Higher Education

Lord Ahmad of Wimbledon Excerpts

Wednesday 9th April 2014 Lords Chamber

Moved by

[Lord Ahmad of Wimbledon]

That this House takes note of higher education in the United Kingdom.

[Lord Ahmad of Wimbledon (Con)]

My Lords, more than half a century ago, a former Member of this House, Lord Robbins, published his seminal report on higher education. He and his colleagues, including the noble Lords, Lord Layard and Lord Moser, believed that going to university was inherently worth while. This belief remains true today, whether you study particle physics, history or nursing. Higher education is truly transformational.

Our current demographic pressures are less immediate than those facing Lord Robbins and his team in the 1960s, but the forces driving increased demand for higher education have not diminished. They have been at work for the past 50 years and they will continue. We all recognise that there is a huge demand for learning from individuals and, indeed, from employers who continue to demand graduate-level skills.

Governments across the world want to increase their number of students in higher education. No country says, “There are too many students”. Everywhere in the world, in developing and developed countries alike, they want more people to have a higher education. International competition is played out at a higher skills level, and we cannot fall behind.

Our higher education system is renowned throughout the world. We regularly feature highly in the range of world university rankings, often coming just behind the United States as second in the world and, because of our impressive international reputation, our higher education system is a significant international export. However, while the UK has been cautiously increasing its student numbers in the past decade, other developed countries have been expanding at a much faster rate. Participation in tertiary education among young people up to the age of 20 increased by 14% in the UK between 2005 and 2011. However, it increased by 51% in Denmark, 35% in Germany, 29% in Austria, and 23% in the Netherlands, to name just a handful of the countries that have expanded their student numbers faster than we have.

When Lord Robbins reported in 1963, there were fewer than 200,000 British students in higher education. We now have 1.2 million British undergraduates. His view was that,

“courses of higher education should be available for all those who are qualified by ability and attainment to pursue them and who wish to do so”.

That principle is just as important today as it was then.

However, in 2009, when the noble Lord, Lord Browne, was commissioned to undertake his independent review on higher education funding and student finance, all political persuasions recognised that to continue to fund a world-class higher education sector during a time of significant economic downturn we would need to rebalance the costs of higher education between student and state.

The Government’s reforms to higher education were based on achieving a well funded sector which had a reliable stream of income to enable it to compete internationally and to drive up the quality of teaching. We have done just that. Indeed, the OECD said recently that we are,

“the first European country that established a sustainable approach to HE funding”.

By increasing the tuition fee cap but, importantly, subsidising tuition fees, students have a significant stake in their higher education. They are becoming more discerning consumers of their education, valuing their experience and demanding more quality learning.

Better information is central to the Government’s reforms. The key information set gives prospective students a range of data that they need to make meaningful comparisons on costs, courses and employability. The Government have plans to work with universities to extend it to make it even more useful and powerful, so we have made more information than ever before available to students and their parents while at the same time preserving the independence and autonomy of institutions. That is, indeed, a key feature of the landscape—government does not intervene in what is studied or how it is taught. However, good-quality teaching and an improved student experience are central to the reforms. Bold vice-chancellors—indeed, some are in your Lordships’ House today—are already changing the incentives to focus on good teaching within their institutions. Above all, our reforms have put students back at the heart of the system, where they belong.

The good news is that, since our reforms, young people have not, as some have suggested, been put off applying to higher education institutions. The Government sent recent graduates into schools and colleges to explain how the new finance system works, and applications for higher education in 2014 have returned to pre-2012 levels. Many popular universities have been able to grow the number of places they offer to students. Data published by UCAS for entry in the 2014 cycle from applications up to the January main scheme deadline show that the application rate for English 18 year-olds has increased to the highest ever level, at 34.8%. This figure is even more impressive when seen in the context of the continued fall in the 18 year-old population in our country.

The rise in applications shows that young people understand that they do not have to pay upfront to go to university. They recognise that paying back as graduates through PAYE once they earn £21,000 or more is nothing like leaving university with a credit card debt. This matters. All the evidence shows that going to university is a truly life-changing experience, and it would have been a tragedy if young people had given up the dream of getting a higher education. Higher education truly empowers.

Application rates for those from disadvantaged backgrounds have continued to rise to a record level of 20.7%. The naysayers who said that an increase in tuition fees would deter disadvantaged students cannot argue with the facts before us. The trends are upwards and, in addition, there is a welcome rise in applications from mature students—an increase of 9% compared with the same point last year for the 35-and-over age group. Students and their families have come to understand that a degree remains one of the best routes to a good job and a rewarding career.

Perhaps I may offer a personal reflection for a moment as the son of a migrant who arrived in this country with only £5 to his name. One thing instilled in us as we were growing up was the value and empowering elements of education. No matter what education you have received, wherever you go in the world it is your personal asset. I personally realise the struggles that many make to ensure that they, and in turn their families, have opportunities for education.

Looking at the current figures, 87% of graduates are in now in employment as against 66% of non-graduates. However, we should not suggest that graduation guarantees a job. I remember in the early 1990s applying for my first job, and my experience is something that I have shared with others. I am not ashamed to admit that I received 63 rejections. However, I kept going and got a job. That showed that, despite the odds, perseverance is important. Apart from educational skills, that is an attribute that our universities up and down the country instil in students.

Increased supply appears to have been matched by continuing demand for graduate skills, so the graduate premium has broadly remained constant. It has regularly been estimated at well over £100,000 of extra lifetime earnings after tax. The latest independent research shows that male students with a degree can expect to boost their lifetime earnings by £165,000, and for female students it is an even more striking £250,000.

Of course, the financial returns are not just personal. As my right honourable friend the Chancellor has made clear:

“Access to higher education is a basic tenet of economic success in the global race”.

It drives long-term growth and boosts productivity. Graduates fuel innovation. Research conducted by the National Institute of Economic and Social Research shows that around 20% of UK economic growth between 1982 and 2005 came as a direct result of increased graduate skills. A 1% increase in the share of the workforce with a university degree raises long-run productivity by between 0.2% and 0.5%. This suggests that at least one-third of the increase in UK labour productivity between 1994 and 2005 can be attributed to the rising number of people with a university degree.

I turn now briefly to the issue of student numbers and the related cap. This is the evidence base against which the Chancellor made his historic commitment in the Autumn Statement to expand student numbers. As noble Lords will recall, he announced that, in 2014-15 the Government would increase the number of places by 30,000, so that popular institutions could expand and grow further, and that by 2015-16 the Government would remove number controls for publicly funded universities.

[Lord Purvis of Tweed (LD)]

I am most grateful to my noble friend for giving way. I am listening carefully to the Minister’s speech and am most impressed by it, but this is a debate about higher education in the United Kingdom; it is not about higher education in England and Wales. As someone who is resident in Scotland, and as a legislator in the Scottish Parliament who voted for a different structure for fees for students and for a different funding model, I wonder whether the Minister will be addressing some of the benefits for the whole of the United Kingdom of a distinct approach to higher education in parts of the United Kingdom.

[Lord Ahmad of Wimbledon]

I thank my noble friend for that intervention but as he is aware, that is a devolved matter and one for the Scottish Government. While I have been focusing on England and Wales, when we look at education overall, we talk to the Scottish Government in terms of the overall UK plc offering. I hope that, at the end of the year, we will have similar unified discussions on promoting the UK. I am sure that my noble friend agrees with my sentiments on that.

Turning to universities and removing the cap, as I was saying, universities can accept many more of the qualified people turned away each year. Only this morning, it was brought to my attention by my noble friend Lord Popat, who is sitting next to me on the Bench, that a student who fulfilled the criteria and had clearly qualified on all fronts, was unable to get a place because of the cap on numbers in a particular institution. We need to look at that seriously. We can afford to do this because our reforms have made a systematic change to the funding model. Our reforms rebalance support so that the contribution from graduates increases. However, the taxpayer still subsidises the overall cost of degrees by 50%. We think that it is fair for graduates to pay because there are such definitive private gains. The planned expansion brings new money to educate these students. The Treasury has provided £5.5 billion of student loan outlay as well as additional resource funding over the next five years. In tough times we are protecting science. We have ring-fenced our £4.7 billion annual science budget to give researchers the security they need to plan for the long term, and we have injected major new long-term investment into science capital so that our researchers remain at the cutting edge.

There is extra funding of £185 million over four years for teaching expensive subjects such as science, technology and engineering. This extra spending complements a recent £200 million investment in STEM teaching capital. Matched by equal investment from institutions, this will invest some £400 million in the creation and upgrading of teaching facilities. It will ensure that students receive high-quality teaching that fully equips them for the economy of the future. It will sustain and support an increase in the number of good-quality higher education STEM student places.

Our reforms have meant that we have been able to increase the cash going to universities, while avoiding upfront fees for students and managing the costs to the taxpayer. Our calculations show that, in the wake of our reforms, total overall university income in England—I apologise to my noble friend—from all sources has gone up considerably, from just under £23 billion in 2010-11 to nearly £24.3 billion in 2012-13. The sector is in good financial health. This all ties in with the picture we have from the Higher Education Statistics Agency’s latest higher education business community interaction survey. It is a picture of universities bringing in big revenue by working flexibly with business and the outside world. In 2012-13, they earned £1.2 billion from business research contracts, which is up on the year before.

However, noble Lords will realise that relationships now stretch well beyond this. I am sure that many noble Lords are part of this. Universities earned another £1.5 billion from a wide range of services, from consultancy and CPD courses to regeneration programmes and the use of equipment and facilities. Universities have become a major source of exciting new companies. In 2012-13, 150 new spin-out companies were set up to exploit research ideas born in UK higher education institutions. On top of that, more than 3,500 new start-up companies were established by staff and recent graduates. In total, the survey found that UK universities earned an impressive £3.6 billion in 2012-13 through business and community activities.

I look forward to hearing from all noble Lords who are contributing to this debate. Any new funding system drives a change in the behaviour of both students and institutions and, of course, we will need to monitor the overall affordability of the system. If necessary, we will take action to ensure that it remains sustainable in the long term. We are seeing a historic shift. We cannot predict precisely how our reforms will be viewed three decades from now but the reforms are intended to make our world-class system even stronger. This Government want to see more investment, greater diversity, less centralisation and a sector even more accountable to students and the taxpayer. We are confident that the difficult financial decisions we have had to make and continue to make are the right ones to ensure that we have a sustainable long-term future for higher education in our country. I beg to move.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

My Lords, first, I thank each and every Member of your Lordships’ House who has taken part in this debate. Indeed, reflecting on the words of my noble friend Lady Sharp, I, too, was surprised when looking into this to find that it had been so long since your Lordships’ House had debated such an important subject. It was the Government’s view that it was something that we should put on the agenda, and I am glad that we have done so.

In paying tribute to all noble Lords, it would be entirely apt for me to pay particular tribute to the maiden speech of the right reverend Prelate the Bishop of Portsmouth. In his remarks, he said that he was not sure about how his opening contribution would be taken by the House. It was an excellent one, and I am sure that he will play a significant role not just in representing the people in Portsmouth and wider Hampshire but indeed the country as a whole, albeit that at times he may cause a degree of discomfort to those of us on the Front Bench with the questions that he may ask. We look forward to his future contributions and welcome him to the House.

The noble Lord, Lord Hennessy, referred to poets and plumbers. I do not know what I shall be called by the time I sit down, but certainly if one was to look to my plumbing skills—my wife is testament to that—a plumber I am not.

This is an important subject. As we have heard from all noble Lords, higher education is an important part of what defines Britain today. It is key to the nation’s success and, as last week’s Universities UK report on the impact of universities on the UK economy noted, the sector generates jobs—indeed, 754,000—and contributes to the GDP, some 2.8% in 2011, up from 2.3% in 2007. The report also reveals that the UK higher education sector contributed an output of over £73 billion. The almost £5 billion that students contribute to local economies through their off-campus expenditure shows that the impact of higher education is felt in businesses across the country. These figures remind us that universities are absolutely pivotal to driving the growth that will safeguard a more sustainable future for everyone.

My noble friend Lord Purvis referred to university funding. University income across the whole of the UK represents £29 billion in 2012-13, as opposed to £12 billion in 1999 to 2000. Again, that demonstrates the flexibility and autonomy to which several noble Lords alluded for our universities. Education is of vital importance to the nation as a whole.

I shall take certain areas in a specific order. Several noble Lords raised the issue of social mobility. Right from the outset, I say to the noble Lord, Lord Young of Norwood Green, that, although he said that his background was not one of university education, I have stood across the Chamber from him at this Dispatch Box and talked about apprenticeships. The Government recognise the importance of apprenticeships for the future growth of our economy, which is why we have created the number of apprenticeships that we have. I am sure that he will recognise that various companies are coming on board—I accept that we start from a low base—that are now participating in the apprenticeship programme. I believe that we all share the sentiment that diversity, not just in terms of the university route but in terms of the apprenticeship route, is vital for our continued growth.

The noble Baroness, Lady Morris, spoke about social mobility from her great experience. Institutions now have a much greater responsibility to focus on widening access. The Director of Fair Access has agreed more than 160 access agreements with institutions for 2014-15. These detail the plans by universities and colleges to spend more than £700 million by 2017-18—up from £440 million in 2011-12. The Government will invest another £50 million through the National Scholarship Programme in 2014-15.

Access issues were also raised by the noble Lord, Lord Rees. It is important to note that in all these access agreements we are looking at issues of gender, social class and ethnicity. The director has certainly reflected these issues in the access agreements. However, I am sure all noble Lords agree that we need to make sure that all this money is spent where it really counts. Just last week, the Government announced a new national strategy for widening access, led by the HEFCE and OFFA. One of the key focuses of this strategy will be the employment prospects of graduates from less advantaged backgrounds. Research published last year by our Social Mobility and Child Poverty Commission showed that, three years after graduation, individuals from higher socioeconomic backgrounds were more likely to be in a high-status occupation than those from less privileged backgrounds. OFFA is also asking all universities, especially those which have not yet made progress, to invest more smartly in their access activities generally and ensure that they are properly evaluating what works, and then sharing that best practice with other institutions.

The noble Baroness, Lady Morris, raised the issue of diverse universities, as did my noble friend Lady Sharp. My noble friend Lady Perry gave examples of the universities with which she has been associated—namely, Cambridge and London South Bank. The noble Baroness, Lady Morris, rightly values a diverse system, as we all do. Of course, university rankings are not a government tool per se, and there are many different measures of a good university. Indeed, the noble Baroness, Lady Deech, highlighted a particular example of how ratings can be used. One of the reasons the Government have focused on improving student information is so that students can use their purchasing power to seek out the best course to match their aspirations—indeed, the best institution as well. Popular institutions will grow and attract more income, and this is reflected in how they are perceived.

My noble friend Lord Storey rightly wants to encourage more women to take up leadership roles. The Government are committed to supporting this aspiration. The universities are, of course, autonomous institutions and the Government do not have a specific role in micromanaging this sector. However, I believe that all universities increasingly recognise the importance of reflecting diversity in their own leadership.

The noble Baroness, Lady Warwick, raised the issue of part-time students. The Government have addressed what we considered was the primary barrier to part-time study—that is, access to tuition fee loans. We recently announced that we are examining the rules regarding equivalent or lower qualifications which rule out loans for past graduates, so that those wishing to undertake engineering, technology or computer science courses can do so.

The noble Baroness, Lady Donaghy, referred to teacher training. The Government are carefully considering the implications of our policy on the quality of teacher training. The expansion of School Direct, to which she referred, has been challenging for many universities, but there is scope for successful school and higher education collaboration in this regard. Outstanding university providers have been guaranteed the same number of places as last year, and many have increased their share of the initial teacher training market. I understand that the higher education institutions remain involved in more than 80% of the initial training places. Additional places have been created to reduce the chance that some courses may have to close.

Several noble Lords, including the noble Lord, Lord Hennessy, referred to the loan system. We are absolutely not seeking to treat the student loan system like a private debt system. The system operates very much like a graduate contribution scheme, and we feel that it takes the best features of a graduate tax. Students repay only when they can afford and at only 9% of income earned above the £21,000 threshold. As I said in my opening remarks, the OECD recognises that what we are seeking to do through our reforms puts our higher education funding on a sustainable model basis.

I turn to the funding and RAB charge, referred to by the noble Baroness, Lady Kennedy, and the noble Lord, Lord Giddens. There has been much discussion of the Government’s estimate of the returns that they will get from student loans. However, the resource accounting and budgeting process—the RAB charge—is not a straightforward financial calculation, as noble Lords will know. It is an estimate of the economic circumstances 35 years in the future. The Government have improved the modelling. It is sound and has been quality-assured by experts in the field, such as the Institute for Fiscal Studies.

We have taken careful note of the recommendations in the 2013 National Audit Office report on student loan repayments. It is not surprising that the Government’s assessment of the proportion of loans that will be repaid has changed. After all, it is a complex analysis. Estimates are just that and they will continue to change, as they are based on assumptions about the future. However, it is important to note that lower-earning graduates will be protected, while those who benefit most from their higher education and go on to earn more will pay back their loan more quickly.

The Government are still delivering a tough deficit reduction programme. The funding model that they have used has made it possible to address the deficit, while, as I indicated, at the same time giving more income to higher education institutions to boost the quality of their provision. The Government are working with an estimate of around 45%. It could be argued that currently the savings are small but, depending on the performance of the economy—and we are encouraged by the IMF’s report published yesterday—this could change over time. However, there continue to be savings to government compared with the previous assessment, even if we take the figure of 45%. We believe that this system continues to be the best way to use limited public funds to meet the country’s requirement for long-term, high-level skills, but we must not forget what it ultimately means for students: a progressive repayment system, better information and higher-quality provision.

I turn to the STEM subjects, specifically science and research. I acknowledge the contribution of various noble Lords in this respect. Science and research, including the arts and humanities, are essential drivers of the innovation that leads to growth. The base funding awards that are made to support vital research will be distributed using the outcomes of the research excellence framework. The peer review is currently the most established method of research assessment and it underpins the academic system. Obviously, we can shape cultures both positively and negatively depending on how we measure things. The latest exercise contained, for the first time, an explicit assessment of the impact of research. There were some concerns about what that impact might mean in the UK, but it has sent a powerful reminder to researchers to think about how their research might be used or the difference that it might make, and it is encouraging much greater engagement with the industry.

Perhaps I may take some of the specific questions that were asked on research and development, including by the noble Lord, Lord Bilimoria, and the right reverend Prelate the Bishop of Winchester. The UK’s overall research and development spend was 1.72% of GDP in 2012, amounting to £27 billion. I acknowledge that this sum is lower than that of some of our trading partners such as the US, Germany and France. We continue to look to invest more and, as I said in my opening remarks, we have protected funding in this area.

Several noble Lords, including the noble Baroness, Lady Greenfield, and my noble friend Lord Storey, raised the important issue of technology transfer and asked what universities are for. It is important to note that the UK does very much better than people think. The impact of the research excellence framework is a key incentive in driving this. The excellent HEIF programme is widely recognised as supporting technology transfer. Indeed, we are in the top five globally for university/business interactions. One of the drivers behind removing the cap as an incentive is that this is demand-led: the private sector wants to see more graduates and, increasingly, there is a strong link with what universities provide in the communities. My noble friend Lord Storey gave examples in Liverpool, which the Government fully endorse and support.

The noble Lord, Lord Rees, and others talked about credit accumulation and transfer. Much has been done in this area. Many institutions allow students to build a qualification from smaller modules but the decision to accept and recognise credit has always been one for the universities, which act autonomously in this regard. Mention was made of the need for academic freedom by my noble and learned friend Lord Mackay of Clashfern. Others talked about value and gave examples, as my noble friend Lady Perry did, when she spoke of the value of freedom of the universities. The Government are fully committed to the Haldane principles, whereby decisions on which research projects are funded are made by the research councils themselves, not by Ministers. Around two-thirds of all research council grants are made through this measure—that is, not responding to any government priority.

Mention was also made by my noble and learned friend, and the noble Baroness, Lady Deech, I believe, of where higher education should sit. Should it be in BIS or in Education? I have noted the comments, as I have noted the wider debate, and will take those suggestions back.

The noble Baroness, Lady Coussins, raised modern languages.

[Baroness Warwick of Undercliffe]

I wonder whether I may refer back to the noble Lord’s support for HEIF to ask the specific question that I asked in my intervention. Do the Government see it as important to accept the Whitty recommendation to increase that fund?

[Lord Ahmad of Wimbledon]

If I may I will write to the noble Baroness in that regard, and, of course, share it with all those who have taken part in the debate.

The Government are committed to the teaching and learning of modern languages in schools. As the noble Baroness, Lady Coussins, acknowledged, from September 2014, primary schools will be required to teach a foreign language at key stage 2. Thanks to the English baccalaureate, modern languages GCSE entries are improving. The Government have prioritised higher education funding for modern language courses to ensure the continued availability of language study in higher education institutions. The noble Baroness raised some other questions, but with her permission, and in the interests of time—at five hours, this has been somewhat of a marathon—I will write to her and share that letter with other noble Lords.

The explosive growth in massive open online courses was raised by the noble Lords, Lord Giddens and Lord Rees, among others, and by my noble friend Lady Sharp. We have seen growth in this area and the UK’s new MOOC platform FutureLearn brings together free courses from 23 top UK and international universities. In the four months since the first course began, FutureLearn has already 450,000 sign-ups. Users come from an impressive 90 countries and a range of backgrounds.

My noble friend Lord Holmes mentioned the BPP. The BPP is the third university to achieve the university title last year and it is respected for its professionally geared education. My noble friend flagged that particularly in his comments. Various issues were raised by the noble Lord, Lord Bilimoria, the right reverend Prelate the Bishop of Winchester, the noble Baroness, Lady Warwick, the noble Lord, Lord Giddens, among others, and my noble friend Lord Holmes. I underline that on specific questions I shall write to noble Lords, in the interests of time. I reiterate that the Government are fully committed to international students and we have announced that we will extend options for people to stay on following their study. I will write with the details. Just to be clear, the numbers of international students are not capped. I can do nothing better than quote my right honourable friend the Prime Minister when he visited India last year and said that we were open for anyone wishing to come to the UK for a legitimate course at an accredited university. The doors are open. As I said, I will write with further details.

I fully acknowledge the points made by my noble friends Lord Watson and Lady Sharp, and the noble Lord, Lord Hennessy, about the importance of soft power when we travel the world. Indeed, my noble friend Lady Bottomley spoke about this with great passion. English itself is an incredibly powerful tool in ensuring that the issue of soft power both at home and abroad is not forgotten. I totally ally myself with the comments made on that point.

My noble friend Lord Addington raised issues about the disabled students’ allowance, specifically on dyslexia. These changes will not come into effect until 2015 and we are working through the sector-driven centres to consider specific individual needs and to inform higher education institutes how we expect them to offer support in this regard.

My noble friend Lord Norton of Louth, spoke with great expertise in this area, as ever. I particularly commend and welcome his commission’s report on the future regulation of the university sector. Again, perhaps I may write to him in respect of the specific questions he raised.

In conclusion, we have had five hours of debate and even Lord Robbins, if he was here and reflected on the words of the debate, would say that it has perhaps been a useful consultation exercise in its own right. I can assure noble Lords that I have been listening. The noble Lord, Lord Young, made the point about the range of speakers. I have been riveted to my Front Bench seat during this extremely informed debate.

Our universities are one of our greatest national assets. UK universities are second in international rankings only to the US. They contribute to the nation’s wealth and to the rich cultural fabric of our society. The thousands of extra higher education places that the Chancellor announced at the end of last year will help the nation to grow and flourish.

Again I thank all noble Lords who have participated in the debate. Their thoughts, perspectives and suggestions have provided a valuable resource as we seek to further strengthen our world-renowned higher education sector—a sector which is central not only to our economic growth but to our position on the global stage. As a Minister responding to such a debate it is appropriate for me to finish with a quote from Aristotle. He said:

“It is the mark of an educated mind to be able to entertain a thought without accepting it”.

Motion agreed.