Higher Education
Debate between Lord Ahmad of Wimbledon and Lord Purvis of Tweed
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.