Universities

Thursday 14th November 2024 Lords Chamber

Motion to Take Note

15:14

Moved by

[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.

15:28

[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.

15:34

[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?

15:40

[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.

15:44

[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.

15:49

[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.

15:55

[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.

16:01

[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?

16:07

[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.

16:13

[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.

16:19

[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”.

16:26

[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?

16:32

[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.

16:36

[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?

16:42

[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.

16:50

[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.

16:56

[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.

17:03

[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”.

17:09

[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.

17:16

[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.

17:26

[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.

17:47

[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.

Motion agreed.

House adjourned at 5.49 pm.