Higher Education Funding

Baroness Smith of Malvern Excerpts

Thursday 12th September 2024 Lords Chamber

[The Minister of State, Department for Education (Baroness Smith of Malvern) (Lab)]

My Lords, I too am grateful to the noble Lord, Lord Krebs, for bringing to the House’s attention today the important matter of higher education funding. I also very much welcome the noble Lord, Lord Tarassenko, his maiden speech and the considerable expertise as both a student and an academic that he brings to our debate today. I thought I was relatively new, but I am pleased that there are now those who are even newer to this House than I am. I feel confident that he will make a strong contribution.

Our higher education sector is one of the very best in the world, and we are rightly proud of it. I have been very pleased with the tone of the debate today in which that fact has been largely recognised, not least, as the noble Lord, Lord Wallace, said, because a large number of Members of this House have considerable expertise in this area. I think I mentioned that in my maiden speech when I said how much I was looking forward to learning from it, not realising that I would be brought to the House on a very early Thursday afternoon to respond on that. Nevertheless, I welcome the contributions made today.

I welcomed the contribution of the noble Baroness, Lady Barran, in which she talked glowingly about the university sector. I wholly understand that that has been her long-term approach. It is just a shame that it was not so much the approach of the previous Government, who tended, particularly towards the end of their time in government, to see higher education as an opportunity for political point-scoring rather than the enormous benefits it brings to the country.

The noble Lord, Lord Krebs, challenged me on the number of higher education institutions. I have to say to him, “It’s complicated”. The UK higher education sector comprises different types of providers, including universities and university colleges as well as HE providers without university titles, and there are also FE providers offering HE courses. In 2022-23, there were 291 HE providers in the UK reporting student number data to HESA. These figures do not include further education providers that offer HE courses as they report data to the Education and Skills Funding Agency. I hope that has brought some clarity to the debate.

I return to the contribution of higher education. UK higher education creates opportunity. It is an engine for growth in our economy, and it supports local communities. As the Robbins report set out over 60 years ago, and as I believe today, universities have a broader role to play as well in shaping and enriching the society we live in and the culture we enjoy—not just for each of us but for all of us. For that reason, I disagree with the noble Lord, Lord Trees, that we have too many students and too many universities. I do not believe that we should cap student numbers or the number of universities, because of the contribution to individuals and to our society as a whole, and, of course, because of the crucial role they play in promoting economic growth. Universities will have a key role in developing the growth that is so important for this country. For these reasons, I assure noble Lords that this Government are committed to creating a secure future for our world-leading higher education providers, so that they can ably serve and benefit students, taxpayers, workers and the economy.

Several noble Lords emphasised the significant contribution that higher education makes. My noble friend Lord Howarth, the noble Lord, Lord Willetts, and his campaign manager, the noble Lord, Lord Johnson, and the noble Baroness, Lady Clark, are all right that the higher education sector has a huge role to play locally, nationally and internationally in driving growth. Teaching and research activities are estimated to generate £158 billion total economic impact for the UK, with a further £37 billion in value from education exports.

The right reverend Prelate the Bishop of Sheffield and my noble friend Lord Watson identified the substantial contribution made throughout all regions and locally in the UK, and although economic and employment impacts are the largest, in absolute terms, in London and the south-east, the sector’s proportional contribution to employment is between 2% and 4% in all individual regions and nations. It is an integral part of our landscape at a local level as well. Why do so many people—colleagues in the other place, for example—campaign for university campuses in their constituencies? It is because they understand the economic, social and cultural power they can bring to the communities that they represent.

I did not agree with everything that the noble Baroness, Lady Bennett, said about universities, but where I do agree with her is that they are a public good as well as autonomous organisations and that they owe a duty to students and staff. Given this enormous contribution, we may ask ourselves—as the noble Lord, Lord Krebs, did in introducing the debate—why we are facing such a very worrying financial position in the higher education sector. I agree with him: whether or not we call it a crisis, it is enormously challenging for our higher education sector.

The Office for Students has identified that 40% of higher education institutions will be in deficit this year. For that reason, I understand why the noble Baroness, Lady Clark, and my noble friend Lady Warwick urged speed in addressing this issue. This Government did act quickly: we refocused the Office for Students on to the issue of financial sustainability; we brought in the interim chair, David Behan, who is helping to ensure that we have that focus through the Office for Students; and we have already started reviewing options to deliver a more robust higher education sector. It will take some time to get right but I do not believe that it will take as long as some people fear. We are determined that the higher education funding system delivers for our economy, for universities and for students. I look forward to bringing further information about this to this House.

I also recognise, as noble Lords have identified, the impact of the current situation on both courses and staff, although I say to my noble friend Lord Hanworth that I think that is an impact on all staff. Trying to create a distinction between academic staff and those who support them to deliver their work is not particularly helpful.

The noble Lord, Lord Krebs, suggested that I was relaxed about higher education providers closing. I am most certainly not relaxed about that, but I recognise the autonomy and independence of higher education institutions. That is the point that I was making.

The noble Baroness, Lady Barran, asked what we would do in the event that a provider was at particular risk. We would work enormously closely with the Office for Students, the provider and other government departments to ensure that students’ best interests were protected in those circumstances. Students will always be our priority.

Several noble Lords, particularly the noble Lord, Lord Willetts, have identified the range of funding that needs to be part of a response to this challenge: the contribution of tuition fees, the importance of research funding, the grants that the Government provide and of course the contribution of international students. I will talk briefly about each of those.

The noble Lords, Lord Mair and Lord Johnson, my noble friend Lord Watson and the noble Duke, the Duke of Wellington, all identified the challenge with student fees and the fact that in real terms they have reduced in value in funding the teaching that they are aimed at helping to provide. That is of course a challenge as part of the funding arrangements that the Government are thinking about, but we also recognise that students have been particularly badly affected by the cost of living crisis. It will be important to find a funding arrangement that is fair to both institutions and students. That is at the heart of the very hard thinking that, I assure noble Lords, the Government are doing.

The noble Baroness, Lady Barran, asked about progress on alternative student finance. I assure her that we will be restarting the work on that and bringing together the stakeholder group to make progress. She also mentioned franchising, which for some higher education institutions is a source of funding and provides high quality, but she is right that in some cases there are concerns. We will monitor that very carefully.

The noble Lord, Lord Krebs, and the noble Baroness, Lady Garden, talked about the challenge of research funding. The noble Lord referenced a deficit in research funding of £5.3 billion, and that is a number that I recognise. The Government recognise the importance of research and development to our national success. We are determined to work with the sector to transition to a sustainable research funding model, including by increasing grant cost recovery. Of course universities will also need to take their own steps to ensure that they are working as efficiently as possible and, where necessary, make difficult choices. Across all the areas that we are talking about, we need to find a suitable balance that provides stability for our higher education sector.

On the point about the Government’s strategic priorities grant, raised by the noble Baroness, Lady Wolf, I recognise her concern about the levels of government funding, but the strategic priorities grant is particularly focused on those subjects that are expensive to deliver, which she identified. The Government will keep that under review in order to support teaching and students in particularly expensive subjects such as medicine, science and engineering. That is important in terms of the contribution of HE.

Several noble Lords spoke about the importance of international students, sometimes as contributors to the finances of higher education. I have to say I do not accept the use of the expression “cash cow” that was used by several noble Lords. Some have feared that international students are somehow displacing domestic students but, actually, international students have made a very important financial contribution to the teaching of domestic students. They make a broader contribution than that, and we recognise the vital contribution that they make.

I want to make the Government’s position clear, as my noble friend Lady Warwick asked. We are committed to a UK that is outward-looking and welcomes international students, who make a positive impact on our higher education sector, our economy and our society as a whole. Our top universities benefit from strong international ties, as many of our universities do—so much so that, as noble Lords mentioned, we have we have educated 58 current or recent world leaders. As the noble and learned Lord, Lord Thomas, identified, we have educated top lawyers as well.

International students enrich our university campuses. They forge lifelong friendships with our domestic students. They become global ambassadors for the UK and for too long international students have been treated as political footballs, not valued guests. This Government will take a different approach and we will speak clearly about that. Noble Lords should be in no doubt that international students are welcome in the UK.

Several noble Lords challenged me on the position of the Home Office with respect to international students. I do have the benefit, although it was some time ago, of understanding some of the challenges and interests of the Home Office. On the cost of student visas, the Home Office keeps fees under review. It also does not, as some have suggested, make a profit from fees. Any income from fees set above the cost of processing is utilised for the purpose of running the migration and borders system.

There is, of course, despite some threats, the maintenance of the graduate route to enable students to come to this country and stay after their period of study. This is an important way of recognising and welcoming international students, but I have to say that the Government do not have any intention at this time of removing the restrictions on dependants that were introduced by the last Government.

Several noble Lords identified the range of provision and different ways of learning. That is important for both our higher education sector and its relationship with further education. I do not see a distinction. I do not think it is helpful to see a university education and a vocational contribution of the further education sector as being in conflict. We will be successful when we manage to find the successful links between them, not least because it will provide better access and give different routes depending on the strength of the students and it will be good for the economy. So we will continue to support degree apprenticeships, which we know can deliver excellent outcomes.

We are working to ensure that the approach to lifelong learning will be as effective as possible, enabling people to gain the skills that they need to support their careers, and to do that in a way that enables them at different times in their life to benefit from education. I want to come back to this House to update it on the issue of the lifelong learning entitlement. I hope noble Lords are in no doubt that we consider the objective of lifelong learning to be a very important one. That was an important point raised by the noble Baroness, Lady Garden of Frognal, and my noble friend Lord Watson.

On the subject of freedom of speech, I have to say that the noble Baroness, Lady Fox, wholly misrepresented the position of my right honourable friend the Secretary of State for Education. In actual fact, she said at Questions in the other place earlier this week that of course, it was a Labour Government who enshrined freedom of expression in law. The recent decision to pause further implementation of the freedom of speech Act at this point was made precisely because we believe in the importance of freedom of speech and academic freedom, and it is crucial, therefore, to make that legal framework workable. My officials and I are meeting with a range of stakeholders, including academics concerned about their free speech being protected, and their views will form part of our consideration of options for protecting freedom of speech and academic freedom in future. On that too, I shall want to come back to the House to update noble Lords on our proposals.

The noble Lord, Lord Krebs, asked us to take a strategic approach. He is absolutely right, but stable funding has to be at the heart, and the basis going forward. Many of the things that noble Lords have argued for—considering the diversity of the sector; better access; ensuring progression for students; the contribution of our higher education sector to growth, skills and innovation; the local and regional contributions; and the quality of teaching and the student experience—all require that stable funding basis; but we are also committed to making progress on all those areas.

I close by thanking noble Lords for their contributions. I assure them that the Government will consider many of the excellent points made in this debate. As I said in my maiden speech in this House, our higher education sector is one of this country’s greatest enablers. It provides opportunities for people to follow their passions and expand their horizons; through research and teaching, it enables us to challenge our understanding and develop new ideas. In many communities, higher education provides a vital anchor for wider economic development and progress. That is why this Government are committed to creating a secure future for the sector.