Universities
Baroness Warwick of Undercliffe Excerpts(1 month, 1 week ago)
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Baroness Warwick of Undercliffe
That this House takes note of the findings and recommendations in the Universities UK report, Opportunity, growth and partnership: a blueprint for change, published on 30 September.
Baroness Warwick of Undercliffe (Lab)
My Lords, as a former chief executive of Universities UK, I appreciate the interest of this House in debating the findings and recommendations of its recent blueprint. It is good to see so many speakers from all sides of the House. The report sets out a stark question in which we all have a stake: how can we ensure that our universities are in a stronger position in 10 years than they are today?
Universities are one of our great national assets. They are a source of real strength in the UK. They provide opportunities for individuals from an ever-wider range of backgrounds. They are essential to our current and future economic success, to strong public services and to flourishing towns and cities in all parts of the United Kingdom. As the report argues, the success of our universities and our country are intertwined. Neither can be said to be in the most robust health today. It says forcefully that as a nation we have a choice. We can allow our great universities to slide into decline or we can act together to ensure that they take a different path and thrive in the next decades.
Our higher education sector makes a £265 billion annual contribution to the UK economy. This means that for every £1 of public money invested in higher education across the UK, £14 is put back into the economy. Universities play a critical role in supporting public services, with more than 191,000 nurses, 84,000 medical specialists and 188,000 teachers expected to graduate between 2021 and 2026. The Government have set out a number of missions. Universities have a central role to play in achieving each of them. They will play a foundational role in the industrial strategy and continue to be a source of competitive advantage to the UK in our position on the global stage. They are a major source of export earnings and attractors of foreign direct investment. In short, they are engines, which we need to be firing on all cylinders.
We all know that our universities are facing enormous financial challenges. This is also true of students, of course, who struggle to make ends meet as costs rise and maintenance loans fail to keep pace, an issue to which I shall return. However, the blueprint sets out to be about much more than funding. It considers the central missions of the university sector and what the country needs of it. It asks what is working well and what could be better. It is consciously self- critical.
In putting together its contents, Universities UK asked a set of commissioners—some of them from this House—to act as critical friends and to hold a mirror up to the universities to allow for a thorough examination of what needs to change in the future. I commend that approach. I am pleased that the noble Lord, Lord Willetts, as the commissioner for chapter 6, is contributing to the debate today. The commissioners were largely but not exclusively drawn from outside the higher education sector to give fresh and more objective inputs, drawing on their diverse range of expertise. Universities UK also consulted closely with its 141 members and with stakeholders such as the CBI, and with related sectors, to hear and input their views.
The blueprint advocates five shifts: to expand opportunity, to improve collaboration across the tertiary sector, to generate stronger local growth, to secure our future research strength and to establish a new global strategy for our universities. Chapters on each of these topics address where performance is strong and where it could improve, generating recommendations for universities as well as for government on how we go about that. The blueprint also sets out three foundational areas where change is needed: putting universities on a firm financial footing, streamlining regulation, and improving how the impact of universities is assessed. Throughout the report, there is a lot of emphasis on what universities can do themselves. As the president of Universities UK, Professor Dame Sally Mapstone, says in her foreword, it is “consciously reform-driven”. Happily, it anticipates many of the same areas for reform that the Education Secretary, the right honourable Bridget Phillipson MP, set out in her recent statement to the other place, to which I will return.
Each chapter generates practical proposals for change, which I hope will provide a foundation on which the Government can build in determining their own approach to university reform. I have said that the blueprint is not exclusively about funding. However, it also puts forward very clear proposals in that area and about student support.
I believe it is widely understood in this House that the funding of universities across the UK is structurally unsustainable. In England, the most recent Office for Students report on the financial sustainability of the sector indicated that 40% of providers expected to be in deficit in 2023-24, and a rising number of universities reported low net liquidity days. Does my noble friend agree that joint efforts from the Government and the sector are of the utmost importance to ensure that higher education returns to a stable financial footing?
University research and development activity is world leading, but the current system relies on a disproportionate and growing cross-subsidy from universities to make this activity viable. Given the financial deterioration of universities, this has produced a huge gap in funding and renders this vital activity exposed. Fees from international students currently make up some of this shortfall, but I think we all agree that this is not a robust or sustainable solution. An ambitious and long-term approach is needed to ensure that the UK retains its international competitiveness and continues delivering on the Government’s ambitions for economic growth. I hope the Minister will comment on this.
For students, rising living costs in England have coincided with below-inflation increases in loan funding for many years. The removal of grants was, in my view, a retrograde step that I would like to see reversed. The blueprint argues that both fee and loan levels should be linked to inflation on an ongoing basis, and that grants should be restored. It proposes a two-phased solution to the sector’s funding challenge. The first phase is to be focused on stabilisation, and the second on an enduring solution that puts universities on a path to longer-term sustainability.
The new Government should be congratulated for their swift action on the first goal in the recent announcement on tuition fees and maintenance loans. The decision to end the near 10-year freeze in tuition fees cannot have been easy for the Government, but it is the right thing to do. The financial sustainability of the university system is not a challenge that can be ducked. Inflation has eroded the real value of student fees and maintenance loans by around a third, which has proved unsustainable for both students and universities. Last week’s announcement was a hugely important and courageous act, but only a first step. This inflation linking must become automatic each year.
Alongside this—and I congratulate my noble friend the Minister on her personal contribution to this—the Government have sought to stabilise international recruitment through efforts to communicate to international students that they are welcome and appreciated, and that the Government wish to support their ambitions. I ask my noble friend to go one step further and confirm that the graduate route is here to stay, and that action will be taken, at long last, to ensure that international students are properly presented as largely temporary visitors in migration statistics.
On the research side, we look to the Government to reverse the long-term decline in QR funding—a feature of all four nations of the UK.
The decision to index-link tuition fees and maintenance loans for one year cannot, as I have said, be the end of the matter. We need to carve a path for a second phase to transform the sector’s finances longer term, through a package of reforms. This is where universities must work with the Government to ensure that the Treasury is utterly convinced that investment in the university sector will assist in fostering stronger growth, getting more people into high-wage jobs, reducing social inequalities and supporting our national ambitions, through both a better skills system and our industrial strategy.
The five priorities for reform set out by the Education Secretary last week speak to these challenges. The blueprint shows that universities are ready to answer the call and are primed with ideas about how they can deliver. However, we should be clear that linking fee income to inflation does not solve the sector’s financial problem. It just stops the real value continuing to decrease. It seems churlish to mention that this one-year uplift will be more than offset by increased national insurance contributions, but that is the fact of the matter. As we approach the comprehensive spending review, there is a clear case for an injection of further public funding to go beyond stopping the slide to equip universities adequately to meet the Government’s reform priorities. This will also allow for rebalancing the way that we fund higher education with a fairer balance between public funding and graduate contributions, reflecting the fact that universities deliver both public and private benefits.
I am a firm believer that universities have to be architects of their own solutions. Universities UK has committed to leading a transformative programme of work that will bring universities together to share learning and good practice in efficiency, transformation and income generation. The work will also build on the sector’s rich tradition of finding efficiencies through collaboration by exploring the appetite for additional regional or national shared services. Universities UK’s transformation and efficiency taskforce is leading on this work. It will be established by the end of 2024 and will report in summer 2025.
I stress that across the university sector a huge transformation is already under way. As many noble Lords will be aware, universities in all parts of the country and of all types have been trying to balance shrinking budgets against rising costs. I am sad to say that a staggering number of jobs have been lost. Huge changes in the way that many universities organise themselves have been accompanied by changes to course offerings, reducing module options and, in some cases, cutting whole programmes of study. Some of these changes will be good and necessary, but many do us great damage, such as the worrying loss of modern foreign language programmes. There is an urgent need to act. Universities can and must take this head-on, as they are doing, but the Government must act too. It is in all our interests to do so.
Ahead of this debate, I consulted Hansard. In the past five years, there have been 44 references to “world-leading universities” across this House and the other place. There is great commitment and willingness across parliamentarians, the sector and wider partners to sustain and better our world-leading universities, but there is a clear choice. Our world-leading university sector can be allowed to slide into decline, or institutions and the Government can work together to ensure that the sector delivers for the nation into the 2030s. I hope the Minister will confirm that this is the path that they will take. I beg to move.
Baroness Warwick of Undercliffe (Lab)
My Lords, I thank the Minister for her constructive, positive and comprehensive response to the debate and for her commitment to work with the sector and to resolve the dangerous financial instability of universities. I am delighted that she will engage with the sector on that.
At this stage, I will not attempt to cover the very wide range of contributions. I think that everybody acknowledged the expertise around the House and the amazing number of ideas that have come out of the debate. All I will add is that the blueprint from Universities UK has provided an invaluable catalyst for a degree of consensus across the House on the issues which were powerfully raised in the report and which universities will need to take seriously when they look both at this debate and at their continuing dialogue with the Government and other stakeholders about the way forward. This is the start of a process, as Universities UK clearly says, and there were so many valuable suggestions, recommendations and, to some extent, remonstrations for the sector, which all need to be taken very seriously.
I thank all noble Lords for making such wonderful contributions to the debate. I am absolutely delighted that so many people right across the House were prepared to make a contribution on a Thursday afternoon, going on until almost 6 pm.
Higher Education Funding
Baroness Warwick of Undercliffe Excerpts(3 months, 1 week ago)
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Baroness Warwick of Undercliffe (Lab)
My Lords, looked at objectively, the crisis facing universities seems inevitable, given that the two key elements of their income have been undermined. Government grants have been cut by 78% over the last 12 years, and the level of fees paid for tuition in 2012 has not been revalued since then, so inflation has reduced £9,000 to £5,942 in real value. It is scarcely surprising that the sector regulator expects at least 40% of providers to be in deficit this year. As the noble Lord, Lord Krebs, and others have highlighted, research excellence is also at risk, as the funding method for our universities’ world-class research has been undermined as well.
Fees from international students, who pay the full cost of their tuition, have been the mechanism for trying to bridge these ever-increasing gaps in funding, and this helped while the numbers remained buoyant. But the numbers are inherently unstable and subject to, among other things, political changes in immigration policy. The drop in numbers this year reinforces this. I hope that the Minister today will undertake to change the previous government rhetoric on international students to restore confidence that the UK will be an open and welcoming place for them.
Recent independent scenario-planning shows that a significant proportion of universities are vulnerable to reductions in international student numbers, increased expenditure, and reduction in growth of undergraduate students—what UUK has called “a perfect storm”. At the same time, it is important to recognise that students, too, have been directly hit. Frozen household income thresholds and inadequate maintenance increases mean that the maintenance loan falls £582 short of covering living costs every month. Pressures on staff are leading to demands for pay increases to mitigate rising living costs.
Universities have not yet sunk under these pressures. Most have introduced restructuring and efficiency programmes. Some very unpalatable course closures have been made, which will inevitably restrict student choice; estates are being neglected; and carbon reduction plans are stalled. This cannot continue without irreparable damage being done. I am glad to say that our Government have recognised this; they have said that they are committed to a sustainable funding model which supports high-value provision. They are not short of suggested approaches as to what that funding model should look like, including from Members of this House.
The Secretary of State has said that she intends to “reform the system overall”, which may be eminently sensible, but it will inevitably take some time, possibly considerable time. In the meantime, all the pressures on higher education will continue, to the detriment of students, institutions at risk, and
“powering opportunity and growth and meeting the skills needs of the country”,
to quote Minister Janet Daby.
I urge the Secretary of State urgently to talk to Universities UK to ensure that her longer-term ambition does not mask the need to stabilise the system now. UUK has proposed measures that will
“create … space for a wider review of university financing”,
and I hope that my noble friend will ensure that the Government respond speedily.
I have focused on universities, but we have received some telling evidence from the FE college sector, where higher education is a relatively small but strategically important part of the provision. It, too, is facing increasing financial pressures. I refer specifically to the fact that demand in key areas such as construction, engineering, and health and social care is outstripping the funding that it has available to provide them. I hope that my noble friend the Minister will refer to this in her response as well.