Higher Education: Funding

Baroness Wilcox Excerpts

Wednesday 27th October 2010 Lords Chamber

Moved By

[Baroness Wilcox]

That this House takes note of the Independent Review of Higher Education Funding and Student Finance.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, the late John Masefield, poet laureate, once wrote that:

“There are few earthly things more beautiful than a university: a place where those who hate ignorance may strive to know, where those who perceive truth may strive to make others see”.

I welcome this opportunity to debate the central role that higher education plays in our country so soon after publication of the outstanding report produced by the noble Lord, Lord Browne. Last week, my colleague the Minister for Universities and Science placed the noble Lord’s report on a par with those of two distinguished former members of this House: Lord Robbins and the much missed Lord Dearing. I very much echo that view. The noble Lord’s review has earned many plaudits, and rightly so. Of particular importance to me is the spirit in which he has conducted it. While the focus was clearly on funding and student finance, his abiding purpose has been to secure the long-term future of so many great institutions, that they may continue to be the beacons of wisdom and tolerance that Masefield praised.

I cannot emphasise enough that our universities are and must remain centres of free thought and discovery, and seats of learning in both the sciences and the arts. While the Government, who are currently formulating a detailed response to the noble Lord’s report, are clearly concerned with universities’ contribution to our economy and skills base, they will never lose sight of the wider purposes of higher education. There are many experienced figures on all sides of this House whose opinions I look forward to hearing today. Although my own experience is more modest, I am familiar with the HE sector from a number of perspectives: as a graduate and, latterly, a governor of what is now the University of Plymouth and as a governor of Imperial College. I also take a close interest in the UK’s outstanding research base through roles in several organisations, including the Foundation for Science and Technology and some work with the Royal Society.

Perhaps I may begin by reminding your Lordships of the context in which the noble Lord's report was published and by highlighting some of its central arguments. I defer to him, of course, on the detail.

We should not forget that it was the previous Government who invited the noble Lord to undertake this review, but on a cross-party basis. The coalition Government hope that consensus on the future of HE will continue. What cannot continue, however, as the noble Lord concludes, is the current unsustainable system of funding, and any reform must be reconciled with the parlous state of the nation's finances, which the Chancellor addressed in last week's comprehensive spending review. The Chancellor has announced that the overall resource budget for HE—excluding public funding for research, to which I will return—will fall from £7.1 billion to £4.2 billion by 2014-15. This is because we have accepted the main idea in Browne—that money for universities should flow through students rather than the funding council HEFCE. The noble Lord’s was, of course, a review on higher education in England, but it is of interest across the UK. My ministerial colleagues and I will work with the devolved Administrations on how the proposed reforms in England might affect Scotland, Northern Ireland and Wales, so that they can decide how to proceed.

The key point, though, is that money is not being withdrawn from the system but going into the hands of students by giving them loans to cover their tuition. With funding following students, whether they undertake degrees in Portuguese or particle physics, there will be stronger incentives for institutions to improve the quality of teaching and information that they provide. Indeed, it means that those universities which offer a better student experience from the lecture theatre to the careers service, from the library to the union’s bar, can expand to accommodate greater numbers of applicants. That process of universities responding to the expectations of more discerning students is a powerful means to drive innovation.

It is also by far the best option for maintaining quality in the sector, something which would have been impossible had we decided to cut the unit of resource per student or introduced a graduate tax. The noble Lord rejected both as unviable. Neither is compatible with his desire, and ours, to preserve UK universities among our greatest national assets. Higher education continues to deliver a significant lifetime earnings premium to its beneficiaries. The noble Lord has concluded that graduates should make a greater contribution to the cost of their education, but within a system that is both fair and progressive. It is to these fundamental principles that I now turn.

It bears repeating that the noble Lord, Lord Browne, was entirely right to insist that there must not be any up front tuition fee for students. The Government are committed to social mobility. We know that going to university is often a transformative experience, opening new vistas for students and great opportunities. Initial costs would deter people from less affluent backgrounds from applying to HE. For the same reason, we welcome his ground-breaking recommendation that part-time students be exempt from up front fees. This is not only fair in making HE more accessible to older students or people whose work or family commitments make full-time study impossible; it will also stimulate innovation in the sector as universities develop different modes of delivering different courses and degrees.

The goal of social mobility informs other features of the noble Lord's report, including his recommendation for a more generous maintenance grant available through a simplified system which the coalition is now considering. Then there are the graduate contributions linked more progressively than under the existing arrangements to an individual's ability to repay. Not all graduates, of course, go on to lucrative jobs. The noble Lord has proposed raising the income threshold below which no graduate would begin to make contributions. Above the threshold, higher-earning graduates would pay a real rate of interest, but repayments would cease should their salary decrease, say, or they choose to look after a young family. His modelling would mean that the top third of graduate earners would repay more than twice as much as the lowest third. We believe that is fair and progressive.

When it comes to setting higher tuition graduate contribution levels, the Government are keen, like the noble Lord, that institutions demonstrate how they will support the vital work of attracting applicants from less affluent or non-traditional backgrounds. Universities have undoubtedly made progress on widening participation. However, the Office for Fair Access has found that the participation rate among the least advantaged 40 per cent of young people at the top third of most selective universities “has remained almost flat” since the mid-1990s. The Government will support universities to raise their game on access by improving advice for young people at school and college, for example. Indeed, the Deputy Prime Minister has already pledged £150 million for a national scholarship scheme to improve access for students from families of modest means.

It should be clear from this brief summary that the Government accept the overall thrust of the noble Lord’s report. We are currently looking closely at the detail. That is deliberate; it is crucial that we proceed on a sound and sensible basis. There are relatively tight deadlines to ensure that we can amend regulation around fee structures and student support in time for universities to include accurate information in their prospectuses. We will also need to make some changes to primary legislation to adopt the noble Lord’s proposal for a real rate of interest on repayments. At the same time, it is not only prospective students and their families who are dependent on our getting this right but universities themselves and a country urgently seeking to balance the books. We need to handle any transition with sensitivity.

There was another dimension to the spending review that was of huge significance to universities: the decision to protect the overall level of funding for science and research programmes in cash terms. This ring-fenced settlement, worth £4.6 billion in each of the next four years, is unquestionably good news. Across the country we have excellent university departments with the critical mass to compete globally and the expertise to collaborate with businesses and other organisations. The settlement should mean that we can continue to support them. I remind noble Lords that the Research Councils cover the arts and social sciences, in addition to the physical and life sciences. Moreover, Sir Bill Wakeham, at the behest of the Research Councils and Universities UK, has identified a range of efficiency measures, which universities can now pursue to mitigate the effects of inflation and preserve research funding in real terms.

From my association with Imperial College, I recognise the value of a stable investment climate. It allows teams of researchers to plan ahead and gives business, both domestic and international, reassurance that our excellent scientists will be able to complete projects. The same is true for medical charities and other investors. It is vital that we maximise returns on this investment, continuing to produce outstanding research more cost-effectively than any other country in the G8. The Government will continue to support capital investment in priority areas, hence the recent allocation of £69 million to the Diamond synchrotron in Oxfordshire, where scientists conduct ground-breaking research in the life, physical and environmental sciences. Elsewhere, my department and the Department of Health are co-funding the UK Centre for Medical Research and Innovation, alongside medical charities and University College, London. For similar reasons, we welcome the progress that HEFCE is making on developing an assessment framework that combines recognition of the highest levels of research excellence with reward for the impact it has on the economy and society. We will also work with HEFCE to reform the higher education innovation fund to increase the rewards for universities that are most effective in business engagement.

It would be foolish to deny that much work remains to keep the country’s universities on a secure footing, and equally foolish to suggest that the Government have all the answers. Nevertheless, in adopting the bulk of the noble Lord's recommendations—in spirit, if not always in detail—we will not lose sight of what a modern university is for. That is certainly the case in seeking to improve the experience of students so that they may embark upon the next stages in their lives with the skills and confidence to do rewarding jobs, and I mean “rewarding” in the broadest sense. It is certainly the case in making sure that one's financial circumstances are no obstacle to a higher education and at an institution where one's talent and ability can best be realised. It is certainly the case in terms of allowing outstanding researchers, home-grown and international, in English literature as well as engineering, to carry on producing world-class work.

However, I make no apologies for stating that the Government also want universities to help drive economic growth. As the noble Lord, Lord Browne, notes in his report:

“Higher education is a major part of the economy, larger in size than the advertising industry, and considerably larger than the aerospace and pharmaceutical industries”.

In fact, almost every industry, and certainly the trio I have just mentioned, is influenced by the teaching and research that goes on in HE. We want university/business links to go from strength to strength in terms of R&D and in tailoring courses around the needs of employers.

We must harness this valuable asset in a way that gives universities the best opportunity to thrive, and that is by respecting another defining feature of UK institutions besides their traditions and their capable staff. I refer to their long-standing autonomy. Our universities will make a greater contribution to society and the economy by pursuing their various missions with maximum independence from the state.

Better teaching and world-leading research, improved access and social mobility, closer links to business and public services, affordability and autonomy are the principles that will underpin any reforms, and the Government will manage them cautiously with a view to a stronger, more vibrant HE sector. I look forward to the debate and beg to move.

--- Later in debate ---

[Baroness Wilcox]

My Lords, I thank noble Lords on all sides of the House for an excellent debate. The noble Lord, Lord Liddle, said that it was a tutorial and that is what it was for me. I thank the noble Lord, Lord Browne, for the work that he did, which enabled us to have this debate today. I also congratulate my noble friend Lord Boswell on a lucid and eloquent maiden speech. He is distinguished as a former Education Minister and has great experience in another place. He will be a great asset to your Lordships’ House. We look forward to hearing his views voiced often in this Chamber.

I should like to respond to as many questions and comments as I can but with one necessary and obvious caveat: there are two major pieces of work that set the context for reform of our higher education system—the report by the noble Lord, Lord Browne, and the comprehensive spending review. The Chancellor has already stated that we will build on the recommendations in the former to put universities on a sustainable financial footing so that we can maintain the quality and competitiveness of the sector. We will also provide financial support and solid advice to individuals to make sure that a decent university education is not beyond any person either because of pecuniary need or because of inadequate information. The Government will shortly produce a detailed set of plans covering both areas and I cannot pre-empt that this evening.

The thoughtful contributions from the noble Lords, Lord Maples and Lord Sawyer, the noble Baroness, Lady Morris, and others, illustrate the challenge facing the Government in responding to the Browne recommendations. The noble Lord, Lord Maples, strongly advocated the benefits of competition and unrestricted fees. The noble Baroness, Lady Morris, and the noble Lord, Lord Sawyer, are very concerned by that prospect. Both views are inspired by genuine concern for the welfare of students and the success of universities. The Government will truly find it challenging to please everyone, but we will do our best.

My noble friend Lady Falkner made some most interesting suggestions about improvements to access. She suggested that pupils receiving the pupil premium who have the desire and aptitude to go to university might get a first year free. We will carefully consider whether this could be achieved, building on the excellent work that many universities are already doing to support the neediest students.

Social mobility is non-negotiable for the coalition. We will improve the advice and guidance available to young people so that they are aware, for example, of the qualifications required for different courses and careers—and well in advance of applying. We will establish clearer, alternative routes into HE besides school or sixth-form college and we will communicate more effectively the considerable financial support available to applicants from poorer backgrounds. We note carefully what the noble Baroness, Lady Kennedy of The Shaws, had to say about the importance of fair access and of mentoring and raising the ambitions of all our young people. It might well be that lower expenditure on bursaries but higher expenditure on mentoring and links between universities and schools would prove more effective in improving fair access.

Just as we are determined to put the challenges, pleasures and rewards of a university experience within reach of people young and old, part-timers and those looking to develop new expertise, we also expect that experience to equip graduates with the knowledge and skills required to make their way in the world. The financial reforms conceived by the previous Government did not always lead to a qualitatively or quantifiably better student experience. We will expect universities to do better this time around, whether through better teaching, improved contact time with faculty or relevant preparation for life in the workplace and beyond. As my noble friend Lord Maples argued, allowing greater competition—such as new providers and alternative modes of learning—will help, boosting what is already a diverse sector.

The noble Lords, Lord Smith and Lord Hunt, asked whether departments will be allowed to close. It is not for the Government to tell universities which subjects they should teach or in which departments those subjects should be taught. That is for autonomous universities to manage for themselves. However, they will need to become more responsive to demands from students and employers.

I will deal with student support and university funding separately. For the former, I reiterate the recommendations made by the noble Lord, Lord Browne, which, in the Government’s view, set the right strategic direction and to which we are currently preparing a detailed response.

The noble Baroness, Lady Blackstone, asked about the default rate on higher fees, default by EU students and modelling. The repayment regime will be more progressive, which means that low-earning graduates will repay less than they do now. This is a welcome feature of the proposal of the noble Lord, Lord Browne, so it is not a question of greater default but an assurance to students who end up as low-earning graduates that their repayments will be fair. The European Union graduates will be required to pay their graduate contribution. There is no evidence so far that they are less willing to do so than home students. However, if they are, they will be pursued and their repayments enforced by the courts if necessary. To answer the final question asked by the noble Baroness, I can confirm that the Government plan to release data that underpin the financial modelling.

No students, part-time or full-time, will be required or expected to contribute to the cost of their tuition until they graduate. As graduates, they will begin to make contributions only once they earn a specified income, which will be higher than it is now. Should their earnings fall beneath that threshold, contributions would cease until earnings recovered. Full-time students from disadvantaged backgrounds can, in future, expect a more generous maintenance package, linked to their family’s income.

My noble friend Lady Sharp asked how we will help middle earners, especially those in valuable but low-paid professions. At 9 per cent of earnings over £21,000, these graduates will contribute at an affordable rate. Remember that this is not like a credit card debt. It does not affect one’s ability to obtain a mortgage or to get on the housing ladder, because it is income-contingent. Here I welcome the helpful, well informed comments of the noble Lord, Lord Desai. On bursaries and golden hellos for teachers and social workers, I must defer to the Secretaries of State for Education and Health, who oversee these schemes.

I have skipped away from the question asked by the noble Baroness, Lady Morris of Yardley, about protection for non-STEM subjects. The noble Baroness is right to remind us of the importance of universities teaching a wide range of subjects as part of our civilised society. I can reassure her that the coalition Government will keep this goal in mind when we consider our response to the report by the noble Lord, Lord Browne, and when we come to implement our decisions. I can also reassure her that we take very seriously the need to ensure that the poorest students get adequate financial support for living costs while at university.

The noble Baroness, Lady Blackstone, my noble friend Lord Smith and the noble Lord, Lord Hannay, asked about the timing of the government response, the HE Bill and the future of HEFCE, OFFA, QAA and OIA. The noble Baroness, Lady Blackstone, and my noble friend Lord Smith asked whether there would be a full government response about the shape of the higher education sector as a whole. We have committed to a higher education White Paper this winter followed, subject to parliamentary time, by an HE Bill later in this extended Session. This will invite views on a wider framework for higher education, including on the roles of HEFCE, OFFA, QAA and OIA. We are open to suggestions but, as my colleague the Minister of State for Universities and Science has already made known, we do not find the idea of a superquango inherently attractive. However, we accept the point made by the noble Lord, Lord Hannay, that universities and students urgently need to know the financial position and rules for the year 2012-13, and we will ensure that this is not delayed by lengthy discussions about quangos. We hope to make an announcement shortly.

I remind noble Lords that the previous Government had already reduced the spending on higher education institutions for 2010-11 and planned to go further. Tuition funding will in future be channelled much more through students themselves instead of through a block grant. Universities will decide what they charge for their courses but, as the Deputy Prime Minister has signalled, we expect to set a cap beyond which these charges cannot rise. We do not envisage unlimited university fees for UK and EU undergraduates, and if students are being asked to accept that they will, as graduates, face higher contributions than currently, we will expect a stronger performance from universities on fair access, transparency of information for students and parents and the overall quality of the student experience.

The noble Lord, Lord Norton, suggested that the Government should remove completely the cap on tuition fees. As the Secretary of State and the Minister of State for Universities and Science have stated, the Government recognise the concerns that uncapped fees would put off some applicants, particularly those from low-income families, and the need to balance these against the needs of our research-intensive universities to compete with their global competitors. We therefore have reservations about removing the fee cap completely, and the Deputy Prime Minister has made that known. The Government will put forward proposals on fee levels very shortly. I hope that also answers the question asked by the noble Baroness, Lady Blackstone.

Several noble Lords, including the noble Lord, Lord Giddens, and the right reverend Prelate the Bishop of Wakefield, raised concerns that these proposals on the arts and humanities would be to the detriment of the arts, humanities and social sciences. Many noble Lords spoke eloquently about the social, cultural and spiritual value of these subjects. On this, I wholeheartedly agree. These necessary reforms would not abandon the arts and the humanities and we will, through billions of pounds of investment in student support for tuition costs and in generous funding for research, continue to enable these disciplines to thrive. I make no apology for investing money in subsidising the teaching of STEM subjects because it is important to limit the proportion of costs that are passed on to graduates of these more expensive courses.

The noble Lord, Lord Bilimoria, and my noble friend Lord Norton spoke about the Government reducing public spending on higher education by so much. It is certainly true that in the spending review we have accepted that we need to reduce the public spending that we pay to universities via HEFCE, but that does not mean a straightforward reduction in the money that universities can secure from the public purse. If more funding flows to universities from those who study there and the Government lend students the money to pay that contribution on favourable terms, our overall GDP expenditure on higher education need not fall.

The spending review also contained several assumptions about efficiency savings within universities. They were focused around pay, pensions, procurement and shared services. It will be for each autonomous institution to decide how it will respond. More information about HE funding will, as usual, be contained in the annual grant letter to HEFCE, which the Government will send at around the turn of the year.

My noble friend Lord Norton of Louth suggested that we will not be able to compete internationally, as other countries invest in higher education. Let me be clear: the current level of investment in higher education is significant. However, the country is committed to delivering a tough deficit reduction programme. Only by rebalancing the contributions to higher education between the state and the beneficiary can we avoid a damaging impact on the quality of higher education.

I return to the related matter of research funding. The Government have recognised the substantial contribution that universities around the country make through research to economic growth and to the overall health and cohesion of our society. The decision to protect public investment in our highly productive science and research base represents a major investment in future growth. University reputations are built not just on teaching but on the quality of their research. The excellence of university research is also a critical factor in investment decisions by international companies. UKTI has used the strength of the United Kingdom research base to attract hundreds of R&D projects into the country.

I might now be taking the next points out of the flow of my response, but at least the noble Lord, Lord Willis of Knaresborough, the noble Baroness, Lady Blackstone, and others will get an answer. When I referred to the proposed HE White Paper and the HE Bill, I should have added that I welcome the suggestions that various noble Lords have made on the issues that we should consider in that White Paper, including the remarks made by the noble Lord, Lord Willis, about the spread of degree-awarding powers and research funding. We will consult widely with the sector, students and experts, such as the noble Lord, when formulating this White Paper.

The noble Baroness, Lady Kennedy of The Shaws, referred to NUS proposals on graduate contributions. The progressive repayment system proposed by the noble Lord, Lord Browne, shares many of the attractive features of a graduate tax and of the NUS proposals. I welcome the questions from the noble Lord, Lord Triesman, but I am sure that he will understand that I cannot pre-empt the Government’s full response, which will be announced shortly.

In conclusion, I remind noble Lords of the stakes involved in university reform. The Times Higher Education world rankings, which were issued a couple of months ago, highlighted the jewel that is our HE sector. The United Kingdom is home, once again, to 29 institutions in the top 200, second only to the United States of America.

League tables of this kind never tell the whole story, of course, but they at least provide a part of the narrative where higher education has become a global endeavour, where academics and students are mobile internationally and where universities in emerging nations are rising in stature. At present, the UK punches well above its weight. The quality of our higher education is one of the best adverts for our country and this must continue.

The challenge is to make sure that UK institutions dominate league tables in a decade’s time and in decades to come. We can meet one part of this challenge by building research partnerships with universities overseas, and that is happening already. My colleague, the Minister for Universities and Science, will be making a second visit to India next month, where he will discuss our role in this. However, much of the challenge will come down to introducing effective changes at home, for a renewed focus on higher education as a driver of social mobility, business growth, innovation and skills development is critical to our shared future.

The notion of a shared future brings me back to my starting point in this debate: the idea of autonomous institutions stimulating the curiosity and creativity of our people, reminding us of our common heritage and inspiring us in regard to human potential. The Government are duty bound to protect this invaluable national resource, and we will.

[Lord Hannay of Chiswick]

Can the Minister make a little more coherent the eloquent remarks she made about this being an international matter and that Britain’s place in the international market is strong and needs to become even stronger? Given the incoherence between that and the issue of immigration, I do not see how the two can be fitted together in the timetable she has given. Universities are being hampered now by the immigration system that is temporarily in place, and they do not know whether they will be hampered even more by the one that will be put in place. Can she not say anything about bringing some coherence into these issues?