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Baroness Deech
That this House takes note of the future affordability and quality of higher education.
Baroness Deech (CB)
My Lords, I declare an interest as a former Independent Adjudicator for Higher Education and principal of St Anne’s. Let me say at the outset that our universities are a brilliant global asset and, in order to carry out the innovation and research that they do, they must be free to be elite and not be held back by manipulative regulation or excessive preferential diversity targets. In my maiden speech 20 years ago, I pointed out that it was taken as axiomatic that students see themselves as consumers, with rights and outcomes, mainly that higher education is mostly about higher earning power over a lifetime. I begged to differ.
I understand this quantifier now, because the burden of loan repayments is so heavy, but it remains true that HE is not simply about equipping students with skills for employment. It involves unmeasurable assets which add up to a public benefit: induction into citizenship, leadership and employment, instilling ambition and motivation, the ability to savour work and leisure, independence of thought, intelligence and intelligibility, having a stake in the future and control over one’s destiny, and an informed interest in politics. The difficulty in gaining employment is not a weakness of HE; it is the result of this Government’s own policies and the expectations of arguably too many graduates.
Studies show, none the less, that only 8% of graduates regret going to university, and far fewer of them are out of work than in the non-university population. The quantity of a graduate salary should not be taken as a marker of success. Counting success by salary level undervalues the public good of teaching, nursing, social work and the arts—traditionally not so well paid. I profoundly disagree with the ranking of subjects according to how much graduates will earn, with creative arts at the bottom of the table. Is it seriously considered that creative arts, one of the glories of our culture, are to be axed because students will, and they know it, be precarious wage earners?
In sum, the sector faces a significant funding and quality crisis. Without sustainable funding and the maintenance of the standards which have put Britain at the top of the international league, there will be closures, further reliance on international students, who may well find that what they came here for no longer exists, a revolt against fee paying and loans, and lower research input and success.
The Government’s 2025 White Paper, Post-16 Education and Skills, categorises courses rather than institutions. Noble Lords should also read the Policy Exchange report, Tarnished Towers. I propose fewer universities, with a type of return to the former division of universities and polytechnics, and a fee differential. As an aim, I suggest that outstanding quality and differential are to be valued, in contrast to the universality of admission and outcome grades that we have at the moment.
There are some lessons to be learned from Europe. There, lower-ranked universities supply teaching and training and make contracts with local industries. Nearly all have far fewer luxury facilities and buildings than British universities. The pay of staff and leaders in Europe is about one-third that of their UK counterparts and ranks with civil service pay. I urge emulation of the ratio of European university leaders’ salaries, where they earn no more than three or four times what ordinary lecturers get, whereas here it is 13 or 14 times more, a ratio that destroys loyalty and replaces it with distance.
In Europe, grants are more often for living costs than tuition. This is excellent because, as the Sutton Trust has shown, social mobility is achieved here by students leaving home to mix with others who have the same ambitions and where the course is the best in their subject, rather than having to stay at home and going to the local university. The White Paper is right to reintroduce maintenance.
Our great quality is under threat. This is due to the low admissions requirements, the inflated degree results and the lack of data about or requirement of student input. The proportion of Firsts, which is 30%, and 2.1s awarded by each institution should be capped. The National Student Survey asks detailed questions about the education provided to the students and their opinion of it. It asks nothing about how much work they do and whether they have done it as required and on time; in other words, they are treated as passive consumers. The OfS is right to consider the credibility of the inflation of Firsts and Seconds, which does nothing to help employment prospects and contributes to the number of students complaining to the authorities that they have not received the grade they thought they were buying or that they should have received, if their disabilities were taken into account.
The figures about entrants’ lack of qualifications are shocking. Some 8% of UK undergraduates starting in 2024 had no formal qualifications and 75,000 students did not have a single A-level. This lack is concentrated in certain universities, which, I suggest, are ripe for transition to distance learning and skills provision. Ravensbourne, Bath Spa and Leeds Trinity took in more than 60% of students without qualifications. I recommend national entry qualifications; I leave aside mature students. There is a decline in standards of admission and assessment for both undergraduate and master’s degrees in response to many universities’ dependence on foreign student fees and pressure to widen access and close performance gaps in favour of students from disadvantaged backgrounds.
Some universities should transition to being different, low-cost digital institutions, making use of AI learning or merging with further education institutions. This may make room for higher grants for higher-quality institutions. Places should be gradually reduced, student loans tailored, and foundation years and access schemes reviewed for their worth. The OfS has the power to downgrade—although I would not call it that—an institution, or the institution can change itself into a different one.
As the White Paper acknowledges, international students are as much a problem as a benefit. I have no doubt that international students who come here for graduate work are not a problem: they have already proved themselves and are likely to be funded by external sources and collaborating with established colleagues here. So I welcome the Government’s global talent fund. However, universities are far too dependent on international undergraduate student fees. If China, for example, were to reverse its policies—or, as is already happening, the Chinese student-age population reduces and China’s own universities are doing so well that they might even attract non-Chinese students—the financial consequences here would be clear.
It is time for our universities somehow to wean themselves off that reliance, not only for the reasons I have given but because of the integration problems. I know from my time dealing with complaints that some foreign students felt that they were cash cows. They were not given orientation, they clustered together, their English was not good enough, and they had visa and funding problems, and so it was difficult to integrate them into academic work for those reasons. International students have long been overrepresented as complainants to the Office of the Independent Adjudicator. It is also possible that the entry regulations are being abused by those who seek to remain here rather than study in the short term.
I agree with the Policy Exchange recommendation that there should be a cap of 30% foreign undergrad students at each institution. We have universities in the top 35 of the world league tables, and the European Union has none. It is also the case that this top quality brings many more foreign students here than British ones going abroad, where, in my experience, they were disappointed by the lack of pastoral care and face-to-face contact with lecturers. So I am wary about giving any loans to international students as the record of repayment is very bad. They should, of course, pay full fees. Now that Erasmus is being restored, the cost to our Government will increase, because it has always been the case that three times as many overseas students came here as ours who went abroad. The Government have proposed an international student levy, which seems a good idea. However, there are complex issues, given that the number is likely to reduce in any case, while the attractiveness of the UK will remain.
The loans system is a real blot on the landscape. The average student debt is over £47,000. Most graduates will never repay it in full—and if they do, it can take 31 years. Those fees are insufficient in any case. The balance is £492 billion, and less than one-third are likely to repay. The issue is the high levels of unemployment undermining the repayment aim. The scheme is complex and not at all understood by the teenagers who sign up to it without full knowledge or understanding. Unbelievably, they may end up paying more than they borrowed, over decades, with shifting rules. The interest rate is excessive. It pushes graduates into very high tax rates, and it is a regressive system. They see it as a tax on ambition. The way out for women is to get married right after university and not work.
I predict that the outstanding debts will have to be written off sooner or later. After weighing it all up, I have concluded that the way forward is indeed a graduate tax for several decades. It is relatively simpler and easier to understand, avoids huge debts and can be progressive. Still, we should await the report of the Treasury Committee inquiry into the scheme.
I cannot leave this topic without looking into freedom of speech, which lies, or should lie, at the heart of higher education. There was a fight for centuries over freedom of speech in all arenas—freedom from religious domination. Just as it seems to have been won, there have re-entered a new religious repression, gender issues and racism. Because of the misuse of human rights and loss of liberal leadership, respect for divergence, curiosity, courage and tolerance is vanishing. This is a serious rot at the heart of the system. Universities have failed to uphold free speech and have tolerated extremism and antisemitism—which I have spoken about many times here—as if they are frightened of their students’ excesses. The OfS must take this on if the vice-chancellors will not.
The Government have finally implemented the complaints process for freedom of speech complaints, as mandated in the Higher Education (Freedom of Speech) Act 2023 so long ago. The jurisdiction is rather awkwardly split between the OfS and the Office of the Independent Adjudicator. The latter can deal only with students, and then only after the university’s internal procedures have been exhausted. The OIA would look to see whether the university’s procedures have been followed, not at the substantive issue of whether freedom of speech was actually threatened and whether it was permissible. The Office for Students, on the other hand, will deal with academics, staff, external speakers and student unions, and has more substantive enforcement powers.
The danger with both is that they may be too slow. After all, if a free speech issue manifests itself in May, the students and others will be long gone by the time there is a decision, and the costs will be high. There is no mechanism for immediate injunctive relief so, unless university authorities show muscle, we can expect more of the crowd and intimidation tactics that stop a speaker in his or her tracks.
It is time for an overhaul, with fewer, more diversified universities, more skills and technical ones, and a lifelong learning entitlement, and of quality of admission and grades, with caps on numbers, with the courage to deliver quality and free speech and to tell the world about the public good that our excellent system delivers. Will the Minister push for fewer, recategorised universities; capping Firsts and Seconds; the National Student Survey asking students how much work they have done; a national entry qualification; and a cap, even on undergraduates? Will she reconsider a graduate tax to keep our system at the front of the world, as it has been for so long?
Baroness Warwick of Undercliffe (Lab)
My Lords, I am grateful to the noble Baroness for giving us the opportunity to reflect on the future affordability and quality of higher education in this country. Her interest in HE is of long standing, and I recall her very effective role as inaugural chair of the Office of the Independent Adjudicator for Higher Education.
I will not attempt to address some of the issues that the noble Baroness has raised, but I will address others. This House is well aware that there are real pressures on students, graduates and our universities. Funding has been eroded in real terms, costs have risen, and institutions are being asked to do more for more students with fewer resources.
However, let us be equally clear: this is not a system in decline; it is a system under strain, but one that remains one of the country’s greatest national assets. Our universities are engines of growth. They sit at the heart of the Government’s ambitions for productivity, innovation and regional development. From digital arts in Dundee to naval defence in Plymouth, from graphene in Manchester to advanced manufacturing in Sheffield, and from compound semiconductors in south Wales and the extraordinary film and television industry in Belfast, our universities create opportunity.
In all parts of the UK, universities are doing much more than educating the next generation workforce. They are at the heart of industry clusters; they drive inward investment in towns and cities all over the country; they generate jobs; they spin out companies; and they work with public sector organisations in deep partnerships. Our universities have faults and there are real problems, to which I shall return, but they should not dominate our understanding of a sector which remains, in my view, one of the best reasons to be optimistic about the future of our country. That is why it is so important that this House pays attention to the challenges and is honest about the problems. We must encourage government and the universities themselves towards renewal in the national interest.
I have been pleased to see that Universities UK recognises this need. Following on from the work of its blueprint, published two year ago, Universities UK has now embarked on a programme of work that it is calling “future universities”. It is asking how the university system needs to change and adapt to deliver what the nation needs in the next decades. As a former chief executive of Universities UK, I am pleased to say that it is not afraid of criticism but is thinking hard about how the system can respond to it.
The sector has certainly widened opportunity. Over recent years, more students from disadvantaged backgrounds have entered higher education than ever before. Sutton Trust research shows that
“around two-thirds of upward mobility among people from non-graduate families is accounted for by higher education”.
The Government are right to want to continue to expand and widen participation, because access remains unequal. Higher education transforms lives. We see it in institutions such as Teesside University, which is supporting students from non-traditional backgrounds into high-skilled employment. We see it in the work done by the Open University, whose data shows that higher education study reduces prisoner reoffending by 22%.
Value, as the noble Baroness, Lady Deech, said, is not just about earnings. We know that graduates are more likely to be in work and less likely to be unemployed. On average, they enjoy better health, and graduate parents have a positive impact on the educational outcomes of their children. A newly qualified nurse from the University of Birmingham, a teacher from the University of Cumbria and a social worker from Cardiff University may not enjoy high salaries, but surely we value them. These are the professions on which our public services depend, and they are sustained by our universities and students who choose careers that allow them to contribute to society in a variety of ways.
The Office for Students has an important job to do in safeguarding the reputation of this country for high quality. The sector should be, and is being, held to account. There is very little understanding of the processes that universities use to uphold quality, from the way they design and validate programmes to the sector-wide structures that ensure consistency. They are not understood and may not be fit for the age we live in. The Quality Assurance Agency for Higher Education, once a globally recognised mark of the trust that you can place in our universities, now has a marginal role in England, although things are different in Scotland and Wales.
No one, not even the most ardent supporter of university expansion, would argue that there should not be high-quality alternatives to university education, but improving one should not come at the expense of the other. I strongly believe that those who believe that we have gone too far in the expansion of universities are wrong. We cannot win in a global economic competition by decreasing our ambition and aspiration.
High-quality provision depends on a sustainable financial system, and here we come to the central challenge. The real value of domestic tuition fees has declined sharply over the past decade. Scottish universities received about £2,000 less per student than those in England. The gap between the cost of teaching a vet and the money an English university receives to provide an education is about £10,000 per student per year. The Westminster Government are about to hand another cut to English universities through cuts to the strategic priorities grant. Despite having made the commitment to ongoing increases in the undergraduate fee, which is a good and brave move, the financial position of the sector is getting worse due to tighter immigration requirements and decisions such as the introduction of the international levy. Institutions have responded with innovation and efficiency, but there are limits. We cannot continue to expect world-class teaching, research and student support on a diminishing resource basis.
Finally, we have to resist false choices. This is not a question of universities or skills, or of academic or technical education; we need both. Without underestimating the need for change and the improvements that need to be made, let us be confident in what we have: a system that is of high quality, is globally respected, changes lives and drives growth. At a time of global competition and economic uncertainty, to weaken our universities would not simply be short-sighted; it would be an act of profound self-harm.
Lord Willetts (Con)
My Lords, I congratulate the noble Baroness, Lady Deech, on calling the debate. I declare my interest as a visiting professor at King’s College London and as a director of Thames Holdings. It would be in the spirit of an education debate to have some set texts. I have two set texts, although I am afraid that they are rather heavily oriented to economics. I should therefore apologise straightaway to the noble Baroness, because she made some very important points.
I am thinking of the Policy Exchange paper for which the noble Baroness wrote the foreword, as well as the very recent report from the Institute for Fiscal Studies on graduate earnings. It is worth focusing on these two documents, because they have very different accounts of what is going on. In the words of the Policy Exchange paper,
“the graduate … premium has plummeted”.
Those are its words and that is a widespread narrative in the media.
The IFS finds no such effect. In its words,
“average net returns … are large”—
and by “large” it means really large. After discounting lifetime earnings at a rate of inflation plus 3%--which is a very high rate that people object to when it is applied to student loans, but the IFS applies it to earnings—you find it is £290,000 extra earnings for a woman and £370,000 of extra earnings for a man over their lives. After you then allow for tax and loan repayments and make some rather heroic calculations about the counterfactual—what someone like that would have achieved by earnings had they not gone to university—even after all those deductions and the very high discount rate, you get a £90,000 gain for women and a £109,000 gain for men. The Government gain too. They are a net beneficiary through the repayments of loans and through the higher taxes paid by people with higher earnings, of £48,000 for women and £107,000 for men.
Unless there is to be a challenge on a comparable methodology—I have to say that the Policy Exchange methodology is not comparable; it takes the national living wage at an hourly rate, multiplies it by 40 in 2026 and compares it with graduate earnings in 2022, including part-time earnings—I think we have to take the IFS assessment as the authoritative assessment unless there is overwhelming evidence to the contrary.
This matters for the policy debate. The noble Baroness, Lady Deech, expressed concern about people with lower qualifications going to university. The IFS has looked at the outcomes for the 30% of students with the lowest prior attainment, and 85% of women and 60% of men are better off as a result of going to university. The evidence, not just in Britain but in other advanced western countries, is that if you take the marginal students—the people who just got in and who have particularly low attainments—and compare them with people just like them who did not go to university, you find a significant benefit from going into university.
However, behind this—behind these averages—on the IFS figures, after all the allowances, there are indeed 20% of men and 30% of women who are worse off, and they are concentrated in the performing arts and languages. That is why I, as the Minister, personally fought long and hard to make this evidence available and to get HMRC to agree that it would make its evidence available so it could be linked with educational data and these calculations would be possible.
However, I occasionally feel like the sorcerer’s apprentice at what has been unleashed, because the noble Baroness is right. This is useful information, it is the kind of information that prospective students should have, and indeed, the IFS research shows it is having an effect: a decline in participation in some of those courses, and an increase in participation in, say, STEM courses, which do better on these earnings measures. But that is supposed to be a useful tool; it should not be the be-all and end-all of the debate about higher education, because then the higher education debate looks appallingly different from at all other stages. On schools, we talk about teaching quality. The only thing we seem to be able to talk about and regard as a measure of quality is earnings, whereas the noble Baroness is right: there is more to higher education than that.
Nevertheless, it is the case that both the Government and the Opposition want to use this evidence to decide which departments, courses and universities they should close. So, they owe us an account of exactly how they are going to use this data, how they are going to interpret it, and what decisions are going to be taken.
For a start, the Government have said that they want fewer people to go on these courses and more to go on apprenticeships. As a minimum, analysis along the lines of that from the IFS should surely also be applied to apprenticeships. We need to compare like with like and, although there are some useful assessments of apprenticeships, they do not have anything like the rigour of this IFS analysis. Will the Minister commit today to apply this analysis to other forms of education and training as well?
Can we also know exactly how granular the information is? The IFS material is not the basis for deciding on an individual course at an individual university. Is that to happen and, if so, on the basis of what information? How up to date will that information be? There is a real dilemma here: the evidence in the IFS assessment is for people who did their GCSEs in the year 2002; is that to be the basis of a decision? If the students are more recent, how can we effectively forecast their lifelong earnings? There are important questions here and I very much look forward to the Minister’s reply, when I hope she addresses them.
The Lord Bishop of Leicester
My Lords, I too am grateful to the noble Baroness, Lady Deech, for initiating this debate. It is good to have the opportunity to contribute to thinking about the future affordability and quality of higher education. I do so as the Bishop of Leicester, but also with a close interest in the Cathedrals Group of Universities—14 universities whose distinctive history and mission speak directly to the themes before us: public service, social inclusion and the flourishing of local communities.
At its best, higher education is not simply an individual good but a common good. It forms professionals, nurtures civic responsibility and strengthens the social fabric of our nation. Many institutions across our system, including those in the cathedrals group, exemplify this tradition, with roots in civic purpose and long-standing commitment to education as a vehicle for service inclusion and human flourishing.
Historically, a number of these institutions were founded to train teachers for communities experiencing deprivation. That purpose continues to shape their work today: they now educate not only teachers but nurses, social workers, physiotherapists and paramedics—often in close partnership with schools, multi-academy trusts and health bodies. In my own diocese of Leicester, we see clearly how vital this local and regional role is. Our universities—that of Leicester, De Montford and Loughborough—are deeply embedded in place. They help to sustain public services, provide pathways for local people and act as anchors of opportunity within diverse communities.
This brings me to the importance of widening participation. This is not simply about entry into higher education but about ensuring success beyond it. It therefore requires sustained engagement, starting in schools, continuing through further education and extending into higher education and beyond. In many parts of the country, including areas of Leicester and beyond, the challenge is not only individual disadvantage but structural fragmentation. Too often, the system can feel disjointed, with schools, FE colleges and universities operating under different pressures, incentives and expectations. If we are serious about both quality and affordability, we must also be serious about coherence.
I argue that we need a more joined-up approach across the whole education sector, one that recognises the vital role of further education alongside higher education and the importance of strong, sustained partnerships with schools. A flourishing system is one in which learners can move with confidence along clear and supported pathways, whether academic, technical or vocational. Higher education institutions have a key role to play in this, but they cannot do it alone, particularly in the face of growing financial pressures.
Among these pressures are externally determined and potentially volatile costs, which continue to constrain universities’ ability to sustain the very activities we value most. One example is the increasing costs of pensions across the sector. The teachers’ pension scheme, in particular, has placed significant strain on university finances in recent years, with employer contributions at high levels. While a reduction is anticipated in 2027, this will not resolve the underlying challenge. The point is not to weaken pensions but to ensure that institutions have sufficient flexibility to manage these costs without undermining their broader mission. Without that flexibility, rising costs inevitably place pressure on staffing, investment and the range and quality of provision offered to students.
There is a moral dimension within all of this. If universities are less able to invest in partnerships with schools and further education, or to sustain provision in key professional areas such as supporting social good, the consequences will be felt not only in higher education but across our schools, our health service and our communities. If we fail to build a more coherent system linking schools—both FE and HE—into one flourishing system, then we risk leaving too many learners without clear and supported routes to flourishing.
I therefore urge the Government to take a broad and integrated view of higher education sustainability. Yes, we must consider funding levels and student experience. Yes, we must safeguard equality. But we must also address the structural pressures that sit beneath these debates, and we must strengthen the relationships across the whole education system. Universities know that they need to adapt and continually iterate their offer for a changing world. In order for this to be possible, greater flexibility for institutions and a stronger emphasis on partnership will be essential.
The universities of the Cathedrals Group remind us that higher education is not only an economic endeavour—
The Deputy Speaker (Baroness Finlay of Llandaff) (CB)
My Lords, we are resuming at 3.35 pm. That means that the debate was adjourned for 34 minutes. We will add injury time to the end time, so the new end time is 6.01 pm. The right reverend Prelate the Bishop of Leicester has some time left. We will resume with his speech and then proceed with the speeches in order.
The Lord Bishop of Leicester
I thank the noble Baroness very much. I am not used to having quite such a dramatic effect when I speak—I did not realise that what I was saying was quite so inflammatory.
I will be brief. The universities of the Cathedrals Group remind us that higher education is not only an economic endeavour but a moral and social one. It is about the formation of people, the strengthening of communities and the pursuit of the common good. If we are serious about that vision then we must ensure that the structures surrounding our institutions—financial, organisational and relational—enable them to fulfil that purpose.
Lord Patel (CB)
My Lords, if the right reverend Prelate the Bishop of Leicester’s speech was inflammatory, mine is burned—so I am starting afresh, ad-libbing. I congratulate the noble Baroness, Lady Deech, on securing this debate. It is not an easy task to win a ballot for debates among the Cross-Benchers, as the competition is usually pretty fierce, particularly as one of the competitors was the convenor—but she won it and I thank her.
I will briefly speak about the challenges that universities face around research. We know that our leading universities are world leaders in research. We contribute more publications than any other country in the world. Our citation index for universities is 1.54, which is extremely high, and 16% of publications are rated at more than 10% in citations.
The value of universities is enormous. We do blue-sky research, and universities contribute to early innovations and help build billion-pound industries. For the population of 0.8%, we have a publication record of about 6%. Some 60% of the publications are international collaborations. Of the £72 billion that the United Kingdom spends on R&D—which is 2.64% of GDP—higher education is responsible for 24% of all of it, which is £17.1 billion a year. What is amazing is that that is the highest of the OECD countries. Japan, for instance, is the next highest, but it is at 11%, compared with 24% for higher institutions in the United Kingdom.
Where do universities get their funding from? They get it mainly from UKRI, which is structured, dual-support funding of about £6 billion, given to universities on a competitive basis. The second is the so-called QR funding, which is related to the efficiency metrics of research efficiency funding. They also get it from charities, mostly from Wellcome and Cancer Research UK in the health sciences; from philanthropy; and, for some universities, from the alumni network.
However, there are deep structural flaws in how the universities get the funding and what happens. The so-called 80% full economic cost that they are supposed to get from UKRI is, in reality, about 68%. The funding deficit amounts to about £5 billion, which the universities have to fund from somewhere else. Mostly they do this now from international student levies, but that is going down. QR funding has gone down to less than 15% since 2019, so universities are in trouble around supporting research. If they do not support research then either there are job cuts or a plan to cut research in certain areas, and universities will not bid for charities’ research because the overall funding required to support it will be higher. The implications are severe.
There are also implications for PhD training, with UKRI supporting only 5,000 students, compared to the nearly 7,000 students it used to support. PhD training institutions have been cut from about 76 to about 45, so there are huge implications for the PhD training that supports university research—PhD students are the fuel that supports university research. If we take them out, it impacts on our industrial strategy and therefore on our economy.
We need something to fix this. What are the fixes? The fixes are restoring 80% support for research funding to 100% and supporting QR funding for REF to a level that is compatible with inflation and with other costs, such as energy, et cetera, rather than 15% down from 2019. What will the Government do to restore university funding to full economic cost and QR funding to the level it should be? In future, how will they control the global talent visas—not the international student visas—that attract international scientists to work in our highly competitive and globally recognised research universities?
Baroness Freeman of Steventon (CB)
My Lords, I thank my noble friend Lady Deech for initiating the debate. I declare my interest as principal of Hertford College, Oxford.
I was incredibly lucky to have one-to-one and one-to-two tuition at university. My tutor said, “I have you for three years. I’m going to spend two of them teaching you how to think and then, at the end, I’m going to teach you how to pass the exams”. Over two years, I learned how to learn by myself, how to think critically and how to interrogate evidence and ideas—I was perhaps less good at learning how to pass the exams, which was not my tutor’s fault. I then went on to do a doctorate; like all doctorates, it was on a weirdly specialised topic that few outside the field would think important—perhaps even few inside the field. Again, I was lucky in my supervisor. He reminded me that a doctoral degree is education. It is about learning skills, not about making advances in the field. Every chapter was training me in a different skill.
As a doctoral student, you have to become even more independent as a learner and a thinker, and do more creative thinking within the bounds of your topic. As an individual student, the skills gained from this kind of education are very flexible. The specific facts and knowledge are not the point. I suspect that noble Lords who have done a degree, even one that is related to their professional career, rarely use much, if any, of the knowledge from the course. Instead, subjects are more a way of embedding the teaching of critical thinking and learning, and that gives you transferable skills and the confidence to work in a wide range of fields.
For the country, this is very important. Higher education that equips people to be confidently adaptive, to learn things quickly and independently, and to be creative is vital to a workforce, as are diversity and plurality of thought. People have different experiences and have learned different ways of thinking and approaches. Now, more than ever, we surely need critical thinking skills, intellectual flexibility and diversity, as technology increases the pace of change in work and the spread of ideas through society.
How do we encourage this kind of learning? The answer is dialogue: structured argumentation, personalised challenging conversations and detailed feedback. I was incredibly lucky to get that from a great tutor and then from my doctoral supervisor. The time investment and the skill needed for this kind of teaching is intense. It is important that academics who commit to it are given adequate recognition.
I am sure many people will be starting to wonder whether AI can be a good tutor, at least for undergraduates. It is personalised, challenging and can respond to challenge. In some cases, it probably could be good. But whether we can take advantage of its pros without losing other aspects of good tutoring through poorly thought-through use of it remains to be seen.
So much of what we learn during higher education is social. It cannot all be delivered digitally. Human mentorship, sports, music, drama, administration and normal social interactions with people from different backgrounds can be at least as important as the course tuition itself. We have to learn key skills, such as resilience, appropriate risk-taking, confidence and humility. These are priceless. But of course, they are not; they have a price. As a country, we have to think quickly and hard about how we can have a higher education system that is affordable, gives students the chance to develop these skills and works in the world of AI.
Others have spoken, and will speak, with more experience about financial issues. I will just say that, as the number of young people in the UK falls following changes in demographics and immigration, there is the opportunity to increase the ratio of tutors to students more affordably if funding is not allocated on a per-student basis. What plans do the Government have for higher education funding as student numbers fall?
In the immediate term, we also need to address the costs for students. Looking at our undergraduate students at Hertford, we see a squeezed middle of students who come from households within the household income bracket where the government assistance tapers. As the cost of living has risen, those in that taper band have less assistance from the Government, but their families are also unable to give financial support. I would like to ask the Minister whether they are increasing the income bands used to assess student support as the cost of living increases.
Finally, I have a plea for those students who want to continue their studies, particularly to do a higher research degree such as a doctorate. These students, however promising, are really struggling to find the means to study, particularly outside the disciplines of science and medicine. Higher research degrees are not professional training for those who want to stay as academic researchers. They are for people who want to learn to research topics to the greatest depth and teach themselves new techniques and to be creative thinkers.
Half of our home students studying higher degrees at Hertford are now self-funding. We cannot afford for our future thinkers to have low diversity, either through narrow domains of study, restricting the number of people who have learned to approach problems in certain ways, or through narrow demographics: having only those who come from backgrounds where they can afford to fund themselves. I ask the Government to think about how they can best ensure that students from all backgrounds have the opportunity to be taught how to think and how to learn for themselves within the framework of a broad range of subjects, because that is what this fast-changing world demands.
Lord Tarassenko (CB)
My Lords, I congratulate my noble friend Lady Deech on securing today’s debate. Her commitment to the issues of quality and affordability in higher education is second to none. I declare an interest as the founding president of Reuben College, Oxford’s newest college: a 21st century college in a 900 year-old university.
In early 2025, just over two years after the launch of ChatGPT, a survey carried out by the Higher Education Policy Institute revealed that 90% of UK undergraduates were using AI in their assessments. As a professor from the University of Warwick recently put it,
“all typed work by students is now worthless as a means of assessing them and their knowledge”.
Many departments are going back to hand-written assessments for all tests that matter, and I believe that we should contemplate reintroducing all exams as part of summative assessments, such as finals. Right now, conversations about AI in the higher education sector are mostly defensive, and this needs to change. The question should not be “How do we catch students cheating with AI?” but “How can we reimagine the delivery of education in the age of AI?”
As with the social media ban, it appears that Australia is ahead of the UK in this domain. In a recent paper, two Australian academics argued that, as AI automates analytical tasks, the true purpose of a university must shift from teaching students how to generate answers to developing capabilities in reasoning, critical judgment and acting under uncertainty.
My estimate is that we need only about 20% of the lectures which we required prior to the advent of generative AI. Lectures should be given only to introduce a subject, occasionally go through a particularly difficult topic or proof, and then provide a synthesis at the end. In between, students can—and will, in any case—use their favourite generative AI tools to progress, at their own pace and with immediate, personalised feedback, through the subject framed by the lectures. The time which professors would save by giving only 20% of the pre-AI age lectures should be devoted to their facilitating small-group seminars, typically with 10 to 12 undergraduates in each group. In these settings, the students would not be allowed to have their smartphones or laptops with them. The professor would probe their knowledge and enable them to develop the critical cognitive capabilities now being blunted by the regular use of AI during the learning process.
Of course, small-group teaching, as opposed to giving lectures to 200 or 300 students, is much more inefficient. For such a strategy to be feasible, the higher education sector will need to embrace the use of graduate teaching assistants. As in the US, these would be PhD students or post-doctoral researchers, who would be trained to deliver high-quality, small-group teaching, working in tandem with the professor responsible for the undergraduate course.
The Department for Education cannot tell universities how to teach, but it controls the financial levers. The large-scale deployment of graduate teaching assistants to support small-group teaching would require DfE and UKRI to develop plans for an alternative model for funding PhDs. Those UK-domiciled postgraduate students who chose the option to become teaching assistants would be able to start paying off their student loan while doing their PhDs.
I am aware that the Office for Students has launched a research project to investigate how universities are using AI, with a nationwide data-collection phase closing at the end of next week. The OfS says that it will
“analyse the findings in collaboration with Advance HE”
and that it expects
“to publish the findings later this year to support institutions in using AI tools to improve students’ experiences of higher education”.
But we need to be bolder in our ambition if we are to maintain the quality of higher education in the age of AI. We need to start now to develop the rigorous training programmes required to turn PhD students and postdocs into expert facilitators, able to lead device-free sessions in which undergraduates can develop genuine critical thinking and independent reasoning.
AI-guided learning, framed by just a few lectures and combined with rigorous oral probing in small-group seminars, is surely of higher quality than 100 hours of sitting passively in a lecture theatre. We need the DfE to fund pilot programmes in selected university departments, from the humanities to engineering, to demonstrate how undergrad teaching can best be adapted for the age of AI. It is a challenge which we cannot ignore, and I hope that the Minister will be able to reassure the House that the DfE is devoting some critical thinking time to addressing the issue.
Lord Isaac (Lab)
My Lords, it is an honour to follow the noble Lord, Lord Tarassenko, and to see Oxford so well represented in this afternoon’s debate. With that in mind, I declare interests as provost of Worcester College in Oxford, but also as the chair of governors of the University of the Arts in London.
As has been widely acknowledged in the debate this afternoon, our universities are among the finest in the world. They generate world-leading research, attract international talent and contribute billions of pounds each year to our economy. Yet I think it is no understatement to say that the higher education sector is in crisis. Higher education should be an opportunity for all, not a financial burden that deters talented students from fulfilling their potential. I was fortunate to be the first in my family to go to university. I was supported by a student grant and I was able to graduate, believe it or not, without any debt. Times have changed, but I would like as many young people from similar backgrounds to enjoy the same good fortune.
Tuition fees have undoubtedly provided universities with a stable income, but rising living costs and concerns about debt are discouraging many able students from applying. It is therefore welcome that the Government have announced the return of maintenance grants for lower-income students. However, these are currently linked only to priority courses. My preference would be that such courses were defined more broadly, so that students from lower-income families have the same freedom of choice as their more affluent or more economically confident peers.
Of course, universities themselves, as we have heard this afternoon, face mounting pressures. Even with recent fee increases, we now know that four in 10 institutions are expected to be in deficit by the end of this year. Student numbers are falling, while heavy reliance on international students leaves the sector vulnerable to geopolitical uncertainty. I also fear that the new international student levy raises the risk that many international students are less attracted to studying in the UK, because inevitably—I speak as part of a governing body that has to assess the cost of international fees—we may well be passing these additional costs on to our students. Cuts and delays to the strategic priorities grant, together with the loss of world-leading specialist funding, add further pressures.
Quality must never become the casualty of financial constraint, and we must continue to invest in excellent teaching and research, including, as I wish to stress this afternoon, in the humanities. The recently announced deep cuts in the humanities at Exeter University remind us just how fragile these disciplines have become. I agree that, to deliver on these ambitions, universities must embrace new forms of collaboration, share resources more effectively and, as we have heard, make full use of digital technologies and AI. All this must, I suggest, lead to an improvement in teaching and will drive innovation.
Finally, I turn to creative education, which the noble Baroness mentioned in her speech. As I have said in this House before, the creative industries are one of Britain’s greatest success stories. They contributed nearly £150 billion to our economy last year, yet creative courses remain extremely vulnerable, because they are more expensive to deliver and ever fewer students are attracted to them. These courses must not become the preserve of only those who can afford them or who are prepared to take on debt. If they do, we risk denying future generations of David Hockneys, Tracey Emins and Alexander McQueens. Changes to the pre-degree courses imperil people just like them. We need a pipeline of people moving from further education to higher education and endorsing their preference for the creative industries. Creative education is the pipeline for one of the UK’s most successful industries, and its value, I suggest, cannot be judged solely by graduate earnings. These disciplines enrich our culture, strengthen our international reputation and contribute significantly to economic growth.
Our universities must remain accessible to all. They must offer the widest range of disciplines and be financially sustainable. The future prosperity of our country depends on it.
Lord Bew (CB)
My Lords, I thank my noble friend Lady Deech for securing this debate and express my agreement with many of the themes in her speech. I declare my interest as a jobbing academic and, having listened to what has already been said this afternoon, I speak with great relief that I did not have to compete with AI, although I think some very important things have been said on that subject this afternoon.
Because of the exigencies of my life, being married to an academic whose books were occasionally more fashionable than mine, I have travelled around a lot. I have taught in one of the old polytechnics, been a fellow of a Cambridge college, taught at a fairly basic, if I can say that, American state university and at an American Ivy League school, so I have seen educational systems in this country and abroad. I have been an external examiner in Galway and in the European university in Florence. I have been around a bit—it is multicoloured—and what I am going to say is based on that experience.
The first thing I want to say is that I agree with all those who have spoken this afternoon and said we talk so often in this country about our world-leading this and that, but the one thing that really is world-leading is our higher education. The figures are indisputable. If you look at the top 10 universities or the number of universities—it is 26—we have in the top 200 in the THE list, or look at the QS list and so on, the figures are indisputable. Holland is perhaps one country that comes even remotely near to the level of achievement of this country. We really are, in this respect, if not in others, genuinely world-leading, and it is something to be very proud of.
In the lead-up to this debate, I have been reading and preparing. On the research assessment exercise—or REF as it is now known—I was really surprised to see the very fine professor, Stefan Collini, saying:
“Few things would improve the intellectual culture of universities more quickly than the complete abolition of this flawed and coercive exercise”.
I can assure noble Lords that, if you are teaching in an unfashionable provincial university, as I was at the time, there is nothing more liberating. Anybody who has read a novel about provincial university life will realise the need for some sort of external coercive pressure, saying, “Research is important”. It is vital and liberating.
I know quite a lot about the educational system in Ireland and enormously respect the intellectual culture there, but one of the reasons why Ireland has only one university in the top 200 is simply the absence of a similar mechanism to the research assessment exercise over the last four or five decades. It definitely propels the system upward. I know it is gamed and I know there are brutal and silly aspects to it, but, none the less, broadly speaking, I am strongly opposed to the idea that it would be liberating to drop that or equivalent forms of that exercise. It is one reason for the research excellence of our university system.
If I may say something else from my experience of teaching in an American Ivy League school, I would make a traditional humanist point. Oxford and Cambridge are great research universities, but they are also great teaching universities. Princeton now is quite rightly shooting up the league table towards the top, but, like most American Ivy League schools, it is not an undergraduate teaching institution in the way that Oxford and Cambridge are. It is just not a priority. Again, from a traditional humanist point of view, I think it is something we can congratulate ourselves on.
One thing that we cannot congratulate ourselves on is something which was certainly not part of my student life in Cambridge: I am still amazed by the rise of antisemitism in our universities. I am just surprised, because that is something I never expected to see, so I want to qualify my praise for our system.
Finally, there is no question but that the golden age of financing is gone. The Chancellor recently said:
“It is not right that people who don’t go to university are having to bear all the cost for others to do so”.
These are our students, who are now the political class, telling us this, and there is no going back to the golden age. I think the implication has to be fewer universities than those we currently have. If you look at what the incoming Prime Minister has been saying about localism and the fact that more and more students are staying at home because of costs, that means fairness requires more good, locally established universities right across the country.
In conclusion, this particularly applies to my home place in Northern Ireland. I taught at both the main universities there. They both have great things to their credit. In 2024, Times Higher Education said that the University of Ulster was the best university of the year. Queen’s University, where I taught for most of my career, has just gone up a number of places, significantly and impressively, in the QS rankings, but the university also has a major financial crisis. It is time to look at whether we really need two universities in such a small place as Northern Ireland. I suspect that is also a debate to be had in other parts of the country.
Lord Biggar (Con)
My Lords, I speak as a former professor of Christian ethics at the University of Leeds, Trinity College Dublin and the University of Oxford. I declare an interest as the chairman of the Free Speech Union. I simply want to underscore the plea from the noble Baroness, Lady Deech, for our universities to become more muscular in the defence and promotion of liberal culture.
Britain’s universities are culturally strategic because they educate the elites who run our institutions, be they economic, social or political. Let us be clear: elites are a social necessity, even if elitism is something we should avoid. Because they educate our elites, universities are important not just for economic success, as they are, but for the kind of society we want to be. Do we want to be a society whose leaders have been educated to reason, to proportion claims to evidence and to yield to justified criticism? Do we want our leaders to be the kind of people who are capable of honest reasoning because they have been formed in the virtues of self-restraint, humility and courage, which are necessary for it, or do we want to be led by graduates indoctrinated by dogmatic, ideological professors who penalise dissidents? Do we want to be led by graduates who have witnessed university authorities let aggressively ideological students abuse and intimidate them? Do we want graduate leaders who have learned that the only way to advance in the world is to keep their thoughts to themselves and their mouths shut, and to run with the prevailing wind?
I take it that we do not want that; if that is so, our universities must become much more assertive in defending and promoting a liberal culture, by which I mean a culture where everyone is free under the law, without fear of penalty, to say what they believe the truth to be and then to test it in the critical give and take of reasons. As the noble Baroness, Lady Deech, wrote in her preface to the excellent Policy Exchange report mentioned several times already this afternoon,
“too many universities have repeatedly failed in their duties to … foster civil debate”.
Indeed, too many universities have tolerated highly uncivil aggression.
Let me give two examples. Five years ago, the admirably temperate and reasonable feminist philosopher Kathleen Stock came under attack for her gender critical views at the University of Sussex. After a sustained campaign of vilification led by students, and even supported by some of her academic colleagues, she became so depressed and demoralised that she resigned from the post that she had held for 18 years and, in effect, terminated her own academic career. To this day, as far as I can tell—trust me, I have hunted high and low—the authorities at Sussex have offered no public explanation of why they failed to support Kathleen Stock or of what they have done since to ensure that what happened to her will not happen again. To the outside eye, the aggressive illiberal ideologues at Sussex triumphed and nothing has changed.
Then, less than a month ago, in Oxford, Professor Michael Foran abandoned his lecture series on law and gender because pro-trans protesters had stormed the stage and intimidated his student audience, all the while passively observed by one the university’s disciplinary officers. I have been told that the university is unrepentant about its conduct, has offered no apology and thereby has granted aggressively illiberal hecklers an effective veto.
The problem is not just these individual cases; the larger problem is their generally chilling effect. As the late Sir Tom Stoppard said five years ago,
“It’s not so much cancellation as self-cancellation. People tread warily—they’re careful of what they say”.
In other words, a single successful cancellation causes a thousand horrified observers to beware of trouble and bite their tongues. On the eve of civil war in 1920s Ireland, WB Yeats famously wrote:
“The best lack all conviction, while the worst
Are full of passionate intensity”.
If, instead of civil war, we want a civil society led by virtuous, reasonable elites, not repressively illiberal ones, university leaders are going to have to muster greater liberal conviction and visibly face down the intensely passionate ideologues running wild before their eyes.
The Earl of Clancarty (CB)
My Lords, I am grateful to my noble friend Lady Deech for the opportunity to speak in this debate. I wish to make one single point, which is to draw attention to the threat to arts and humanities courses at universities, which is a long-term concern but one that appears to be getting worse. As the noble Lord, Lord Isaac, said, the latest victim of this is the faculty of humanities, arts and social sciences at the University of Exeter, a Russell group university, with over 110 academic roles proposed to be cut, affecting subjects including the visual arts, history, English and languages. But Exeter is not alone. The universities of Hertfordshire, Leicester, Nottingham, Cardiff, and Bristol, Goldsmiths, University of London, and others have all recently either closed courses or threatened closures in music, creative writing, film studies, theatre, English, theology and modern languages.
My worry is not just this trend, which has deep-seated roots—I will come back to that—but the Government’s attitude towards this trend, which is more than worrying. The DfE’s announcement in the press release last week of a new deal for young people says:
“Ministers will unveil plans to crack down on poor-quality university courses”.
On Tuesday, in an Oral Question, I asked the Minister for the criteria that would be used to define “poor-quality courses”. In reply she said that it is, in part,
“the ability to determine what the returns are from individual courses. It is for that reason that we will take action to prevent the expansion of those courses that are not providing the returns … that students have the right to expect”.—[Official Report, 30/6/26; col. 944.]
When pressed further by the noble Baroness, Lady Cash, the Minister referred to last week’s report from the Institute for Fiscal Studies, which identifies courses which effect the greatest financial return for students in terms of salary and those which do not, as the noble Lord, Lord Willetts, pointed out. In the graph which the IFS supplies in that report, courses such as philosophy, performing arts, other creative subjects, English and history lie to one degree or another on the low side of that equation. It is precisely those courses which are already suffering, while the Government seem to wish to discriminate against them further.
Also, the Minister said in reply to my question that, if necessary, they will legislate to do this. I dread to think what that might be in legislation. We are not hearing the language the Conservatives used of “Mickey Mouse courses” from this Government, but the effect will be the same. The Opposition do not now talk about Mickey Mouse courses. The noble Baroness, Lady Cash, in an Oral Question on 22 June, suggested, precisely because of the returns we are talking about, that creative courses should be the first to be cut. This way of thinking, from both the Opposition and the Government, of education in this narrow, crude transactionalist sense is deeply wrong, because it is narrow, short-term thinking concerned primarily with the economic effect on the individual.
There is no thought here of the sum total of a diversity of knowledge and experience, of their total value towards society, of the social value of subjects. Arts and humanities subjects, perhaps more than others, stimulate and engender the critical thinking so necessary in our society, and they are therefore entirely worthy subjects to be studied in universities. We know that many starting salaries can be low, but that should not invalidate the study of such subjects since it ignores, among other things, the larger-scale economic effect. In that respect, the creative industries are hugely important—in their profound social value and the acknowledged wider application of these studies for different kinds of work. In defence of these subjects, Vivienne Stern of Universities UK has said that
“in an age of AI, we’ll value the understanding of how human beings think and act more, not less, in the future”.
In terms of the pipeline, the Government are being inconsistent because the policy works so much against the intended encouragement of arts subjects in secondary schools through changes being brought in through the Curriculum and Assessment Review, particularly with the removal of the EBacc. It is, of course, those 14 years of arts subjects being squeezed in schools, and the knock-on effect that this had on higher education, which have, in part, left higher education in the precarious state it is in with respect to the arts, as the GuildHE report The Value of Creative Graduates pointed out in 2024. The British Academy has also pointed out that if we believe these subjects to be worth while, their further reduction at universities will create cold spots across the country. Of course, those cold spots will become more prevalent in the regions outside London.
I am confused about what the Government are trying to achieve. Are they trying to remove vocational subjects from universities and boost apprenticeships that way? If so, this is misguided, as not all vocational subjects are about apprenticeships. Whatever we may think of the long-term developments in higher education—I regret that art colleges are not the stand-alone institutions they once were back in the 1960s—that is nevertheless water under the bridge. These subjects have, or ought to have, a settled place in our universities. The University of the Arts London, and many of our arts and humanities departments, do a great job. To be fair, that is not what the Government appear to be criticising with this strange label of “poor-quality” courses.
I said at the beginning that these concerns had deep-seated roots. Many of these roots lie in the introduction of the loan system back in the 1990s, with the commercialisation, in effect, of our higher education system. The Government really need to look at how complicit they are now, alongside some university management, in deepening that culture, because it is bad for education and bad for society.
Lord Verdirame (Non-Afl)
My Lords, I too express my gratitude to the noble Baroness, Lady Deech, for securing this debate. I declare my interest as a professor at King’s College London.
I am one of the many Europeans who came to this country to pursue an academic career. I arrived at the age of 22 with a first degree from an Italian university, with respectable—but certainly not native—English, and with a social network that consisted of only two people, both Italian students. After my master’s degree, however, I obtained funding to do a PhD at the LSE, and I got my first academic job at Oxford. What academic immigrants like me found was that British universities, unlike universities in our countries of origin, were liberal and based on merit. They did not demand conformity. They were institutions where young academics especially could flourish. This was in part because, as a young researcher, one did not feel stifled by overbearing professorial egos, as was unfortunately the norm in Italian, German or French universities.
In my 32 years in this country, things have changed. These changes have been examined in the report by Policy Exchange that has been mentioned. It has a powerful foreword by the noble Baroness, Lady Deech. I associate myself with what she wrote in that report, and with the excellent introductory speech that she gave. The Policy Exchange report identifies several trends that many of us who work in universities recognise well.
First, there is the growth in managerialism and bureaucracy. Of course, universities need good administration, but administration should serve scholarship and teaching. When the best-paid jobs go to the administrators, you create the wrong incentives. Moreover, what is worse is that the academic managers too often understand their main role as ensuring and enforcing compliance with the myriad of regulations that govern academic life these days. In turn, they generate vast amounts of internal policies and processes that take time away from scholarship and teaching.
Another major change that has happened in these 30 years is that students are now treated as consumers who need to be satisfied. This has changed higher education for the worse. The purpose of education is not to flatter students; it is to form them. Satisfaction is completely the wrong notion. If anything, the objective of education should be to encourage dissatisfaction. I support a number of the recommendations in the Policy Exchange report, including abolishing the National Student Survey and making the OfS a light-touch regulator.
Another, even more sinister trend has emerged, and both the noble Baroness, Lady Deech, and the noble Lord, Lord Biggar, have addressed it. In the late 1980s, Allan Bloom wrote a famous book titled The Closing of the American Mind, in which he examined the narrowing of argument in American universities and the rise of intolerance and dogmatism. I fear the British mind may be closing too. In my field, international law, there is less diversity now than before. When I say “diversity”, I mean the diversity that matters in a university: not how we look but how we think. In the 1990s, there were Marxist, socialist, liberal and conservative international lawyers in academia. As many studies have shown, however, the range of political opinion in academia has become considerably more limited.
In addition, people holding minority views, as we heard from the noble Lord, Lord Biggar, are often not argued with—they are denounced. Even in academic international law—can your Lordships believe it?—the bigotry of seeking to denounce and ostracise those who hold different views, whether on migration, empire, sex and gender, the European Union or human rights, has taken hold. It beggars belief that this could happen among academics devoted to the study of the law of nations, which was invented in the early modern period so that nations divided by wars of religion could find common ground. There is a famous alumnus of Hertford College who disagreed with that view, but I hope we will prove him wrong; obviously, that was Thomas Hobbes.
We must remember that universities have not always promoted free thinking and advancements in knowledge. There have been long periods in western history when universities became the guardians of orthodoxy. We should not take too much comfort in international rankings: they do not spot these trends. By the way, while the top British institutions are still performing well, those just below them have been losing ground in recent years. The Government’s White Paper from last October deals with some of these problems and identifies some fixes, but many of the problems that have been debated today still need answers. It would be useful to understand where the Government sit in the range of opinion that has been expressed about the diagnosis of what is going wrong in academia. Do the Government agree that these problems exist and that there is a risk of decline?
It is often said that Britain can combine the best of Europe and America, and in many ways, we did that in the university sector. But the risk is a future where we end up in the opposite place: universities that are European in bureaucracy and overregulation, American in consumerism and levels of student debt, and, especially in the humanities and social sciences, eager to import every illiberal fashion, whether from Europe or America. That risk is real, but by no means a foregone conclusion. But there is no room for complacency. We must act urgently if we want to secure a better future for higher education.
Lord Hannay of Chiswick (CB)
My Lords, there can surely be no doubt about the timeliness—indeed, the urgency—of a debate on higher education, as the facts flow in of universities in financial trouble, of the lack of value of a university education, of universities being pushed towards unwanted mergers, and of the impact of the Government’s immigration policies on universities. There can be no better person to lead this debate than my noble friend Lady Deech, whose career in higher education has been so outstanding—although I warn the House that the line I will take on international students is a bit different from hers. Let us hope, therefore, that those with responsibility for universities in the new Government will read this debate and give it due weight, as they move towards decisions that cannot be made without damage being done to a sector of our economy that really matters to its future health and growth.
Any analysis of the higher education sector in this country could surely not escape the conclusion that it is potentially highly positive to our economy. After all, we do not have that many sectors of our economy where we stand second in the global rankings, behind only the United States, nor many where the benefits to such a wide spread of our economy, including often being the principal employer in relatively small towns and cities, are so marked.
You might expect such an economic treasure to be nurtured and promoted by the Governments of whichever party. If we had an industrial sector that had such characteristics, you can be sure that it would be treated like the crown jewels, but higher education is not. Instead, the Government’s immigration policies seem designed to damage the highly valuable contribution that foreign students make to our financial health and to our subsequent influence worldwide. The system for making loans to students for their tuition fees is manipulated to charge punitive levels of interest, which remain a burden on students for most of their lives. This would be hardly credible if it were not happening before our eyes.
I welcome the fact that the Government seem, belatedly, to have woken up to the immigration problem and to be planning to introduce in the autumn a new immigration channel for universities. I hope that the Minister, in replying to the debate, will supply some of the details missing so far from the initial announcement and that these will measure up to the damage already done.
Then there is the value of a university education to its recipients and our economy overall. I made myself rather unpopular many years ago when I asked the then Minister responsible on the Front Bench in your Lordships’ House, the noble Baroness, Lady Ashton of Upholland, who was announcing the target of 50% of our population to receive a university education, whether it was not wise to be able to answer the question of what the benefit to our economy was before announcing any target. Now, the question is being posed, rather haphazardly, and we still do not have an answer.
I hesitate to conclude these remarks with a call for another full-scale inquiry into the higher education sector, and I will not do so. But there are quite a lot of questions that need answering, and I hope that they will soon be answered, because the country is now putting at risk one of its greater assets, albeit doing so inadvertently.
Lord Londesborough (CB)
My Lords, I must thank my noble friend Lady Deech for securing this debate, which has been appositely framed with the words “affordability and quality”. I will tackle these words from an economic angle and from an employer’s perspective, reflecting, in part, on my own experience. Before I go down that path, I readily accept, like many others, that higher education should not be measured purely through the lens of economic impact, jobs, salaries and the ability to pay back student loans. Universities should be character-building through those vital formative years. It is where you develop life, social and communication skills and, indeed, have your beliefs questioned and challenged. You should graduate with much more than a degree, and many students develop friendships or partnerships that last for a lifetime. It would be remiss of me not to mention that I met both my wife and my business partner at university, and both would claim, quite rightly, to be of greater importance to me than my rather modest second-class degree in economics. That said, it is difficult to avoid the economic and financial consequences, and whether you look at this from the Government’s, employers’ or students’ perspective, the data is deeply concerning. Put bluntly, higher education is not working.
Let me start with our public finances. Sitting on the Treasury’s balance sheet is a current liability of £295 billion of unpaid student debt. That figure will reach £500 billion in the next decade, and much of that will eventually be written off. That would be less of a problem if we were a high-growth, low-debt economy, but we are not: our national debt has trebled in size in the last 15 years to almost £3 trillion, and we now spend more in servicing the interest on that debt—£130 billion a year—than we do on our entire education budget. That is a damning statistic.
With productivity growth averaging a feeble 0.5% over the last 20 years, our graduates—who have grown in number by 50% over this period—face double trouble: a sharp fall in the number of graduate jobs and a significant shrinking of the graduate premium on wages. It is no wonder that the latest British Social Attitudes survey found that 34% of people agreed that a university education
“just isn’t worth the amount of time and money”—
that is up from 14% who held that view in 2005.
There has also been a marked decline in those who believe that going to university leaves graduates “a lot better off” in the long run. It is down, from 50% in 2005 to 36% today. I acknowledge that these perceptions are challenged by the data analysis of such bodies as the IFS, but, none the less, the perceptions are there.
Turning to employers, low growth, with significantly increased employment costs, has resulted in much slower job creation—and that is before you take into account the impact of AI. Yet employers in multiple sectors continue to complain about all sorts of skills gaps, many of which could be filled by vocational training rather than university education. Supply is not meeting demand. Fundamental mismatches are growing.
Employers also complain that graduates are often poorly prepared for professional life, not so much in terms of the quality of their degree courses as in terms of personal discipline, social interaction and communication skills in general. This has been compounded by the increasing practices in higher education of working and studying from home and overdependence on online teaching and remote communications, not to mention the productivity-sucking distraction of smartphones and social media, which is an issue not just for schools but for universities and indeed the workplace.
I believe universities need to do a much better job in preparing their students for professional life. Degree courses should be rebalanced to address the broader human skills deficits cited by employers, and much more emphasis needs to be placed from year one on careers advice and development. Employers will often tell you that graduates from Europe are better prepared than their British counterparts for working life, and that was certainly my experience as an employer. We should be less hubristic and learn from our European counterparts, whatever the league tables suggest.
If we want higher education to be affordable, we should focus on quality, not quantity, and develop a more holistic approach to preparing our graduates, and indeed non-graduates, for the realities of the marketplace.
Lord Stevens of Birmingham (CB)
My Lords, I declare my interests as chair of King’s College London and as an honorary fellow of Balliol College, Oxford. At this stage of the debate, I will just draw out a few of the salient points that we have heard so far and pose one or two related questions.
The first is that I particularly commend the excellent speech of the noble Lord, Lord Willetts, which drew attention to the latest data published by the IFS. Indeed, although he did not mention it, we have seen new data from the Department for Education this month which demonstrates that graduates go on to earn higher average salaries even when compared with those who have similar GCSEs but did not go to university. That is clearly encouraging.
It is also encouraging that on 11 June we saw revealed that the number of students who view their university course as “good value for money” has risen to its highest level in more than a decade, and in fact, only 7% of students now say that, with hindsight, they would have preferred not to go into higher education. Interestingly, in contrast with that, when you ask the general public what they think the student response would be, they say that about 40% of students probably have regret, although it is only 7%. That is the good news.
However, as we have heard extensively, there is absolutely no grounds for complacency. For students, living costs are an increasing burden, such that more than two-thirds of full-time undergraduates now have paid jobs in term time. Teaching is under stress. The figures from Universities UK suggest that English universities now get £6.4 billion less for teaching, in real terms, than they did a decade ago. With tuition fees going up with inflation—in other words, staying flat in real terms—that £6.4 billion pressure is now baked in. So for students and teaching there are significant grounds for concern, as there are for research.
This week, the political headlines have been dominated by the £5 billion black hole in the defence investment plan, but there is a £5.4 billion black hole in the full economic costs of research recovery, as the noble Lord, Lord Patel, pointed out. On average, for every £1 of research that universities undertake, they can recover only 66p. This combination of pressures on students, teaching and research means that something will have to give.
While we tell ourselves about the brilliance of British universities—which I entirely endorse—these measures are based on the rear-view mirror to some extent, and if we are not careful, they are resting on past glories. The proportion of field-weighted citations in top decile publications in which UK researchers have participated worldwide has fallen from 11.5% a decade ago to 8% now. We may pat ourselves on the back, because it is only 6% in Germany and 3.2% in France, but in India it has grown over that decade from 3% to 9.6%; and in China, from 13.5% to 35%. So we have no grounds for complacency; we need a step change in teaching and research.
In that context, we need to avoid acts of self-harm as we do so. Had the noble Lord, Lord Rees of Ludlow, spoken, he might have referred to the Science and Technology Facilities Council, which proposed reductions of up to 30% in the funding for some areas of astronomy, and particle and nuclear physics, which is set to be extremely damaging for those disciplines.
One question I want to pose to the Minister is about a further potential act of self-harm that the Daily Telegraph reported on this week, which the Government have apparently been contemplating. I hope she confirms that that is not the case. It is, as part of a new reset deal with the EU, to offer EU students the automatic ability to access English universities at home tuition rates. If that were the case, it would be a hit of another £580 million to British universities. The consequences would be home students displaced by EU students, a further deterioration in the teaching experience and a further hit for research. In response to that piece in the Telegraph, the government spokesperson said:
“We do not recognise these claims”—
a classic non-denial denial. I invite the Minister to say, on the record, that the Government will not put this on the table and sell British students down the river, as part of an EU reset to the tune of £580 million.
Lord Liddle (Lab)
My Lords, the noble Baroness, Lady Deech, is to be congratulated on stimulating a very good debate. I agree with her fundamentally about freedom of speech and the shocking rise in antisemitism and intolerance in our universities, but I do not agree with the central thrust of her argument: that we should revert to having a more elitist higher education system.
I was a product of the elitist system when, in 1964, I got a telegram telling me I had won a scholarship to Queen’s College, Oxford, as only 6% of my age group went to university. I had a great time. My dad was a railway clerk, and I had a full grant with all my fees paid. I went on to do a master’s for another two years—all at the public’s expense. It was great.
However, I think we were right to make higher education a mass model; that degree of generosity to an elite could not be sustained. It was obviously unfair that people who did not go to university paid high taxes for the people who did, and therefore the fee system had a great logic to it.
I had the privilege of being chair of council at Lancaster University for seven years, and there I saw how wonderful this mass expansion of higher education had been. That institution had one of the best equity records among academic, research-intensive universities in recruiting state school students, and it also came out very well in the research assessment exercise. So, in principle, that can be done and we should resist the temptation to go back to a narrowly based elite system.
In our politics, the Member for Makerfield, who is about to become Prime Minister, will recognise that the core of the economic success of Manchester is its university sector and its contribution to the great revival of that city. That story is there right across Britain.
Obviously, there are, as my friend the noble Lord, Lord Stevens, said, no grounds for complacency, and there is something of a crisis. I think we can overcome this. We must not restrict international students. Prioritising immigration control over international students is the wrong decision. There are efficiencies that can be realised in universities; I saw that as chair of council. A small university such as Lancaster should be considering partnerships and mergers. Indeed, on one occasion, I proposed to the University of York that we merge to create a roses university, which would have saved quite a lot of administration. There are efficiencies that can be made. However, I agree with those who do not like the way humanities is being run down. That is not in conformity with my ideal of what a university should be about. The criterion for assessing the worthwhileness of courses cannot be only employability and earning power; we have to recognise the value of people who study the arts, or even theology. That is a very important contribution to society.
One thing that has not been mentioned in this debate is the great need for the post-16 education and training system to be improved. Universities should be thinking about how they can contribute to that. One of the radical things the previous Government did—in fact, it was Gavin Williamson, who I would not normally congratulate—was to introduce the idea of modular courses being part of the lifelong learning entitlement. Universities should be looking at how they can co-operate in partnership with further education colleges to make that a reality.
As my final point, I advise the Government to look at the affordability question, particularly for graduates on these plan 2 loans. I think it is very unfair and is one of the reasons we are finding, in the Labour Party, that a lot of young people are going off to the Greens: if you get a salary of 50 grand a year, you are effectively paying a 50% marginal tax rate. That is not acceptable for people who have spent years devoted to study.
Lord Trees (CB)
My Lords, I join fellow noble Lords in thanking my noble friend Lady Deech for securing this important debate. As we have heard several times this evening, two major problems are converging in the higher education field. The first is the underfunding of universities: the Office for Students has warned that 45% of higher education providers are likely to run a deficit in 2025 and 2026. The second problem, of course, is the colossal accumulation of student debt: in England alone, it has reached the figure of £295 billion and is continuing to increase, and much of it will remain unpaid.
There is no doubt, as we have heard from many noble Lords, that our best universities are world class and a jewel in our crown, and our objective should be to ensure their financial sustainability. But I question whether we need all the universities that currently exist. That may be a heresy from someone who has worked in higher education for 30 years, but we have to be honest about the problems we face and the possible solutions.
The seeds of this problem lie in the policy of then Prime Minister Tony Blair in 1999, who set a goal to have 50% of 18 to 30 year-olds attending university. Following this, the number of UK higher education institutions rose by 45% up to 2021, but the attendant fall in further education colleges was 40% over the same period. What was the evidence for that goal of 50%? It sounds to me more like a political slogan than an evidence-based objective. It created an image and impression that, if you did not go to uni, you were some kind of failure, and it encouraged many young people to pursue expensive degree programmes of questionable worth.
That is not just my opinion: the Augar report in 2019 concluded that
“too many students were being recruited to poor-value higher education courses … with both poor graduate retention … and poor graduate outcomes”.
In January 2026, an analysis by the Centre for Social Justice found, sadly, that over 700,000 graduates were out of work and claiming benefits.
To be kind, in 1999, the incredible recent developments in AI probably could not have been anticipated, but now it is quite clear that AI will have a differential effect on the job market, with vocational and customer contact roles—such as those in social and health care, catering and hospitality, building, plumbing, fixing things in general—less likely to suffer than many roles formerly regarded as for graduates. We are likely to need fewer graduates but more people trained in technical, vocational and practical skills. Indeed, many students will be better served by vocational programmes, preparing for employment and a defined career path. Five years after qualifying, a higher level 4 apprentice earns almost £12,500 more than a graduate from a low-value university course, and £5,000 more than the average graduate.
Although we are likely to need fewer graduates in toto, we will require graduates from those quality institutions providing the academic and technically demanding qualifications we absolutely still need in certain key sectors. Yet, by expanding the total numbers of universities and university students, we have reduced their unit of resource for all such programmes. An example in the HE sector with which I am familiar is that of veterinary education. Our veterinary schools are world class, with five in the global top 20, but their funding for UK students is inadequate, and to compensate for this shortfall, which the noble Baroness, Lady Warwick, reminded us was in the region of £10,000 per student per year, many vet schools are admitting substantial numbers of overseas students. Currently, over 20% of veterinary graduates from UK vet schools are overseas students.
This pattern is repeated in many other degree programmes, which provide the high-value graduates urgently needed for our strategic sectors, yet government support plus fees is inadequate. Because of changing immigration policies, which have been referred to, pursuing large numbers of overseas students is now an insecure and probably unsustainable means of propping up quality higher education. What plans do His Majesty’s Government have to close this funding gap? I suggest that we need to value the huge range of contributions to society by tertiary education in its entirety, ranging from vocational skills to academic degrees, and give targeted and appropriate funding to each element. Currently, I suggest that we are failing the country’s needs and the capabilities of our young people. Let us focus our finite resources in an evidence-based way to satisfy the aspirations of students and the actual needs of society for our economic and intellectual growth.
Baroness Finlay of Llandaff (CB)
My Lords, my noble friend Lady Deech is to be congratulated on securing this crucial debate. As a current pro-chancellor at Cardiff University and a previous chair of council at Cardiff Metropolitan, I suggest that this debate should not be framed as a choice between affordability for students and sustainability for universities. Why? Because a system unaffordable for students damages participation, and a system financially unsustainable for universities damages quality, choice, research capacity and economic growth overall.
In Wales, enrolments at Welsh higher education providers fell by 5% in 2024-25, compared with a 1% fall across the UK as a whole. Wales already faces participation challenges, particularly among learners from deprived communities and those needing more flexible routes into higher education. Wales has a more integrated tertiary education system, which creates an opportunity to plan across schools, colleges, universities, apprenticeships and lifelong learning, but high-quality provision is not cheap.
Cardiff University has not been alone in recording a recent underlying operating deficit. Almost one-third of the £33.4 million deficit in 2024-25 was through the loss of international student tuition fee income. To address this, we developed our academic futures strategy, which has embraced change across the whole university. As with other research-intensive universities, research has been cross-subsidised from other income streams, but, as my noble friend Lord Trees highlighted, that model is fragile when international recruitment falls.
To illustrate this, we cross-subsidised research by tens of millions of pounds in 2023-24, as well as receiving around 40% of UKRI funding coming to Wales in our major role in Welsh research and innovation capacity. A Universities Wales/London Economics analysis found that Welsh universities generated an estimated £10.97 billion in total economic impact in 2021-22, including teaching, research, knowledge exchange, educational exports and institutional expenditure. Every £1 of public funding for Welsh universities generated £13.10 of economic impact. Higher education is an investment, not simply expenditure.
Wales has some specific issues, with around only one in three young Welsh people engaging with higher education overall. However, they are more likely to return to higher education later in life, predicted at 55% by the age of 30. Welsh-medium provision is key to our identity but, realistically, Welsh-language teaching costs around £10 more per credit than English-medium provision. Better collaboration across the tertiary sector is hindered by competition law, increasing the risk of cold spots in provision if high-cost or low-recruiting subjects become financially unsustainable.
Artificial intelligence presents a systemic change to university operations. We have created master’s courses in AI, AI robotics, AI in business and AI digital media. These developing opportunities build on our high-profile research and innovation ecosystem around digital, cyber and AI, with a number of spin-out companies contributing to the AI growth zone for South Wales. AI skills will be essential to growth, with courses co-designed with industry to meet employer demand, particularly in prompt engineering and data ethics.
Cardiff University has established a continuous improvement hub to lead process redesign, following lean principles, and to make processes efficient, joined up and student focused, ultimately delivering cost savings in some areas. But we face huge changes. As my noble friend Lord Tarassenko raised, we must identify acceptable and unacceptable use of AI in an academic context. HEPI’s 2026 survey reports 95% of students using AI in at least one way and 94% using generative AI to help with assessed work, while 64% say that assessment has already changed significantly in response. Potentially, AI can improve learning support, feedback, accessibility, study coaching and productivity for both staff and students, but this must be balanced against the challenges around academic misconduct and a dangerous overreliance on AI.
Finally, as my noble friend Lady Freeman so rightly raised, there are concerns about the implications of the rapidly escalating use and emergence of AI, which currently has limited evidence to underpin it. We have three such concerns I would like to add to the list: first, widening inequalities as a result of access to paid-for AI platforms; secondly, AI’s ability to operate as effectively through the medium of Welsh; and, thirdly, the challenge of sustainably meeting AI’s energy needs and the difficulties of the green agenda.
Lord Mohammed of Tinsley (LD)
My Lords, I join other noble Lords in thanking the noble Baroness, Lady Deech, for securing this important debate. I thank all noble Lords who have taken part for the points they have raised, which are clearly important to many of us who are interested in the higher education sector. It comes at a crucial moment for higher education in England. I declare an interest, in that my daughter has just finished her first year at Sheffield Hallam University.
I note that a number of challenges are facing the university sector: mounting financial pressures, as we heard from many noble Lords; declining affordability for students, particularly given the cost of living crisis; a growing concern about quality and value for money; and the need to ensure that world-class universities remain engines of opportunity, innovation and economic growth.
This debate comes at a pivotal moment, as I said, because only this week, during Oral Questions, I asked the Government what long-term strategy they have to address the growing financial crisis facing our universities. I did so following a meeting that I attended in my home city of Sheffield, where students and staff from the University of Sheffield and Sheffield Hallam University came together to describe first hand the consequences of years of financial uncertainty, redundancies, course closures and growing anxiety about the future of institutions that are central to our city’s economy and identity.
For us, the starting point is straightforward. Higher education is not merely a private benefit; it is a public good. Universities educate the teachers, doctors, nurses, engineers, scientists and entrepreneurs upon whom our society depends. They drive research, regenerate communities and contribute billions to our economy. Any debate about affordability must therefore consider the financial burdens on students and the long-term sustainability of the institutions themselves. The current system is failing on both counts.
Students continue to face cost of living challenges and, while maintenance support has increased in recent years, it has not kept up with the real increases in living costs experienced during inflation surges, leaving many students working long hours simply to make ends meet. The House of Lords Library notes that term-time employment has become the norm for many students, not as a lifestyle choice but as a financial necessity. Education should expand horizons, not force students to choose between attending lectures and paying rent.
We consistently argue that maintenance support should reflect the real cost of living. We welcome the principle of reintroducing maintenance grants, but limiting them to selected subjects risks creating a two-tier system that values some students more than others. Financial hardship does not discriminate by degree subject. If we are serious about widening participation, support must be based primarily on need and not on Whitehall’s judgment about which courses deserve assistance.
At the same time, we cannot ignore the financial realities facing our universities. After years in which tuition fees failed to keep pace with inflation, many institutions are under severe financial strain, similar to what I described is happening in Sheffield. Some have become increasingly dependent on international students, as we heard from many noble Lords, including the noble Lord, Lord Isaac. That income simply subsidises domestic teaching and research, a model that is neither stable nor sustainable.
However, solving one problem by simply transferring ever-greater costs on to students is not the solution. We need a funding settlement that is honest and sustainable, and commands public confidence. That means the Government accepting their responsibility to invest properly in higher education as a national asset, rather than expecting universities or graduates alone to carry the burden.
Affordability must be matched by quality. Students and taxpayers alike deserve confidence that every course will offer high-quality teaching, strong student support and meaningful outcomes. Where provision consistently falls below acceptable standards regulators should intervene, but regulation must be intelligent and proportionate. We should be wary of reducing educational value to a narrow set of earnings metrics. A graduate entering social work, teaching, nursing or the creative industries may never command the salaries of those entering investment banking, yet these contributions to our society are no less valuable. Universities should certainly be accountable, but they should not be judged solely by graduate pay packets.
We have long championed diversity in the higher education sector. Universities succeed because they pursue different missions. Research-intensive institutions, specialist providers, civic universities and teaching-focused institutions all have vital roles. Regulation should encourage excellence in all its forms, rather than forcing every institution into the same mould.
We strongly support greater flexibility in lifelong learning. The proposed lifelong learning entitlement offers significant opportunities for adults to retrain, upskill and return to education throughout their working lives. As technology transforms our economies, as we have heard from many noble Lords, learning cannot stop at the age of 21, but flexibility will succeed only if employers, further education colleges and universities work together to create genuine accessible pathways.
Finally, we must remember that widening participation is about far more than admissions statistics. Students from disadvantaged backgrounds must not only enter university but thrive once they are there. They require adequate maintenance support, affordable housing, high-quality mental health services and effective career guidance in inclusive learning environments.
The measure of success is not simply who gets through the university gates, but who graduates, succeeds and fulfils their potential. Britain’s universities remain among our greatest national strengths; they deserve a funding system that is sustainable. Students deserve a funding system that is fair, and our country deserves a higher education system that combines excellence with opportunity. We believe that these goals are not competing ambitions but mutually reinforce one another. By investing in students, supporting universities and maintaining higher standards, we can ensure that higher education remains both affordable and world-leading for generations to come. I hope your Lordships’ House agree with the principles I have outlined.
Baroness Cash (Con)
My Lords, what a superb debate the noble Baroness, Lady Deech, has secured. I thank all noble Lords this afternoon for their excellent and informed contributions. I feel the least academically qualified in the House to speak among so many doctorates, master’s and prestigious holders of positions at some of the universities to which we have referred. What I have heard this afternoon is that where our higher education is good, it is really good—world-beating. Where it is not so good, there are so many factors to consider that what we need—as the noble Lord, Lord Willetts, has said this afternoon—is a lot more data to understand and dig into where it is going wrong.
We on these Benches welcome the work the Government are doing on apprenticeships. But we also believe that we need more data on whether those apprenticeships will provide fair outcomes for those who participate, in the same way that the IFS has undertaken an exercise on university degrees. We need to think about the lower-value courses. I take on board the point the noble Earl, Lord Clancarty, made about the creative arts. I spoke during a Question on history master’s degrees and made very clear my position: that the humanities are essential to the health of our nation and our future intellectual vigour. But we need to understand which of those creative arts courses are not performing. Again, I agree with the noble Lord, Lord Willetts, that perhaps there is more data to be collated by the Government. I invite the Minister to think about this—if not today, when so many other points have been raised, then on another occasion. We have to find a way of analysing some of those creative arts subjects, which really are not coming up to scratch for the students who are spending money and accruing a lot of debt to take part in them.
The noble Baroness, Lady Warwick, made some very important comments about social mobility and the value of education for children; when their parents are educated, that is very important for their outcomes. I declare an interest as the founder of a behavioural science business, MindGym, but also of its philanthropic arm, Parent Gym. We have always looked at what education means for families overall, and we should not neglect that.
However, as has been made clear this afternoon, we need to think about how to resolve the tension between individual aspiration and what we as a country can aspire to. There is some tension there, because in funding higher education and the courses students take, we need to think about our growth strategy, a point raised by the noble Lord, Lord Londesborough. How we fund all of this, and how we create employment at the end of it, is crucial; otherwise, it is not sustainable. I was alarmed to hear the noble Lord, Lord Stevens, refer to a dropping off of research. I had a beautiful passage prepared about our current research—I am now ad-libbing. I would be very grateful if the noble Lord shared that information, because I would hate to see our research dropping off. It is very important to continue to ensure that our universities are incentivised to invest in research, and that the Government look at how to encourage this.
The previous Government looked hard at how we build our economy and grow our future as a nation globally using our universities. In 2023, we backed the reform of how well universities share their research through the independent review of university spin-out companies, as some noble Lords may recall. It did work. The UK’s spin-out value has nearly tripled since 2020, second only to the US. In Cambridge alone, the cluster of firms around the university, known as Silicon Fen, now numbers over 5,000 and turns over more than £18 billion a year. The barrier now, according to the UKRI, is speed and early capital, and I urge the Government to build on the previous study and to act on that.
The other thing is that, whereas American colleges build lasting relationships with employers, sometimes securing places for their own graduates in different firms with places held specifically for their institutions, British universities do not have that culture or tradition to the same extent. It should become a measure of performance and not an afterthought. There are ways of measuring quality that benefit both the nation’s economy and individual students on outcomes.
I would caveat the recruitment of international students—bringing more international students here—with making sure that they do not lean on our loan system. The displacement and cost identified by the noble Lord, Lord Stevens, are serious. We already have an employment crisis for our graduates which needs to be addressed, and we cannot fund and subsidise international students at the cost of our own.
I support the case made today for minimum entry standards and for a cap on the proportion of firsts at any institution—both are modest, sensible steps. I also agree with much that was said by the noble Baroness, Lady Deech, and the noble Lords, Lord Verdirame and Lord Biggar, about the culture at our universities; I will come back to that in a moment.
I want to say briefly—the noble Baroness, Lady Finlay, touched on this—that AI could serve us so much better than it is currently doing. On this, I urge the Government, perhaps more than anything else, to consider that the cost-saving potential of the proper harnessing of AI is huge, not only in how universities deploy teaching and learning for students but in the efficiencies of how they run. The diagnostic technology now is incredible, and we have seen it used in the workforce quite regularly. We see it used in the NHS. This could be deployed across higher education to much greater effect, removing the managerial class, which so often creates the cultural problems and difficulties identified so well by the noble Lord, Lord Verdirame.
We have to come back, I am afraid, to the culture point, because without the muscular defence of liberal education, as the noble Lord, Lord Biggar, so beautifully put it, none of this is really of any value to us as a society or for the individual students. I am very proud that the Conservatives introduced the Higher Education (Freedom of Speech) Act 2023, but I am sorry that it was necessary to do it because of the nature and extent of cancel culture across our campuses. Vice-chancellors must be ready to confront cancel culture and insist on vigorous debate as a measure of the quality of an institution. I urge the Government to look at this more carefully so that we are restoring the value of a degree by restoring the confidence in the institutions that award it.
The year after the publication of John Stuart Mill’s On Liberty, in an Oxford museum in 1860, Bishop Wilberforce and Thomas Huxley argued out the theory of evolution in public before a packed hall. It is hard for us to imagine now how absolutely controversial that was—it was one of the great contests in the history of science, won by argument and not by cancellation or silence. Too many higher education institutions today appear to struggle with that concept. I urge the Minister to address this, along with the many other issues on her desk, as she moves forward.
The Minister of State, Department for Education and Department for Work and Pensions (Baroness Smith of Malvern) (Lab)
My Lords, I thank the noble Baroness, Lady Deech, for raising this subject. In my two years in this place and in this job, it has become very obvious to me that there is nothing that the House of Lords likes more than a debate about higher education, perhaps because people are able to bring such expertise and experience, as we have seen today.
I begin, as many noble Lords have, with a recognition of the value of higher education, and of our higher education sector. It is, as many have said, world leading. It includes four of the world’s top 10 universities and has educated 59 current or recent world leaders. It generates significant economic value, contributing over £265 billion to the UK economy and supporting around 750,000 jobs. The noble Baroness, Lady Freeman—who I congratulate on her relatively recent appointment as principal of my former college, Hertford—was absolutely right in identifying that the sector enables the development of critical, independent and creative thinking. I recognise the point by the noble Baroness, Lady Cash, that this is also something that we need to safeguard within our universities.
Beyond its economic impact, higher education is, as others have argued, associated with substantial social benefits, including better health outcomes, longer life expectancy and higher well-being among graduates. Higher education providers also play a vital civic role, strengthening local communities and contributing to public services, place-making and regional development. That is why this Government are committed to maintaining a world-class higher education sector that delivers for students, our society and the economy. I share the view of my noble friend Lord Liddle: however powerful the overarching speech of the noble Baroness, Lady Deech, we disagree that we should be aiming to reduce the opportunities to benefit from higher education in this country and the number of universities.
An analysis of our skills need shows us that we need more higher-level skills, not fewer. That is why the Prime Minister has set a target to increase the proportion of young people with level 4 and above skills to two-thirds by the age of 25. I hope that also reassures the noble Lord, Lord Trees, the right reverend Prelate the Bishop of Leicester and my noble friend Lord Liddle. Having a variety of opportunities to gain higher-level skills—through higher education but also through apprenticeships and other technical education—is very much part of this Government’s approach to seeing the tertiary sector as one and interrelated. That is particularly in terms of co-operation on modular courses and new pathways into higher education. The relationship between higher education and further education is at the heart of our plans, as is the development of the lifelong learning entitlement, which will enable people to come back to learning in both HE and FE for higher-level courses throughout their lives.
We of course recognise that the sector’s financial environment is challenging, but the sector is rightly independent from government. That means that it is providers’ responsibility to manage their finances and ensure that their business models provide long-term sustainability. Nevertheless, we remain committed to securing the sector’s future. That is why, after them having been frozen for eight years, we increased tuition fee caps in line with inflation in 2025-26. We will increase them once again in line with forecast inflation in 2026-27 and 2027-28, and then legislate, when parliamentary time allows, to increase tuition fee caps automatically for future academic years. That is, over the coming years, £6 billion-worth of safeguarded index increase in income, underpinned by the Government. That is a quite different position to be in than for many public sector organisations at the moment.
We have been clear, however, that future uplifts will be conditional on higher education providers achieving a higher quality threshold through the Office for Students’ quality regime. More broadly, the Post-16 Skills and Education White Paper sets out our commitment to placing the sector on a more sustainable footing, supporting providers to drive efficiency, strengthen financial resilience and adopt more effective operating models.
I agree with my noble friend Lady Warwick on the importance of UUK’s future university work. This is an important piece of work. I also agree with the noble Lord, Lord Mohammed, on the diversity of the higher education sector being one of its strengths. We spelled that out in the White Paper that we produced last year.
The noble Lord, Lord Stevens, invites me to comment on stories in the Daily Telegraph. He knows not to believe everything that he reads in the Daily Telegraph. He also knows that I will not be giving, to use a cliché, a running commentary on what is happening within discussions about the EU reset. He is right, however, that we should not penalise UK students or university finances through any agreements that we might make as part of that reset.
Several noble Lords rightly identified research as a very important element of the work of our universities and talked about the funding that is available for it. This Government are investing a record £86 billion in R&D from 2026-27 to 2029-30. As part of this, UKRI will deliver an expected £38.6 billion of research investment, rising to nearly £10 billion per year by the end of that period. In the Department for Education, we are working closely with DSIT to deliver the White Paper’s commitments, which include research funding reform and improvements to research grant cost recovery. Early action includes reforms to the Research Excellence Framework 2029 to reduce the burden and place stronger emphasis on institutional strategy and areas of strength, supporting more sustainable research planning. I agree with the noble Lord, Lord Bew, about the significance of the REF and the contribution it makes. That was an important point.
The noble Baroness, Lady Freeman, raised the issue of support for postgraduate and doctoral students. The Government are working with UKRI through the new deal for postgraduate research to strengthen financial support and the overall student experience. We have increased the minimum stipend by 40% in cash terms between 2021 and 2026 and have provided better support to students through revisions to their standard terms and conditions of training grant, with changes implemented from October 2025. I also recognise that for our higher education sector to remain world-leading, it must continually uphold the highest standards of quality, integrity and student outcomes. It must also remain accessible and affordable, ensuring that students from all backgrounds are able to benefit from the opportunities that higher education provides and from the undoubted outcomes and lifelong benefits that higher education brings.
The noble Lord, Lord Willetts, and others, referenced the work of the IFS, commissioned by the Department for Education and published last week alongside the LEO statistics. The noble Lord worked hard to make it as detailed and wide-ranging as possible. There is a clear message there. It is still very worth while to go to university. In terms of the lifelong returns, that varies by subject, but the vast majority of people who go to university will gain, as well as all the social benefits that noble Lords have identified, a considerable return over their lifetime from having done that.
Having said that, and given the work that we are doing and the differential between subjects that the research identifies, it is the case that, for some subjects, the financial return is not as great, and for some it is actually negative. Of course, that does not mean that people should not continue, for example, to train to be teachers—as I did—or social workers. Of course it does not mean that people should not study performing arts of creative subjects—for all the sorts of reasons that the noble Earl, Lord Clancarty, spelled out. What it does mean is that everybody should make those choices, particularly given the investment they are making, on the basis of the best possible information. We are determined, working with UCAS and Discover Uni, to provide much clearer information to people making those decisions about what they can expect from a higher education course and where they can expect that to enable them to go.
We have committed to increasing the number of starters on courses that lead to priority occupations related to our industrial strategy. That is the reason for producing, as we have, what we have called our Pathways to Priority Occupations document. We will use that and a whole range of other information and data to make decisions on support for higher education. We want to make that available for people making decisions about which courses they will do.
In relation to the point made by the noble Lord, Lord Willetts, and the noble Baroness, Lady Cash, about the returns to apprenticeships, there is already a variety of evidence on the economic returns to apprenticeships that has been published by the department, the Centre for Vocational Education Research and others. We will be considering how to apply a methodology similar to that used by the IFS to apprenticeships as we go forward.
We are committed to raising teaching standards in higher education, so that every student receives the high-quality education and strong outcomes that they deserve. We continue to support the Office for Students as it implements a stronger and more integrated approach to assessing the quality of teaching. Where lower-quality provision is identified, it should be improved for existing students before it expands further. We are working to ensure that the Office for Students can impose recruitment limits on those providers. As I have already said, the White Paper sets out plans to reward and incentivise excellence through measures such as linking tuition fee uplifts to the Office for Students’ high-quality ratings.
Several noble Lords, and the noble Baroness, Lady Deech, raised questions about how we protect academic standards. It is right of course that confidence in degree outcomes is key to maintaining the reputation of English higher education. That is why we have committed to a range of actions to explore risks to standards, including whether recent patterns of improving grades can be explained by an erosion of standards rather than improved teaching or assessment practices. I am sure that there is continuing improvement in both teaching and assessment. We are also looking closely at assessment integrity and the external examining system, including the threats and opportunities that artificial intelligence presents. Alongside this, we are working with the Office for Students to understand the risks presented by generative AI to academic standards.
I agree with the noble Lord, Lord Tarassenko, and I recognise the point made by the noble Baronesses, Lady Finlay and Lady Cash, that there are important opportunities in the use of AI within higher education. I do not believe that the primary opportunity is to reduce the number of staff, but there is a range of ways. I know, from having spoken to vice-chancellors, that there is a lot of work going on in higher education on how the benefits and opportunities from AI can be recognised.
I want to say something about how, in considering how we protect academic standards, we address the risks posed by certain delivery models that have developed in the sector. In particular, we have seen an enormous growth over recent years in franchised provision. This is why we are taking forward proposals to strengthen oversight of franchising in higher education by requiring large franchise providers to register with the Office for Students. The response to the consultation on that, published last December, sets out the details which will ensure that student loan funding is better protected from misuse and that students studying at franchise providers can have confidence that their courses are subject to rigorous quality requirements.
The changes we are making through regulations will ensure that large, unregistered provision is brought within the OfS’s strengthened regulatory regime while not increasing the burden on smaller providers. These regulations are the next step in the Government’s programme of work to strengthen the integrity of the student finance system and ensure that franchise provision operates in students’ interests, with clear accountability and robust safeguards for public money. The lead providers must also take responsibility for ensuring the quality and governance of their partnerships and act swiftly where standards fall short, as will the Government and the Office for Students.
These risks to quality and oversight also underline the importance of safeguarding the proper use of public money. This Government take very seriously the need to ensure that we protect the student finance system from exploitation. That is why we are bearing down on any misuse or risk of misuse of that system. Where that occurs, and I am afraid we have seen some evidence of that through the Office for Students, it undermines student outcomes, damages public trust and diverts funding away from legitimate higher education.
Further, we intend to consult on a new minimum English language requirement that will ensure those receiving student finance are able to engage fully with their course. We want to ensure that public funding supports students who are able to benefit from the investment the Government make in higher education. I know that mature students, in particular, may come to higher education through different pathways and different academic routes. We are really keen to ensure that access to higher education remains open, but the aim also has to be to ensure value for money and protection for those students. Frankly, students should not be mis-sold courses that they are not equipped to undertake. We will not set up arbitrary barriers to participation but will, in consultation and in the light of evidence, think carefully about the potential impacts on students and providers as we take forward this approach to safeguard students, safeguard our student finance system and balance access with successful participation in higher education.
Several noble Lords raised student finance, including the noble Lord, Lord Isaac, and my noble friend Lord Liddle. Our student finance reforms are already regearing that system to better support disadvantaged students, make things fairer for graduates and create a more flexible, responsive post-18 education system, as I have said, through the introduction of the lifelong learning entitlement. We are also future-proofing maintenance loans by committing to increase them in line with forecast inflation every year. We are making care leavers automatically eligible for the maximum rate of maintenance loan from the next academic year, providing vital support for one of the most vulnerable groups in society. We are reintroducing targeted means-tested maintenance grants from the academic year 2028-29 to provide disadvantaged students with up to £1,000 per year on top of existing maintenance loans, funded by a levy on providers for international students.
We know, as we have heard today, that some graduates are concerned about the cost of loan repayments, and that is exactly why we are making the system we inherited fairer. Maximum interest rates on plan 2 and plan 3 student loans will be capped at 6% for the academic year 2026-27, delivering stability and protection for graduates from escalating student loan interest. We increased the repayment threshold for plan 2 loans in April 2025 and have increased it twice again. This is higher than the average graduate salary of £28,100 three years after graduation. I have already this week argued why I do not believe a graduate tax is the answer to the problems of student finance.
As I am coming to the end of my time, let me close this debate by thanking the noble Baroness, Lady Deech, for bringing this important and timely issue before the House. This Government remain firmly committed to a higher education system that is both world-leading in quality and fair in its access, and one that delivers value for students, graduates and taxpayers, including those who do not go to university, and that equips learners with the skills they need to succeed throughout their lives. I look forward to continuing to work with noble Lords across the House to ensure that our world-leading higher education sector continues to thrive.
Baroness Deech (CB)
My Lords, this debate has sounded the alarm to the Minister and the department about what is going on in our universities. In fact, ever since Prime Minister Tony Blair, the attitude of successive Governments has been somewhat “light the blue touchpaper” in relation to numbers and “stand back and see what happens”.
There is a real crisis, and the fact that we have gathered this afternoon such a galaxy of leading academics of this country is in itself a tribute to the effect of higher education. In fact, there are dozens of other Members of the House—maybe more than that—who could not be here this afternoon but who are also the most distinguished academics. However, I hazard a guess that many of them, like me, and as the noble Lord, Lord Liddle, said, benefited from free tuition, maintenance grants and a smooth passage through higher education.
Not least of our luminaries in this House is the noble Lord, Lord Rees. If ever there was an exemplar of scientific research at the highest level, recognised around the world, it is him, and it is a privilege that he sits here. I think he stands in himself for a more flexible attitude to higher education, less of a division between humanities and science, and the contribution that scientists can make to the general well-being of the country. We should learn from that and adopt a more flexible approach, whether it is allowing students to have more of a mixture of subjects or turning some universities into places that offer a different sort of learning, or even over a shorter time. I would call the noble Lord, Lord Rees, the CP Snow of our age, because that is what he has expressed to us in his time here.
There were some disagreements among us, but I think there has been very broad division on the fact that AI needs careful attention, as the noble Baronesses, Lady Finlay and Lady Cash, and the noble Lord, Lord Tarassenko, said. Many of us agree that salary is not the main issue. How many of us said to ourselves, “What’s the salary going to be?” when we went to education? I am sure we did not say that. When I was choosing students at admissions and said to them, “Why have you chosen this subject?”, if they said to me, “Because of the salary”, I can assure your Lordships that it would have been an immediate thumbs-down. It is the morality, as the right reverend Prelate said, and the personal qualities that are drip-fed into you by those precious three or four years, and many of us have agreed on that—the noble Baroness, Lady Freeman, and others.
As people spoke, I was thinking, “Is it not such a good thing now that members of the Royal Family go into higher education, and even the women?” That was not the case so long ago. The values of higher education will indeed show themselves out in the attitudes and benefits that the Royal Family can bring to us.
Access remains important. I agree with the noble Baroness, Lady Warwick, who herself did so much for the higher education sector, that access is important, but, putting it rather crudely, I think access should now swivel to class rather than ethnicity. I think the problem is with poor students, especially poor white students, rather than focusing all the time on diversity of ethnicity.
As I have already mentioned, research is vital. We led the way with the Covid vaccination and AI. Unless research is supported, as the noble Lords, Lord Patel, Lord Bew and Lord Stevens, and the noble Baroness, Lady Finlay, said, Britain will sink back. Our research is world beating and it benefits us personally.
Freedom of speech has been a passion of mine for a long time. I was pleased to hear the noble Lord, Lord Verdirame, and the noble Baroness, Lady Cash, express their anxieties. It is something that we absolutely must all promote, lest our universities sink down.
Student loans remain a real problem. I confidently predict that they will topple over and the whole system will not survive. It cannot. Something else will have to take its place. My bet is on some form of graduate tax. One can see student loans becoming unaffordable and the debt to the country mounting up and being a deterrent.
We are all keen to see the arts flourish regardless of salary, and we hope that the Government will recognise that. We need to see vocational education flourish, whether through apprenticeships or different types of universities, as the noble Lord, Lord Trees, said, so there is much that unites us. I remain troubled about international students as they will be a great cost to the system, especially if, as was formerly the case, three times more EU students come here than our students go there, and they are not paying their full whack and not repaying. That is a real problem.
We have a wonderful system. All of us here implore the Minister to listen to what the academics here have said and to preserve that system with special attention to the arts and the fragility of the loan system.
Motion agreed.