point. I was in the Republic of Korea recently to talk about the importance of hybrid warfare and information wars. We must consider that fully when we get the defence review and ensure that our hybrid capability is a match for anybody’s. That involves trying to influence others opposing us at the present time.
Lord Bridges of Headley (Con)
My Lords, according to the OBR, if the Government were to meet their ambition to increase defence spending to 2.5% of GDP by the end of the Parliament, they would break their new debt rule. Which is more important: the 2.5% target or the debt rule?
Lord Coaker (Lab)
I am not a Treasury Minister, but I know as a Defence Minister that 2.5% of GDP is an absolute commitment. I hope the Treasury is successful, because if we get the growth in the economy that we want, that 2.5% will be of a much larger amount.
Lord Craig of Radley (CB)
My Lords, the defence review is due to report early in the new year. If that is the case, it will report before the figures on the years affected by the 2.5% increase are announced. Does that not make the whole defence review unbelievable, because it will not have the figures to hand?
Lord Coaker (Lab)
I thank the noble and gallant Lord for his question. As I suggested in an earlier answer, the sequencing of all of this is extremely important. Of course, we need the defence review, which is taking place within the context of the 2.5% budget figure that the Treasury has set. As I said, we will make an announcement about the pathway to that and how we intend to reach that point at a future fiscal event in the spring. The noble and gallant Lord is right to point out the importance of sequencing.
Lord Soames of Fletching (Con)
My Lords, were any instructions or guidance given to the SDR team on guarantees about the financing of what will inevitably be the findings of the SDR?
Lord Coaker (Lab)
The SDR team know the context within which they are working, which is the 2.5% envelope. There will be choices in that, and they will lay out those choices. It will then be a matter for consideration and decision following that. Laying out the threats for us to properly consider what they are and how we meet them is an important function of the SDR.
Lord Dannatt (CB)
My Lords, is the Minister aware that in 1935 we were spending less than 3% on defence? We failed to either deter or appease Hitler. Is he further aware that, in 1939, when the war had broken out, our defence spending rose to 19% and in 1940, when we were fighting for our lives, it was 46%? That is the disastrous cost of fighting a war. Does he agree that we must do all we can to prevent history repeating itself?
Lord Coaker (Lab)
I completely agree. The noble Lord will know that at various conferences and in various decisions I have made I have talked about the importance of deterrence. That has to be at the forefront of our minds as well.
Viscount Trenchard (Con)
My Lords, will the Minister answer more clearly the question from the noble and gallant Lord, Lord Craig of Radley, about sequencing? It seems to me that the noble Lord, Lord Robertson, cannot conduct his strategic defence review if he does not know the date by which 2.5% will be available to him. The Minister also said that we are second to the United States as a spender in support of NATO. However, this year Germany will spend £30 billion more than the United Kingdom on defence.
Lord Coaker (Lab)
What I meant about the UK’s position is that, when I visit European countries and go around the world, the UK is seen as one of the foremost leaders with respect to the military. The noble Viscount may point to Germany and its spending, but I am just saying that, in terms of leadership on Ukraine and the deterrent effect we provide, the UK is at the forefront.
I have answered the question from the noble and gallant Lord, Lord Craig, and others. The defence review team know the context in which they are working. The review will identify the threats and choices we have. As a consequence, at a fiscal event that we expect in the spring, we can then make decisions about the choices before us.
Let me finish with this: nobody should be in any doubt, as the noble Viscount knows, over this country’s determination to ensure that our Armed Forces are supported and given the equipment that they need to both deter those who seek to undermine us and be there to fight where necessary.
Social Security Advisory Committee: Winter Fuel Payment
(2 days, 12 hours ago)
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Baroness Stedman-Scott (Con)
My Lords, I trust that the Minister will agree that the Social Security Advisory Committee made six reasonable recommendations in its letter. I urge all noble Lords to read it. I ask the Minister to respond to the letter, particularly covering the point about the additional cost of pension credit against the savings of the winter fuel allowance. There are a number of other benefits that pensioners may well get that could be impacted by taking pension credit. I am sure that all the things the committee raised in the letter would raise unintended consequences, but we want to avoid making a difficult position worse. I draw noble Lords’ attention to one:
“We would encourage the government to assess the equity of excluding housing benefit as a qualifying benefit on the basis of incomes after housing costs, rather than on the basis of gross incomes”.
When the Minister replies to that letter, I ask that she place a copy in the Library for all noble Lords to see.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, I thank the noble Baroness for her question. I am sure she is aware that the Secretary of State has replied to the Social Security Advisory Committee and has placed a copy of that on GOV.UK. She has gone through all the points raised by the SSAC and responded to them in detail, so I commend that to the noble Baroness. If noble Lords would like to ask any questions, I am happy to respond to them specifically. The department has a good working relationship with the SSAC. We welcome its observations and comments, and we always listen to the points it makes. It will be no different on this occasion.
The noble Baroness raised questions of housing benefits and costings. Final costings for the changes were certified and published by the OBR at the Autumn Budget and take account of any behavioural responses and the estimated number of people claiming pension credit in the upcoming years. I stress that if more people who are entitled to it claim pension credit, that is a good thing. It means that those people will get approaching £4,000 a year rather than or in addition to the winter fuel payment.
On the question of housing benefit, the judgment was made not to make housing benefit in itself a qualifying benefit, because it is based not only on financial circumstances but the amount of rent. As the noble Baroness will understand only too well, households that get housing benefit can go higher up the income distribution than those that get pension credit. That can be true even if they get the maximum, because of the way earned income is treated. We also have to take account of fairness between those who are renting and those who are paying mortgages. I presume that is why, when the previous Government did cost of living payments, they did not choose housing benefit as a qualifying benefit. I imagine it was for the same reasons.
Lord Palmer of Childs Hill (LD)
My Lords, following the Minister’s reply, the Social Security Advisory Committee recommended that the Government consider bringing forward an urgent amendment to the regulations which would, for this year only, very modestly passport those in receipt of the full rate of pensioner housing benefit on to winter fuel payments. It is a very modest request. Will the Government take that advice?
Baroness Sherlock (Lab)
My Lords, I think I have answered the point about housing benefit and explained why the Government took the decision we did. However, we are determined to do everything we can, so we are directly contacting approximately 120,000 pensioner households that may be eligible for pension credit, to encourage them to make a claim. We are also writing to all pensioners to make sure they are aware of the changes coming forward and to link them to where they can claim pension credit if they are entitled to it.
Lord Deben (Con)
Will the Minister accept that the decision not to give money to people who do not need it was the right decision, and that to argue against it is not sensible? However, it is also true that the public has really not understood what this now means. The Government have to communicate much better than they are doing at the moment. It is wrong to attack the Government for the decision, but it is perfectly right to attack the Government for not putting that decision over in a way that people can understand.
Baroness Sherlock (Lab)
I am grateful to the noble Lord, especially for the first half of that encouragement. The Government had to make some difficult choices. Deciding not to pay the winter fuel payment to people who do not need it was one of those choices. Inevitably, that causes some challenge and concern, particularly for those who are around the margins, as with any system of means testing. That has been challenging, but I take the advice of the noble Lord and we will look again to make sure that we are properly explaining to people what is happening and that those who need this most will still get help. I hope that they will not just get the help of the winter fuel payment, but potentially thousands of pounds in pension credit as well.
Lord Dodds of Duncairn (DUP)
Have the Government carried out any assessment of the differential impacts across the regions of England and the countries of the United Kingdom of this decision to axe winter fuel payments for most pensioners? There will be different impacts. Coming from Northern Ireland, we know some of the concerns there are, and the different levels of information that have been given out about people’s eligibility for pension credit and the campaign to encourage uptake.
Baroness Sherlock (Lab)
My Lords, the situation is different in different parts of the country. In Scotland, it is complicated by the fact that this is the first year it is devolved, so we have had to legislate in a different way to enable us to do that for Scotland but not for elsewhere in the UK. The Government have sought to make sure, by writing, across the piece, to 12 million pensioners, that we are directly engaging and that people are as aware as possible. There are also campaigns going on with partners in local government and voluntary organisations, as well as a media campaign on radio, television and social media. I will certainly check, go back and review that, and if I have any concerns that it is not being done appropriately in some parts of the United Kingdom, I will very happily come back to the noble Lord.
Lord Davies of Brixton (Lab)
As my noble friend says—I will get it right this time—we now have the letter from the Secretary of State. I am sorry to have to press her on this, but the Government consistently fail to answer the first question raised by the committee. I asked the same question in a Written Question during the recess and, again, it was not answered. The committee wants to know,
“the offsetting cost of different levels of additional Pension Credit take-up”.
I too asked that question, and saying that the OBR has signed off the figures is not an answer.
Baroness Sherlock (Lab)
My Lords, I understand that the OBR listed certified costings if nobody claimed pension credit, and costings on the assumption, which was also our assumption, that there would be a five percentage-point increase in that. It seems to me that that gives the entire range, and between that, presumably one could do the sums. I think that that does answer the question.
Chagos Islands
(2 days, 12 hours ago)
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Lord Callanan (Con)
My Lords, the new Government were suspiciously quick to conclude the deal, within weeks of taking office, with the Mauritian Government, represented as they were by a close legal friend of the Prime Minister. They now seem strangely reluctant to allow anyone to see the actual text of this handover. Since then, of course, we have had two important elections, so can the Minister confirm what discussions the Government have had with the new US Administration and with the new Mauritian Government? Is this not a case of negotiating with the wrong people at the wrong time?
Today, the Chagossian Voices group sent a letter, signed by 200 Chagossians, to the Foreign Secretary, again confirming that no Minister has ever responded to its previous letters. Can the Minister confirm whether there are any plans to engage with Chagossians in these negotiations? Can she explain why no Chagossians have been consulted so far? The vast majority of Chagossians deeply resent their homeland being handed over on a subsidised plate to Mauritius, a country 1,000 miles away. Lastly, does the Minister think there are adequate safeguards in this treaty—which, of course, we have not yet seen—to allow the lease of Diego Garcia to be extended beyond its current 99 years?
The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office (Baroness Chapman of Darlington) (Lab)
My Lords, as the noble Lord, Lord Callanan, said, there have been changes of Government in the US and Mauritius. I take this opportunity to congratulate both President-elect Trump and the new Prime Minister, Dr Ramgoolam, in Mauritius, on their election victories. Changes of Government are an inevitable part of negotiations with fellow democracies. We have also had a change of Government in this country since these negotiations began. This is the conclusion of a few years’ worth of negotiation—11 to 13 rounds of negotiation took place under the previous Government. We were aware that this could happen, and we are working closely with our allies, in both the US and Mauritius, on making sure that everyone is comfortable with the deal and the treaty. We have no reason to think that this is not the case at this stage.
On engagement with Chagossians, it was not possible for them to be party to these negotiations because they took place between Governments. I regret what happened to the Chagossians in the past—it was over 50 years ago, but that in no way diminishes the pain and hurt that they will have experienced. I accept that Chagossians will be concerned about the arrangements reached. We have prioritised the security of the US-UK military facility on Diego Garcia. People can disagree with that and can say that prioritising security was the wrong thing to do, but that is what the Government have chosen on behalf of the people of the United Kingdom, because we think that was in the best interests of the UK. There are arrangements in the deal to allow Chagossians to visit and return, and some Chagossians will be able to take advantage of that.
The treaty will be published as soon as it has been finalised with the Mauritian Government, and there will be a process for Members of this House and the Commons to debate it.
Lord Purvis of Tweed (LD)
Given that there was no public information from the previous Government—of whom the noble Lord, Lord Callanan, was a member—about any of the 11 rounds of negotiations that took place, does the Minister agree that two points of principle should be adhered to now? First, for the treaty approval process, nothing should be done on behalf of the Chagossians without their involvement, and Parliament should have an ability to vote on the treaty proactively, rather than the limited process under the Constitutional Reform and Governance Act. Secondly, unlike what Nigel Farage or Kemi Badenoch might suggest, British foreign policy should be formed and set by us, not Donald Trump.
Baroness Chapman of Darlington (Lab)
My understanding is that the process will be the usual one for agreeing these treaties. We need to be careful about the use of the word “consultation”, because there will be an opportunity to listen to the views of Chagossian communities and to understand that there is more than one view among them about this deal. It would be wrong to give the impression that there would be an opportunity to have a treaty changed in light of Chagossian voices. We can all have a view on that, and some of us might wish that it could be otherwise, but when we are dealing with a matter of security like this in the Indian Ocean, and with a treaty between two Governments, it is far better if we are up front and honest about what will be possible during that process.
Baroness Whitaker (Lab)
My Lords, is this not something of a trumped-up objection on the part of the Opposition? Does my noble friend agree that the previous Government never questioned the legitimacy of Mauritius’s eventual sovereignty over the Chagos Islands, very many years ago and internationally confirmed? Does she further agree that the majority of Chagossians do agree with this, and that all Chagossians are now being consulted by the Government? But can she say whether our Government are also discussing the resettlement plans with Mauritius?
Baroness Chapman of Darlington (Lab)
What is important is that Chagossians have the right to visit and return that the Mauritian Government will be free to enable. This is new, and some Chagossians have said that they wish to see this. It will now be possible under this deal. On the record of the previous Government, it is not for me to say whether the outrage is faux—others will judge. But I will say that I regret very much the implication by some on the Opposition Benches—by no means all, and I do not point the finger at the noble Lord, Lord Callanan—to attempt to co-opt other overseas territories into this, and to somehow suggest that there is a vulnerability there, which there is not. This is a unique situation, and I am glad that we have been able to move this forward and resolve it. It secures our base in the Indian Ocean and gives certainty on that and to Chagossian communities here.
Lord Howell of Guildford (Con)
My Lords, as the noble Baroness’s brief will probably be telling her, the Chinese are taking an immensely close interest in what is happening in the Chagos Islands and Mauritius. Can she reassure us that the Foreign Office has a clear focus on how the Chinese are playing this situation and what they are up to generally, in the Chagos Islands and in many other islands and coastal states of the Commonwealth, where they are involving themselves increasingly closely?
Baroness Chapman of Darlington (Lab)
We consider this issue closely. I draw noble Lords’ attention to the fact that Mauritius is a close ally of ours and of India, and it does not take part in the Chinese belt and road initiative. It is our view that the stable, secure and long-term arrangement we now have protects the Chagos Islands from any interest from any other parties that we would not wish to see.
Lord Hain (Lab)
As a Minister of State who dealt with this matter a quarter of a century ago, I applaud the Government for reaching an agreement. Does the Minister agree that if the treaty were somehow derailed by some of its critics, surely the losers would be not just our country but the United States, Mauritius, the Chagossians themselves, the United Nations General Assembly, the Commonwealth, the African Union and international law?
Baroness Chapman of Darlington (Lab)
It is hard to believe that it was 25 years ago. We are confident about this treaty and the fact that it secures our presence in the Indian Ocean. We accept that when there is a change of Government questions are raised and it is right that new Governments will want to cast their own eyes over the deal that has been done. We respect that and will co-operate, but we are confident that we can answer any concerns that may exist, because we think this is the right thing for us, for Mauritius and for the Chagos Islands, in securing our security.
Lord Hannay of Chiswick (CB)
My Lords, will the Minister accept my welcome for what she said—that this treaty, when it has been concluded, will be brought to both Houses? If it involves the International Agreements Committee, on which I have the honour to serve, will she undertake that the committee will be given sufficient time to take proper evidence on the treaty before it?
Baroness Chapman of Darlington (Lab)
That would be very helpful indeed. My experience is that the more people find out about the treaty and the deal that has been done, the more likely that some of the concerns they will naturally have—we welcome questions and scrutiny on this—can be answered fully. I am not responsible for the scheduling and timing, but I am sure my noble friend the Chief Whip has heard what the noble Lord said.
Renewable Energy: Costs
(2 days, 12 hours ago)
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Lord Frost
That this House takes note of the cost of renewable energy and its effect on energy costs in the United Kingdom.
Lord Frost (Con)
My Lords, I draw attention to my entries in the register of interests. I thank all those Members of your Lordships’ House who have agreed to speak today; I am very grateful to them all.
With COP 29 well under way in Baku, it is a timely moment to have this debate, even if that conference is perhaps attracting rather less interest than in previous years. That is certainly not because of lack of interest in the climate and energy issue. President Trump’s election is likely to open up debate once again at a global level. In the EU, we see increasing levels of doubt about the policy consequences of the climate commitments already made. Here in the UK, we have the new Government’s plan to decarbonise the energy grid by 2030, with the report last week from NESO, the newly formed National Energy System Operator, constituting the first detailed commentary on that plan.
Central to that plan is delivery of large-scale renewable capacity for our energy grid, both wind—onshore and offshore—and solar, together with a revamp of the transmission system to handle that. The NESO report provides us with costings for all this and much else besides. Like most other official and quasi-official studies on the costs of net zero, the NESO report uses figures already produced by the Government for this purpose. That is why it is such a matter of regret that there appears to be a large measure of disagreement about many of those underlying figures. We would have a much higher quality debate about the costs of net zero overall if there were at least consensus on the underlying figures. There is not, and that is why I felt it right to try to secure today’s debate on this matter. I do not expect we will find consensus today either, I fear, but perhaps we can hope to shed some light on why the differences exist.
The difficulty arises for two broad reasons. First, there are starkly different views of the levelised costs of renewables, particularly onshore and offshore wind, and these are relevant to the closely connected question of subsidies to this sector. Secondly, it is an inevitable consequence of the intermittent nature of renewables that this imposes costs elsewhere on the energy system: back-up, interconnectors, other non-renewable generation, and measures to ensure grid stability, together with the costs of rebuilding and reconfiguring the transmission system—and all this seemingly on a highly ambitious scale. I want to look at these areas in turn.
First, on the levelised costs of renewables—that is, the cost of building and operating wind and solar, discounted over time—the latest figures were published in 2023 by the Department for Energy Security and Net Zero and, as I said, the NESO report is based on them. Those figures claim that offshore wind can generate power at £44 per megawatt hour in current prices. Yet AR6, the recent round of capacity auctions, awarded contracts for offshore wind at £82 per megawatt hour in current prices. It is difficult to understand why there should be such a significant difference between these figures, if the £44 figure is in any way correct. One becomes even more baffled if one looks at the actual accounts of recently commissioned offshore wind farms, which suggest a production cost of around £100 per megawatt hour, or, indeed, if one looks at the recent payments, published yesterday, to offshore wind farms under contracts for difference, which suggest a production cost of around £150 per megawatt hour.
There are similar huge gaps in other areas of the costings. DESNZ assumes a capital cost for offshore wind of £1.5 million per megawatt of capacity. Yet, once again, looking at the accounts of wind companies, the figure appears to be about £3 million per megawatt, which is twice as much. Indeed, at the end of 2023, the developers of Moray West wind farm were still installing the foundations of the wind farm yet had already, at that point, spent the equivalent of £1.6 million per megawatt hour. It bears noting that if the seemingly correct higher offshore wind capital spending figure were used, the NESO estimate for capex from now to 2030 would go up by about £15 billion every year, taking the total capex from a total of £31 billion to £34 billion to a total of £45 billion to £50 billion annually.
To take just one further difference, the DESNZ figures assume a 61% capacity factor for offshore wind—that is, they assume that over a year, wind farms generate about three-fifths of their notional installed capacity. But once again, recent wind farms are opening at a capacity of 45% when new, and that figure is falling over time. The real capacity factor over the whole of the life of a wind farm may well be under 40%. If that is correct, it means that we will need to build 50% more offshore wind farms to get to the actual power that DESNZ estimates—and, of course, costs will go up by the same amount.
I note that Professor Gordon Hughes from Edinburgh University and Andrew Montford, director of Net Zero Watch, wrote to the Permanent Secretary at DESNZ on 16 September asking for further detail on some of these discrepancies. They have not yet received a reply.
Those figures are just the actual costs of operating offshore wind. The gap between assumptions, auctions and actual real-world costs explains why there has been such a need for subsidies ever since the shift to renewables began in the mid-2000s. The OBR says that “environmental levies”—a catch-all category which covers the renewables obligation, the contracts for difference and the feed-in tariffs—currently stand at about £12 billion a year. That is over £400 for every UK household. Yet one has to ask again: if the real cost of offshore wind really is £44 per megawatt hour, well below current market prices and the prices agreed in auction rounds, why do we need these subsidies at all?
I turn now to my second category: the costs elsewhere in the energy system. I think everybody agrees that there are some such costs; the question is: how high are they and what are the consequentials? The costs are principally those of intermittency, of which there are two kinds. The better-known one is the fact that little power is generated by renewables when the wind does not blow and the sun does not shine—periods like the one we saw in this country for most of last week. This requires back-up, currently mainly gas, and there is obviously a capital cost in maintaining a dual system of any kind. Moreover, the fact that the gas-fired stations cannot be used at close to full capacity but must be turned on and off at short notice brings a cost in reduced efficiency and revenue. The cost of paying operators not to shut their power down as a result of this lack of efficiency—the so-called capacity market—is currently £1 billion a year. The OBR says it will rise to £4 billion in three years’ time.
The other kind of intermittency, which is less well known, is the reverse: what happens when the wind blows and the sun shines when we do not need the power generated. Under current arrangements, that involves us paying the renewables producers not to produce and to turn their kit off to avoid grid instability. That costs £2.5 billion per year, which is expected to rise to £3.5 billion in three years’ time.
It bears noting that the more renewables we produce and build, the bigger these figures will get. The more we rely on renewables, the bigger the problem when we have the wrong kind of weather, and the bigger the concomitant costs are going to be. That is why it is a simple fallacy, though a seemingly widely believed one, that building more renewables reduces costs and brings more security. It is surely clear that the reverse must be true.
Finally, there are the wider knock-on costs, most notably in the plans for what NESO calls “demand management”: rationing of energy if the grid cannot supply enough energy to meet demand. This will come either by compulsion—for example, in plans to reduce supply to industry in such circumstances—or by price rationing to consumers, or both. The NESO plan for demand management is slated to cover, by 2030, five times as much potential demand as now—that is, about 10 gigawatts.
Now noble Lords may say, as people do, there have always been differential energy tariffs. Indeed, some of us are old enough to remember things like Economy 7, from the 1980s. But that was differential pricing to stimulate demand in the night-time, when supply was high but demand was low. This is the reverse; this is a plan for us to put up with differential pricing to reduce demand, when it is demand that is high and supply that is low. That is quite different, and it necessarily imposes an economic cost on industry and the consumer, for they cannot use energy when they want to use it and may have no warning of the fact, either. It is hard to quantify that cost, but it is clearly potentially significant. It should be factored in to the cost of running an intermittent renewables system, but it is not.
The only attempt that I am aware of by government to quantify some of those wider costs—though not all of them, for some are still excluded—was made by the then BEIS in 2020, in its document entitled Energy Generation Costs 2020. This showed, even on the imperfect measures being used, that both offshore and onshore wind were on average likely to be more expensive than modern gas power stations, even allowing for some of the implausible assumptions that I discussed earlier.
Let us try to bring all this together. We have a significant discrepancy—disagreement, call it what you will—in assessments of the levelised costs of renewables. In the case of offshore wind, it is a discrepancy amounting, potentially, to up to £100 per megawatt hour. The high levels of subsidy we are paying in various forms suggest that production costs are in fact quite a lot higher than acknowledged. There are also wider costs to the grid—£3 billion to £5 billion in the current year, growing in future—and to the economy, hard to quantify but definitely present in the various kinds of inefficiencies created by an inefficiently working electricity supply system. In short, one side of the argument sees low levelised costs and believes that they will fall further; the other, with which obviously I associate myself, sees costs that are not falling and that require high and growing levels of subsidy and complexity to make the whole system work properly.
This situation is deeply unsatisfactory. The Government are about to embark on a dash to decarbonise the electricity grid according to an assessment that is based on certainly disputable direct costings, and which will be heavily contested and simply fails to take into account many of the wider costs and consequentials. This really is not good enough; the country is owed better.
I recognise, of course, that when the Minister responds he may not have the information he needs to reply fully to some of these detailed points, but I hope he might do so in writing, and perhaps at the same time encourage his Permanent Secretary to reply to Professor Hughes’ letter, which I mentioned earlier.
I say all this not to make a political point. We really need to understand better the real cost of renewables to the consumer, the Government and the economy. If it turns out that I am wrong and the costs really are low and falling, that will be excellent news for us all. I am doubtful about renewables not on some ideological grounds, but because they seem to me extremely expensive in their own right and to come with many additional costs and security risks too. I have not yet seen the evidence that would persuade me otherwise.
I finish on this point. With this in mind—and I am not sure the Minister will leap with alacrity on what I am about to say, but I hope he might respond anyway—the Government should consider establishing some form of expert committee on this subject, made up of officials and experts from the department and bodies such as NESO and the Climate Change Committee, with a red team of outside experts to provide challenge, to look on a totally transparent basis at the evidence and the costings, and to see how close it could get to a common view. This would seem to me the best way of getting at the reality and an assessment that might command a bit more consensus than the current situation does. Whatever this country’s future energy policy may be, we surely all want it to be established on the best possible analysis and the best possible knowledge. I look forward to the debate today and to the Minister’s response.
Lord Whitty (Lab)
My Lords, I appreciate the noble Lord, Lord Frost, starting this debate. He did so in the way I anticipated he would, repeating what was said in the debate a couple of weeks ago. Rather than following him into his arguments, the House needs to recognise that even if the costs of renewables, including of construction, carbon capture and storage and so forth, prove to be double the estimates made under the previous Government—and which are still supported by the Conservatives and by the new systems operator—they would still be substantially cheaper than the estimated cost of gas.
Of course, the electricity price in this country, contrary to what the noble Lord has said and to what the noble Lord, Lord Lilley, said the other week, is higher than in other countries at various points because it is based on the price of gas. We have to pay the world price for gas, which went up considerably. It does not matter whether the gas is from the North Sea or from overseas: that gas price determines our electricity supply. The mechanism is explicit and implicit.
The real problem with our attempt to move to net zero is that we have failed to do certain complementary things, and on that I would largely agree with the noble Lord. We have failed to develop storage, switching capacity and aspects of the grid. We have failed to provide an offshore grid so that different arrays and wind farms can land at one place, rather than creating a planning problem in different parts of the country. On the other hand, we have failed to develop nuclear power or to return to nuclear power early enough. We have also failed to develop the long-term investment in tidal and wind power, which we have plenty of around our coast and which would not be intermittent. But that is very different from denying the whole ability to provide at relatively cheap cost predominantly renewable energy and to get back on to the trajectory, around which there was a degree of political consensus a year or two ago.
There are other problems, as well, with the policy so far. Effectively, we have failed to produce a supply chain for renewable energy in this country to any great extent. Most of the blades and paraphernalia for wind farms come from abroad. I applaud the Prime Minister’s announcement a few days ago on investment in manufacturing blades in Hull. I hope that that is only part of a new industrial policy that takes into account the need to provide alternative employment through training, retraining and recruitment of those who hitherto worked in areas that were supportive of North Sea activity, so they have jobs in the new industry. The actual techniques used in the jobs are not that different, so retraining can relatively easily be done; but we also need a new generation who can support the renewable energy sector.
I do not think that the noble Lord makes the case for changing significantly our trajectory, but he does make the case for ensuring that these back-up arrangements are in place and provide jobs and income for this country’s businesses and workforce.
The other reason I put down my name for this debate is my deep anxiety that, while it is obviously right to query costs, particular technologies and their effect on employment and business within Britain, what are essentially queries about particular projects—whether on who pays for it, the environmental impact of, for example, solar farms on agricultural land, or the total cost—have been used by some people to support what appears to be a growing international degree of ending the consensus on climate change. Some of that is reflected in what is going on in Baku now and the near failure of the COP process so far. We need to get back to that consensus, with all-party support for the trajectory that, a few years ago, seemed to be agreed by us all.
Baroness Hayman (CB)
My Lords, it is a pleasure to follow the noble Lord, Lord Whitty, and to agree with him particularly on the last point that he made. There are difficult decisions to be made; we need transparency and we need critical analysis of individual projects and policy decisions that will influence how we go forward. But we had the advantage in this country, and it is one reason why we became such a leader, of basing those decisions on a fundamental agreement across parties of the huge significance of the issues relating to climate change and the opportunities that there were both to save the world—that sounds very dramatic, but it is not necessarily incorrect—and to hold back and stem the potentially disastrous consequences of global warming by taking action now.
I am getting ahead of my speech and I have not declared my interest, which I do now. I also congratulate the noble Lord, Lord Frost, on again directing the House’s attention to these issues. However, I fear that today he has asked us to take a very narrow focus on the cost of renewable energy and the effect on energy costs in the UK. I do not dispute that these are important issues, but I will not spend my precious four minutes going into the arcane debate about the latest LCOE figures from DESNZ or the implications of the latest strike price from AR6 CfD.
I simply say to the noble Lord that he puts a very gloomy interpretation on these figures, and he says that they are disputed. I do not dispute that he disputes them. However, there is a weight of opinion—academic, scientific and international—that suggests that his interpretation is wrong. If we look at the latest reports of the NESO, which he referred to, the CCC, the IEA and the International Renewable Energy Agency, and the excellent briefings we got from the Grantham Institute, the ECIU and the UK Sustainable Investment and Finance Association, they do not take the same view of the costs as he does.
My fear is not only that the noble Lord, Lord Frost, has got his sums wrong—and possibly, some would say, not for the first time—but that we focus only on the narrow issue of the debate today. We run the risk, as Oscar Wilde told us, of seeing
“the price of everything and the value of nothing”.
There is value in the transition to renewables, beyond the savings to consumers, which I believe are there. There is value in terms of energy security, sustainable jobs for the future, this country’s economic performance and our ability to lead in this area in the future. I hope that other noble Lords will go into more detail about that value later in this debate.
The Lord Bishop of Norwich
My Lords, I am grateful to the noble Lord, Lord Frost, for securing this debate at the time of COP 29. It is a pleasure as always to follow on from the wise words of the noble Baroness, Lady Hayman. I speak as the lead Bishop for the environment and as a member of Peers for the Planet.
I would like to ensure that there is reflection in this debate on the cost of not embracing renewable energy, especially as a global neighbour. Under even the most optimistic scenarios, the planet will experience warming above 1.5 degrees. The predictions for people and planet are stark. Ours is the generation that simply must move off our reliance on fossil fuels and embrace a new, cleaner, more resilient energy future.
We know the data. We know that climate change knows no international borders. We know that those being most impacted by adverse weather events are the poorest in the world. We know that those nations are least resilient as they are least able to afford mitigation and adaptation to protect their populations. We know that climate change is leading to more health problems, more migration, more conflict and more war. The cost of this is in the trillions—as well as the huge human misery that results. The UN has estimated that moving to renewables could save the world up to $4.2 trillion per year by 2030 as we reduce pollution and climate impacts. By the UK investing in renewables, we are investing in the technological development that will see costs decline over time. That is ultimately good for us, the consumers of electricity. It also contributes to the technological development that is needed across the world as it becomes more affordable.
We have made international commitments about our carbon emissions, and I welcome the recent announcement by the Prime Minister at COP 29 that we will reduce them by 81% by 2035. Let us not underestimate the importance of having international leadership in this area. We make these commitments because we know that it will contribute to the well-being of the planet, but it is also in our domestic interest. The lesser the impact of climate change, the less our national security risks, the better our public health, the more secure our food supplies and the more progress we can make restoring our native biodiversity.
Last year Pope Francis, in Laudate Deum, his short follow-up encyclical to the much-lauded Laudato Si’, wrote:
“We must move beyond the mentality of appearing to be concerned but not having the courage needed to produce substantial changes”.
I urge His Majesty’s Government to consider our global responsibilities as part of the cost-benefit of renewable energy, and I hope that other noble Lords feel able to as well.
Lord Howell of Guildford (Con)
My Lords, I declare interests, both for past energy issues—I was at one stage the Secretary of State—and as an adviser to Mitsubishi Electric, which is one of the biggest producers of equipment and kit related to moving to a clean energy world. I congratulate my noble friend Lord Frost on securing this debate, which is very well timed. It comes not only during COP 29 but after a very good debate last week, promoted by my noble friend Lord Lilley. It also comes before we debate, on Monday, the Great British Energy Bill, which, as far as I can understand it, is going to confuse things even more among many agencies. Still, we will have to live with that for the moment.
This is of course a question of pace and process. It is an honour to come after the right reverend Prelate but, with respect, the issue is not really whether there is a problem and we address it. The issue is whether we address it in a way which slows it down and creates a pushback, diverting us from the real task, or whether we focus on what we are trying to do, which is to reduce or slow down the rise in methane and CO2 emissions, which are going to lead to a very great world disaster. At the moment, methane emissions are rising faster than ever; CO2 worldwide is rising faster than ever. That at least raises the question of whether we are doing the right thing now, when clearly some action is needed.
We also need to create a rendezvous with reality, of which there is little sense in this debate, and counter a tide of misinformation—some of it unconscious and some of it conscious disinformation—about what should be done now and which way we should go. There are also some rather cuckoo recommendations from really quite senior bodies about flying more slowly, which sounds extremely dangerous to me, or eating less beefsteak. For some people, that may be necessary, but generally that seems a rather bad addition to the nation’s health.
I am very pleased that our own Library here in the House of Lords has put forward an excellent briefing, in which it has corrected, rightly, a very important and basic issue about this whole discussion. It is the matter of the confusion, in assessing where we go next, between electricity generated, as at present, and total energy use. Those are very different things. Last year, the former, according to the Office for National Statistics, produced about 19% of total energy use and renewables were about half that. Of that 19%, about 51% was green electricity of all kinds, including nuclear, wind, sun and all the rest. That leaves renewables providing about 9% or 10%—not 50%—of the total energy that we use in this economy at present. It is the remaining 90% that we now have to focus on.
There are a number of reasons why it may not be quite as bad as that and a number of reasons why it might be much greater. Energy efficiency will reduce growth; interconnectors will help us out; local generation and tidal will help us out as well. The prospects are also for a huge increase in energy demand in this country, which we will have to meet by nuclear, when we have made no moves so far beyond Hinkley, which is turning into a pretty bad outfit altogether. There are also the costs of storage and having much more nuclear power at Sizewell, which will be a great mistake. We need six new switching stations, a new grip on pylons and an entire makeover of the National Grid system. None of these things appear to be going forward very fast and we therefore face the fact that we will have huge electrical growth for which someone will have to pay, and it will cost a great deal more.
Lord Hain (Lab)
My Lords, in October 2006 Professor Nicholas Stern, a former chief economist at the World Bank, later introduced as the noble Lord, Lord Stern, vividly briefed the Cabinet on the looming climate crisis. His central message was that the costs of combating it will be high, but the costs of not doing so will be immeasurably higher. How right he was and how wrong the noble Lord, Lord Frost, is. As the right reverend Prelate the Bishop of Norwich said so eloquently, the science and the devastating effects of global heating are indisputable, as extreme weather—chaos, droughts and mega-floods—batters the planet, most recently in Spain.
Renewables are getting much cheaper, gas more expensive and nuclear power incredibly more expensive, especially with its decommissioning and waste storage costs. The Nuclear Decommissioning Authority has estimated the future costs of the nuclear decommissioning mission at a colossal £105.3 billion, significantly taxpayer funded. Offshore Energies UK also reports spiralling costs and a dramatic hike in the decommissioning costs for oil and gas platforms and plugging oil and gas wells, costing taxpayers over £16 billion from a 2021 Tory-funded deal. In March 2023, independent research showed that, since 2015, the last Conservative Government gave £20 billion more in support to fossil fuel producers than to renewables.
There is no doubt that generating electricity from nuclear power costs significantly more than generating it from solar and wind. Then there is the enormous untapped potential of marine energy: notably, the very low-cost tidal power from the Severn estuary, with the second highest tidal rise and fall in the world, which has never been harnessed and surely must now be.
Britain’s dependence on fossil fuel markets controlled by autocrats such as Vladimir Putin has left us vulnerable to energy price spikes, as well as the escalating costs of the climate emergency. That is why our Labour Government have committed to delivering clean, homegrown energy by 2030, meaning electricity based on renewables, nuclear and clean energy technologies that we control at home, rather than fossil fuels sold on volatile international markets. Last week, the National Energy System Operator—NESO, referred to by the noble Lord, Lord Frost—published an independent, expert analysis showing that clean power can lead to cheaper and more secure electricity for households. A wide range of groups from business leaders to trade union leaders, the International Energy Agency and leading UK and international companies, such as National Grid, Scottish Power and SSE, have backed this.
We need Labour’s pro-energy security, pro-growth, pro-jobs, pro-climate and lower cost policy to tackle the climate emergency with real urgency. Prioritising green, clean renewable energy is about choosing investment over decline, new skilled jobs over low productivity ones, growth over stagnation, and cheaper over more expensive consumer prices—or, as the noble Lord, Lord Stern, might have said to the Cabinet meeting that I attended in 2006, investing in the short term to save over the longer term.
Lord Moynihan (Con)
My Lords, I declare an interest as chair of Acteon, which operates across global marine energy and offshore infrastructure services. Central to this debate is a clear understanding of the significant distinction between the availability of renewables and hydrocarbons. One leads to the generation of intermittent power; the other to much-needed baseload. While moving to an increasing share of renewables, we always require the availability of baseload.
I had the good fortune, as Energy Minister back in 1990, to introduce the first competitive framework for renewables: the non-fossil fuel obligation, which morphed into the contracts for difference that we have in place today. What it has not led to is a simple trade-off between gas-fired power generation and renewables. Even as we debate today, at this hour—not just last week—our grid status shows that 53% of our power generation is from gas, with wind at 18%. Nuclear at 13% is far too low; the late delivery of SMRs is due to their being stifled by bureaucracy. While gas plants account for about one-third of Britain’s power requirements and are destined to fall to an average of 5% in about 10 years, we still have to retain the capacity of these gas-fired plants as a strategic reserve for windless days like today.
It is worth pointing out that we will not achieve that switch without substantial investment and private sector creativity. The recent NESO report, referred to by my noble friend Lord Frost, finds that the shift to renewables necessary for the Government to reach their flagship manifesto pledge of a clean power system in 2030 will require annual investment of more than £40 billion, with nearly 2,700 miles of offshore electric cables and 620 miles of new onshore cabling.
The alternative to this scenario necessitates storage solutions, and while I agree with the noble Lord, Lord Whitty, that storage technology is improving, there is a long road to travel to reach scalability and affordability. The capex has to be found by the Government if they want to keep the promise made by the Secretary of State Ed Miliband that household bills will fall. Given this reality, it would be irresponsible to turn our back on maximising domestic gas production in the UKCS. A stable fiscal regime for gas production is essential in a highly competitive global market for investment dollars. Norway has a consistent 78% tax rate. If the Government are to follow the Norwegian model, which they began to do in the Budget, the next steps must include further investment allowances. Without them, we face—as we do today—a premature wind-up of the UKCS, leaving gas stranded and substituted not by renewables but by expensive, more polluting, imported LNG, which makes neither economic nor environmental sense.
Renewable energy sources come with massive upfront capital investments which cannot be excluded in any cost comparison. Maintenance, decommissioning, grid costs and life-cycle replacement need to be costed. It is true that the marginal cost of producing electricity from wind or solar, once the facilities are operational, is extraordinarily low. In summary, we have to create a resilient, sustainable energy system which has to underpin energy security. The key, as ever, will lie in the strategic investments we make today, in both technology and infrastructure, and in private sector investment to ensure that we are not merely reacting to market forces but proactively shaping the energy landscape for generations to come. This, I would argue, is a future well worth striving for, and I wish the Government well.
Baroness Whitaker (Lab)
My Lords, it is an education to follow the noble Lord, Lord Moynihan. It is an obvious truth that we should note the costs of any national policy and we are grateful to the noble Lord, Lord Frost, for giving us the opportunity to debate it. I congratulate him on his timing. COP 29 provides an international context for what is manifestly an international problem: the climate change emergency.
We must also factor in to the national calculation the benefits of the policy and the costs of not adopting it, as has been mentioned. We should do this for the long term as well as the short term. I shall focus on the long term, but it is unarguable that there will be short-term costs—whatever they are—in moving to reliance on renewables. A key issue is who is to bear them. We shall need to consider the split between public funds and consumer and upfront private sector expenditure.
Industry thinks long term, and the chief executive of CorPower, which has pioneered the first commercial wave energy device in Portugal, said:
“I believe that there are, today, several key trends in renewable energy which can be considered megatrends. One of them is … cost reduction”.
He describes this trend in solar energy as being
“even in places where the solar irradiation is quite low”.
I think the UK might find itself here, and in wind energy and eventually marine energy.
NESO, referred to by my noble friend Lord Hain, considers that the economies it mentions, after the shift to a clean-power system, come from offsetting benefits from the eventual fall in the price of electricity, the cessation of dependence on volatile international gas prices, and improved efficiency measures. I regret that there simply is not time in four minutes to break down the figures. We should also find a way to include the so far unquantified but clear gains in energy security and health which will come with renewables.
If we can ensure that our national strategy invests fairly and equitably in short-term costs, the profits of the companies involved will yield tax, as will the jobs that they provide, together with more consumer spending power. There is already an example in the joint venture project to supply decarbonised heat to buildings across Westminster from the Thames, the Underground and the sewer networks. It will cost £1 billion: an investment that is certainly a significant short-term cost but a measurable long-term significant gain in reducing energy bills.
We must put into our equation the likely costs of unimpeded climate change from the overuse of fossil fuels: extensive floods in the UK, homes abandoned from rising sea levels in the UK, lives lost from extreme heat—probably also in the UK—and the international disruption caused by the effects of climate change on people fleeing ruined habitats.
Finally, I put one request to my noble friend the Minister. Wave energy is the Cinderella of renewable energy, but it has huge potential, especially when combined with offshore wind, not least for reducing battery storage costs. The contracts for difference scheme does not give it a fair chance at present, because it has not yet achieved the scale-up reductions of the more established tidal energy schemes. Will he consider giving it its own ring-fence, so that all the research now producing results can be speeded up?
Baroness Finn (Con)
My Lords, I declare my interests as set out in the register, specifically my chairmanship of Project Tempo, a non-profit organisation which researches public attitudes towards the energy and climate transition. I thank my noble friend Lord Frost for this important and timely debate.
My right honourable friend the leader of His Majesty’s Opposition is right that we need to tell the truth. Over the last few years, successive Governments have set more and more ambitious emissions reduction targets, without a plan for how to meet them. We urgently need an honest debate about the different pathways to decarbonising our economy. The road is paved with trade-offs, and we must choose which ones to make.
I want to make two observations. The first is that British voters overwhelmingly support the ambition of getting to net zero. Project Tempo’s research shows that the public care about protecting the environment and want us, as a country, to do the right thing. However, it also shows that public support for green policies declines dramatically when individuals are asked to pay for them through higher energy bills, prices or taxes.
The second observation is that British energy prices are going in the wrong direction, and have been since well before the war in Ukraine. Data from the energy department shows that between 2010 and 2023, domestic electricity bills almost doubled in real terms, and data recently published in the Financial Times showed that the UK’s industrial electricity costs were among the highest in the world, more than four times those of the United States or China, and significantly higher than those of all other G7 economies. This is a profound challenge.
Our globally uncompetitive energy costs not only damage our productivity and economic growth, they risk undermining public support for the transition. If people come to associate green policies with higher bills, it will become much harder to maintain the public support that we need to reduce emissions and tackle climate change. That is why I was worried to read last week that the Institute for Fiscal Studies has said that Labour’s plans for clean power by 2030 will see green levies rise by an average of £120 per household by the end of the decade. The recent report from the National Energy System Operator also suggested that energy system costs could rise as a result of Labour’s plans.
We ought to pursue the mix of technologies that will reduce energy bills, protect national security and drive growth in our economy. Unfortunately, the Government’s policy will do exactly the opposite. Their ideological rush towards accelerated targets will send prices higher and exclude the development of other forms of clean energy such as nuclear, which would help us hedge the costs involved in decarbonising the grid. Can I press upon the Minister the importance of new nuclear and ask him to set out briefly the position on the Wylfa plant in Ynys Môn?
We must tell the truth about the challenges we face, not pretend that inconvenient facts do not exist. The reality is that many of the Energy Secretary’s current plans entail borrowing enormous amounts of money and spending it on subsidising technologies which are not otherwise viable on the open market, or on importing more products from China. Before the election, the then Opposition promised that their plans would cut consumer energy bills by £300. That claim—which they continue to stand by—is bogus. My fear is that false promises such as that, and their general rush to accelerate the transition, risk undermining the very environmental action which so many of us wish to see. I look forward to hearing how the Minister will address these legitimate concerns.
Lord Elliott of Ballinamallard (UUP)
My Lords I welcome the opportunity to speak in this important debate and I thank the noble Lord, Lord Frost, for securing it. The renewable energy system stems from the climate change issue, so we cannot look at one in isolation without the other. I am interested in the noble Lord, Lord Frost, saying that there is no consensus around some of the figures and costings. I assume that that is because some of those estimates are just guesstimates at a high level, as opposed to having any significant background to the figures.
I am concerned about climate change, as I am sure most in this House are. I want to see renewable energy and I support it, but it all comes at a cost. We have to devise that cost in a practical manner and not just set targets that cannot be achieved. In Northern Ireland, we have set targets that I do not believe are achievable—in fact, we have missed all our early targets on climate change.
It also comes sometimes at an environmental cost. In the early 1950s, a renewable project—a hydro-plant—was built at Ballyshannon, in the Republic of Ireland, using the water that flows from Lough Erne in County Fermanagh. That has had huge environmental challenges, not least in that it has decimated the salmon and eel industries in Lough Erne. The salmon, eel and other fish trying to get back up through the hydro-plant have been slaughtered. They have been cut and killed by the blades of the hydro-plant, and that has reduced the number of fish stocks within Lough Erne. This has been a huge environmental disaster in County Fermanagh, so we need to be careful about how we do this. Just a few years ago, hundreds of thousands of eels were trapped in that hydro-plant and killed. That is a huge loss to the environment in County Fermanagh and to Lough Erne.
We do not always have sun shining and wind blowing, so we need to find other back-up mechanisms. I accept that other aspects, such as wave energy, might be more reliable. We need to do this in a managed way. In Northern Ireland, we had the renewable heat incentive, or RHI, which turned out to be an absolute disaster. We cannot now invest in further renewable incentives in Northern Ireland; we are pouring money back from the Executive every year, simply because we are not allowed to utilise that funding while the RHI is still in place. It has been a disaster not only for the Government and the Executive but for many of those genuine users who have invested millions of pounds into projects that they now cannot make pay, and who are returning to conventional types of heating such as oil and coal. We need to be careful in what we do and how we do it. That is why we should not rush into issues that are not reasonable.
Last December, I attended a seminar led by government and executive officials in Northern Ireland. We were told that, by 2027—in just three years—it will cost government departments in the small area of Northern Ireland £2.3 billion to implement climate change policies up to that point, and that is not to talk of what it will cost businesses, ordinary householders and the public.
Lord Browne of Madingley (CB)
My Lords, I refer the House to my relevant interests as set out in the register.
I would like to make four related points on this topic and its wider context. First, in the UK, the cost of supplying electricity from renewable sources such as wind and solar is far below the cost of supplying it from generators using oil, coal, gas or nuclear fission. However, there are many assumptions in these average calculations, notably for financing, location and risk. In my long experience, these will cause different analysts to come up with different estimates, but in almost all cases the results are the same: namely, that renewable energy sources are the cheapest today.
Secondly, the cost of renewable power has come down by at least 60% over the last decade. That is a result of economies of manufacturing scale and improvements in technology. Both these effects will continue. There is no reason why, for example, the efficiency of solar cells could not improve by 50%. The cost of battery capacity has shrunk by over 80% and it will continue to decline. That is important because it now makes it possible to have long duration storage of electricity supply, removing the uncertainty of sunshine and wind.
Renewables will be a significant contributor to the transition to clean energy sources. Their continued cost-effective deployment is vital to avoid the impacts of climate change. They are not the only source of climate mitigation, but they tell a story which needs to be repeated in other technologies. Their continued improvement and deployment in the UK give us credibility in the energy transition industry. We must not let go of this position.
Thirdly, no improvement or deployment can happen automatically. It requires research and development, from fundamental science to the engineering of how to grow an innovation to a commercial scale. The UK’s grip on many of the needed intellectual and practical scientific components is strong. If continued to be aggressively developed, this could become the source of significant growth, both domestically and as a source of export earnings.
Fourthly, the UK will need to pull together all its resources to compete in the areas likely to have the highest commercial impact and the lowest cost deployment. It will need to demonstrate that our innovations are scalable. That will best be done if the UK creates a national energy institute. It must consolidate in one place the best minds to work on problems that need access to many different scientific, engineering and economics disciplines. It must attract the best of the best, because it is a centre of excellence, much as has happened in the life sciences at the Francis Crick Institute and the Laboratory of Molecular Biology. It will need to be based in a city which already attracts the best people and has an appropriate platform of scientific and technical support. Given its track record in energy, Cambridge must come high, if not top, of the list of those candidates.
I make these four points to make a single overarching comment: that we need access to the best, lowest-cost and highest-impact technologies, not just now but in the future. We have low-cost renewables; we must not throw away the chance of having other low-cost technologies here in the UK to have low-cost, secure and clean sources of energy for generations to come.
Lord Moynihan of Chelsea (Con)
My Lords, I thank my noble friend Lord Frost for calling this debate and for his excellent opening remarks. I call attention to my register of interests.
Each day, the direct and indirect cost of renewables expands upwards and outwards, with subsidies, constraints, payments, curtailment, demand-side response, artificial inertia, and on. There have been rising prices every year from 2002 to 2020, at a time when—contrary to the assertion of the noble Lord, Lord Whitty—gas prices were broadly flat. Now, we have the highest electricity prices in the developed world.
This week Ed Miliband claimed that renewables are cheaper than fossil fuels and that the price of electricity will go down by £300. These assertions generated widespread derision. The Centre for Policy Studies called them “nakedly dishonest”, saying that
“the £300 figure is pure garbage”.
I am afraid that the noble Lord, Lord Browne, just made a similar assertion.
We are told that net zero can be achieved at modest cost, but behind almost all those claims are the assertions of DESNZ, which are, unfortunately, divorced from reality. My noble friend Lord Frost mentioned experts discrediting DESNZ’s figures. The findings of others, including Dr Aldersey-Williams of Robert Gordon University and the independent energy consultant Kathryn Porter, are also completely inconsistent with DESNZ, yet its figures are treated as gospel throughout our institutions. The Climate Change Committee uses them and NESO’s claim that the Secretary of State’s plan is affordable depends on them. If current costings, rather than those of DESNZ, are applied to the Royal Society’s recent study on a net-zero grid, the overall cost rises, arguably, to an unaffordable level.
We are basing public policy on hopeful predictions that have little grounding in reality. Policymakers should surely demand to know what net zero would cost, using real numbers. It is unforgiveable that successive Governments have failed to prepare a cost-benefit analysis of net zero that is based on real, hard data.
Several weeks ago I told your Lordships’ House that
“net zero is a religion”.—[Official Report, 24/10/24; col. 774.]
How else can one interpret its proponents’ head-in-the-sand approach? Entire industries have been destroyed in this country—cars, aluminium, steel, North Sea oil—and for what? China’s carbon emissions are already five times the emissions of the entire European Union. India is about equal to the EU but rising fast. We ourselves are a rounding error. Why pursue this extraordinary destruction of value in our economy, spending huge random amounts that will not—as the noble Baroness, Lady Hayman, put it—“save the world”?
The Government should be honest about their fudge, delegitimise those who created it and start again with credible, disinterested analysis as to what the real cost is, what it might be in future, whether we can afford it and what the overall impact on the country and the economy will be. Remarks in the recent debate implied that we must not concern ourselves with the cost, because we have to do this to save the planet. That is emotion-based, not calm and fact-based, reasoning. We must accept that, at some given level of cost, we would want to decide that net zero was unaffordable. We must find out, using facts and assertions, whether net zero’s cost takes us into that unaffordable territory.
To conclude, I hope that the Government will consent to my noble friend Lord Frost’s request for a speedy inquiry into what the costs really are and whether their expected impact on the nation is affordable. I do not believe it is.
Lord Rooker (Lab)
My Lords, I am voluntarily involved in a small Archimedes screw on the River Teme, generating electricity at Ludlow.
Given that the UK cannot build railways as fast as the Victorians, I am on solid ground in my belief that clean electrical power by 2030 is a non-runner. The UK is world class in setting targets, which is not the same as delivering actions. Last week’s report from the National Energy System Operator is claimed by some as saying it is all possible—that is pie in the sky.
What is expected in the 1,873 days until 1 January 2030? The list has to be delivered—all of it, simultaneously and in full. Market reforms need to unlock £40 billion a year in investment. Onshore wind capacity has to double. Battery capacity connected to the grid has to grow fourfold. Solar capacity has to be tripled. The high-voltage grid has to be upgraded and expanded twice as much in the next five years as we have seen in the past 10 years. Carbon capture and storage targets have to be achieved using technology that has not yet been delivered at scale. We have to contract as much offshore wind power in the next one or two years as we have seen in the past six years. We need a fourfold increase in the flexibility of demand using smart meters that actually work. When the wind drops and the sun does not shine, batteries and pump storage hydro will have to be there to compensate. The nuclear plants will be required as back-ups.
That will all have to be delivered at pace, on time and at the same time—come off it. This is the UK in 2024, not the UK of the Lunar Men 250 years ago at the start of the Industrial Revolution. The UK no longer has a culture of building or people like Isambard Kingdom Brunel.
I have never yet heard a Minister address the issue of intermittent renewables. Who pays for the intermittency? It is never addressed. Huge amounts of kit cannot be manufactured in the UK. There is an international shortage of substation transformers and the ships needed for offshore installation. There is a massive shortage of homegrown skills to make all this possible.
I keep hearing that planning has been dealt with. Really? I know I am alone in this, but I see pylons and wind turbines across the countryside as truly majestic. Not everybody agrees, but burying the grid at sea is far less secure than having it where you can see it. We know that the massive undersea cables for the world wide web have been interfered with by Putin’s Russia. A lot of these doubts have been set out in detail by many people, including Professor Dieter Helm in one of his blogs. Nothing has changed since then except the Government and the creation of NESO.
Let me be clear: I am not a climate sceptic—I was the first Minister ever to speak on the Climate Change Bill, for the simple reason that I introduced it in this House in 2007. It is 1,873 days and counting.
Lord Swire (Con)
My Lords, I crave the House’s indulgence for largely lifting the comments I will make from a contribution to a debate we had in February this year. I was going to make a few rather politically pris comments until I discovered that, in February, the Minister who answered was a Conservative Minister. Rereading his answers, I found them as unsatisfactory as some of the things I have heard since.
I congratulate my noble friend Lord Frost on what is a timely debate. I will limit my remarks to a very narrow part of it: the costs of transmitting the renewable energy that we are debating. There is absolutely no consensus on these costs at all.
I do not share the sentiment—although I understand it—expressed by the noble Lord, Lord Rooker, about the “majesty” of a whole new generation of pylons marching across our countryside. In fact, that is when the public will begin to lose their enthusiasm for renewable energy. There are other ways of doing it, but we first need to address some fundamental questions. Why are we locating substations for bringing offshore renewable energy onshore, when countries such as Holland and Belgium are planning vast offshore substations? They are absolutely huge. Why is it current UK policy that, instead of pooling the power from the 18 or so wind farms around the country and having limited interconnectors, the National Grid is offering an individual connection to each offshore wind farm? It is completely unthought through and unnecessary.
On the subject of burying power lines versus not burying them, the technology is ever-changing, and some of the figures that have been bandied about by National Grid and others are simply unrecognisable. The noble Lord, Lord Rooker, is right: we do not build things very well any more. If you look back to the 1850s, when we carried telegraph traffic across the transatlantic cable, we were one of the first to do that, and five years later, Sebastian Ziani de Ferranti designed the first high-voltage underground mains cable, which he used to connect the Grosvenor Gallery to Deptford substation, and which carried 10,000 volts. These were all highly innovative and revolutionary acts of engineering. But we can do the same now; we need to have a debate about the various costs of ploughing in and trenching power lines. The new technologies are there, and we know that the environmental benefits of burying power lines in terms of reducing outages, the effects on the flora and fauna and bird life, and the visual impact as well on our landscapes are there and need to be factored into any cost-based analysis.
There was some question about the cost of burying power lines, particularly in East Anglia, and that is a good example. The National Energy System Operator, which formed part of the former National Grid, maintains, on the power lines which it is proposing to build overland in East Anglia, that if that timeframe was to slip to 2034, an underground cable system would come in £600 million cheaper than using pylons. So, we need an honest debate about the various costs, but I urge anybody who is keen on increasing the amount of renewables transmitted to this country to think very carefully about how we do that if we are to carry the public with us.
Lord Oates (LD)
My Lords, I welcome this debate and I thank the noble Lord, Lord Frost, for initiating it. It follows our recent debate initiated by the noble Lord, Lord Lilley, and it feels a bit like it is a band reunion with some of the stars missing. We rehearsed a number of arguments from last time.
The noble Lord, Lord Frost, protests that his position is not ideological, but I am afraid that I do not really buy that. He told us in his speech the other week:
“In my view, we are not in a climate emergency”.—[Official Report, 24/10/24; col. 769.]
I think science would beg to differ from that. I am all for us having the most open debates; we should have had greater debates on these issues, particularly at the time that we adopted net zero. That was the right thing to do, but we did not have sufficient debate. However, it is important that those debates seek to illuminate rather than to obfuscate the issues, and I fear that that is often what the noble Lords, Lord Frost and Lord Lilley, organisations such as the Global Warming Policy Foundation and others seek to do, a bit like what the tobacco industry sought to do, confusing all the science—and we all know the cost of that.
The noble Baroness, Lady Hayman, quoted that old adage about knowing the price of everything and the value of nothing. But in a way, the noble Lord, Lord Frost, disputes the price of everything but he knows the cost of nothing. We heard very convincingly from Lord Browne about the realities of these costs. We know that from the figures that are provided by the Government, which I have heard some noble Lords on the Official Opposition Benches disputing, but which were quoted by the noble Lord, Lord Lilley, in his speech last week or the week before. What he did not do was compare like with like; he took one figure which he had taken off the carbon price on gas and compared it with something else which was not in the graph and which told a completely different story. That is not very illuminating.
The noble Lord, Lord Hain, described the noble Lord, Lord Stern, speaking at a Cabinet meeting some years ago and making clear that the costs of inaction were much greater than the costs of acting: that the costs of combating climate change would be high—that is true—but the costs of not doing so would be higher.
The noble Lord, Lord Frost, did not talk at all about the external costs of burning carbon fuels. We have known a long time about those impacts. In fact, as long ago as 1965, in a report from the President’s Science Advisory Committee to President Lyndon Johnson, that council warned that the burning of fossil fuels
“may be sufficient to produce measurable and perhaps marked changes in climate”
by the year 2000. As we know from internal papers of Exxon, the oil company, which were exposed by Inside Climate News, the oil companies knew about this very well themselves. In May 1981, an internal memo from Exxon stated:
“We estimate now that the doubling time”
for CO2 in the atmosphere
“is about 100 years. This permits time for an orderly transition to non-fossil fuel technologies should restrictions on fossil fuel use be deemed necessary”.
The memo went on to predict a
“3°C global average temperature rise and 10°C degrees at the poles if CO2 doubles … Major shifts in rainfall/agriculture … polar ice … melt”.
A number of presentations, documents and memos internally in those companies, with the American Petroleum Institute, which made clear the dangers of globally catastrophic effects.
However, we know what happened. After that time, companies such as Exxon, which had been very forward-looking in research on the impacts of carbon dioxide, suddenly changed their leadership on that and went about the process not of continuing to research—it closed down its research on that—but seeking others to do research to try to undermine climate science, the very climate science some of which they had pioneered. It is very much like big tobacco. We need to bear that in mind. Those costs were known about, and if we had acted earlier, the costs we would be dealing with now would be much easier.
The noble Baroness, Lady Finn, quite rightly talked about costs to households. We have to think about how we move into this transition, which is why it is so important that we have the real facts available and that we do it in a way that is as fair and has as least impact as possible on individuals. However, as she may know, average household expenditure on energy actually fell between 2013 and 2020. A lot of that was to do with measures that had been taken in the coalition Government through the levies in terms of energy efficiency of people’s homes and reducing energy consumption, and that should be a key area that we focus on.
The right reverend Prelate the Bishop of Norwich made the important point that the most vulnerable and the least resilient nations are likely to be the most impacted by climate change. On the costs, the noble Lord, Lord Lilley, last week stated:
“If continuing to do nothing … were likely to result in the extinction of the human race, or even its immiseration, almost no costs would be too great to avoid it”.
However, he went on to say that he had put down a question to the Government some time ago about
“whether they knew of any peer-reviewed science, or science produced by the Intergovernmental Panel on Climate Change—whose job it is to consider the science—which forecasts that, if we do nothing over the coming centuries, it will lead to the extinction of the human race or even its immiseration”.—[Official Report, 24/10/24; cols. 795-96.]
But he did not actually ask that question. What he asked was whether there was any peer-reviewed science which said that the human population would be exterminated within the next century, and of course he got the answer, no. Again, it is this obfuscation of the actual facts.
When I think about the external costs, I think about some of the kids I taught many years ago in a school in Zimbabwe, which I mentioned last time. Shortly after my father died, that school, very movingly, sent me a photograph of a playground it had built and dedicated to his memory. At the bottom of the slide there is a six year-old little girl with a big smile—it is a beautiful picture. I think of that person, who has contributed almost nothing to the carbon in the atmosphere, but who will be one of the people most impacted by what we do, and to whom we have a moral obligation.
In a post on Facebook, one of the pupils I had previously taught was not talking about climate change; he was explaining why the school was named after St James. The Anglicans had this habit of naming a mission after a saint, but also adding the area where the mission was situated. In our case it was St James Zongoro. The name Zongoro is from the river, but the river is slowly dying because of climate change. That river is dry most of the time. They cannot feed their fish ponds any more, and they are increasingly impacted by severe weather events. It is those vulnerable people who are one of the reasons why we have to continue with this. We have been a leader in renewable energy; we should continue to be so, and we should be honest and open about the costs of doing that, the benefits and the values.
Lord Offord of Garvel (Con)
My Lords, it is a pleasure to wind up this interesting debate on energy on behalf of the Opposition. Indeed, it is the second such debate we have had in the last two weeks, with a third to come on Monday as we begin the discussion on GB Energy.
It is worth framing this debate in the context of the new Government’s stated ambition on this topic, which is to make Britain a clean energy superpower. They are now bringing forward specific proposals for cheaper zero-carbon electricity by 2030, accelerating to net zero.
It is worth reflecting again on the consensus that exists on net zero: that we have set a target of 2050; that at the moment the majority of our power—roughly three-quarters—comes from hydrocarbons and a quarter from non-hydrocarbons; and that our objective, over one generation, is to flip that on its head so that a maximum of a quarter comes from hydrocarbons, which will be green hydrocarbons, and three-quarters from non-hydrocarbons.
As to what that mix, or matrix, might look like, we have used words in the past such as a “balanced scorecard”. We have also discussed the fact that 2024 may not be the right moment to accurately predict what will make up that matrix or scorecard. We know the direction of travel, but as the noble Lord, Lord Browne, has mentioned, technology is advancing rapidly and costs will move accordingly. Therefore, there will be a debate to be had on how we move forward and in which area.
It is interesting, therefore, having set that scene, to think about the specific proposals we will be considering next week, because this is the first concrete step on this Government’s journey to that end. The keyword here is “accelerating”. A number of noble Lords have already expressed concern about this concept of accelerating, and why and how we do that.
Coming before us will be the Great British Energy Bill, and the Budget committed £8 billion of funds as a key enabler of the zero-carbon electricity target of 2030, which has been brought forward by five years. The NESO report has described the ambition to achieve zero-carbon electricity by 2030 as “immensely challenging”, requiring the UK to double its onshore wind capacity and triple its solar power; and it will depend on flexible power demand—a euphemism for rationing.
That is quite a considerable statement by NESO, and a number of experts have raised concerns that this is going to be too aggressive. In fact, as we know, the analyst Cornwall Insight says that we are on track to get 44% from renewables, but that decarbonising the electricity grid completely would require getting to 67%. That is a long way off, and we estimate that that will cost an extra £50 billion.
I think the point the noble Lord, Lord Elliott, was making is this. These are great targets to have, but the Scottish Government, for example, have had to roll back very considerably on targets that were set, it would appear, more for grandstanding than in reality. I think we all agree that we do not want to set false targets that we cannot achieve, when we have an opportunity to do this in the right way and in a considered fashion.
Turning to the Great British Energy Bill that is coming up next week, I am concerned that the Government may have to manage public expectations on this matter. I gained some direct understanding of this a couple of months ago when I was in Irvine for the BBC’s “Any Questions?” The audience was convinced that GB Energy will be a new low-cost energy supplier, and was quite taken with the figure being bandied around of £300 per household. Rightly or wrongly, this is now in the public domain. In reality, as we will next discover week, GB Energy is simply an investment fund that will channel £8 billion of taxpayers’ money into renewables, principally offshore wind farms.
That may or may not be the right thing to do, but at the moment that sector is well invested in by the private sector. There is already £35 billion of private sector money in offshore renewables, projected to rise to £60 billion. This is a well-functioning market, so why does the taxpayer need to put £8 billion into a sector that is already well invested in?
If we take the £300 per household and multiply it by 28 million households, by compete coincidence that comes to £8 billion. Therefore, one has to double one’s money in five years—by 2030. Renewables is a low return on investment category, in the region of 5%, whereas hydrocarbon is a high return on capital category, in the region of 20%. The private sector has been investing renewables over a 20-year period and does not contemplate doubling its money in the space of five years, so why would the taxpayer expect to be able to do something different and double the money in five years? It is, frankly, beyond me, and we will get to the point where these numbers will be interrogated and will need to be backed up.
It has also been asked whether, if there is a spare £8 billion going and we are told that money is tight, the taxpayer should be considering getting rid of some of the bottlenecks in the system. Should we be thinking about some of the plumbing, for example? Should the money be invested instead in the national grid?
The national grid was built in the 1960s and ’70s, when energy was generated in coal-fired power stations in Scunthorpe and had to be sent to Orkney, which was considered a remote region and therefore had to pay more for its energy. Today, the majority of the wind farms are off Orkney and now send energy back to Scunthorpe, but at the moment the pipes do not allow for that to happen. There is no storage capacity in the meantime, which is why we have this ridiculous concept of curtailment payments and subsidies to switch off wind farms when the wind blows and keep the gas-fired power stations open when the wind does not blow. Given this, a lot of thought needs to be put into how we proceed.
As the noble Baroness, Lady Finn, said, the real issue is that our electricity is too expensive. Our energy in the UK is too expensive. The cost of living crisis has been driven largely by the fact that basics—energy, housing and transport—are too expensive in the UK. Any Government of any shape or form should be working hard to bring down these costs. Why should it be that UK consumers are paying 43% more than French consumers in domestic usage and 83% more than the French in industrial usage? That should be the focus of government activity, rather than piling into a sector that is already well covered by the private sector as things stand. If we see the likes of the OBR saying that the levies will rise by £3 billion, which is £100 per household, and if the IFS is correct that these levies are fundamentally raising prices for consumers, I do not understand how that ties in with the narrative of any Government saying that we need to make the lives of our citizens better by urgently bringing energy prices down and not up.
I conclude by coming to the precise events on this issue that we saw in the other place last week, when the Government voted against an amendment to cut bills by £300, which they had promised would be a strategic priority for Great British Energy. That might be the wrong number, but can we please have some analysis on what the number will be? Why did the Government vote against an amendment that would hold them to their word if, at the end of the day, that is to the detriment of the British consumer? I am sure that we will get into this next week. When we come to the Second Reading, I will ask the Minister to confirm that these energy policies will cut energy prices as promised, and by how much.
The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)
My Lords, it is a great pleasure to respond to this morning’s debate and I congratulate the noble Lord, Lord Frost, on initiating it. We have had an interesting discussion on many of the challenging issues that we face around energy. This is our third debate because, although the noble Lord was not present for it, we had one on electric vehicles, which covered many of the same issues. As the noble Lord, Lord Offord, said, we look forward to the Second Reading of the Great British Energy Bill on Monday.
I welcome the interest. It is so important, on an issue that is of such critical importance to our country, that your Lordships are making a real effort, debating some of the difficult challenges that we face. Clearly, there are different views. I agree with the noble Lords, Lord Frost and Lord Whitty, and the right reverend Prelate about the apposite nature of the debate happening at the same time as the discussions in Baku. I also take the right reverend Prelate’s point about our international responsibilities, which we very much understand.
In essence the noble Lord, Lord Frost, has argued today and in previous debate that he sees the net-zero consensus as breaking down. He has said previously, although he did not cover it much today, that he disagrees that investment in net zero will make us richer. He thinks that we should unwind and invest in gas and nuclear. I agree about nuclear. I note his detailed analysis of the costs of renewables. I will ensure that he receives a considered response. I have a response that I could read out, but it might be better if I wrote to him, with a copy to all Members of your Lordships’ House, since it is technical in nature. I get the substance of what he is saying. He will understand that I do not think the consensus was quite with him. There are clearly many different interpretations of the costs, not least, as noble Lords have said, the costs of not taking action. That is one of the great dividing lines between us. It was discussed by my noble friend Lord Hain, the right reverend Prelate and the noble Lord, Lord Oates, whose speech was about the costs of not taking action.
It is interesting that the noble Lord, Lord Frost, made no reference to climate change, as far as I can recollect. I find it very difficult to debate this without taking climate change as the context in which we develop these arguments. I say to the noble Lord, Lord Moynihan of Chelsea, that I see net zero not as a religion but as a rational response to evidence that is becoming clearer and clearer. The noble Lord, Lord Offord, said that he disagrees with the pace at which we are going—I understand that—but he does not resile from net zero. I do not want to waste your Lordships’ time repeating what other noble Lords have said about the impact of climate change. Clearly, it is with us. I took over the Climate Change Bill from my noble friend Lord Rooker in 2008. When we were debating it, it was almost an academic exercise in whether climate change was real. It was a future threat, but now it is with us. The noble Lord, Lord Oates, is so right about what is now happening. It is not a religion but a rational response to say that we have to take action and speed it up as quickly as we can.
I agree with the noble Lord, Lord Frost, that this requires a lot of investment. We cannot get away from that. I know that some noble Lords opposite are saying that the OBR, the Committee on Climate Change, my own department and NESO are all part of a blob. I hesitated to use the word, because it gives Michael Gove credibility and I think it is a word that is very disrespectful to many people who are doing the right thing—but noble Lords know what I mean. You cannot just dismiss the conclusions of those august, independent institutions. Their broad consensus is that we have to go down this route.
I quote the Committee on Climate Change:
“the net costs of the transition (including upfront investment, ongoing running costs and costs of financing) will be less than 1% of GDP over the entirety of 2020-2050, lower than we concluded in our 2019 Net Zero report”.
The party opposite has started to criticise the OBR, which is unfortunate, but it highlighted that delayed action on reaching net zero will have significant negative fiscal and economic impacts, which would be as true for Northern Ireland as for the rest of the UK, as the noble Lord, Lord Elliott, raised. Do we ignore or just dismiss this? I suggest not; that is the basis on which we make progress.
The National Energy System Operator has produced a report; I have realised that noble Lords can find evidence in it to support any case they wish to put forward, but I think that the substance of what it says is significant. It says that an
“investment programme averaging £40 billion or more annually”
can support “economic and job opportunities” across the UK.
I will briefly mention levelised costs to the noble Lord, Lord Frost. As the noble Lord, Lord Oates, suggested, he may not be comparing like with like, which is part of the problem of having a rational debate on the true cost of energy. For instance, you can have a levelised cost of electricity for offshore wind, which reflects the average cost to build and operate a plant, but it cannot be equated to the strike price. The strike price represents the price needed over the contract for difference for a project to be commercially viable, factoring in revenue, market and policy considerations. There are other points that I could make on that, but I think it best that I circulate a paper so that all noble Lords can see that.
I come to the issue that the noble Lord really raised. He agrees with net zero but thinks that we are going too fast. He and my noble friend Lord Rooker and the noble Lord, Lord Elliott, suggested that the 2030 target is unrealisable. We can look again at the NESO report, but it depends how you interpret it. I interpret it as saying that that is very challenging. I do not think anyone has resiled from that; of course it is challenging. It involves plumbing, as the noble Lord said, and there are issues with the planning system at the moment about the grid and what needs to happen, but we are working very fast to try to resolve some of them. I say to my noble friend Lord Rooker that we may not be of the same measure as the members of the original Lunar Society, in our great city of Birmingham, but we believe that we can meet those targets.
To the noble Lord, Lord Swire, I say that of course pylons are not popular. We understand that. I was interested in what he said about potential alternatives, although he will understand that the figures we have so far suggest that they are much more expensive at the moment. In the end, we have to make connections to the grid much quicker and we have to invest in and see an extension of the grid. This is inevitable and it will sometimes involve unpopular decisions. I accept that.
In relation to public opinion on the cost of energy to householders, the noble Lord, Lord Moynihan, made his point very well. I gently say that most of these costs actually occurred under previous Governments, over a long period. The decisions that we are taking now will have an impact—there is no question about that—but noble Lords need to accept that that was an inevitability given what needs to happen to start to invest in the move towards clean power.
The noble Lord, Lord Howell, was absolutely right when he said that this is but one part of the story. The decarbonisation of heating, transport and industrial processes represents an immense challenge too, as we go towards 2050. This is very well understood, and our debate on electric vehicles two weeks ago brought that home to your Lordships.
The noble Lords, Lord Howell and Lord Moynihan, the noble Baroness, Lady Finn, and others mentioned nuclear. I say to the party opposite that, when I was doing this job between 2008 and 2010, we had just taken the decision to go back to new nuclear and were in firm discussions about Hinkley Point C and its siting, the skilled jobs required and the supply chain. I understand that the final investment decision did not take place until 2017, so there was an awful lot of delay. There have been other issues too. The cost of the project was underestimated and there was an unrealistic assumption that taking a technology from France and putting it into Hinkley Point C would not involve design changes because of our approach to regulation.
In July, I went to see Hinkley Point C, and I met the chief executive yesterday to talk about progress. It is fair to say that considerable progress is now being made. It is the largest construction in the UK, if not in Europe. It is immensely impressive, and 65% of the value of the supply chain went to UK companies. Another point is that, when Sizewell C is developed and we get to final investment decisions, which I hope will be in the next few months, it is going to be a replica above ground of Hinkley Point C, so all the lessons that have been learned will be translated. Huge progress has been made between the first and second reactors.
Noble Lords will understand that I am very passionate about the role of nuclear. It provides the essential baseload and deals with some of the issues that noble Lords have mentioned. The issue of intermittency is well understood, and it is part of the cost of what we seek to do. Our approach is to take nuclear as the essential base load.
I think the noble Lord, Lord Moynihan, was a bit unfair about progress. The technology of the SMR programme is being appraised by Great British Nuclear at the moment, and I hope that over the next few months we will begin to see progress there. There is clearly great potential with AMRs as well. We are all excited by what is happening in the US and the link between the major media companies’ data centres and potential AMR technology, and I want the UK to be part of that.
On Wylfa, I understand its potential. We will come to decisions over the next few months.
A number of noble Lords mentioned oil and gas and the North Sea. I understand the potential that it still has, because we are still going to need gas and the flexibility of gas. We want to develop carbon capture, usage and storage to make sure that it is abated gas, which means that we wish to see an orderly transition. We are working, and will work, very closely with industry in relation to the North Sea.
Other technologies have been mentioned: the noble Lord, Lord Moynihan, mentioned hydrogen and the noble Baroness, Lady Whitaker, and my noble friend Lord Hain mentioned wave energy technologies. I readily acknowledge that all that may have a role to play. Essentially, we are ever-open to people coming forward with ideas and new technologies, but, at the moment, we think that in reaching clean power we need to focus on offshore wind, onshore wind and solar, alongside ensuring that the nuclear programme speeds ahead as quickly as it possibly can.
The noble Lord, Lord Frost, did not discuss this today, but implicit in what he says is his doubt about the impact on the economy of investing in renewables. The evidence we have is that many jobs will become available in future because of what is happening and our drive towards clean power. We reckon that 640,000 people are employed in the UK in what are described as green jobs, and that number is going to grow as we accelerate to 2030. We have an office for clean energy jobs that is going to focus on how we can develop the skilled workforce.
On the nuclear side, the national Nuclear Skills Taskforce has estimated that, by 2030, we need an extra 40,000 people. If the programme goes well and we have a continuous number of nuclear power plants being developed, that figure could go well over 100,000 by the 2040s. We are talking about high-quality, well-paid jobs in all these sectors.
In relation to the North Sea, many of the skills being used there are translatable. We want to make sure that happens as smoothly as possible.
Lord Howell of Guildford (Con)
My Lords, in a very interesting speech, the Minister said just now that, in the next few months—those were his words—some decisions will be made on the smaller end of modular reactors and so on. My understanding from Great British Nuclear is that no decision will be made before 2029. Is this a new position being taken up? If so, that is extremely encouraging.
Lord Hunt of Kings Heath (Lab)
I hope I have not just announced a new position. The position is that they are now going through a technology appraisal, which will take a matter of months. At that stage, the Government will then have to make decisions about what will happen in the future and on the funding, and we will have to have discussions with our friends in His Majesty’s Treasury in relation to that. Before that, I hope we will be having discussions about a final investment decision on Sizewell C.
I am in danger of overrunning. I thank the noble Lord, Lord Frost, again. This has actually been a very interesting debate, although he did not anticipate consensus. I am going to disappoint him on his request for yet another committee. I have picked up the suggestion by the noble Lord, Lord Browne, of an energy institute—without commitment, I should say, but it is very interesting. I am grateful to the noble Lord, Lord Frost, for instituting such an interesting debate.
Lord Frost (Con)
My Lords, I do not want to detain your Lordships’ House for long. I thank every contributor today for the care with which they have presented their case, and I am grateful to the Minister for his thorough winding up. I did not really expect him to pick up my suggestion, and indeed he did not. I look forward to his full response to some of the points that I raised.
We have heard an extremely interesting set of speeches. If I might be allowed just one reflection, on those that we have heard from proponents of the transition, it is that I detected perhaps a reluctance to tackle some of the specific details of costs and numbers that I mentioned but rather appeals to authority and nebulous assertions about the costs of not acting in relation to our global responsibility and credibility in this regard. I feel that is a little unsatisfactory as a basis for transforming our entire energy system, which is why I suspect we will need to come back to this and related subjects before long in the future. Meanwhile, I commend the Motion to the House.
Budget: Arts, Heritage and Cultural Organisations
(2 days, 12 hours ago)
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Baroness Sater
To ask His Majesty’s Government what assessment they have made of the impact of the Budget on arts, heritage and cultural organisations.
Baroness Sater (Con)
My Lords, I am delighted to introduce this debate and am very grateful to all noble Lords who have signed up to speak. I declare my interests as a trustee of the Dartington Trust and a member of the Arts and Heritage APPG, the Royal Academy, the Tate, the National Trust, and Historic Houses. I am a lover of old buildings and an enthusiastic amateur artist. It is an honour to share this debate with so many noble Lords whose many years of experience in the arts and heritage will add far more than I can ever hope to do.
We are a country of deep-rooted cultural and artistic traditions. For many centuries, we have led the way. We are a proud nation where arts, heritage and culture are an essential part of the lifeblood of our country. The arts have an enormous societal impact on our health and well-being. A report by UCL for DCMS in April 2020 showed, for example, that exposure to the arts and cultural activities positively impacts social skills, language learning and overall mental health, particularly among adolescents and young people.
Our cultural contribution is not only about us in Britain. Our institutions are world leaders with global standing, attracting people from around the world, who visit Britain because of the richness, breadth and depth of our cultural offering, delivering a vibrant addition to our tourism and hospitality sectors. These cultural industries support our global soft power. According to the House of Lords Library briefing in January, the UK exported £7.2 billion of cultural goods and £9.3 billion of cultural services. Between 2016 and 2022, the cultural sector in the UK ran a consistent trade surplus. DCMS figures in 2022 reported that gross value added for the cultural sector as a whole was £34 billion, which confirms that the arts and cultural sectors are enormous contributors to the UK economy.
We all know that there is no free meal. There is a financial cost to supporting, maintaining and extending our cultural life. We rely on thousands of organisations and individuals in our globally renowned institutions, including our art galleries, museums, theatres, historic houses and buildings, dance and art production companies, orchestras, choirs, local community organisations and charities. But they all rely on some form of financial income or support, whether from organisations such as the Arts Council, the National Lottery Heritage Fund, the British Film Institute and English Heritage, public funding from local authorities, private philanthropic donations, or memberships or sponsorships from corporations and volunteers.
The most recent edition of the Art Fund’s research, published in June, reported that visitor numbers have been on the rise—which is good news—with over half of venues at or above pre-pandemic levels. However, it also found that local authority-reliant organisations were in a “perilous and uncertain state”. Post-pandemic financial fragility, real-terms funding cuts, ageing buildings and increased overheads were all found to be placing these organisations under “enormous strain”. In addition, the impact of the cost of living crisis on staff and audiences was recognised as the biggest collective challenge facing organisations, with increased outgoings and falling income identified as problems for the sector.
Against this backdrop, we welcome the Chancellor’s recent Budget announcement of keeping tax relief for theatres, orchestras and museums and galleries; the extension of the audiovisual creative tax relief, which helps the film and heritage sectors reduce their tax burden; and the addition of £3 million into the creative careers programme set up in 2018. We also welcome the increase of 16% in the capital budget for DCMS for the next year. However, less welcome is the announcement in the Autumn Budget that the day-to-day DCMS resource spending budget will stay year on year at £1.5 billion. In reality, this represents a 2.5% real-terms cut, accounting for inflation.
This will make it much harder for the department to fund the cultural institutions it supports, such as the 15 DCMS-sponsored museums and galleries, at a time when the Art Fund reports that 89% of adults agree that museums are important to UK culture. Although national museums and galleries saw increased grant-in-aid funding in the recent Budget, regional ones did not.
Visiting York last week, I was overwhelmed by the incredible preservation of the Roman, Viking and medieval city, and was proud to see how we are preserving our history. Tourism thrives in the regions and cities, substantially because of our cultural heritage. None of this is possible without funding in our regional and local communities, together with the support of the dedicated people and volunteers who care so much about our wonderful cultural life.
In the Spring Budget, the then Chancellor Jeremy Hunt announced £100 million of funding for levelling-up cultural projects. The money would have funded projects such as the British Library north in Leeds, the National Railway Museum in York, the Victoria and Albert Museum in Dundee, and the National Museums Liverpool. However, the recent Budget suggested that the Government were minded to cancel them. I ask the Minister: why do the Government not consider this investment to be an important part of their growth mission? Will they provide a commitment to investing in the arts across the entire country?
For the already financially challenged cultural sector, the Autumn Budget contained two further challenges. First, although relief for business rates has been extended, at the same time this is being reduced from 75% to 45% until March 2025, when it will cease. Many arts and cultural organisations operate from a physical location and will struggle significantly to foot the increased overall costs of business rates.
Secondly, British cultural offering contributes significantly to employment, with 2.9 million people in full-time jobs, according to the DCMS creative industries subsector, and with nearly 700,000 in the cultural subsector from the data from April 2023 to April 2024. This is why the employer national insurance contributions rise is causing real concern. It will push up staffing costs for cultural organisations and may impact levels of employment and future pay rises for staff, hurting particularly the lower paid workers. The Southbank Centre in London’s initial calculations showed that these changes will cost it at least £700,000 in 2025. These are not small sums. As we all know, no one can fundraise for tax increases.
With 40% of theatre and performing arts venues at risk of closure over the next five years, according to the Society of London Theatre, and with two-thirds of museums being concerned about funding shortfalls this year—up from 50% in 2022—the future is looking challenging. This was the situation before the increase in NI and the minimum wage and the reduction in business rates relief. Have the Government done an impact assessment on the effects of these increases in NI, the minimum wage and the removal of business rates relief on the cultural sector? Is the Minister able to provide an assurance that the Government will increase funding to the cultural sector, similar to that provided to the public sector, protecting it from these unwelcome rises?
Local authorities are champions of local arts and are the lifeblood of many organisations, playing a huge role in creating a thriving arts and cultural environment for their communities. They are the biggest funders of culture, spending around £1 billion in England alone on services such as libraries, museums, heritage and the arts. It was suggested in the Autumn Budget that the UK shared prosperity fund will be phased out the year after next. It will continue at a reduced level for a transition year by providing £900 million for local authorities to invest.
However, the Government have not said how they will replace it, which makes it difficult for future planning of arts funding. It creates uncertainty at time when local councils’ core services funding is under pressure, putting cultural projects and institutions in increasing jeopardy. Could the Minister give the House assurances that a replacement funding model will be established as soon as possible to provide the security so desperately needed? I know we all share a desire for a long-term settlement for our cultural future for continuing sustainability and enduring creativity, and a major global role for the country.
Let us thank all the extraordinary and talented people who deliver our fantastic cultural life, be they paid or hugely committed volunteers, who are preserving our heritage. They are caretakers for our most amazing buildings and the institutions we enjoy today.
Lord Bassam of Brighton (Lab)
My Lords, I thank the noble Baroness, Lady Sater, for ensuring that we have this debate. We do not talk enough about the arts and cultural industries in our politics, and it is vital that we focus on the issues that she rightly highlighted.
For background, the Library note explains that public funding for the arts has, over the last 14 years, decreased by some 18%. Museums, in particular, have been hit hard, with 32% of them experiencing budget reductions. Overall, local government revenue funding dropped by 48% in that period, and Arts Council funding dropped by 18% in England and a whopping 66% in Northern Ireland. BBC public funding dropped by 23% and the national portfolio criteria were changed—public funding there dropped by 10%. Worse than that, libraries experienced cuts of some 53%. So, if we are asking why the arts are in peril as a result of changes in public funding, the answer is clear: the last Government took money away from arts and cultural industries. Our Government’s challenge is to find ways of ensuring that some of that damage is repaired.
In that context, the recent Budget is very welcome. The DCMS settlement brought an uplift of 2.6%, and the Treasury committed to ensuring that creative sector funding became one of the eight growth areas, because of the way in which arts and culture drive our economy and make an important contribution to our industrial strategy. As the noble Baroness said, another £3 million was put into the creative careers programme, signposting employment in the sector. The Budget also promised additional grant in aid for arts and culture for the long term, to sustain that sector. Most importantly, increased investment in cultural infrastructure was promised to bring in additional capital for cultural institutions. I do not know a museum that has not complained recently about a leaking roof, and there are plenty of them. Money is tight.
So, can we explore other ways of funding? To ensure long-term sustainability, one of those might be the smart fund, which has been proposed by many from DACS. It is a mechanism that compensates artists whose original work is copied or stored on electronic devices. This works in 45 other jurisdictions. A levy of between 1% and 3% on the sale price of electronic devices could fund some 1,200 cultural projects a year, as it does in France. I also recommend to the Government a music venues ticket levy, which might bring in new and very welcome additional revenues, and perhaps help cross-subsidise small venues where talent emerges and where research and development is important.
I urge the Government to look again at Nesta and at Arts Council funding, to see where the balance lies, and to find new sources of revenue so that cultural and arts institutions have a more certain funding base for the long term, in addition to what we make available through public funding.
Lord Berkeley of Knighton (CB)
My Lords, I am grateful to the noble Baroness, Lady Sater, for securing this important debate, and I declare my interests as a composer and broadcaster. I was delighted that the Prime Minister said in the other place recently that it was a priority for his Government to get music back on to the curriculum in schools. In my view, this is the single most important step in music education—indeed, in music. It is an opportunity for the young to make music, to listen and to react to others: there I think we have an analogy with sport. But of course, the devil lies in the detail, and I look forward to hearing more on this from the Government.
What is really relevant to today’s debate is that we also need to think about the financial status of supporting organisations and venues where, once acquired, a musical curiosity can be developed. That brings in small venues and organisations that promote the arts, where funding is most urgently needed after many years of underfunding. I think of the English Symphony Orchestra in Worcester and the plight of Welsh National Opera, both of which have done so much good work in underprovided areas.
I congratulate the Government on the orchestra tax relief, a welcome support, although it still relies on the orchestra activity being able to go ahead in the first place and the money can be received only after a long process, which can cause significant cash-flow issues.
The rise in employers’ national insurance is, as the Government have acknowledged, a difficult burden at this time. One would have hoped that charities, especially small ones with, perhaps, under £1 million pounds in turnover, might have had a dispensation.
I thank the Government for listening to concerns about VAT on specialist performing arts schools and confirming that courses covering the music and dance scheme and the dance and drama awards scheme will not attract VAT.
On the other hand, as my noble friend Lord Clancarty pointed out a few days ago, the reduction in business rates relief will adversely affect the arts. The Music Venue Trust has calculated that it will place an additional £7 million burden on 350 grass-roots music venues, put at risk more than 12,000 jobs and cost more than £250 million in economic activity. While of course it is good news that the arts tax relief remains unchanged, it is sad that it has not been extended to choirs.
In terms of the arts generally, the exchange of ideas across borders is essential, and the loss of Erasmus tragic, so a new rapport and sense of good will towards and from Europe must be fostered to allow easier touring in both directions. I ask the Minister whether any replacement for Creative Europe has been found or whether we might rejoin it, since the rules allow us to do so.
The Lord Bishop of St Albans
My Lords, I too thank the noble Baroness, Lady Sater, for securing this debate.
A number of elements of the recent Budget are to be welcomed, such as the continuation of Museums and Galleries Exhibition Tax Relief and the cultural infrastructure funding. However, many of us were disappointed that there was no update on the Listed Places of Worship Grants Scheme, which is such a lifeline for so many of our historic buildings. The Church of England and other churches are trustees of some of the most important buildings in this country. We have to raise, voluntarily, tens of millions of pounds, and we really need to find ways to help very many pressurised local communities. These buildings are not used just for worship; many of them are the local concert venue. They have all sorts of music-making going on and they are places where music lessons are given. Many of our schools come into the churches, and they are used for all sorts of reasons beyond Sunday and midweek worship. I hope that DCMS will make a decision on this in the coming weeks, and I urge the Minister to ensure its future.
I want to say a few words about the impact of the introduction of VAT on school fees for cathedral choir schools. These schools are often not well known but, by and large, they are not in the top rank of schools for the privileged. Many of them offer an outstanding musical education for local pupils. Often, we have to raise money for bursaries to keep them going. They are running on very tight budgets, but they are a fundamental part of providing musical education. Many of this country’s leading composers over the last 200 years started their lives in church choirs, on organs or learning through local music-making. This pipeline is really important in bringing such people through.
There has already been a great deal of concern. The increase in employers’ national insurance contributions announced in the Budget has contributed further to the financial uncertainty facing these valuable institutions. I am sure the Minister will be aware of previous comments made by my colleague, the right reverend Prelate the Bishop of Southwark, and by John Glen, who spoke on this in the other place.
About a decade ago, Country Life published a list of 60 things that make Britain great, and the choral tradition was on that list. There is a real threat to this, as we look at the resources, and a danger that, should choir schools be forced to close, state-funded schools will not be able to plug the gap. Does the Minister appreciate that choral music is an essential part of our heritage and agree that we need to do all we can to ensure that it is preserved?
The Earl of Clancarty (CB)
My Lords, the danger for the arts of economic growth being so central to the Government’s plan is that more high-profile commercialised creative industries and institutions get support while other of the arts and related cultural areas, particularly in the regions, as the noble Baroness, Lady Sater, has said, get neglected. Unfortunately, this Budget, while there are certainly good things in it, bears that out, with no emergency help for civic museums and a situation where our already struggling grass-roots music venues are in a worse position now than before the Budget. It is an elephant trap.
With respect to the arts, we need a plan for arts and cultural growth as much as we need one for economic growth, for three reasons. First, the arts are a good in their own right. Secondly, they are important socially and locally, in terms of both production and access. Thirdly, and crucially, they are the grass roots from which the commercial creative industries spring. The arts are an ecosystem.
I have some specific points to make. On Monday, the noble Lord, Lord Murphy of Torfaen, and I—as the noble Lord, Lord Berkeley, has done today—drew attention to the plight of the Welsh National Opera, which benefits both Wales and England. In a recent Answer to a Written Question by Liz Saville Roberts, Chris Bryant said that the WNO is in a “strong place to succeed”. Unfortunately, this is clearly not the case. The noble Lord, Lord Murphy, asked for the Westminster and Welsh Governments to get together on this. Will the Minister use her influence to enable that?
As big operators are now a major factor in the arts, we need to consider levies—and the noble Lord, Lord Bassam, has mentioned a couple. I welcome the introduction of the voluntary ticket levy on big arena gigs to help small venues, although I believe it should be mandatory. Will the Government also consider the smart fund, which the noble Lord, Lord Bassam, also mentioned. Would the Minister be willing to meet parliamentarians and interested parties who have proposed this scheme, including the Design and Artists Copyright Society?
Thirdly, as discussed in the Channel 4 interview with Peter Kosminsky, director of the Hilary Mantel adaptations, there is the application of levies on the big streaming companies such as Netflix to help our film and TV production, which, like the private copy levy schemes, are already applied sucessfully in European countries. Will they consider such levies, too?
Last but not least, there is Brexit, which I mention because this is a Budget geared to a desire for economic growth. Brexit is not in the past but is lived on a daily basis by artists, and it continues to have a detrimental effect on opportunities for, and incomes of, musicians, visual artists and many others. The Government need to set out a coherent plan to address it, because the sector is waiting on that.
Lord Vaizey of Didcot (Con)
My Lords, I congratulate the noble Baroness, Lady Sater, on securing this important debate. I am a member of not nearly as many arts organisations as she is, but that is partly because I remain the king of the freebie—and in that sense I am completely aligned with government policy.
As I have said before, it always surprises me that the Tories get such a bad rap when it comes to the arts, compared to the party opposite. We created the DCMS, put in place the National Lottery as well as the museum and theatre tax relief—and there was also the superb support given by the noble Lord, Lord Parkinson, and his colleagues during Covid. Yet here we are today with only one Labour speaker on the Back Benches, and no Minister in the Lords who is in the actual department. The Budget has seen a real-terms cut to DCMS, a cut to the levelling-up funding, the removal of planned capital funds for the national museums of Liverpool and York and the Victoria and Albert Museum. I should declare that I am a trustee of the Tate—although maybe not for much longer after this speech.
With the ongoing impact of the Budget, the national insurance hike, the removal of business rates relief and the war on non-doms, many of whom give to arts organisations, it is not exactly what one would call a refreshing time to have a Labour Government in place for the arts. There have been some bits of good news hinted at in the Budget. The cultural infrastructure fund was mentioned, but we have no detail on that. As the right reverend Prelate pointed out, the listed places of worship scheme is so important, and we need its future to be guaranteed and established. There is, of course, some increase in grant in aid to the national museums, which it would be churlish of me not to recognise.
I give the same speech in this Chamber every time we have a debate on the arts, because securing the future of the arts in this country is such a simple and easy thing for any Government to do—believe me, I have fought those battles as well—by giving long-term and generous funding, which is still a rounding error on the overall budget of government, for all our national and regional institutions. It may be the time to experiment with some other form of funding. As somebody who believes in simplifying the tax system, it is perhaps counterintuitive, but I am interested in Manchester’s experiment with a tourist tax and whether that can make an impact. It is perhaps something that cities should be thinking about to embed the arts in health and education. Of course, we also talk about soft power and diplomacy, and the arts play such a vital role in that.
It is not a one-way street. There has to be some give and take for the arts. I became increasingly frustrated as Arts Minister that we lived in a world where no museum or no theatre should ever close. We celebrated the openings of numerous theatres and museums, which were never covered. The minute that one was under threat of closure, it was supposed to be a disaster for the arts. There should perhaps be more M&A in the arts and more co-operation.
Finally, I think that the national museum should be given independence and that the Parthenon sculptures should be returned to the Greeks—I give way to my noble friend.
Baroness Bottomley of Nettlestone (Con)
Does my noble friend agree that, in these difficult times, waste is to be avoided at all costs? We have the wonderful Imperial War Museum with the Holocaust galleries. The last thing that anybody wants is to waste over £30 million on a memorial museum in the beautiful Victoria Tower Gardens when that money could be spent—
Baroness Blake of Leeds (Lab)
With respect, the noble Baroness was not here at the beginning of this debate.
Baroness Bottomley of Nettlestone (Con)
I tried very hard, but the traffic was very bad.
Lord Vaizey of Didcot (Con)
She was stuck in traffic, which is a side effect of rapid economic growth. I take her point; it is a narrow and focused point, but all I say is that I referred to M&A in the arts. I would like to see museums working together, with perhaps some merging. That is the kind of thing that we should be thinking about.
Lord Janvrin (CB)
My Lords, I too am grateful to the noble Baroness, Lady Sater, for the opportunity to discuss this important subject. I draw attention to my interests in the register, including being on the board of the British Library. Most of what I have to say is in relation to that institution.
The British Library’s stated mission is
“to make our intellectual heritage accessible to everyone, for research, inspiration and enjoyment”.
In the knowledge economy, it has a vital part to play in any growth agenda. In common with other DCMS-sponsored cultural bodies, the British Library has faced a period of sustained pressure on budgets in recent years. This has been mainly due to the inflationary pressures across the whole sector. In our case, this pressure has been greatly exacerbated by the cyberattack on the library last year, which is requiring a major rebuild of our digital infrastructure.
It was reassuring to see the broad commitment in the Budget to increasing grant in aid for our national museums and galleries. This will be a welcome first step in restoring financial stability for a vital part of our cultural sector. For the library, such investment, if confirmed, would be absolutely critical to our continuing recovery from the cyberattack. I pay tribute here to the essential part played by officials at DCMS to support this recovery over the past year.
The Chancellor was unable to commit in the Budget to some of the capital plans announced in the previous Parliament. I am nevertheless pleased to note that the British Library’s partners in Leeds and the wider region are just as committed as we are to making the strongest possible case for a new British Library presence at Temple Works in that city. We continue to believe that a new British Library site in the north can be transformative, unlocking opportunities for innovation and research, culture and regeneration. In doing so, it offers a long-term opportunity to contribute to national economic growth, an aim which unites us all.
Baroness Fleet (Con)
My Lords, I too thank my noble friend Lady Sater for securing this important debate. I declare my interests as listed in the register.
Arts organisations were so full of hope when Labour came to power and there is now just profound disappointment and disbelief. As the esteemed critic Richard Morrison said:
“So much for Labour’s arts-friendly Budget”.
Theatres, orchestras and museums worked so hard to emerge from the dark days of Covid and, thanks to the previous Government’s £2 billion culture recovery fund, distributed by the Arts Council, most were on their feet again with ambitious ideas and programmes. They desperately want to contribute to economic recovery and growth. They are now reeling, with the minimum wage up and employer national insurance up. This is a tax on jobs, work and growth. It is a tax on talent, creativity and ambition.
In the music world, where I have a particular interest as co-founder and chair of the London Music Fund, providing scholarships for pupils from low-income backgrounds, organisations—music charities, music venues, music colleges, conservatoires, opera companies and music hubs, too, which are central to the delivery of music in schools—will be clobbered. At least the national plan for music education, which I chaired for the previous Conservative Government, was embedded in the nick of time, with funded streamlined music hubs, plus £25 million for musical instruments and a £5 million pot for music progression.
The noble Lord, Lord Berkeley, referred to the schools in the Government’s music and dance scheme. I hear different things from what he has heard: incredibly, I am told that they will be affected by the VAT on school fees. That would have a profound effect on the future viability of MDS schools. At the Yehudi Menuhin School, where I was a governor, for example, over 75% of its exceptionally talented pupils receive MDS funding or school bursaries. How can parents with an income of £45,000 or even £60,000 find up to £10,000 a year for VAT? If the school absorbs the costs, it will run out of funds within a few years.
This pernicious tax is a tax on just those young people who we want and need in orchestras and the music industry—young people from diverse backgrounds who have been selected for their talent and potential, not on their ability to pay. They are the sons and daughters of teachers, truck drivers, care workers and refugees. Why should they be punished? I look forward to an update.
As my noble friend said, DCMS real-terms funding for day-to-day spending next year will go down. No doubt the Minister will enlighten us on how this will affect many of the arts institutions. Four months after the election, with all its broken promises and massive tax increases, is the Minister aware that many of our cherished arts organisations, right across this country, are now in peril?
The Earl of Clancarty (CB)
The noble Baroness, Lady Fleet, has just mentioned the specialist schools. Like the noble Lord, Lord Berkeley, I have heard something that was completely the opposite. I wonder whether the Minister could clarify the latest situation on that.
Baroness Grey-Thompson (CB)
My Lords, I thank the noble Baroness, Lady Sater, for tabling this debate today. I draw your Lordships’ attention to my entry in the register; I am president of the LGA, chair of Sport Wales and previously chair of ukactive.
The LGA’s Commission on Culture and Local Government has highlighted that access to culture is not evenly distributed across the nation. Any measures to address this are very welcome. However, I believe that access to sport and physical activity is also very important but under threat. This is not about elite sport but about keeping people fit and well, mentally and physically, and keeping them out of the NHS, which, like local councils, is under significant pressure.
The positive benefits include driving economic growth and educational outcomes and improving the quality of life. Sport Wales has shown that sport contributes £5.89 billion in social value to Wales. Sport England’s figures, in research from 2024, show that participation relieves pressure on the NHS through £10.5 billion a year in health and social care savings, while the annual social value is over £107 billion. Providing people with the right culture and leisure services has the potential to deliver significantly better outcomes and socioeconomic benefits.
I thank ukactive for its briefing. Budget measures, particularly the rise in employer national insurance, the national living wage and business rates, place additional financial strain on the physical activity sector. Large public and private operators estimate that the changes will result in a 10% increase in payroll costs, forcing reductions in staffing, services and future investments. Cost pressures threaten the affordability of facilities such as gyms, pools and leisure centres, risking high barriers to the second-largest driver of physical activity in the country, and worsening health inequalities across communities.
His Majesty’s Government need to work with the sector to mitigate the Budget’s impact on the operating costs of facilities, thus safeguarding jobs, sustaining public health benefits, and allowing for continued growth and investment in local communities. The sector is essential in improving national health, driving economic growth and supporting the Government’s five missions. I understand there are massive challenges, but sport and physical activity are integral to a healthy society.
Lord Harlech (Con)
My Lords, I declare my interests as a member of Historic Houses and the owner of heritage-listed buildings in Wales.
As my noble friends Lord Vaizey of Didcot and Lady Fleet have said, the Conservative Government recognised the significance of heritage to our nation’s cultural fabric, its role as a major employer, its educational value and the joy it brings visitors. This understanding was evident in the robust support extended to the sector during the pandemic.
In just one Budget, the new Government have enacted in this sector measures of financial savagery not seen since the post-Second World War era of country house destruction. At the Historic Houses AGM, held at the QEII Centre this week, owners and operators spoke of their terror at the ramifications of this Budget. Not a single Minister or civil servant from DCMS chose to attend. At best, this Budget shows a total lack of understanding by the Treasury as to the fine margins and long-term planning with which these organisations survive. At worst, much like in the farming community, it is seen by many as an ideological attack on private ownership which will decimate the sector.
The changes to the IHT regime could mean sales of land, buildings, artworks—all diminishing the heritage significance of estates. An increasing number could now be sold in their entirety and new owners may be less inclined to open for visits and events, so a reduction in public access to heritage is another consequence of the Budget. This in turn will reduce the number of jobs and diminish the strength of the UK tourism and heritage sectors.
Because an estate will comprise predominantly capital assets, IHT becomes an existential issue for the owners and custodians of heritage businesses. In few other sectors, and I cannot think of another, must businesses relinquish 40% of their net worth at the point of a succession event—that is, death—with all the added stress that can come with a bereavement. Therefore, the long-term sustainability of these businesses depends on their ability to manage the ever-present IHT risk.
The Welsh Government’s 2024-25 budget initiated severe cuts to heritage and this Westminster Budget heaps on further damage. Will the Government raise the £1 million cap or limit it to assets held for less than 10 years, or provide that assets held for 10 years after succession qualify for full relief? This will catch those who have bought land to escape IHT by claiming APR or BPR, while permitting long-term custodians of important heritage estates to continue to benefit from full relief.
Lord Freyberg (CB)
My Lords, I speak today with profound concern for our nation’s cultural and heritage sectors. The current funding situation raises serious doubt about our ability to maintain and develop our cultural institutions effectively. I agree with much of what the noble Lord, Lord Bassam, said about how this came about. Since 2010, grant in aid funding has fallen by 18%, and DCMS’s core cultural funding now represents just 0.17% of public spending per capita, relegating the United Kingdom to among Europe’s lowest cultural funders. The impact on communities has been severe. Local authority revenue funding of culture has suffered devastating cuts, at 48% in England and 40% in Wales. Only two in five cultural organisations can adequately maintain their collections. Heritage site visits remain below pre-pandemic levels—although thankfully they are rising, as the noble Baroness, Lady Sater, mentioned—while school visits have dropped by nearly 40%.
While I welcome the recent Budget’s increased grant in aid for national museums, focused support for the creative industries and sports facilities, revised tax relief rates, an announcement of cultural infrastructure funding and some stabilisation of local authority funding, these measures fall short of addressing the fundamental challenges.
Consider the mounting pressures. National insurance contributions are rising to 15%. Increased minimum wage costs, while essential for supporting workers, burden the charity sector by £1.4 billion, and a 35% reduction in business rates relief will impact heritage venues. The new £1 million cap on agricultural and business property relief threatens centuries-old estates and their collections, a point well made by the noble Lord, Lord Harlech. The £5 billion reduction in levelling-up funding has left vital cultural projects at risk. The National Railway Museum is losing £15 million—one of many—while local authority museums’ urgent plea for a £20 million emergency fund goes unanswered. The Art Fund describes many institutions as in a “perilous and uncertain state”. Local authority museums, vital repositories of community heritage, face redundancies, reduced access and potential closure.
While the Government promise to increase DCMS funding to £2.3 billion by 2025-26, this offers little comfort to institutions fighting for survival today. Our regional and local cultural institutions—the bedrock of our nation’s cultural democracy—cannot endure another year of chronic underfunding. Therefore, like the noble Baroness, Lady Sater, I ask what assessment the Government have made of these measures’ cumulative impact on our cultural sector. What plans exist to address local authority museums’ urgent needs? How will the Government ensure that increased operating costs do not trigger widespread closures across our cultural landscape?
Baroness McIntosh of Hudnall (Lab)
My Lords, I know time is tight. I am very grateful for the opportunity to speak in the gap, and I will do so briefly.
I ask my noble friend the Minister to bear two things in particular in mind, both of which have arisen in the course of this debate. One is the complex interdependency of the entirety of the arts and cultural ecosystem, as referred to by the noble Earl, Lord Clancarty, within which any bit, small or large, is important, as if it comes under threat it is a threat to the whole system.
The second point I want to make is narrower, about the particular challenges facing small performing arts organisations. I remind noble Lords of my many, often rehearsed interests in the performing arts sector. Those organisations operate on tiny margins; very small sensitivities can have a huge impact on them. It is very important—in particular to those organisations that expend an enormous amount of effort on fundraising—that they can feel confident, even in difficult times, that this Government understand and appreciate the value of public funding of the arts and will do their very best to sustain it to the best of their ability, locally and nationally.
Lord Parkinson of Whitley Bay (Con)
My Lords, I am very grateful to my noble friend Lady Sater for this debate. It is an opportunity to welcome the positive news in the Budget, which I do gladly, not least the reconfirmation of the extended rates of tax relief for theatres, orchestras, museums and galleries. As I noted in my Question on 15 October, it is not just the rate but the certainty for planning that is so important. I welcome too the recognition of the need for cultural infrastructure funding. There were no numbers attached to that in the Budget, so maybe the Minister can provide some today.
Today’s debate is also an opportunity to highlight the less positive news and the entirely absent. Like so many other businesses, employers in the arts and heritage sectors are dismayed by the Government’s new job tax, in the form of national insurance contributions and the rise in the minimum wage. My noble friend mentioned the £700,000 cost to the Southbank Centre. The Youth Hostel Association says that the Budget will add another £1.75 million to its cost base, on top of the hit it will receive from the decision to scrap the National Citizen Service.
At a well-attended event hosted by the Heritage Railway Association here in Parliament yesterday, I spoke to the North Yorkshire Moors Railway and the Ffestiniog and Welsh Highland Railways, the latter of which said that the Government’s changes in the Budget would wipe out its entire modest profit, forcing it to re-budget and make some very difficult decisions.
The NCVO estimates that the national insurance hike alone will cost the charity sector £1.4 billion. It is calling for the exemption that the Government have given to public sector employers to be made available to charities. Can the Minister say whether that is being considered? If it is, does she understand the invidious position in which that will put many arts and heritage organisations that are currently constituted as companies?
As the noble Earl, Lord Clancarty, noted, it was disappointing that, while the Government are providing welcome support to our national museums, there was nothing to help our brilliant civic museums. There are 2,500 of them, compared to the 15 national museums. Many are reliant on local government, a far bigger funder of culture than central government. What are the Government doing to support both of them?
The Minister’s colleague Sir Chris Bryant today called on the music industry to impose a new levy on larger venues, but the sector is still reeling from the removal of the 75% business rates relief for grass-roots music venues in the Budget. That will create a tax bill of £7 million for a sector that, last year, returned an entire gross profit across all venues of just £2.9 million. The Music Venue Trust says that that £7 million bill is equivalent to 12,000 jobs in the sector.
I congratulate my noble friend Lord Harlech on his award this week from the Historic Houses Association; I was sorry that no one from DCMS attended to see it. Its director-general said that the Budget was a disaster from its perspective, particularly the changes to business property relief—a measure first brought in by a Labour Government in 1976. Many custodians of historic houses are lynchpins to their local visitor economy, providing venues for films, television and music concerts as part of the interconnectivity that the noble Baroness, Lady McIntosh, mentioned.
I am very grateful to the right reverend Prelate for mentioning cathedral schools. I hope that the Minister can give us some clarity on the music and dance scheme for schools and address its importance.
I have mentioned already the halting of funding for the National Railway Museum. That was part of more than £52 million for the culture and capital regeneration projects announced in March, including for National Museums Liverpool, the International Slavery Museum, the V&A Dundee, Venue Cymru, British Library North and the National Poetry Centre—a project led by the Poet Laureate, Simon Armitage. Sadly, the Government have now said that they are “minded to withdraw” funding from all those projects. Those of us familiar with Whitehall jargon fear that that may be just a euphemism to avoid judicial review; I hope that the Minister can put us out of those worries.
Finally, I hope that the Minister will pick up the right reverend Prelate’s point in telling us about the Listed Places of Worship Grant Scheme, which is a vital lifeline for the custodians of historic churches.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Baroness Twycross)
My Lords, I thank the noble Baroness, Lady Sater, for initiating this important debate. Noble Lords will notice that we are extremely tight on time. Everyone managed to get about three or four questions into their very short speeches, so if I do not get to every point I will write to noble Lords and place copies of the letter in the Library. I thank noble Lords from all sides of the House for their thoughtful contributions. Many have raised concerns that I will endeavour to address, but first I will highlight the Government’s commitment to the arts, culture and heritage, and their recognition of the value of the sector. At various points, I will refer to what the Budget does to support these sectors.
Most noble Lords stressed the value of culture and heritage, not least the noble Baroness, Lady Sater, and the noble Lord, Lord Vaizey. The arts, culture and heritage are vital to the UK’s economy, well-being and opportunities. They are also fundamental to our cohesion as a society and to our national story, fostering pride and earning global recognition. These sectors employ 666,000 people and indirectly support a whole host of other businesses. Culture and heritage are not simply nice to have. To respond to a point raised by the noble Baroness, they have crucial roles to play in supporting the missions of both growth and opportunity. This Government are committed to making sure that heritage and culture are not just the preserve of a privileged few but that their benefits can be enjoyed by everyone. As the noble Baroness noted, that includes social and mental health benefits.
A number of noble Lords spoke about the pressures faced by the culture and heritage sectors. The Government recognise the financial pressures facing our sectors after 14 years of cultural vandalism and the legacy of Covid-19. The level of the cuts experienced by the sector during the period of Conservative government was highlighted by my noble friend Lord Bassam.
I will go through some of the specific questions raised. The noble Lord, Lord Berkeley, asked about the impact of business rates on grass-roots music venues. The Government are working closely with the live music sector to support an economically sustainable grass-roots music sector. Following the Autumn Budget, we are continuing to support Art Council England’s supporting grass-roots music fund, which provides grants to venues, recording studios, promoters and festivals.
The noble Lord, Lord Vaizey, and the right reverend Prelate the Bishop of St Albans asked about the Listed Places of Worship Grant Scheme. I note the concern for our listed places of worship. Departmental budgets have been set following the Budget announcement on 30 October. The outcome of individual programmes such as the Listed Places of Worship Grant Scheme will now be assessed during the departmental business planning process.
On the points made by a number of noble Lords, including the noble Lord, Lord Berkeley, around touring and the EU, the Government are focused on resetting and strengthening our relationship with our European partners. We will engage with the EU Commission and member states and explore how best to improve arrangements for touring across the European continent without a return to free movement.
My noble friend Lord Bassam made a number of points. I agree that it is absolutely vital that we work with Arts Council England and leading thinkers such as Nesta on understanding how we should fundraise. On the smart fund, we are not ruling out that type of work but we need to look at more evidence on user behaviour.
The noble Baroness, Lady Fleet, asked about specialist schools and VAT increases and a number of noble Lords also raised the issue of VAT on private schools. The noble Baroness asked whether the specialist schools were in scope of the VAT increase. As set out in the Treasury’s response to the technical consultation on the VAT changes, performing arts schools that offer full-time education to children of compulsory school age and/or 16 to 19 year-olds for a charge will remain in scope of this policy. This is to ensure fairness and consistency across all schools that provide education services and vocational training for a charge.
The noble Lords, Lord Parkinson and Lord Harlech, made points about business property reliefs. Currently, agricultural and business property reliefs contribute to the largest estates paying a lower effective tax rate on average than smaller estates. In our view, that is not fair or sustainable.
The noble Baroness, Lady Sater, mentioned the strain on the sector after the pandemic and local government funding issues, as did the noble Earl, Lord Clancarty. The Government know that the public funding landscape we inherited is very challenging. Net expenditure on cultural services by local authorities—which, as noble Lords made clear in the debate, are the largest funder of culture across England—has fallen significantly since 2010 as councils saw their budgets decimated. This Government have, however, started to address the funding concerns for local authorities, with an increased settlement confirmed at the Budget. We recognise that commercial income is not keeping pace with increased outgoings. We are acutely conscious of these significant challenges.
The noble Baroness, Lady Sater, made a specific point about business rates. The Government are creating a fairer business rate system that protects the high street, supports investment and is fit for the 21st century.
In relation to other Budget issues highlighted by my noble friend Lord Bassam, the measures announced by the Chancellor on 30 October amount to a valuable package of support for these sectors. It included an uplift in grant-aided funding for national museums and galleries to help support their long-term sustainability and a package of cultural infrastructure funding that will build on existing capital schemes, with additional capital investment to support cultural organisations across the country. Further details will be set out in due course. The Budget also included funding for creative industries, one of the eight growth-driving sectors in the Government’s modern industrial strategy, which will see DCMS continue to fund important programmes such as Create Growth and an expansion of the creative careers programme, worth £3 million. This will build on its success in raising awareness of career routes and tackling skills gaps in this key sector.
Another priority for this Government is to improve access to arts and music for all children and young people, which links to our government mission to extend opportunities. That is why we are working with the Department for Education on its curriculum assessment review that promises to review barriers and opportunities in order to ensure that every child has the best start in life.
This Government also committed £3 million at the Autumn Budget to expand the creative careers programme, which will give schoolchildren the opportunity to learn more about creative career routes and directly engage with the workplace.
We are going to run out of time for this debate, so I will address a couple of issues that came up and I will write to noble Lords. I am keen for the noble Baroness, Lady Sater, to get at least a minute at the end to respond.
Baroness Twycross (Lab)
Okay—I will carry on until I am cut off.
The right reverend Prelate the Bishop of St Albans, the noble Baroness, Lady Fleet, and the noble Lord, Lord Parkinson, among others, raised the issue of national insurance contributions. I know that the announcement of an increase in the rate of employers’ national insurance contributions has caused some concern across these sectors. Officials from my department have spoken with a number of major cultural organisations to understand how it will impact them.
Regarding the cuts to the levelling-up funding for cultural projects, mentioned by the noble Baroness, Lady Sater, and the noble Lord, Lord Parkinson, the Chancellor has set out the state of the UK’s spending inheritance from the previous Government—a forecasted overspend of £21.9 billion above limits set by the Treasury in the spring. The MHCLG will consult with potential funding recipients, including funding to some projects related to DCMS-sponsored cultural bodies, before a final decision is made. Recipients will have until mid-December to respond.
This Government are absolutely committed to culture, as we believe is demonstrated by the positive settlement achieved for DCMS at the Autumn Budget. However, to repair the public finances and help raise the revenue required to increase funding for public services, the Government had to take some difficult decisions, including increasing the rate of employers’ national insurance.
On the impact to charities in particular, our tax regime, including business rates exemptions, is among the most generous anywhere in the world, with tax reliefs for charities and their donors worth just over £6 billion for the tax year to April 2024.
The noble Earl, Lord Clancarty, raised the issue of support for the Welsh National Opera, and I am happy to pick that up with him separately outside this debate.
Lord Parkinson of Whitley Bay (Con)
My Lords, I sympathise entirely with the Minister; I know what it is like to watch the Clock when there are lots of questions to answer. She kindly offered to write. Will she commit to going through the Official Report and picking up some of the detailed and technical questions that noble Lords raised? I know that we would be grateful.
Baroness Twycross (Lab)
Absolutely—I would be happy to. We are almost out of time, so I again thank the noble Baroness, Lady Sater, for raising the issue and securing this debate. A number of these one-hour debates on Thursday afternoons could be considerably longer. I look forward both to working closely with the sectors and to continuing to provide the support they need.
The Earl of Clancarty (CB)
My Lords, the question we asked on specialist schools was about the music and dance scheme, and the dance and drama awards. I am not sure that the Minister mentioned them. They are the ones that I thought were now exempt from VAT.
Baroness Twycross (Lab)
With huge apologies, we have run out of time and we need to move on to the next debate. My officials will go through the Official Report and we will endeavour to write to noble Lords.
Universities
(2 days, 12 hours ago)
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Baroness Warwick of Undercliffe
That this House takes note of the findings and recommendations in the Universities UK report, Opportunity, growth and partnership: a blueprint for change, published on 30 September.
Baroness Warwick of Undercliffe (Lab)
My Lords, as a former chief executive of Universities UK, I appreciate the interest of this House in debating the findings and recommendations of its recent blueprint. It is good to see so many speakers from all sides of the House. The report sets out a stark question in which we all have a stake: how can we ensure that our universities are in a stronger position in 10 years than they are today?
Universities are one of our great national assets. They are a source of real strength in the UK. They provide opportunities for individuals from an ever-wider range of backgrounds. They are essential to our current and future economic success, to strong public services and to flourishing towns and cities in all parts of the United Kingdom. As the report argues, the success of our universities and our country are intertwined. Neither can be said to be in the most robust health today. It says forcefully that as a nation we have a choice. We can allow our great universities to slide into decline or we can act together to ensure that they take a different path and thrive in the next decades.
Our higher education sector makes a £265 billion annual contribution to the UK economy. This means that for every £1 of public money invested in higher education across the UK, £14 is put back into the economy. Universities play a critical role in supporting public services, with more than 191,000 nurses, 84,000 medical specialists and 188,000 teachers expected to graduate between 2021 and 2026. The Government have set out a number of missions. Universities have a central role to play in achieving each of them. They will play a foundational role in the industrial strategy and continue to be a source of competitive advantage to the UK in our position on the global stage. They are a major source of export earnings and attractors of foreign direct investment. In short, they are engines, which we need to be firing on all cylinders.
We all know that our universities are facing enormous financial challenges. This is also true of students, of course, who struggle to make ends meet as costs rise and maintenance loans fail to keep pace, an issue to which I shall return. However, the blueprint sets out to be about much more than funding. It considers the central missions of the university sector and what the country needs of it. It asks what is working well and what could be better. It is consciously self- critical.
In putting together its contents, Universities UK asked a set of commissioners—some of them from this House—to act as critical friends and to hold a mirror up to the universities to allow for a thorough examination of what needs to change in the future. I commend that approach. I am pleased that the noble Lord, Lord Willetts, as the commissioner for chapter 6, is contributing to the debate today. The commissioners were largely but not exclusively drawn from outside the higher education sector to give fresh and more objective inputs, drawing on their diverse range of expertise. Universities UK also consulted closely with its 141 members and with stakeholders such as the CBI, and with related sectors, to hear and input their views.
The blueprint advocates five shifts: to expand opportunity, to improve collaboration across the tertiary sector, to generate stronger local growth, to secure our future research strength and to establish a new global strategy for our universities. Chapters on each of these topics address where performance is strong and where it could improve, generating recommendations for universities as well as for government on how we go about that. The blueprint also sets out three foundational areas where change is needed: putting universities on a firm financial footing, streamlining regulation, and improving how the impact of universities is assessed. Throughout the report, there is a lot of emphasis on what universities can do themselves. As the president of Universities UK, Professor Dame Sally Mapstone, says in her foreword, it is “consciously reform-driven”. Happily, it anticipates many of the same areas for reform that the Education Secretary, the right honourable Bridget Phillipson MP, set out in her recent statement to the other place, to which I will return.
Each chapter generates practical proposals for change, which I hope will provide a foundation on which the Government can build in determining their own approach to university reform. I have said that the blueprint is not exclusively about funding. However, it also puts forward very clear proposals in that area and about student support.
I believe it is widely understood in this House that the funding of universities across the UK is structurally unsustainable. In England, the most recent Office for Students report on the financial sustainability of the sector indicated that 40% of providers expected to be in deficit in 2023-24, and a rising number of universities reported low net liquidity days. Does my noble friend agree that joint efforts from the Government and the sector are of the utmost importance to ensure that higher education returns to a stable financial footing?
University research and development activity is world leading, but the current system relies on a disproportionate and growing cross-subsidy from universities to make this activity viable. Given the financial deterioration of universities, this has produced a huge gap in funding and renders this vital activity exposed. Fees from international students currently make up some of this shortfall, but I think we all agree that this is not a robust or sustainable solution. An ambitious and long-term approach is needed to ensure that the UK retains its international competitiveness and continues delivering on the Government’s ambitions for economic growth. I hope the Minister will comment on this.
For students, rising living costs in England have coincided with below-inflation increases in loan funding for many years. The removal of grants was, in my view, a retrograde step that I would like to see reversed. The blueprint argues that both fee and loan levels should be linked to inflation on an ongoing basis, and that grants should be restored. It proposes a two-phased solution to the sector’s funding challenge. The first phase is to be focused on stabilisation, and the second on an enduring solution that puts universities on a path to longer-term sustainability.
The new Government should be congratulated for their swift action on the first goal in the recent announcement on tuition fees and maintenance loans. The decision to end the near 10-year freeze in tuition fees cannot have been easy for the Government, but it is the right thing to do. The financial sustainability of the university system is not a challenge that can be ducked. Inflation has eroded the real value of student fees and maintenance loans by around a third, which has proved unsustainable for both students and universities. Last week’s announcement was a hugely important and courageous act, but only a first step. This inflation linking must become automatic each year.
Alongside this—and I congratulate my noble friend the Minister on her personal contribution to this—the Government have sought to stabilise international recruitment through efforts to communicate to international students that they are welcome and appreciated, and that the Government wish to support their ambitions. I ask my noble friend to go one step further and confirm that the graduate route is here to stay, and that action will be taken, at long last, to ensure that international students are properly presented as largely temporary visitors in migration statistics.
On the research side, we look to the Government to reverse the long-term decline in QR funding—a feature of all four nations of the UK.
The decision to index-link tuition fees and maintenance loans for one year cannot, as I have said, be the end of the matter. We need to carve a path for a second phase to transform the sector’s finances longer term, through a package of reforms. This is where universities must work with the Government to ensure that the Treasury is utterly convinced that investment in the university sector will assist in fostering stronger growth, getting more people into high-wage jobs, reducing social inequalities and supporting our national ambitions, through both a better skills system and our industrial strategy.
The five priorities for reform set out by the Education Secretary last week speak to these challenges. The blueprint shows that universities are ready to answer the call and are primed with ideas about how they can deliver. However, we should be clear that linking fee income to inflation does not solve the sector’s financial problem. It just stops the real value continuing to decrease. It seems churlish to mention that this one-year uplift will be more than offset by increased national insurance contributions, but that is the fact of the matter. As we approach the comprehensive spending review, there is a clear case for an injection of further public funding to go beyond stopping the slide to equip universities adequately to meet the Government’s reform priorities. This will also allow for rebalancing the way that we fund higher education with a fairer balance between public funding and graduate contributions, reflecting the fact that universities deliver both public and private benefits.
I am a firm believer that universities have to be architects of their own solutions. Universities UK has committed to leading a transformative programme of work that will bring universities together to share learning and good practice in efficiency, transformation and income generation. The work will also build on the sector’s rich tradition of finding efficiencies through collaboration by exploring the appetite for additional regional or national shared services. Universities UK’s transformation and efficiency taskforce is leading on this work. It will be established by the end of 2024 and will report in summer 2025.
I stress that across the university sector a huge transformation is already under way. As many noble Lords will be aware, universities in all parts of the country and of all types have been trying to balance shrinking budgets against rising costs. I am sad to say that a staggering number of jobs have been lost. Huge changes in the way that many universities organise themselves have been accompanied by changes to course offerings, reducing module options and, in some cases, cutting whole programmes of study. Some of these changes will be good and necessary, but many do us great damage, such as the worrying loss of modern foreign language programmes. There is an urgent need to act. Universities can and must take this head-on, as they are doing, but the Government must act too. It is in all our interests to do so.
Ahead of this debate, I consulted Hansard. In the past five years, there have been 44 references to “world-leading universities” across this House and the other place. There is great commitment and willingness across parliamentarians, the sector and wider partners to sustain and better our world-leading universities, but there is a clear choice. Our world-leading university sector can be allowed to slide into decline, or institutions and the Government can work together to ensure that the sector delivers for the nation into the 2030s. I hope the Minister will confirm that this is the path that they will take. I beg to move.
Lord Johnson of Marylebone (Con)
My Lords, it is a great pleasure to follow the noble Baroness, Lady Warwick of Undercliffe. I am delighted that she has secured this timely debate on the future of our higher education system. It is timely because the financial condition of the sector is worsening very rapidly. She mentioned in her excellent remarks that 40% of universities are likely be in deficit next year and that a further, or perhaps the same, 40% have low liquidity of less than 40 days’ cash. Updated analysis suggests that as much as three-quarters of the sector will be in deficit next year, suggesting that conditions are deteriorating extremely rapidly. Like the noble Baroness, I welcome the Government’s move to increase fees with inflation for the next financial year. It is an important step. It is a shame that it has taken this long, and it is a shame that, as she said, the sector has had almost a decade of real-terms erosion of undergraduate tuition fee income. I am glad that this decision has at last been taken. It was a real abdication of responsibility on the part of more recent Governments to have let this issue drift in the way that it has. It is no way to provide certainty for institutions vital to our success as a knowledge economy and, as she remarked, has led to needless job cuts, programme closures and increased dependence on the volatile income from overseas students, welcome though they are.
Above all, the freeze in fees has been detrimental to students themselves, who have, in many cases, seen their institutions lack the resources they need to provide them with the high-quality teaching and wraparound support they want during their studies. That is why I echo the noble Baroness’s pleas for the Government to ensure that the uplift in tuition fees is undertaken on an ongoing basis throughout this Parliament. People can disagree on whether it was an easy decision for the Government to take. Personally, I think that an automatic uplift of tuition fees with inflation should not be a big drama in our system. It is a real cost that institutions experience. The Government need to recognise that and accept their responsibilities towards institutions that are critical to our performance as a highly innovative economy.
The OBR forecasts inflation of 2.6% next year and a further 2.9% in 2028-29. This is an ongoing issue and the Government cannot simply leave the uplift as a one-off. If it is treated as such, it will deliver about £1.5 billion of additional income to the sector over the course of this Parliament to 2029-30. However, that does not in itself address the issue of real-terms erosion of institutions’ income. They will continue to see a real-terms erosion of income per student of 11.4% over the course of this Parliament if the Government do not continue to uplift fees with inflation in the later years of this Parliament.
The real-terms hit will be all the greater for the probably quite considerable number of institutions that find themselves unable to pass on this increase in tuition fees this coming financial year because they are too late to update the contractual position to students to whom they have offered places already. I would be grateful for the Minister’s thoughts on this and whether she has made any assessment of how many universities will actually be in a position, at this relatively late stage, to uprate their fees for this coming financial year.
It is clear to me that, as the noble Baroness said, many institutions will not just be barely standing still following this one-off uplift; many will be going backwards. The net position, as a result of the other recent policy changes, including the increase in employer national insurance contributions, suggests that the sector overall will be down rather than up. I have seen analysis that suggests that the sector will bear almost £400 million in increased costs from national insurance contributions, compared with increased income for English providers of only £300 million, so it is clearly not assisting the Government overall at this stage, even though, as I said, I welcome the move to increase the fees. Perhaps the Minister might indicate how much of the fee increase, if any, will be left for universities following the rise in NICs.
The last few weeks have not been a bonanza for the sector by any means. That said, it needs to accept accountability for the additional public money being invested in it. The write-offs associated with the increased fees could amount to about £450 million over the course of this Parliament, and it is important that the Government continue to ensure that there is robust quality assurance and assessment of where institutions are delivering value for money and high-quality teaching in their performance. I am glad to see that the TEF, as well as B3 metrics, will continue to play an important part in that respect.
Lord Krebs (CB)
My Lords, I too thank the noble Baroness, Lady Warwick of Undercliffe, for securing this important and timely debate, and for her excellent introduction to the topic. I declare my interest as an emeritus professor of biology at Oxford University and as the cofounder and chairman of a university spinout company providing software to the financial services industry.
I wish to speak about research in our universities. As has often been repeated, we have a number of truly world-class research universities in this country. Only the US has universities of comparable stature. There may be many reasons for that, but one point to note is that the institutional structure of research in the UK is more similar to that of the US than, for instance, that of France and Germany, where research institutes take a bigger share of the research landscape.
When the late Lord May of Oxford was government chief scientist, he analysed the relative performance of the UK in science and showed convincingly that we outperform most other countries in scientific quality and output per pound. He speculated that one of the reasons might be that we invest in research in universities as opposed to separate research institutes. As Gordon Moore, the creator of Moore’s law and the former CEO of Intel, put it: invest in research in universities and you get three bangs per buck—research, innovation and education—but invest in institutes and you get only two.
I shall make one simple point about investment in research in our universities: the quality of research in our top universities today is a reflection of investment made decades ago—not last year, not in the last five years, but probably during at least the last 30 years. You cannot simply turn research on and off; it is a long-term venture and therefore deserves a long-term strategy. That is true whether you are talking about the basic discoveries of pure research or their translation into outcomes that save lives, save the environment and are a source of prosperity. It took Dorothy Hodgkin, Britain’s only female Nobel laureate, 35 years of research at Oxford University to elucidate the structure of insulin. The Oxford malaria vaccine was the result of 20 years of research effort.
If we look to the future, we see that the system that has brought us success in the past is under serious threat. In 2022-23 there was an estimated £5.3 billion deficit in university research funding. As the noble Baroness, Lady Warwick of Undercliffe, has said, research in universities really is reliant on cross-subsidies from other activities, and that is not really sustainable.
There are two main reasons for the deficit. First, research is not funded at full economic cost. The estimate in the blueprint report is that about 69% of FEC is recovered by universities. Secondly, as has been mentioned, the QR funding stream is not sufficient to fill that gap; it has declined by 15% over the past decade. Across the university sector, the cross-subsidy for research from overseas students and from other activities accounts for over one-third of research income, compared with only one-sixth of research income from UKRI, the major government funding agency. Paradoxically, the more successful a university is in securing research funding, the bigger the gap that has to be filled. Last year Oxford University secured £789 million of research income, the highest of any university, but that poses a massive financial problem for the university in cross-subsidising that income from other sources.
The truth is that we are not investing enough public money in research. Our public investment in R&D is 0.5% of GDP, which places us 27th out of 36 OECD nations—less than the OECD average of 0.6% and substantially less than countries such as South Korea, Germany and the United States, which invest between 0.66% and 0.99% of GDP.
It may be several decades before we see the full effect of the squeeze on university research, and by the time it becomes acute it will be too late. However, there are already warning signs. Between 2016 and 2020 there was a 17% drop in the UK’s share of highly cited papers, one of the key metrics of our performance. If our research quality and output drops, so will our future economic performance. Wealth creation in the future will depend on brain, not brawn. Crucially, it is likely to come from unexpected discoveries motivated by pure curiosity.
I end with three questions. First, does the Minister agree that we need to take a long-term view of research in our universities, with a long-term commitment? Secondly, does she agree that our public spend on research is too low? If we are not prepared to create more jam, should we try to spread the jam less thinly? Thirdly, does she have a view on what proportion of publicly funded research in universities should be ring-fenced for pure curiosity-driven research, which is likely to be, in unexpected ways, the source of future prosperity?
The Lord Bishop of Gloucester
My Lords, I am grateful for the opportunity to speak in this debate. I too thank the noble Baroness, Lady Warwick, for tabling it. My reflections are rooted in conversations and experience in the sector within the diocese of Gloucester. I declare my interest as a pro-chancellor of the University of Gloucestershire, of which the noble Lord, Lord Bichard, is chancellor. It is one of 14 universities in the Cathedrals Group of universities, based on a Church of England foundation and ethos and with an explicit dedication to enhancing and expanding a greater plurality of routes into higher education.
This report rightly highlights a number of areas for reform and poses useful questions about funding. It is well known that universities drive local and regional growth. I agree with the report’s recommendation that universities should have a key role in local growth plans. The University of Gloucestershire recruits heavily from Gloucestershire and the surrounding region, and there are currently opportunities from the cybersecurity hub linked to GCHQ to do more to collaborate with and meet the needs of local employers.
On expanding opportunity, I welcome the report’s analysis that, to meet the challenge and widen participation, universities, schools and colleges should and could work better together to improve outcomes. I long to see learning communities in which every member can flourish. To do that, we need to work hard to break down the barriers that prevent people accessing university, be they issues of disability, age, ethnicity or religion. We need to be intentional about the things that will enable this, and to think long term. Initiatives such as reduced offers for disadvantaged students can and do help, as is evident at the University of Gloucestershire.
The report argues for a reformed funding structure for universities in England, encouraging the Government to work with the sector to establish a more reliable financial foundation. This is key; universities need to have assured, stable incomes. This is about coupling the wise and courageous leadership of vice-chancellors, staff and councils with a government-led initiative. In the University of Gloucestershire, I have seen a drive in income, a continuation to develop a university more connected with its partners, students and prospective students, and a commitment to reduce costs, which has not been without considerable pain. I see good business practice and a commitment to being commercially astute, but what can the Government do to encourage and enable this? For example, as other noble Lords have said, the recent tuition fee increase seems only to mitigate the national insurance increase. International students are another significant matter, as has been mentioned; will the Minister provide clarity on them?
I hope that at the heart of this debate is a recognition that higher education in this country needs to be actively supported in order to develop and to remain being for the common good, and a recognition of the commitment of our universities to supporting and developing individuals, the community and the very social fabric of our nation. I greatly look forward to hearing the rest of the contributions and, in due course, the Minister’s response.
Baroness Blackstone (Lab)
My Lords, I congratulate UUK and the authors of the blueprint for change, which aims over a 10-year timescale to strengthen the universities sector. While our universities are one of this country’s great strengths and more than hold their own internationally, we cannot be complacent.
While the decision to increase fees in line with inflation will be welcomed by the sector, more innovative thinking by the Government on how to finance universities in the medium and longer term is really important and necessary. I am sceptical about continuing to load all the increases in funding on graduates. Although initially young applicants from disadvantaged homes were not deterred by high fee repayments, there are signs that this is no longer the case. Moreover, mature students have been deterred for a long time. What consideration are the Government giving to longer-term funding? What mechanisms, if any, are being set up for a radical review considering all the options, which might even include the possibility of a contribution from affluent parents?
The report’s chapter on expanding opportunity notes that there is a continuing large gap in the participation rates of disadvantaged students compared with those from more privileged backgrounds. The poorer areas of the country have far fewer applicants than wealthier ones. It proposes that the Government and the sector collaborate in reaching a target of 70% participation in level 4 attainment by the age of 25. I would have preferred it to say by the age of 30 since, in my experience, there are many mature students wishing and trying to return to study between the ages of 25 and 30.
The target of 70% is ambitious, and it must include an improved offering for FE as well as a much better apprenticeship scheme than is currently planned. How do the Government intend to distribute the rather small expenditure increase that has been announced for the endlessly neglected FE colleges? What incentives, if any, are they planning to encourage meaningful university and FE partnerships? Would she agree that the national training programme for disadvantaged pupils in the school system mentioned in the report should be extended to FE colleges, so that their students too can be encouraged and supported to progress to university, as well as being helped to improve their skills?
The concept of lifelong learning and how to put it into practice is not really addressed in the report, although many of its recommendations are relevant. A commitment to attaching a high priority to lifelong learning by the Government would be welcome. We all need to go on learning throughout our lives.
I turn now to the UK’s role in global higher education. It is surely right to continue to benefit from the recruitment of large numbers of overseas students, which was introduced by the Blair Government 25 years ago. The obsession with immigration figures has recently posed a threat to granting visas to overseas students which include a short period of employment in the UK after they graduate. I, and a number of other speakers in this debate, have asked previous Governments to take students out of the immigration figures, as happens among most of our competitors. Will the new Government address this? An internationally diverse student body benefits both British and foreign students, who will work in an increasingly globalised world. They need the knowledge and the curiosity about the world beyond these shores to do so.
As the report makes clear, UK universities need to collaborate in research with colleagues around the world. Brexit damaged our opportunities to do so in the EU. The restoration of the UK’s participation in the Horizon programme is hugely welcome, but more joint projects must be developed between research-intensive universities in this country and right across the world if we are to retain our high status internationally in research and innovation. The report asks for a global strategy from the Government. It is surely needed if we are to maximise our opportunities and our research output.
I conclude in hoping that the Government will continue to respect the autonomy of universities. Of course they need to be regulated, but that regulation, as the report argues, needs to be much more effective and efficient. It should also support more flexible courses, which can be followed by older students during their working lives.
Lord Patel (CB)
My Lords, I declare an interest as a professor emeritus of the University of Dundee and its previous chancellor. I have also been associated with the University of St Andrews.
I applaud the Government for recognising that a more sustainable approach to the funding of higher education and research is needed. I am pleased to see that the Government have protected the R&D budget and full funding of our association to Horizon Europe. As highlighted by the Universities UK report, brilliantly introduced by the noble Baroness, Lady Warwick, I hope that, going forward, the Government will recognise that more will be needed to ease financial pressures on universities to support emerging blue-skies research and develop infrastructure to do so.
I will briefly mention two areas that deserve further attention—one was briefly mentioned by the noble Lord, Lord Krebs. The bedrock of the UK ambition to remain a leader in science and technology is doctoral education in UK universities. But there are worrying signs. Although talented overseas doctoral students flock to UK universities, which are second only to the USA, domestic demand, particularly from talented students, is falling. This and the reduction in funded PhD studentships are likely the next university crisis.
Of the 113,000 PhD research students, 46,300 are from overseas. A recent report suggesting that there would be fewer funded places in the future is worrying. Engineering and Physical Sciences Research Council training centres will fall from 75 to 40, leading to some 1,750 fewer funded places. The Arts and Humanities Research Council is reducing its numbers of funded PhD students from 475 to 300. The Wellcome Trust, once a major funder of doctoral students, particularly in the life sciences, is to severely reduce its support following its new strategy. Universities currently provide some PhD studentships and considerable other support for doctoral education, but this will be an early casualty if universities face further financial pressures.
Doctoral researchers are a big cost centre, with low cost recovery. Universities have subsidised doctoral research from fees from overseas students, as we have heard, and from other sources, such as the QR funding. In the past, universities have done this training on the cheap, thanks to 30 years of university growth. By the way, talented overseas PhD students are keen to come to the UK and stay, innovate and help grow our economy, as was mentioned. But, for this to happen, the Government need to introduce more stability in student and post-doc migration policy, as was alluded to. We need them to be able to stay and grow our economy, like in other countries. Otherwise, it does not make sense for the UK to grow brains only for other countries to benefit.
My second point is also relevant to universities’ ability to support research. An important part of this is the QR funding, mentioned in some detail by the noble Lord, Lord Krebs, so I will not go over it again. Although there has been a welcome increase in charities funding research, charity research support funding—CRSF—has not seen a commensurate increase or an increase with inflation. The cost recovery of funding related to charity-funded research is now less than 57%. If this continues, it would undermine the important partnership for research between government, charities and universities.
On successful research institutes, I disagree with the noble Lord, Lord Krebs, who said that, for institutes, the return is two to one, as opposed to three to one for universities. I might have said that it is four to one for institutes, such as the Institute of Cancer Research. This not only carries out fundamental research, particularly in cancers, but has been responsible for producing 60 drug molecules, two of which have been on the market for treating breast cancer and prostate cancer. It also trains half the number of UK oncologists. But it benefits from this research support only due to the funding it gets through the CRSF-related funding, which is not enough for it to support its doctoral students. Over the years, it has therefore supported this activity to the tune of £30 million, which it has to raise from other sources.
There is a need to look at the level of QR and CRSF funding with some urgency. With the spending review in mind, there is a need to look at a more sustained model of university research funding. I hope the Government will be sympathetic.
Lord Willetts (Con)
My Lords, I congratulate the noble Baroness, Lady Warwick, on bringing this debate to the House. I declare my interests as a visiting professor at King’s College London and a member of the council of the University of Southampton. I was also one of the commissioners who served on the UUK exercise. The chapter on which I was most heavily engaged concerned international students. It is excellent that the Government are now preparing, and have committed to produce, an international strategy for higher education—of course, my noble friend Lord Johnson was himself responsible for an excellent one in the past—and I hope that the Minister will be able to tell us what timescale that is on. I shall put two specific points to her about that strategy.
The first point concerns visas. The Minister is a former Home Secretary, and if I pressed her on the cost of visas, I know exactly what her answer would be, so I will not press her on the cost but on another problem with visas: the speed of getting them. There is an internationally competitive market whereby some overseas students apply for a range of different universities around the world, and for several visas, and they are waiting to see whether they get their US visa, their Canadian visa or their British visa. If the British visa process is the slowest, they have already committed to going to Canada before we have even had an opportunity of getting them here. I hope the Minister will undertake to pursue the speed of visa issuing with the Home Office.
Secondly, I ask the Minister to raise the issue of international students with the Department for Business and Trade. There is enormous opportunity here for trade negotiations, whereby we make a commitment that we will extend access to our student loans for British students going to study abroad. The moment that the conversation with another country is about exchange and reciprocity, about saying, “We want more of your students to come here but it would be great if some British students could come to you, and we will provide them with a loan to do so”, we can make much more progress on growing international student numbers.
I very much agree with what my noble friend Lord Johnson said about fees; I strongly endorse his point. It was treated as though it were a heroically difficult decision. I asked the Library about the history. The Blair Government considered £5,000 fees; we ended up with £3,000 fees, but it was well known at the time that the Prime Minister himself and some of his advisers wanted £5,000 fees. They introduced £3,000 fees, which they indexed for several years with no fuss whatever—they just got on with indexing them. If they had done £5,000 fees and simply indexed them every year since then, fees would now be £9,545, almost identical to the level which the Government are now putting them at, but with some associated HEFCE grant; there were still teaching grants as well. The noble Baroness, Lady Blackstone, was right to say that we either need an injection of public money alongside, or fees will need to go even higher.
One of the most disappointing features of the argument about the recent indexation was the amount of confusion and misunderstanding about how the fees regime works. A lot of people linked it, somehow, to student hardship. The cash students need to live on at university is a completely different issue but does need to be tackled. Very few people realise that if the repayment formula is fixed, there is no increase in your monthly or annual repayments; it is just that you will repay for a bit longer.
One lesson from this, so that we do not slip backwards and see the type of anxieties to which the noble Baroness, Lady Blackstone, referred, is that it is really important that the Government keep on communicating the realities of how this system works, so that no disadvantaged student in a college or a sixth form thinks that he or she somehow cannot afford to go. I have to say that, in the last few weeks, Martin Lewis has once again been a voice of sanity, explaining the truth of the system, which is very different from some of the widespread misconceptions.
Unless we have a significant increase in fees, or further public expenditure support alongside, sadly, there will be universities that get into very serious difficulties. Will the Minister tell us when we are going to see a clear statement from the Government of what the process is for a university that runs out of cash? What happens? This could well be tested in the next year; we need authoritative guidance in the absence of a bolder proposal to increase fees.
Finally, I comment on one other issue. This is a Government who have an admirable commitment to raising the growth rate. Universities can really contribute to that. The industrial strategy had, I think, 11 references to FE colleges, which is admirable; it had two references to higher education, both in the context of research, and we have had eloquent statements about research. Universities are just useful for educating people in practical, vocational skills. There are 160 employer and other credentialising bodies that credentialise students who emerge from university. Will the Minister place in the Library the DfE estimates not of how many courses there are but of how many students are studying vocational courses that are in some way credentialised or vocational? Universities have an invaluable vocational role and I very much hope that, in the next stage of the industrial strategy, they are identified as a key sector, meriting particular support from the Government.
Baroness Young of Old Scone (Lab)
My Lords, I declare my interests as a former chancellor of Cranfield University and current chair of the Royal Veterinary College, which is ranked globally as the number one vet school in the world. Nobody should have to follow the noble Lord, Lord Willetts, on the subject of higher education: I want to raise a complaint about that.
I too welcome and support Universities UK’s thoughtful report, and the admirable introduction that the noble Baroness, Lady Warwick, gave in launching this debate, and, indeed, her work in prompting this debate. Her speech really laid out how flourishing universities are key to Labour’s missions. I also thank the Minister for the encouraging way in which the department has set off in its relationship with the university sector, first, in recognising the deep financial crisis being faced by universities, in the face of what was previously the total intractability of the Government to recognise that there was a crisis at all. Secondly, the ministerial team has shown real commitment to a partnership approach with the sector. Thirdly, it is welcome that Ministers have recognised that our universities, in their teaching and research, are vital for the Government’s and indeed the nation’s growth agenda, with the nurturing of skills and talent that the noble Lord, Lord Willetts, talked about, and the world-class research, which is the bedrock of innovation and drives new technologies and approaches, not only to solve the problems of today and tomorrow in the UK but to form the basis of new global export industries.
The UK has always been very good at innovation, but we are not very good at providing a better environment for spin-out and scale-up. We really have to find a way to avoid the distressing repetition of promising start-ups being bought by the USA and others and relocated away from the UK. We should welcome the Chancellor’s recent commitments on pension reforms to enable more UK investment in promising UK businesses. Our research and innovation success is also highly improved by being able to attract high-quality international junior and senior researchers, but there are severe hurdles in their way. Can the Minister tell us how the Government will reduce or stagger the upfront costs for healthcare and visas, how the graduate visa can be developed further and how the Turing scheme can be extended to encourage young international researchers to spend some time here?
As several noble Lords have said, at the moment university research is precariously subsidised by cross-subsidy from other university funding streams, particularly by fees from the growing number of international students. As the UUK report outlined, international students must not just be seen as a cash cow; they are highly welcome for the diversity that they bring to our student bodies and the life of our universities. There needs to be a clearer compact between the universities and government on where the balance between UK and international student numbers should lie, because that fundamentally influences the discussions on the future trajectory for tuition fees.
We might have the carpet drawn out from under our feet by Mr Trump who, in his first term, sabre-rattled about refusing to fund students to study outside the USA. Notably, despite his sabre-rattling, the number of US students in the UK increased during that time, which I hope will continue in his second term.
We should also thank the Minister for the tuition fee increase but, as many noble Lords have said, it has been counteracted in many institutions by the increase in national insurance contributions. That has been particularly so for specialist institutions such as the RVC, where the increase in national insurance contributions is by a factor of four the size of the benefit from the student tuition fees. I welcome the commitment in the Universities UK report and by the Government to work together with the sector on future tuition fees, efficiencies and the reduction of the regulatory burden. I welcome the Universities UK task force on efficiencies, which is being established as we speak.
I make one last point, which is about student hardship. HEPI did a report on students in paid employment and, quite frankly, it upset me for days. It showed that 56% of students have paid employment, working on average 14.5 hours per week. If that was not bad enough, 80% of students who have been in care are working in part-time jobs and, for many, they are not exactly part-time jobs; they work many hours, approaching full-time. I cannot envisage what it must be like to hold down almost a full-time job and try to do a gruelling university course. That is particularly so in the case of students in longer-term studies, such as veterinary and medical studies, where the courses are long and that has to be sustained over a long period of time.
Although I welcome the maintenance loan improvements, I join the noble Baroness, Lady Warwick, in calling for the restoration of maintenance grants. Can the Minister say how this regressive and discriminatory situation for students from poorer backgrounds can be reversed?
Lord Rees of Ludlow (CB)
My Lords, we should welcome this debate on the excellent and thought-provoking report from UUK. It recommends that the long-term goal should be 70% of young people with qualifications at level 4 or above, to be achieved via flexible co-operation between higher and further education. I declare an interest as a member of Cambridge University, and I will focus on the university sector in my comments.
How best can our universities adjust? Despite their manifest general quality, there is currently a systemic weakness: their missions are not sufficiently varied. They all aspire to rise in the same league table, which gives weight to research as well as teaching. Most of their students are between 18 and 21, undergoing three years of full-time residential education and studying a curriculum that is too narrow, even for the minority who aspire to professional or academic careers. There is a contrast with the US, where there are several thousand institutions of higher education: junior and regional colleges, huge state universities—several are world class and some are highly innovative, such as Arizona State University—and the private Ivy League universities, supplemented by liberal arts colleges that offer top-rated undergraduate education but no PhD courses.
We should query the view that the standard three-year degree is the minimum worthwhile goal, or indeed the most appropriate one, for many young people. 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 have personal hardship, should be enabled to leave early with dignity and a certificate to mark what they have achieved. They should not be disparaged as wastage; they should make the positive claim, “I had two years of college”. Vice-chancellors should not be berated for taking risks in admissions nor pressured to entice them to stay, least of all by lowering degree standards.
There are many 18 year-olds of high intellectual potential who have had poor schooling and other disadvantages, and who do not have a fair prospect of admission at 18 to the most competitive universities. To promote fairness and diversity, therefore, universities whose entry bar is dauntingly high—Oxford and Cambridge in particular—should reserve a fraction of their places for students who do not come straight from school. This would offer a second chance to those who were disadvantaged at 18 through their background, or their choice of A-levels, but who have caught up by earning two years’ worth of credits online, at another institution or via the Open University. Such students could then advance to a degree at Oxbridge in two further years.
Moreover, everyone should have the lifelong opportunity to upgrade—to re-enter higher education, maybe part-time or online. This path could become smoother, indeed routine, if the Government were to formalise systems of transferable credits across the UK’s whole system of tertiary education. Incidentally, since I have mentioned league tables, let us not overrate salaries in those tables. If a talented young artist can be enabled to pursue their vocation as a career, after suitable courses, that is surely good for society even if they only just earn the living wage.
What makes Oxford and Cambridge unique assets to the UK is that they combine the strength of top world-class research universities with the pastoral and educational benefits of the best American liberal arts colleges. It is unrealistic to raise 10 more UK universities to the top of the international research league, but we could surely counterbalance the unhealthily dominant allure of Oxford and Cambridge to students, and promote regional balance, by boosting the funding of some of our smaller universities so that they can emulate US liberal arts colleges, and Oxbridge colleges, in offering high-quality intensive teaching.
Let us hope that the UUK report catalyses reform. As other speakers have said, higher education is currently one of the UK’s distinctive strengths and certainly crucial to our future, but it must not be sclerotic and unresponsive to changes in needs, lifestyle and opportunities. A rethink is overdue if we are to sustain its status in a different world.
Lord Waldegrave of North Hill (Con)
My Lords, it is a delight to follow the noble Lord, Lord Rees. I congratulate the noble Baroness, Lady Warwick, on securing this debate. When I was a very junior member of the union she used to run, we marched about with a very unsexy slogan, “Rectify the anomaly”. Only academics could have produced such a thing, but never mind. I do not think it was ever rectified. I was also the Minister who was universally execrated in 1981 for introducing fees for overseas students. We would have been in some trouble without those fees.
Let us congratulate the Government on some good first steps. The R&D protection is good, as are the long-term contracts in R&D, and I so much agreed with what the noble Lord, Lord Krebs, said. To add a sentence to his admirable speech, I say that universities can be thought of as the R&D department of the nation, not only in the sciences and applied sciences but in social sciences. We have very difficult problems to do with the increase in our non-working population and the loss of productivity in the public sector, and these are social science issues that the universities can help with.
As for the unit of resource, it is no good at the moment standing in a queue and demanding more public money but, luckily, the universities have two other sources of funding where the Government can help or hinder. The first one relies on fees going up alongside inflation, and my noble friends have spoken well about that. It has sadly been hit by the NIC costs, so it will not be much of a gain for this year, if any gain at all. However, it must continue and we must explain to the students—as has been said by so many noble Lords—that this is not a cause of hardship for them; rather it is a sensible way of funding universities. That must surely continue in the years to come.
Secondly, there are overseas students. I strongly join with what was said by the noble Baroness, Lady Blackstone, and others. I used to lobby my noble friend Lord Johnson of Marylebone, who was an excellent Minister, about this matter—I never got anywhere. When I was chancellor of Reading University—an interest I should have declared, alongside being a governing body fellow of an Oxford college—we tried to get the overseas student figures taken out of the immigration totals and the crossfire of those battles. I urge the Government to apply their mind to that; it could be a really sensible thing to do, and then put out the welcome mat, as others have said.
I am a little sceptical of the soft-power argument that one used to hear—that we have taught all these people to be friendly towards the United Kingdom. My old mentor Lord Carrington told me once that the most difficult man he ever had to deal with was the late Mr Dom Mintoff of Malta, who was, of course, a Rhodes scholar at Oxford, so it does not always quite work like that. However, it is a wonderful source of income for our universities. It is an invisible export, if you like, on which we should capitalise—we should be putting out the welcome mat. I believe I am right in saying that there has been a 15% decline in visa applications this summer, compared to the one before, and that is a very alarming sign which needs to be reversed. I hope that the Government will heed the words of my noble friends, both excellent University Ministers, on that subject. There are these two funding streams that can help the universities in the medium term, in what is now becoming a near crisis, as so many have said. We have not got long to wait before that crisis begins to hit. The consequences will be seen over many years.
I will raise one other subject, that of regulation. The report has some very sensible things to say on what the Office for Students should do and how it should be focused. I suspect there will have to be amalgamations of universities in the coming year; there will be real difficulties for some, as my noble friend said. The Office for Students will have a big job and should focus its efforts on seeing, as a regulator, that these things are handled in a way which is sustainable for the sector.
The Higher Education (Freedom of Speech) Act is now on hold. I am always against centralisation; universities are separate institutions. I was nervous about the establishment of this regulator—I was proved wrong—but I am also nervous about somebody called “the director of free speech” being established. There is something Orwellian about a director of free speech, is there not? That is not to say that there is no problem of closing of minds and of bullying by people in unacceptable ways. There is a real issue, yet I urge the Government to continue with the declaratory aspect of that Act but to look again at the tort, which will submerge the sector in lawyers if we are not careful.
A final and most unpopular thing of all, particularly to the Association of University Teachers, is that very many of our best academics are underpaid. If we are to compete with the United States in the top, we will have to recognise that—non-collegiate though it is—some of them have to be properly, internationally paid.
Lord Griffiths of Burry Port (Lab)
My Lords, I would like to add my words to my noble friend for giving us this opportunity to look over a sector of national life that is so vital.
I begin by mentioning just two words: “Robbins report”. It in a sense shaped the architecture of much of what happened subsequently in the development of higher education in this country. I pay tribute to the noble Lord, Lord Willetts, whose speech on the 50th anniversary of the report reminded us that perhaps Robbins brought to a proper conclusion what was begun in the Butler Education Act 1944. Since I am the beneficiary of the latter for my secondary schooling and the former for my higher education—or part of it, as I will explain—it is a good place to start for me.
I ask your Lordships to exercise their imagination and see a very raw graduate aged 22, exactly 60 years ago, taking a train—when there was still a train—from Carmarthen to Aberystwyth and stopping at Lampeter on the way. I had just been appointed as an assistant lecturer at St David’s College in Lampeter. I did not want to go. I was doing a PhD and my professor told me I had to, because at that time, Lampeter was being merged with the University of Wales as a fifth college—Cardiff, Swansea, Bangor, Aberystwyth and Lampeter—but could do so only under the aegis of one of the existing colleges. Aberystwyth, fiercely Presbyterian, did not want anything quite so Anglican, so it was cosmopolitan Cardiff that wanted to do the deal.
I was sent to be the assistant lecturer. My subject area was medieval English from “Beowulf” to Chaucer, the history of the English language, pre-Shakespearean drama, and all that kind of thing—gifts that noble Lords would never imagine from hearing other outbursts on my part in your Lordships’ House.
I pause there for a while for two reasons. First, I am absolutely certain that I would not be standing in your Lordships’ House—with all the caveats and mitigations that have been mentioned in the debate—if I had been of university age now. I could not have gone; it could not have been entertained. The poverty from which I came would not have been helped with a bursary, or anything like that. The pressure of home was to have a 15 or 16 year-old boy out working, instead of going off on these fancy educational things about which parents knew absolutely nothing. Little coteries of people would come to persuade my mother, a single parent—we lived in destitution—that it mattered that I went on to do O-levels. They said, “Give him a chance”, and when I did well, that the A-levels were now the next thing I should aim at. Each time, she had to be persuaded, and each time, she did not know how to put food on the table or how to clothe us for school.
From my pastoral work ever since, I can detect large numbers of young people who are trapped in precisely the same way and who will never even entertain the idea, even if we hold out carrots before them. I was just fortunate to have been born when I was. That is the first thing.
I look at this issue through the eyes of students, because most of my life I have not run things, as most Members of this House have done; I have simply gone into people’s homes and dealt with them in their time of crisis and helped with all the pastoral matters. Out of that, I have formed my opinions from the ground up, instead of from the top down.
My second point is that I doubt whether I would easily find a place that wanted a teacher of medieval English now—it is one of the subjects that is been sacrificed. Much more recently, I played a significant part, although not a leading part, in the formation of the University of Roehampton, which brought together four former teacher training colleges: the Roman Catholic Digby Stuart College, the Methodist Southlands College, an Anglican college and a humanist college. We got our degree-granting powers from the Privy Council and all the rest of it. The noble Lord, Lord Rees, mentioned the phrase “liberal arts”, and I am astonished that teacher training colleges—which were, in essence, liberal arts colleges—are now sacrificing jobs in the humanities and liberal arts for the sake of the disciplines and studies that quantifiably can be shown to get you a job in the kind of world we now live in. I promise noble Lords that real attributes that earn real money are to be found in people who can put two proper sentences together, can hold their own in an argument, can read a book, can form a study group and can see, in those aspects of life, things of importance.
I must finish because I have reached my time, but the House must have the impression that I could go on for a very long time. I will say one last thing, if noble Lords will be patient with me. This morning, I heard from the university in Lampeter that it will finish teaching and that it will have no courses after this year. It is for that reason that, although I am usually well co-ordinated, I have put on my Lampeter colours tie to protest the very idea of losing a brilliant piece of educational work, all on the altar of what is called “progress”.
Baroness Grey-Thompson (CB)
My Lords, I thank the noble Baroness, Lady Warwick of Undercliffe, for tabling this debate. I draw attention to my register of interests. Having served as chancellor of Northumbria University for nine years, I have shaken tens of thousands of hands and can see first-hand the difference that a university education can make. I am also privileged to have a number of honorary degrees.
I am pleased that many people are generally supportive of the report and happy to see that elements are already being addressed by His Majesty’s Government, but continued progress is required to ensure that it is a blueprint for change. Having spoken to colleagues at Northumbria University, they welcome the Government’s recent increase in tuition fees in line with inflation for 2024-25, but, as has been suggested, a longer-term solution is required. The increase in fees only just covers the increase that employers must now face to pay for the increase in national insurance. That means that, while tuition fees were raised, additional resources are not necessarily available for students, teaching and research.
A recent study by the London School of Economics has shown that 84% of the costs of higher education will be borne by graduates, with the state contributing only 16%. I and many others in this Chamber were privileged to have free tuition, so I wonder whether we need to consider whether we have the balance quite right. This split is out of kilter with many other countries and does not recognise the benefit to the nation of higher and further education.
While I am pleased that the Government have taken steps to increase maintenance loans for students, the increase of £414 a year comes to only £34 a month, which does not go far in challenging times. It shows that many students from the least well-off backgrounds must take out the maximum maintenance loan. Often, because their parents cannot continue to subsidise them financially, they have to work long part-time or full-time hours alongside their studies to cover the rising living costs. Not only does this detract from them making the most of their education; they leave university with the most amount of debt.
Like others, I support maintenance grants, which I notice were not included in recent government announcements. However, many universities are proud of the work they do to facilitate social mobility, and consideration of this issue would ensure that students who are struggling financially can make the most of their education.
The Open University—of which, I am proud to say, I am an honorary doctor—is facilitating part-time distance learning, which is critical to widening access, supporting social justice and levelling up, so it is not surprising that it welcomes this report. In the academic year starting in 2022, 28% of Open University undergraduates lived in the top 25% most economically deprived areas, and over 37,000 registered students declared that they had a disability. This is really important for the workforce, but it also shows how important flexibility is.
I will take a moment to draw your Lordships’ attention to the wider impact universities have, not just on students; it is about the communities in which they are based. In the north-east alone, universities provide 32,000 jobs. We should capitalise on the central role so many universities are playing in their areas to ensure local growth, and promote collaborations such as the Universities for North East England partnerships, in order to ensure that universities can provide greater social and economic impact. It is clear that steps need to be taken so that universities up and down the country can establish a firmer financial footing for a sustainable future.
I have just one question for the Minister, on the implications of all this. Many universities are looking to diversify in order to bring more money in, and Northumbria is just one example. It has a service called Norman, which provides out-of-hours IT support to approximately a third of UK universities. It generates income, and it is high quality and cost-effective. However, if it partners with another university, it incurs VAT, but if it goes it alone it does not. This is a barrier to the collaboration that I think we would all like to see more of. What reassurance can the Minister offer, in order to help universities promote collaboration and to continue to educate our young people to the best of their ability?
The Lord Bishop of Sheffield
My Lords, I too thank the noble Baroness, Lady Warwick, for securing this debate of a vital report. It is a privilege to follow the noble Baroness, Lady Grey-Thompson—as it happens, for the second time this week. I celebrate the contribution of all the commissioners and advisory group members to the report, and I welcome its recommendations for a bold new strategic vision for the sector.
I am tremendously proud of all the phenomenal HE providers in my diocese: Sheffield Hallam University, the University of Sheffield, the Sheffield Teaching Hospital NHS Foundation Trust, and the colleges of Sheffield, Barnsley, the Dearne Valley, Doncaster and Rotherham. For the next few minutes, I just want to comment briefly on maintenance grants and financial support, and on the challenges facing FE colleges in particular.
First, on maintenance grants and financial support, the inequality of access to education is well documented and much lamented. As the noble Baroness, Lady Warwick, remarked, potential students are facing severe financial challenges as the costs of tuition, housing and other expenses increase to levels that are simply unsustainable for a growing number. Those from disadvantaged backgrounds are particularly hard hit, such as those across south Yorkshire. We are seeing a rise in the number of potential students who cannot afford to study or whose studies are significantly compromised by the obligation to pursue simultaneously a demanding burden of paid work—a point also made by the noble Baroness, Lady Young. It is unacceptable to restrict equality of opportunity in this way.
To make matters worse, special support grants were abolished and replaced with loans in 2016. Since 2007, the household income threshold, which determines access to the maximum maintenance loan, has been frozen at £25,000 per annum. This has meant that the percentage of the student population accessing a full maintenance loan has dropped from 56.6% in 2012-13 to 37.5% in 2021-22. I applaud the report’s recommendation to reinstate maintenance grants for the most disadvantaged students, and to ensure that maintenance loans are increased in line with inflation.
I turn secondly to FE. Noble Lords will be aware that there is a systemic dichotomy between the higher education and further education sectors. According to Ofqual’s latest data, A-level students at FE colleges as a whole secure poorer results than at all other education institutions at which A-levels are studied. I commend the report’s recommendation for the establishment of a “tertiary education opportunity fund” to respond to the needs of pupils in areas with low participation in higher education. It is vital that any new fund does indeed, as the report advises, incentivise HE/FE partnerships and joint programmes to signpost and support a diverse array of learning opportunities both for students and for the sake of employers. As in most sectors, collaboration is key.
The report illustrates some successful models and I hope we can learn from them. As the Government pursue their commitment to growth, I implore that further consideration be given to develop a lifelong learning entitlement to streamline post-18 student funding. This support, provided on a modular basis, would go a long way towards enabling more flexible training and reskilling over a lifetime.
I celebrate the Higher Education Progression Partnership in South Yorkshire, funded by the Office for Students. This partnership supports young people from under-represented groups to improve academic achievement and helps them find bespoke routes into further education.
As other noble Lords have said, the report’s proposals are integral to this Government’s missions. A creative, innovative approach to both HE and FE is fundamental for kick-starting economic growth and breaking down barriers to opportunity. This country owes nothing less to our young people and to future generations.
Baroness Bottomley of Nettlestone (Con)
My Lords, this debate is, to me, the House of Lords at its best. Earlier this week, we were discussing the future of the House of Lords. I do not think that an elected House would produce the quality of debate that we have seen. As I listened to each speaker—all infinitely better qualified to address the House than I am—I was struck by the cumulative experience, knowledge and contribution.
I have known my noble friend Lady Warwick since she was at the AUT, and subsequently at Universities UK, and I recommended her as the person who should join the Nolan Committee on Standards in Public Life. She is such a wise person, as are so many other noble Lords. I look forward to the Minister, who I have not yet heard in her new role, winding up. I will not need to remind her about the importance of universities for training doctors, nurses, paramedics and so forth. I knew her very well in her health days.
I congratulate UUK on what is a tremendous report. I enjoyed reading it, which is rather strange. I do not know about others. I enjoyed the excellent chapter written by my noble friend Lord Willetts—“Two Brains Willetts”—and Andy Haldane’s chapter on the impact of universities. I even enjoyed the chapter by the noble Lord, Lord Mandelson, who we now know is auditioning to be not chancellor of Oxford but British ambassador in the United States. I know that the only aspect of higher education the House is really interested in is not, why did Oxford turn down Baroness Thatcher, many years ago, but will it be my noble friend Lord Hague, the noble Lord, Lord Mandelson, or maybe AN Other? These are, of course, extremely profound points.
I want to speak about the London School of Economics. My great-grandfather, a Wrangler at Cambridge, in a part of East Anglia, went to Toynbee Hall and worked with the Webbs in setting up higher-education institutions across London. In 1894, they received a bequest of £20,000—would that it could be that today—and within a year Beatrice and Sidney Webb were admitting their first students. My great-grandfather, Dr William Garnett, was one of the seven signatories who signed up for the incorporation of the London School of Economics. What a magnificent institution; University of the Year this year; performing exceptionally well across a range of areas; and with a formidable new president and vice-chancellor, who I hope the House will get to know better, Professor Larry Kramer. Twenty Nobel Prize winners and 40 past or present world leaders have studied at the school.
I know that the noble Lord, Lord Rees, will say that this is nothing compared with Cambridge, but Cambridge was not founded in 1894. I frequently agree with the noble Lord on various issues. He has often talked about the importance of social sciences. The issues that we face today are about behaviour change. Climate change, net zero, is about not only science, technology and industry but about how we can persuade people to change their habits. The Minister will know that so many of the issues involved in health, healthy lifestyles and life expectancy have nothing to do with surgery or pharmaceuticals but are all to do with behaviour change—diet, exercise and all the things that are so much more difficult than simply having an operation. I hope that when the Government discuss the importance of STEM, science, innovation and research, they will not forget the importance of economic, social and legal analysis.
The other area where I agree with the noble Lord, Lord Rees, is that the sector is incredibly reactionary. The Open University and the University of Buckingham changed the paradigm. We talk about major efficiency changes, innovation and transformative change, but I do not see much of it. I entirely agree that we need greater diversity of institutions, flexibility, institutional variety and different courses. Of course, many people would much rather go to university when they are older. When you are young, you are too distracted and have too many emotional problems to actually study. I must mention my 17 years as Chancellor of the University of Hull. Who got the firsts? It was the mature women, who had made a great sacrifice to go to university and do well. I hope that we can be more radical and more innovative about what we mean by a university education.
Talking of Hull, I have to say that being in a troubled area with great challenges, its success is all the more important. It is a global institution, but it makes a profound difference to the local community, with Professor Dave Petley doing a remarkable amount. Since Richard Lambert’s review of business and university collaboration in 2003, there has been a great change in innovation, research, collaboration with business and spinouts. The noble Lord, Lord Krebs, talked about his work. All over our universities, we have institutions helping with funding, innovation and intellectual property, and we should celebrate that. I also endorse the vulgar comment. Academics are paid remarkable little. We want our best people to be academics. We need to respect them and support them.
Next time, please can we have a debate that lasts twice as long?
Baroness Prashar (CB)
My Lords, to clear any confusion, I have swapped with the noble Baroness, Lady Finlay, as she is currently on the Woolsack. I declare an interest as a former chancellor of De Montfort University. I currently sit on the international advisory board of IE University in Madrid and I do some ad hoc work with my local university, Royal Holloway.
I too thank the noble Baroness, Lady Warwick, for initiating this debate and introducing it so well, but I also congratulate UUK for taking this timely initiative to produce the blueprint for change. The recommendations in this report are of course intended, as we heard, to achieve five big shifts. However, these shifts cannot be seen as a stand-alone. They are integral to the five missions of this Government and part of the Government’s mantra of “fixing the foundations”. If we are serious about achieving these shifts, a coherent strategy for our universities and higher education sector, which is integral to these missions, is essential. The future of our universities cannot be left to the vagaries of market forces. To avoid decline and maintain our excellence, the Government must intervene to create an enabling environment for universities to become financially sustainable and incentivise them to excel and deliver for communities, society and internationally.
At the same time, universities and other institutions need to adapt and change to meet the challenges of the future. I am grateful that this has been recognised in the report itself. The recommendations of the report, the Government’s plan for the reform of higher education as stated in their manifesto, and recent announcements about increasing the fee cap and making further investment conditional on major reform are all welcome. The direction of travel is encouraging but, as we have heard in this debate, a lot more needs to happen.
I want to amplify two areas of this report: one is the question of local growth and the other is global reputation and impact. On local development, the needs of employers, the skills gaps and a changing technological environment, the report rightly highlights the recent overemphasis on STEM subjects. Employers recognise that arts and the humanities equip students with a valuable and versatile set of skills—skills that are likely to become even more essential as technologies, automation and AI continue to transform traditional professions. It is therefore critical that arts and humanities provision continues to be available. The recent decline in the arts and humanities is worrying. It has rendered humanities and arts education vulnerable to cuts and closures. Are the Government going to take action to reverse this trend and give greater support to the humanities? I was glad to hear the noble Lord, Lord Griffiths, emphasise this point.
In recent years, there has been a shift in universities responding to local and regional needs. I highlight another example of my local university, Royal Holloway. During 2019-20, Royal Holloway contributed £190 million in gross value added to the local economy, as well as 2,700 jobs in the borough of Runnymede. The university has signed a civic agreement for Surrey with Surrey County Council, the University of Surrey and the University for the Creative Arts. This is a declaration of the partners’ shared commitment to working together to help grow a sustainable economy, tackle health inequalities, enable a greener future, and foster empowering and thriving communities.
Such approaches need to be multiplied and scaled up. At present, they are patchy, and the report rightly argues that there is a need for stability, consistency, better co-ordinated engagement through devolution and local structures—such as industrial strategy councils and Skills England—collaboration between universities and investment in the Higher Education Innovation Fund. A critical question is whether the Government can ensure that universities play a full role in supporting growth, especially in areas where there are no mayoral combined authorities. I would have liked to have seen greater recognition in the report of the role that universities can play through local engagement with communities and civil society organisations to create social capital, which helps build cohesion and inclusion. That is the social purpose of universities in tackling society’s challenges.
My second point is about global reach, reputation and impact. I was very pleased that the noble Lord, Lord Willetts, gave a broader perspective to this. It is not purely about international students but about recognising that a global strategy, and leveraging the potential that universities offer by bringing together education, training, research and global development to harness global reach, reputation and impact, should be coupled with a coherent strategy to encourage international students. Such an approach would have multiple benefits. It would create opportunities, foster prosperity, develop knowledge and make strategic use of our universities’ global reputation to build bilateral co-operation in trade and development.
As we know, one area where the UK excels is in research and innovation and the excellence of our universities, where we should endeavour to enhance our leadership and be at the leading edge. In an era of geopolitical shifts and growing competition, there is a need to develop a better understanding of universities’ role in diplomacy and foreign policy. The Government should support universities by investing in the broader infrastructure that supports universities and businesses globally—for example, the British Council. It will be helpful to hear the Government’s plans for supporting the wider structure.
Finally, are the Government considering removing student figures from the migration statistics? This has been a running sore and has contributed to this issue being politicised. It has impacted on our ability to attract international students. Such a removal would change perceptions and enable a more strategic approach to the recruitment of international students.
Lord Lucas (Con)
My Lords, this is a most valuable report, although I wish it had been a mite more self-critical. I would have liked to have seen more of an interest taken in the value of undergraduate degrees. Is the content of our degree courses what is needed now in both breadth of subject and connections? I do not think it would do any harm for a physicist like me, who would probably these days end up in the depths of the AI revolution creating something which would have a big effect on society, to have at least a passing acquaintance with mediaeval English drama, and therefore perhaps to understand people a bit better.
It is also important that the content of courses is reviewed in the context of the curriculum review that is taking place in schools, so that all that is being taught to children is shaped not by the wishes of some professors but much more by the needs of our children. I very much support the whole speech from the noble Lord, Lord Rees of Ludlow, but particularly his going on about what we are teaching our students. This morning, I attended an All-Party Parliamentary University Group meeting on the Government’s plans for skills, and it was notable that there was nobody there from the Russell group. I think that is a great mistake, but it rather indicates a style of thinking.
We need to question whether it is any longer appropriate to have isolated arts and creative arts schools. I declare an interest as having a child at one of them. The needs of children are so much wider than what is taught there. They need an acquaintanceship with the whole of the humanities and a good deal of business if they are to succeed in a difficult and competitive world. These isolated institutions, however grand, just do not provide it.
We need to ask universities to be a great deal more open and honest with prospective students about what their courses will actually lead to. What do students go on to do by way of careers? What do they think of the courses they have taken when they look back on them? It is hard to find anything approaching that sort of information. I think it is untruthful and unworthy of universities that they continue down this road. It is just marketing; it is not taking the interests of our children into account. In that context, I urge them to take seriously the calls for universities to have a duty of care for our children.
Reference has been made to the value of overseas students. Yes, but I note how slow universities have been to sign up to the British Council’s Alumni UK, which would offer considerable additional incentives to students to come here, and a great deal of value to the country as well. I sense universities looking after their own parochial interests, rather than caring for the larger picture.
I would like to see much more openness about finances. Assertions that universities are short of money are not enough. They ought to share with the Government and with students the details of what the money is being spent on, so that somebody setting out on a course which will leave them with a very large student loan knows where that money is going.
If I can offer a small ray of hope, I think the Government are wrong to try to bear down on level 6 and level 7 apprenticeships. Rather than subsidising them, the Government should open them up to the student loan. These are the safest possible investments for the Student Loans Company: somebody who is being backed by an employer to take on a long course of education and be employed at the same time has a very high chance of success.
I end by picking up on something the noble Lord, Lord Patel, said about doctoral students. I am reminded of my first year working for a merchant bank in the City. We were approached by the National Coal Board for a very large loan to build a new coal mine. We had a long look at it, then we went back to the National Coal Board and said, “Yes, we will give you the money, but if you had run the mine differently and started extracting coal as soon as you’d sunk the first drift, you wouldn’t need a loan at all”. I declare an interest as having a child who is studying for a doctorate, but we ought to review whether the current system of not extracting any value out of a student for three years is the best way of financing a doctorate.
Lord Liddle (Lab)
My Lords, I declare a non-current interest: I was for four years a director of the University of Cumbria and for seven years chair of the council of Lancaster University. My theme in these brief remarks is that I believe universities have lost their place at the centre of the ambitions of our nation. I think this is a tragedy.
Lancaster University was opened by Prime Minister Harold Wilson 60 years ago. That was a great occasion. For him, it embodied what his new Labour Government were all about: a new Britain of classless opportunity for all, which he was to achieve through massive investments in education. The opening of the new universities was a very successful public intervention. A successful institution was built, which has grown—with some bumps along the road, of course—to 16,000 students. It has kept to the mission of providing academic excellence with equal opportunity.
How do we put universities back at the centre? I praise the Government for having taken steps to resolve the financial problems and increase the maintenance loan, but the maintenance loan is still 10%, in real terms, below what it was at the start of the Covid pandemic. As an earlier speaker said, 55% of students now need to work to finance their way through university. We need to think more deeply about the role of universities and their financing. To be cruel, this was a bit of sticking plaster politics. We have to proceed with greater thought and more reform.
On research, I listened very attentively to the speech of the noble Lord, Lord Krebs. There is cross-subsidy, a funding gap and potentially a long-term problem there, but he should at least have given the Government credit for what they did in the Budget on research in maintaining the existing budget and not trying to shoehorn the rejoining of Horizon into the research budget. That was a positive step.
At Lancaster I observed a terrific tension between the success of the golden triangle as a great set of research institutions—I fully support that, by the way; I do not believe the way forward is to try to ruin the things you do really well—with universities such as Lancaster, which, in terms of the research assessment exercise, achieved very good results but lacked the critical mass to do projects in the sciences and the medical world, where breakthroughs are being made today. I do not know how we resolve that dilemma. I was keen on partnerships—mergers, even—with other institutions in order to create more critical mass. The European partnerships that Lancaster was able to join were critical, and that is why rejoining Horizon was of such importance.
I think universities should have a duty to come up with proposals to use their research strengths as part of local growth plans—that is essential—and their partnerships would play an important role in that. They should also be required by the Government to put spinouts of research at the centre of their concerns.
On opportunity, the problem with our university system is that there is too much of the single model of the three-year degree. We should be more adventurous in thinking about other models of learning. We should use the lifelong learning entitlement in innovative ways. We should see how people can combine work and study at the same time. We should go over to a modular system that people can build on at one institution and then, later in life, continue at another. We should have more provision for part-time and mature students. Universities should also be charged with the responsibility for breaking down barriers with further education and raising further education standards.
I could go on but I see my Whip staring at me in a knowing way, so I shall be a good boy and say only that we have to think radically about the role of universities, which play a vital role in our society. Now is the moment for a new wave of reform.
Baroness Finlay of Llandaff (CB)
My Lords, I have the privilege of being an observer on the Medical Schools Council, I have a role at Cardiff University and I am on the advisory council of Brunel Medical School.
The relationship between medical schools and universities goes back centuries, and this report is timely as we face changes. There is a shortfall in our workforce in medicine. Places in medical schools need to expand, and the number of medical schools is expanding, but we have another crisis because of the shortage of clinical academics.
Clinical academics are those doctors who are employed 50% of the time treating patients in the NHS and 50% in research and teaching. They are jointly employed, even though HMRC treats them as though they have a single employment. There are costs associated with the newly agreed contractual arrangements for these doctors. The UK’s future research strength is now jeopardised because, unfortunately and erroneously, the funding for the new contractual arrangements for NHS consultants omitted clinical academics. So I ask the Government whether they are making arrangements to reimburse universities somehow for the estimated additional £20 million of costs that this is going to result in for universities.
These clinical academics are, by and large, the research-active doctors. Academic clinical medicine accounted for 35% of all higher educational institute research grant income in 2022, valued at almost £2.5 billion. When all bioscience-related categories are included, the figure rises to around £4 billion, or about 57% of total research income. However, clinical academics represent a decreasing proportion of the workforce. The proportion aged over 55 doubled from 18% in 2005 to 36% last year, meaning that we have more approaching retirement without the flow of younger academics coming through. Only 4% of consultants are clinical academics, compared to 7% in 2005. These are the people needed to research and teach the next generation of doctors; their contribution to the national economy through money invested in research must not be underestimated. The numbers of clinical academics coming from general practice are tiny, even though they have risen slightly to 0.6% of GPs in the last 10 years.
The work to recruit applicants into healthcare from a broader section of society through widening participation is proving effective. The number of entrants to medical school from the most deprived areas has more than doubled from 6% to 14% in the last 10 years. The proportion of female applicants has certainly increased, up to 63%. Asian applicants increased to 29% and the proportion of black applicants has grown from 6% to 10%.
For those coming from schools in more deprived areas which have no selective intake, it is important to ensure that the entry tariff is appropriately adjusted. University league tables look at the average entry tariff, but those which have adjusted to take students from this broader proportion of the country—that is, deprived areas—risk being relatively downgraded in rankings, yet they are providing the future medical workforce for the most deprived areas in the country. Those responsible for student finance arrangements should consider the impact of the cost of living crisis on medical students, with their slightly longer courses, inability to take on other jobs and difficulty of success in a course that is rigorous and demanding. Will the Government support the recommendation from the Medical Schools Council that organisations publishing university league tables should consider removing average entry tariff from the criteria and include diversity and inclusion? Without diversity and inclusion, we will not begin to redress the imbalance in supply of workforce to these most deprived areas of the country.
The decline in clinical academics risks hampering the sector’s attempt to expand medical school places, as set out in the NHS Long Term Workforce Plan. There is a tension here. Without urgent action to increase the numbers and retain pay parity with NHS colleagues, the commitment set out in the long-term workforce plan will not be met, as we risk losing the vital workforce and the benefits it brings. There is also strong evidence that patients cared for in research and teaching-active institutions can have better clinical outcomes. These are benefits to wider society, not only to the innovative aspects of research in our community.
In 2021, the research excellence framework classified over 90% of clinical medicine research as world leading or internationally recognised. We all recall the Oxford AstraZeneca Covid vaccine, which resulted in 3 billion vaccine doses worldwide. As the House of Lords Science and Technology Committee stated in its recent letter to the Secretary of State,
“we heard concerning evidence that the future of clinical research, and the clinical academic workforce in particular, is under threat”.
Baroness Garden of Frognal (LD)
My Lords, I too thank the noble Baroness, Lady Warwick, for giving us the opportunity to debate this substantial and wide-ranging report from Universities UK and congratulate her on her masterly introduction. Like the noble Baroness, Lady Bottomley, I am humbled by all the insightful contributions we have heard from around the House.
I must explain that there are many people on our Benches with expertise and an interest in this subject, but there is a Liberal Democrat “away day” today and I am the only one who has been released for the whole debate, so I am the only one who can speak. Luckily, my colleague my noble friend Lord Storey, has joined me at this stage.
We all recognise that universities are going through a very tough time at the moment. Student fees have not gone up for years, until the Government proposed an increase this year. The noble Lord, Lord Johnson, set out the implications of this. The noble Baroness, Lady Grey-Thompson, and the noble Lord, Lord Liddle, also spoke about this and pointed out that universities would not get the full amount of the fee increase.
EU students are obviously not coming in such numbers since the folly that was Brexit. International students have been put off by regulations on visas, restrictions on staying post-study and the clampdown on accompanying relatives. Some of the decisions have been made in the face of reasoned arguments and opposition from universities, which, perversely, the previous Government chose to ignore. Like the noble Baroness, Lady Prashar, and others, I add my support to taking students and their dependants out of immigration figures. They are temporary and will return home at the end of their stay. The noble Lord, Lord Willetts, raised the issue of visa problems deterring international students. Surely, this is something we ought to be able to sort out. I gather that the noble Lord, Lord Waldegrave, is to be congratulated for bringing in fees for international students.
As the report makes clear, the country certainly needs more young people to progress to tertiary education. We would also argue that the acute shortage of skills means that many young people should be encouraged into apprenticeships and further education. Along with the right reverend Prelates the Bishops of Gloucester and Sheffield, the noble Baroness, Lady Blackstone, and others, we support the report’s proposal that universities and further education colleges should work together to allow talented youngsters, whether academically minded or not, to follow their ambitions and abilities and foster their skills through tertiary education. What plans do the Government have to ensure that further education is properly funded and its teachers appropriately remunerated? Their low pay is shockingly disproportionate to their achievement. How will the Government incentivise greater collaboration between universities and colleges? Of course, we heard a heartened plea for the pay of university staff as well.
In universities, researchers are often more highly prized than teachers. The noble Lord, Lord Krebs, set out the vital importance of research both for the status of the university and in economic terms. The noble Lord, Lord Patel, also raised research, as did the noble Baroness, Lady Young. The noble Baroness, Lady Finlay, has just spoken of the importance of medical teaching and research; it is obviously a vital part of our universities. Yet it is the teachers who encourage and foster learning in the next generation.
Could the teaching grant be restored, for instance? If the national tutoring programme was extended to fund university students to tutor disadvantaged pupils at school, this could not only benefit schoolchildren by seeing teachers nearer their age, but it might encourage more students to teach. The national teacher shortage in schools is reaching critical point in some areas and subjects. Without schoolteachers, students will not be able to progress to tertiary education. What plans do the Government have to recruit and retain teachers in schools, colleges and universities?
Universities have a key role to play as agents of change, but they need assured funding. The recent controversy over some vice-chancellors’ pay has not been helpful; they bear huge responsibilities and need good pay packages. Obviously, cutting the pay of one person will not help universities balance the books, but it would perhaps be encouraging if some might consider taking less as an example to others.
We also know that part-time study is growing. As ever, we applaud the work of the Open University and Birkbeck, which both do so much to support and encourage students. Will the Government consider introducing credit-based fee caps to facilitate growing demand for accelerated part-time study? Will they extend eligibility for maintenance support to all part-time students, including distance learners? Such encouragement would reap dividends. Student hardship has been named a number of times and it is a real problem. The reinstatement of maintenance grants should be seriously considered. The Liberal Democrats have long supported grants rather than loans, on the basis that adults in particular are unlikely to want to incur further debt, whereas a grant may well help them to progress.
The noble Lord, Lord Rees, did not mention—but I will—that Trinity College and Cambridge University have set up a multimillion-pound PhD student programme. Obviously, not many colleges or universities could fund such an enterprising scheme. But both UKRI and the Student Loans Company report a fall in the number of doctoral starters, and Cambridge has thus stepped up to fund more than 25 PhDs. We know that many will become highly successful entrepreneurs and will pay back handsomely the funding they receive. Are there any plans perhaps to replicate this elsewhere? I accept that the funding at other universities will not be as lavish as at Trinity College and Cambridge.
I congratulate the noble Lord, Lord Griffiths, on his medieval English, and I was delighted to hear the noble Lord, Lord Lucas, add his support for this. My Oxford degree was due mainly to my love of medieval French, which has never been of any use to me whatever in later life, but it was fun at the time. I would be sorry if Oxford stopped offering medieval English as well as other medieval languages, because they add something to our national life.
This has been a truly inspiring and an authoritative debate. Universities are applying their efforts and brains to ensure that they continue to thrive, but many are having extreme difficulties with their finances. Good departments, and subjects, are being cut. My own subject, modern languages, is being cut at universities, which is a major mistake because, in this international world, we must be able to speak the languages of other countries. We have been stupid enough to cut ourselves off from the EU, so the very least we can do is learn to speak its languages.
I hope the Government will be able to respond with generosity in their support, even in these straitened times. I look forward to the Minister’s response.
Baroness Barran (Con)
My Lords, I join other noble Lords in congratulating the noble Baroness, Lady Warwick of Undercliffe, on securing this important and excellent debate. I thank all noble Lords for their insightful and varied contributions.
I welcome the blueprint prepared by Universities UK and its distinguished commissioners. The breadth of the report makes it hard to draft a succinct speech, but it underlines the scale, complexity and opportunities that our universities offer. I also welcome the outcomes that the blueprint aspires to: expanding opportunity, improving collaboration across the tertiary sector, generating stronger local growth, securing our future research strength and establishing a global strategy for our universities.
I am grateful to my noble friend Lord Lucas for being the first and possibly only Member to suggest that the report could have been a bit more self-critical. I would have been fascinated to hear more about how technology in general, and AI in particular, will in future shape our degrees, our teaching, our research and the university experience overall—but that is perhaps for another document. I also absolutely agree with my noble friend about transparency on costings and the differential impact from different universities and institutions—that would be really welcome.
This debate comes hot on the heels of that led by the noble Lord, Lord Krebs, recently on the sustainability of the university sector. The blueprint covers the funding picture in detail, in all its aspects. The blueprint argues that there are two phases to achieving the outcomes to which it aspires. The first is about more funding for teaching, student maintenance and research, and the second phase relates to the transformation agenda, which is set out in the document to be led by universities and supported by government. Both are then underpinned by improved regulation and better measurement of impact. I wonder what the Minister thought when she read that and whether she shares my concern that the two phases need to be linked and that the transformation must be in parallel with any additional funding; otherwise, the delicate balance between what is paid for by the taxpayer and what is paid for by the graduate might tip too far towards the taxpayer.
Similarly, what are the Minister’s thoughts about fees increasing in future in line with inflation? As noble Lords have pointed out, the increase in employers’ national insurance contributions has, in effect, wiped out the increase in fees which her right honourable friend the Secretary of State spoke about earlier this month. If fees will increase in line with inflation in future, does the Minister agree that this must be mirrored by an increase in the quality of degrees as it relates to high-skilled employability? As the blueprint itself states, higher earnings are clearly not the only reason to go to university, but they are an important one which should not be dismissed and without which we will not achieve the faster economic growth that we all aspire to.
Does the Minister agree with what the Institute of Fiscal Studies said in an article published in September this year, in which it talked about potential changes to the fiscal rules? It said:
“Another issue is that departments may also face new incentives to design policies that create financial assets (e.g. student loans rather than a graduate tax to finance higher education) purely”—
I emphasise “purely”—
“because of differences in how the accounting treatment affects ease of compliance with a”
public sector net financial liabilities target. How will the Minister ensure that policy in this area, which is so important, is not distorted and other options for reform are not rejected because of this potential conflict of interest?
My noble friend Lady Bottomley talked about room for more radical and innovative approaches. The blueprint rightly raises important questions about cross-subsidisation of different subjects and of research and, indeed, describes this as “not fit for purpose” and “unsustainable”. I would be grateful for the Minister’s thoughts on that.
The blueprint also raises the thorny issue of the affordability of the teacher pension fund for universities. What is the Government’s attitude to giving universities more flexibility in relation to pensions?
The blueprint sets out an ambitious vision for research in our universities, and Universities UK rightly focuses on the importance of R&D and of full cost recovery. I confess that I am concerned at the prospect of having a target for R&D spend as a percentage of GDP and would rather focus strategically on the areas of research that yield the highest social and economic impact. The data in the report clearly shows that full economic cost recovery is highest in the most research-intensive universities, at 74%, compared with below 50% for the less research-intensive ones, although I totally accept the point made by the noble Lord, Lord Krebs, about the absolute size of the shortfall in our largest research institutes. I wrote in my notes that I am to make “jam” points, and then could not remember what I meant, but I think this is about spreading the jam, which he mentioned. I do not know whether there were recovery percentages by subject in the report, but it would be interesting to understand where we should focus for maximum impact and affordability.
In the debate that the noble Lord, Lord Krebs, led recently, there was a discussion about increased specialisation in our universities, and the noble Lord, Lord Rees of Ludlow, raised the subject again today. Does the Minister have more to say about the Government’s view on moving to more specialisation between research and teaching universities, particularly in a world where the giant tech companies have more to spend on research than all our universities combined?
Despite having more time than other noble Lords, as ever my speech is too long. I am going to skip ahead to the section on local growth. I was glad that the noble Baroness, Lady Prashar, highlighted the impact of Royal Holloway, in financial terms and the partnership that it has created. The report highlights the regional disparities that all of us across the House recognise and which so urgently need to be addressed. I remember when I was academies Minister visiting schools in some of the most deprived areas of England, where those children had exactly the same aspirations as their fellows in London and the south-east but a fraction of the opportunities. On the moral purpose, it is an area where universities do, and can do more to, make a huge contribution. I am really grateful to universities with active outreach programmes in those areas of the country for the work that they do.
Finally, in wrapping up, I echo the questions to the Minister from other noble Lords about the Horizon programme and what work the Government are doing to engage and shape its framework. On regulation, we were delighted and slightly horrified—delighted by the calls to streamline regulation but horrified by the diagram on page 107 of the report showing the extent of regulation in the sector. We remain concerned about the delays in the implementation of the freedom of speech Act.
As ever, it has been a privilege to listen to the points made. I look forward to the Minister’s remarks.
The Minister of State, Department for Education (Baroness Smith of Malvern) (Lab)
My Lords, like others, I am very grateful to the noble Baroness, Lady Warwick, for raising this debate and introducing it in such an interesting and broad-ranging way. As noble Lords have said, as always with debates on the subject of higher education in the House of Lords, this has been a high-quality debate—not least when there are contributions from both those who have first-hand knowledge of higher education and those who have previously been university Ministers. I must make a confession at this point that, as a student, I probably protested against at least one of them—and I may well have been wrong.
In considering the Universities UK blueprint, I put it on record that Universities UK plays a crucial role in the higher education ecosystem and is an extremely well-regarded government stakeholder. As the collective voice of our universities, UUK advocates for the interests of higher education providers, offering invaluable insights into the concerns of the sector.
We welcome the report. Taken as a whole, it is an important contribution to the wider and crucial debate that we will of course consider carefully in our policy development, which I shall touch on later. It will help to ensure that our higher education sector, as all noble Lords have argued for today, remains resilient and continues to drive innovation and inclusivity. I reassure my noble friend Lord Griffiths that the Government remain committed to the most famous principle of the Robbins report on higher education,
“that courses of higher education should be available for all those who are qualified by ability and attainment to pursue them and who wish to do so”.
As others have said, our higher education system is not set in aspic. It is important—as is reflected in this report, and something I wholeheartedly agree with—to evolve our higher education into a lifelong journey, accessible to a larger and more diverse cohort than ever before. That transformation will ensure that the UK’s higher education providers remain world-leading and continue to play a key role in meeting the UK’s current and future skills needs. So many of our businesses and so much of our economy are dependent on skills gained in higher education degree courses.
I agree with the noble Lord, Lord Willetts, that universities provide academic, vocational and technical courses, and I will place in the Library the answer to the question he outlined. As the noble Lord, Lord Lucas, also identified, some courses enable us to combine different elements of learning, which is enormously helpful for us in balancing our lives.
The Budget set out the major challenges facing our public finances and public services and the tough decisions the Government are taking to fix the foundations and deliver change, some of which I know will affect higher education providers. As the noble Lord, Lord Johnson, pointed out, the teaching income per UK student that higher education institutions receive has declined in real terms since 2015-16 and is now approaching its lowest level since 1997. That is the reason why the Office for Students reports a growing number of higher education providers facing significant financial difficulty, with 40% forecasting deficits in 2023-24. As many noble Lords have argued, we need to put our world-leading higher education sector on a secure footing. In line with this, from 1 August 2025 we will be increasing both the maximum cap for tuition fees and maintenance loans for students, in line with forecast inflation.
The noble Lord, Lord Willetts, calls on me—as did my noble friend Lord Blunkett earlier this week—to engage the services of Martin Lewis in order to make sure that the explanation of the impact of that on students is clear: that there will be no upfront payment and no increase in monthly repayments. We will certainly take on board the need to continue to communicate that to students. I also recognise the case made by my noble friend Lady Young, the noble Baroness, Lady Grey-Thompson, and the right reverend Prelate the Bishop of Sheffield regarding the hardship experienced by students who have been impacted by the cost of living. This is reason for our increasing the maintenance loan as well, but I take the point that, in our further reform, we need to consider how to support students. I particularly hear the point about how we can ensure that this system is progressive.
Additional funding for higher education, which is of course an increased investment that we are asking students to make, has to be coupled with reform. I share the view of the noble Baroness, Lady Barran, that those things need to run concurrently. That is why, in the reform programme that we are engaging in, we will expect higher education providers to play a stronger role in expanding access and improving outcomes for disadvantaged students; to make a stronger contribution to economic growth; to play a greater civic role in their communities; to raise the bar further on teaching standards; and to drive a sustained efficiency and reform programme. I know that there is much good practice already under way, and this Government are also committed to respecting the autonomy and diversity of the sector. I note and agree with the points made by the noble Lord, Lord Rees, about the benefit of that diversity; it is a great strength of our world-leading system. This agenda will need a real change of approach, from both the Government and the sector itself. We will set out the Government’s plan for higher education reform by next summer to ensure that the system delivers against these priorities. I can reassure my noble friend Lord Liddle that there will be more thought and more reform.
Several noble Lords raised the issue of regulation. As noble Lords are I hope aware, the Government moved fast to deal with the focus and leadership of the Office for Students. Within weeks of entering office, we accepted in full the recommendations of Sir David Behan’s report on the Office for Students and appointed him as interim chair to begin the work of change that the OfS needs. He will oversee the important work of refocusing the role of the OfS to concentrate on key priorities, including the higher education sector’s financial stability.
While the OfS has statutory duties in relation to the financial stability of higher education providers, the Government also have a clear interest in understanding the level of risk across the sector. That is why my department works closely with the Office for Students, and other relevant parties, to understand the ongoing impacts and changing landscape of financial sustainability. The department will come forward with proposals, as raised by the noble Lord, Lord Willetts, about the potential intervention that might be necessary in the case of real financial crisis for a higher education provider, although we have been clear that our focus will be on protecting the interests of students in those cases.
In the case of freedom of speech, I assure noble Lords that while we have paused the implementation of the Act, we are looking seriously at how we can respond to the challenge of ensuring academic freedom and freedom of speech. We will come forward with proposals soon.
I share the views of those noble Lords who have argued that we need greater transparency, transformation and efficiency within the sector. The most recent report from the OfS on the financial health of the sector makes it clear that the business models of a significant number of providers will need to change in the near future to ensure that they remain financially sustainable. That is why we welcome the commitment that Universities UK has made to establishing a cross-sector transformation and efficiency task force by the end of the year, to seek savings through greater collaboration. I am pleased to see the focus on sector evaluation, shared services and structural opportunities, and look forward to the task force reporting. However, I share the views of the noble Baroness, Lady Barran, and the noble Lord, Lord Lucas, that it should include greater transparency and comparability of the finances of higher education.
Noble Lords have rightly raised the issue of access and participation. The House will note that this is the first area of the Government’s reform programme. My noble friends Lady Blackstone and Lord Griffiths identified the challenge of ensuring that all those who can benefit from higher education are able to. Sadly, the gap in outcomes between disadvantaged students and others from higher education is unacceptably large and widening, with participation from disadvantaged students in decline for the first time in two decades. To support not just disadvantaged learners, but all learners, we need to do more to create a culture of lifelong learning and help everybody to access higher education.
We will expect the sector to work closely with the Government and the Office for Students to tackle these issues, making sure that it is delivering strong and ambitious access and participation plans, and implementing the lifelong learning entitlement to the fullest degree. I reassure the right reverend Prelate the Bishop of Sheffield that we will bring forward the lifelong learning entitlement. In response to the noble Baroness, Lady Garden, I say that this will bring with it some improvement to maintenance for some of the areas that she identified. Of course, that will ensure that both young people and adults, as my noble friend Lady Blackstone argued for, can upskill and reskill in an ever-evolving economy and get the benefit of a lifelong education.
This will also require different forms of delivery. The noble Lord, Lord Rees, argued for this; he is right that we should look at this to enable more students to benefit. The noble Baroness, Lady Grey-Thompson, identified in talking about the Open University some of the really imaginative ways in which it delivers access. We need to learn from that as we take forward the work on access and participation. As the noble Baroness, Lady Bottomley, said, in this area we must be radical and not defensive.
I heard the points of the noble Baroness, Lady Finlay, about the efforts being made by medical schools to increase attainment. I will reflect on the points that she made about the accountability measures and how they might act against broadening access.
We recognise that, for some young people, an apprenticeship is the most appropriate route, and the Government are taking action on that. We also recognise that degree apprenticeships support employers to develop high-level skills and provide valuable opportunities for those who would not otherwise go to university and begin a career that requires a degree. We will work with Skills England to ensure that the level 6 degree apprenticeships are part of the growth and skills levy-funded training offer and continue to offer good value for money while supporting our missions for growth and opportunity.
On the issue of quality, while we can rightly argue that UK higher education is world leading, an engine of growth, supports local communities and breaks down barriers to opportunity, we also need to ensure that this is not compromised by low-quality provision. We want to see higher education providers aspiring to improve the quality of the education that they deliver, far beyond minimum expectations. The noble Lord, Lord Lucas, is right: students make a considerable investment in higher education, and they deserve the highest quality teaching to support them in progressing and achieving to the best of their potential. They also deserve to know what to expect when making this investment, and providers should be clear and transparent about, for example, the number and nature of contact hours that students will have.
Several noble Lords rightly talked about the significance of research for both our higher education sector and our country. The noble Lord, Lord Krebs, raised several questions, as did the noble Lord, Lord Patel, and my noble friend Lady Young. It is of course significant that total government investment in R&D is rising to a record allocation of £20.4 billion in 2025-26. As part of this, core research funding is rising to at least £6.1 billion to offer real-terms protection to the UK’s world-leading research base. That increase will support UKRI to deliver on the UK’s key research priorities. In addition, at least £25 million will be invested in 2025-26 to launch a new multi-year research and development missions programme. This will solve targeted problems and will help to crowd in private and third-sector investment to accelerate delivery of each mission.
The Government have maintained long-term institutional funding for university research and knowledge exchange through quality-related research funding and higher education innovation funding. It will be provided on a recurring basis in order to allow universities to plan over a longer time horizon and smooth out funding fluctuations. Nevertheless, the Government are determined to work with sector to transition to sustainable research funding models. Having said that, as with other areas of work, 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.
I noted the point made by the noble Lord, Lord Patel, about doctoral students; perhaps I can come back to him on that. Several noble Lords rightly talked about the civic contribution of higher education providers; they are important not only for learners but for local economies and local communities. There is an array of public benefits to providers engaging with businesses, policymakers and civil society in their local areas, as made clear by the noble Baroness, Lady Prashar, the right reverend Prelate the Bishop of Gloucester, in talking about the University of Gloucester, and the noble Baroness, Lady Grey-Thompson, in talking about the work in Northumbria. This is enormously important work, and we want to promote it as another element of our reform. There are parts of the country where the full civic contribution of providers and their potential to benefit local communities has not yet been unlocked.
We want higher education providers to be civic anchors in our communities and the beating heart of local life in our towns and cities, not ivory towers far removed from local concerns. It is right that they have a role to play in regional and national growth, and we want to work with the higher education sector to maximise that.
I strongly support the comments made about the collaborations between higher and further education. That can be instrumental in improving access for disadvantaged groups to levels 4 and 5, as well as to degrees, and to ensuring that there are clear pathways from further education to higher education. Greater collaboration through local skills systems is also crucial for supporting regional growth and local communities, recognising the different and distinctive roles that different types of providers play regionally and nationally.
We want to ensure that all parts of the country enjoy the benefits of higher and further education collaborations. This will be a key part of our post-16 strategy, where we are exploring how government can foster and encourage stronger relationships and collaboration between higher and further education providers. As part of that, we will make further announcements about how we will allocate the £300 million additional funding that we received for further education in the Budget.
On the issue of international students, I want to make clear the Government’s position. We recognise the vital contribution that international students make; we are committed to a United Kingdom that is outward-looking and welcomes international students. We are conducting a review of our international education strategy to ensure that it continues to reflect the priorities of this Government, including on international students. To the point made by the noble Lord, Lord Willetts, this will be done alongside the Department for Business and Trade and the Foreign, Commonwealth and Development Office.
I will certainly undertake to raise the issue of the speed of visas with my former colleagues in the Home Office. On the point about students within the statistics, it is the independent Office for National Statistics that is responsible for that.
In conclusion, the discussions today have underscored the pivotal role that higher education plays in shaping our nation’s future. We have demonstrated our commitment to sorting the most immediate financial challenges for the sector, but we expect that to be associated with and done alongside a significant programme of reform. We are committed to working collaboratively with Universities UK on that, and its blueprint will help us in this very important task.
Baroness Warwick of Undercliffe (Lab)
My Lords, I thank the Minister for her constructive, positive and comprehensive response to the debate and for her commitment to work with the sector and to resolve the dangerous financial instability of universities. I am delighted that she will engage with the sector on that.
At this stage, I will not attempt to cover the very wide range of contributions. I think that everybody acknowledged the expertise around the House and the amazing number of ideas that have come out of the debate. All I will add is that the blueprint from Universities UK has provided an invaluable catalyst for a degree of consensus across the House on the issues which were powerfully raised in the report and which universities will need to take seriously when they look both at this debate and at their continuing dialogue with the Government and other stakeholders about the way forward. This is the start of a process, as Universities UK clearly says, and there were so many valuable suggestions, recommendations and, to some extent, remonstrations for the sector, which all need to be taken very seriously.
I thank all noble Lords for making such wonderful contributions to the debate. I am absolutely delighted that so many people right across the House were prepared to make a contribution on a Thursday afternoon, going on until almost 6 pm.