Universities

Lord Johnson of Marylebone Excerpts

Thursday 14th November 2024 Lords Chamber

[Lord Johnson of Marylebone (Con)]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Warwick of Undercliffe. I am delighted that she has secured this timely debate on the future of our higher education system. It is timely because the financial condition of the sector is worsening very rapidly. She mentioned in her excellent remarks that 40% of universities are likely be in deficit next year and that a further, or perhaps the same, 40% have low liquidity of less than 40 days’ cash. Updated analysis suggests that as much as three-quarters of the sector will be in deficit next year, suggesting that conditions are deteriorating extremely rapidly. Like the noble Baroness, I welcome the Government’s move to increase fees with inflation for the next financial year. It is an important step. It is a shame that it has taken this long, and it is a shame that, as she said, the sector has had almost a decade of real-terms erosion of undergraduate tuition fee income. I am glad that this decision has at last been taken. It was a real abdication of responsibility on the part of more recent Governments to have let this issue drift in the way that it has. It is no way to provide certainty for institutions vital to our success as a knowledge economy and, as she remarked, has led to needless job cuts, programme closures and increased dependence on the volatile income from overseas students, welcome though they are.

Above all, the freeze in fees has been detrimental to students themselves, who have, in many cases, seen their institutions lack the resources they need to provide them with the high-quality teaching and wraparound support they want during their studies. That is why I echo the noble Baroness’s pleas for the Government to ensure that the uplift in tuition fees is undertaken on an ongoing basis throughout this Parliament. People can disagree on whether it was an easy decision for the Government to take. Personally, I think that an automatic uplift of tuition fees with inflation should not be a big drama in our system. It is a real cost that institutions experience. The Government need to recognise that and accept their responsibilities towards institutions that are critical to our performance as a highly innovative economy.

The OBR forecasts inflation of 2.6% next year and a further 2.9% in 2028-29. This is an ongoing issue and the Government cannot simply leave the uplift as a one-off. If it is treated as such, it will deliver about £1.5 billion of additional income to the sector over the course of this Parliament to 2029-30. However, that does not in itself address the issue of real-terms erosion of institutions’ income. They will continue to see a real-terms erosion of income per student of 11.4% over the course of this Parliament if the Government do not continue to uplift fees with inflation in the later years of this Parliament.

The real-terms hit will be all the greater for the probably quite considerable number of institutions that find themselves unable to pass on this increase in tuition fees this coming financial year because they are too late to update the contractual position to students to whom they have offered places already. I would be grateful for the Minister’s thoughts on this and whether she has made any assessment of how many universities will actually be in a position, at this relatively late stage, to uprate their fees for this coming financial year.

It is clear to me that, as the noble Baroness said, many institutions will not just be barely standing still following this one-off uplift; many will be going backwards. The net position, as a result of the other recent policy changes, including the increase in employer national insurance contributions, suggests that the sector overall will be down rather than up. I have seen analysis that suggests that the sector will bear almost £400 million in increased costs from national insurance contributions, compared with increased income for English providers of only £300 million, so it is clearly not assisting the Government overall at this stage, even though, as I said, I welcome the move to increase the fees. Perhaps the Minister might indicate how much of the fee increase, if any, will be left for universities following the rise in NICs.

The last few weeks have not been a bonanza for the sector by any means. That said, it needs to accept accountability for the additional public money being invested in it. The write-offs associated with the increased fees could amount to about £450 million over the course of this Parliament, and it is important that the Government continue to ensure that there is robust quality assurance and assessment of where institutions are delivering value for money and high-quality teaching in their performance. I am glad to see that the TEF, as well as B3 metrics, will continue to play an important part in that respect.

Higher Education Funding

Lord Johnson of Marylebone Excerpts

Thursday 12th September 2024 Lords Chamber

[Lord Johnson of Marylebone (Con)]

My Lords, I congratulate the noble Lord, Lord Krebs, on securing this important debate. As ever, I find myself in very strong agreement with my noble friend Lord Willetts, who I note incidentally may not be the only candidate in this House for the role of Chancellor of the University of Oxford but is the only one who, day in, day out, demonstrates his commitment to the future of the sector and would be absolutely splendid in that role, were he to be successful in that campaign.

I turn to the issue at hand. I want to say right at the outset that I truly welcome the change in tone from the new Government towards the university sector. It is a wonderful breath of fresh air not to have the negativity and university-bashing that has characterised too many of the airwaves from the previous Government.

In particular, I warmly welcome all the positive messages that the new Government have been sending out about international students, who make such a huge contribution to the success of our higher education system, society and broader economy. That said, I of course agree with others, including the noble Lord, Lord Krebs, who have pointed out that we should avoid an excessive dependency on the fee income from international students. We need to put in place a funding system that is sustainable and does not leave us exposed as a country to volatility and factors well beyond the control of the sector itself.

However, I do not think we need a long, two-year review to come to a conclusion as to what a sustainable system is. My view remains very much that the current model, as Winston Churchill might have put it, is the worst imaginable—except for all the others. There is essentially nothing wrong with it. It does the job you need a funding system to do in three key respects: it maintains the unit of resource, potentially, for what we need to have a world-class HE system; it is fair to the taxpayer; and it removes barriers to access because, as my noble friend Lord Willetts said, fees are not paid upfront by the student but underwritten by the Government in the form of a loan. There is nothing structurally wrong with the model we have, except for two flaws, which are fixable: first, it is not inflation-proof and, secondly, there is no link to quality. We fund volumes—bums on seats—rather than outcomes; clearly, that is unacceptable.

The Cameron Government tried to address those two flaws and, in 2017-18, we allowed a system whereby fees were indexed with inflation, but only for institutions that were able to demonstrate high-quality outcomes as assessed by the teaching excellence framework. I strongly think that we should return to that model. Had we continued with that system over the past six years, many of the institutions that are now forced to make these rationalisations would not be doing so. A mid-sized institution such as Teesside would have £30 million a year of additional tuition fee income, had we continued to upgrade tuition fees in line with inflation over recent years. Such a system is, frankly, the only game in town and everybody needs to get real and recognise that, given the current fiscal environment.

There is not a chance in hell that we are going to return to a system of funding tuition fees through the teaching grant. There is a political window now, early on in the Parliament, for the new Government to put in place a progressive ratchet of fee uplifts with inflation over the next few years, and I urge them to do so.

Higher Education (Industry and Regulators Committee Report)

Lord Johnson of Marylebone Excerpts

Tuesday 21st May 2024 Grand Committee

[Lord Johnson of Marylebone (Con)]

My Lords, it is a pleasure to follow the noble Lord, Lord Freyberg. I echo the points he just made about the creative industries and the need to measure properly value for money in that respect. I declare my interests as a visiting professor at King’s College London, chairman of FutureLearn, and someone who, in my previous ministerial role in the other place, was very much involved in the creation of the OfS and the high-level regulatory framework it is now implementing. I come at this with a certain baggage, and I lay that on the table; your Lordships do not need me to be clearer about it.

I very much want to defend the OfS rather than join the chorus of people seeking to bury it and condemn it for problems which, by and large, are not its responsibility but the responsibility of government policy. It is important that we are very clear in assigning responsibility correctly in this debate as we consider this report.

As the noble Lord, Lord Norton, said in his excellent speech, we have in the UK a world-class higher education system. It is one of our greatest national assets. However, it has some faults: some resistance to accountability, a quickness to take affront at suggestions that there are areas for improvement, and occasionally some short-sightedness in the way it opposes legitimate demands for reform. I fear that the report resulting from this inquiry is to some extent evidence of that phenomenon, because the inquiry and the report that came out of it were in part—probably quite a considerable part—the result of some very self-interested lobbying by university mission groups whose universities have over the years been very well represented in this place.

I am not saying that there is not room for improvement in the way the OfS operates—of course there is. However, it is also important that we do not lose sight of what this report is in part—not in totality—all about. We have to be honest that the report and the inquiry that led up to it are in part a continuation of battles that many in the sector and in this place waged against the very creation of the OfS in the first place.

Just to take us back a little, the fight about the OfS was actually about the change from a funding council acting on behalf of providers to an independent market regulator looking out for the student interest. This shift, as the OfS’s brilliant first chair Michael Barber noted in his evidence to the committee, was very much overdue given the massification of the sector and the change in the tuition and maintenance funding regime from one of government grants to income-contingent loans. My view is that for as long as we have a mass higher education system, as we will have, and this system of funding—to my mind, these two things are very closely and inseparably linked—we will need an independent market regulator rather than a funding council model.

Many in the sector and perhaps in this place might romanticise the Higher Education Funding Council for England. Indeed, there was a lot that was great about it, including its formidable last chief executive, Madeleine Atkins. But of course, by the middle of the last decade it had long passed its sell-by date as a mode of regulation for the sector. Indeed, in some senses it did not even recognise itself as a regulator. It came out of the University Grants Committee model, which was suited to a very different world of very small, limited tertiary participation and a much smaller, narrower system of university providers.

HEFCE was good for a world that had passed, but it was no longer fit for purpose for an era of mass higher education. Its function was very limited: to spread available grant funding around the providers in the system to ensure that everybody got a fair crack at the funding that the Treasury was making available. What HEFCE was not effective at was acting as a regulator to promote quality, choice and competition in the student and taxpayer interest. It is not going too far to say that there is a general consensus that, by the end, HEFCE had become essentially captured by the sector and urgently needed reform.

That is the backdrop to why the OfS was set up. Of course, this was not a popular change in the sector. The battles leading up to the passage of the Higher Education and Research Act 2017 were ferocious. It was one of the most heavily amended bits of legislation in recent memory. We should not ignore all that history, including the way the sector and its outriders lobbied hard against the new accountability regime that the Office for Students represented. To some extent, there are undertones of all that lingering around today at the five-year to six-year mark.

The creation of the OfS represented a move away from co-regulation to something that is much sharper and has greater consequences for institutions that deliver poor quality and poor student outcomes. All the stuff about co-regulation and how it is a better approach is, to my mind, a thinly disguised plea for self-regulation—a stance that I do not think any party in government will return to. As I said at the start, as long as we have a mass higher education system funded by a system of income-contingent loans—we will have this for the foreseeable future because it is the least bad system and is the only game in town from a fiscal perspective—we will need an organisation such the OfS acting in the student and taxpayer interest.

As Michael Barber told the committee, many universities thought that, notwithstanding the clarity of its legal duties, the OfS would be HEFCE under another name. They were very wrong and were surprised to discover that it was different. Some in the sector might think that, if they undermine the OfS enough and throw enough mud at it, they will suddenly get nice old HEFCE back, with its big pot of grant money administering the teaching grant and a system of student number controls that constrains competition and choice and allocates students to providers on the basis of government quotas. That is highly undesirable as an objective and highly unlikely to arise as government policy.

Even in the unlikely event that a future Government did want to replace our current funding system of income-contingent loans and return to a world of grants, they would still want an independent regulator to ensure value for money for taxpayers and hold universities to account for quality and outcomes in a mass higher education system in pretty much the same way the Office for Students does. Although the student focus of the regulator might change in such a scenario, I do not believe that any Government will return to the funding council model of the past.

Respectfully, I disagree with the report’s main contention that the Office for Students is performing poorly. To be honest, I think that Michael Barber and Nicola Dandridge did a brilliant job in leading the establishment of the new regulator in very difficult conditions, which their capable successors are continuing. I remind Members that its initial priority was to set up the new organisation. It managed the considerable task of registering a large numbers of providers at pace and putting in place the new regulatory framework in its first strategy. It then coped admirably with the challenges of the pandemic, suspending some of its regulatory requirements while providers adapted to the changed environment.

In its second strategy, the OfS has moved on to focus on quality. This has seen it reset the TEF, toughen up the B3 outcomes metrics, and reset the indicators for non-continuation, completion and progression. Again, that has generated a fair amount of angst in the sector, but this is absolutely necessary in terms of both the student interest and upholding quality and standards in the sector.

I do not want people to think that I am just a lackey praising the OfS without any self-awareness or criticism. I recognise that it has problems and is not in all respects operating as well as it might. I will be brief: there are three areas that I would focus on. The first is the question of distance from government. The problem here is not the OfS but the DfE—I say that with all respect to the Minister. The problem is clearly Ministers. It is also about where universities sit in government. The mistake is to have universities in the Department for Education, which does not understand institutional autonomy and treats universities like failing schools. My noble friend Lord Willetts made the point before.

In his great report on higher education sometime in the early 1960s, Lionel Robbins warned against moving universities to the education department because he feared that such an interventionist department would not understand or value the autonomy of universities. His warning has proved sadly accurate. The DfE treats universities like poorly performing secondary schools and now intervenes in them so much that the Office for National Statistics may well propose bringing universities back into the public sector.

When I was working on the HERA legislation, I was lucky enough to be Minister for both universities and science, like my noble friend Lord Willetts was when he was in the other place, with responsibility for both aspects of government policy towards the sector. That coherence has to some extent been lost by the move to the DfE and the splitting of ministerial responsibility in that way. It would be preferable to have universities back in a growth department of government, such as the business department or the new DSIT, where universities would be reunited with the rest of the research base.

The layering on of ever more conditions of registration has become slightly crazy. Ministers should adopt a self-denying ordinance of one in, one out—or better still, one in, two out.

My second area for improvement is that the Office for Students has to do much more to support innovation and promote new forms of provision. Now that it has established its bona fides as a tough and independent market regulator it has space to address parts of the role that Parliament has given it that have been neglected in the first five years. New providers—I have been intimately involved with a number—have been stunned by the bureaucracy they encounter in trying to get on to the register and establish new modes of provision. The consultants they have to recruit to advise them tell them that to succeed with the OfS they must, above all, look as much like an established university as possible. This is hardly the recipe for innovation that we want in our system.

My final point is that the Office for Students must make a real go of the lifelong learning entitlement. This policy is flailing at the moment. I think the name of the Office for Students should change to the office for lifelong learning, and it should grip this policy urgently so that it has a fighting chance of delivering the skills revolution that Ministers say they want for it. The detail of how that might work is for another day but that is an urgent priority.

I urge anyone in this Room who believes that the solution to the sector’s troubles is to attack and dismantle the Office for Students to think again. A strong regulator that enjoys the confidence and trust of the sector and of government is vital to the future of our HE system. Everyone should focus on working hard to that end.

Universities: Financial Sustainability

Lord Johnson of Marylebone Excerpts

Tuesday 21st May 2024 Lords Chamber

[Baroness Barran (Con)]

I appreciate that, but the noble Lord will also understand the pressures that students face. We also have a responsibility to students to make sure that university is affordable.

[Lord Johnson of Marylebone (Con)]

My Lords, I declare my interest as a visiting professor at King’s and chairman of FutureLearn. If the Prime Minister goes ahead with curbs to the graduate visa, would my noble friend the Minister say how we will replace the £12 billion in economic benefits that international students bring to priority category 1 levelling-up areas, including towns such as Stockton, Middlesbrough and Darlington, which receive £240 million of benefits every year from international students at Teesside University?

[Baroness Barran (Con)]

With respect to my noble friend, he makes a very speculative statement, which makes it pretty hard for me to comment on it.

Higher Education: Arts and Humanities

Lord Johnson of Marylebone Excerpts

Wednesday 1st May 2024 Lords Chamber

[Baroness Barran (Con)]

As the noble Baroness knows, the Government strive to create a sustainable student finance system that both remains responsive to the needs of the wider economy and of the labour market, which she referred to, and is fair to students and taxpayers. As she remarked, those with creative and critical-thinking skills in relation to AI are of course important, but so are students with STEM skills.

[Lord Johnson of Marylebone (Con)]

My Lords, ahead of the local and mayoral elections tomorrow, would my noble friend the Minister say what the impact of slashing the graduate route will be on arts and humanities provision, as well as on the levelling- up agenda? I am thinking specifically about towns such as Middlesbrough and Darlington, where every intake of international students at Teesside University brings £240 million of benefits each year to the local economy.

[Baroness Barran (Con)]

My noble friend is aware that we remain absolutely committed to our international education strategy, which has been extremely successful in terms of both the number of students who study in this country and their contribution to the economy. I cannot comment on the specifics of individual towns, but we absolutely recognise the value that those students bring.

Student Loan Interest Rates

Lord Johnson of Marylebone Excerpts

Wednesday 27th March 2024 Lords Chamber

[Baroness Barran (Con)]

I come back to my earlier answer: we have a system in which it is very clear that above a certain threshold, 9% of income goes to repaying part or all of a graduate’s debt. The overall package, obviously, in terms of affordability of mortgages and housing, is dependent on many issues, of which graduate debt is one.

[Lord Johnson of Marylebone (Con)]

My Lords, the Government’s excellent recent reforms to the student loan book have significantly improved its affordability to the taxpayer, with less than a third now expected to be written off. Given this, and given the funding crunch facing universities—which will be worsened if the Government take a hatchet to the graduate route, by the way—does my noble friend the Minister agree with me that it is time to allow universities to increase fees in line with inflation for those that can demonstrate they are delivering great outcomes for students, as assessed by the teaching excellence framework?

[Baroness Barran (Con)]

As my noble friend touched on, the Government are trying to balance, or triangulate, a number of things. One is affordability for students, hence the freeze we have had for seven years on fees. Another is addressing poor-quality provision—at the other end of the issue from the one my noble friend raises—through the new Office for Students regime. In relation to motivation, reward and recognition for the highest-performing institutions, a review of allowing indexation of fees based on the TEF is not under consideration currently, but I will say that having a high-quality teaching framework does allow for strong recruitment and research income.

Higher Education

Lord Johnson of Marylebone Excerpts

Thursday 7th March 2024 Lords Chamber

[Lord Johnson of Marylebone (Con)]

My Lords, the Chancellor may not have used his Budget speech to tackle the funding crisis but, as the noble Lord, Lord Blunkett, said in his excellent speech, at least he mustered some praise for our universities. That was a welcome change of tone at a time of often scepticism, bordering on hostility, towards higher education.

There is of course nothing new in the criticism that too many go to university—we have heard it again today—or that too much public money is wasted on low-value courses. Such attacks have been a constant in the history of the expansion of higher education and everybody is well used to it. I do not want to fall into the trap of complacency, and I certainly agree with the noble Lord, Lord Londesborough, that there is a case for cracking down hard on pockets of poor provision in the sector, which affect a minority of students on a minority of courses. We want to ensure that value for money is produced by this system.

However, I do not think that we should succumb to a general cynicism about higher education; nor do I think that we should return to a system of rationing higher education and limiting access to the number of students who progress from level 3 to levels 4, 5 and, particularly, degree level 6. Why do I say this? I say it because there is a very well-established skills bias in knowledge economies. Job creation takes place overwhelmingly in roles requiring graduate skills and, in the UK, this is happening at a time when we are already suffering from marked skills shortage, where we do not have enough highly skilled individuals to fill many vacancies. Our real problem as an economy is skills shortages. This really matters if we care about levelling up. Unless we continue to develop the pipeline of highly skilled human capital, we will see increasing inequality as wages rise more rapidly for those whose skills will be in stronger demand. We must not lose sight of how imbalanced our economy is. The FT recently calculated that, if you strip London out of our GDP per capita figures, the average Briton is worse off than the average resident of Mississippi, the poorest state in the United States.

The second reason is that we are living in an era of unprecedented technological disruption. As the noble Lord, Lord Blunkett, said, there are massive changes ripping through our economy due to two big waves of innovation; the first is a digital innovation wave, built on AI, supercomputing and automation; the second is a deep-science innovation wave based on biotechnologies and nanotechnologies. Our ability to surf those waves depends on the absorptive capacity of our firms and the adaptability of our people.

We are already seeing massive labour market disruption. As the noble Lord, Lord Blunkett, said, these powerful technologies, a number of which are converging at the same time—not just AI, but big data, cloud computing, the internet of things, virtual reality and blockchain—are driving change in all aspects of our lives. As the World Economic Forum’s Future of Jobs report found in its survey of employers, 44% of workers’ skills are likely to be disrupted over the course of the next five years. It is only the quality of our education system that will determine whether the UK will benefit from these innovations and whether it will be able to join the ranks of countries developing the next technologies. The most highly innovative knowledge economies around the world—look at South Korea, Israel, Japan and Canada—have boosted tertiary participation rates to well above ours, to the order of 60%, 70% or even more. Our ambition should be to join this vanguard of knowledge economies, not to give in to the dismal voices calling for student number controls that will hold back our productivity, widen inequality and throw sand into the engines of social mobility.

Lifelong Learning (Higher Education Fee Limits) Bill

Lord Johnson of Marylebone Excerpts

Monday 10th July 2023 Grand Committee

[Lord Johnson of Marylebone (Con)]

My Lords, I will speak to Amendment 6A in my name. I declare my interests in the register as a visiting professor at King’s College London and as chairman of FutureLearn. As other noble Lords have indicated, this amendment attempts to address what is an elephant in the room in our debates. This is obviously a controversial issue, which is very much present but has largely been avoided as a subject for discussion: the absolute level of fees and tuition fees.

While it is very welcome that we are introducing a more flexible system of student finance, that is not much good on its own unless we address the relentless erosion in the value of tuition fees themselves. I have always found it a little unreal that we have a Bill that refers in its title to “Higher Education Fee Limits” but we have not actually had any discussion whatever of those fee limits.

The legal cap on tuition fees for full-time undergraduate study at most universities is now £9,250—that is barely changed from the £9,000 that it was when the system was introduced a decade ago. By May this year, inflation had eroded the value of these fees to £6,020 in 2012 money. If inflation remains elevated, it will be materially below £6,000 in 2012 money by September and teaching UK students at this level will be loss-making for many, if not most, institutions. Carry on like this and we will have stretched the unit of resource to such a point that a crisis is inevitable. The LLE certainly will not be offered, nor will much else. My view is that we are really not doing our job unless we do something in this Committee, and during the passage of the Bill, about the fact that the system as a whole is becoming unsustainable.

The current impasse is creating a situation in which we are systematically defunding our universities, depriving the engines of our knowledge economy of the fuel they need to offer great teaching and world-class research. If we want to retain our position as one of the world’s most highly regarded higher education systems, and to have a fighting chance of attracting researchers to support our goal of becoming a science superpower, this clearly cannot go on. We all know that this needs to be fixed, yet we seem to lack the political courage to do what needs to be done.

As far as I can tell, a lot of effort is going on across all parties to work out how to say as little as possible about higher education funding ahead of the next general election. I am very grateful for the support from my colleagues opposite and hope that, were this amendment to find favour, they would continue to support it as we make progress with the Bill. The amendment seeks to force the debate into the open and to flush out the extent to which the Government—and Opposition parties—are seriously engaging with this issue before the crisis in funding takes a further turn for the worse.

The amendment itself is very simple. It would automatically allow higher education institutions that deliver great teaching and student outcomes, as assessed by the teaching excellence framework, to raise fees in line with inflation. There is nothing novel about this. A mechanism to link funding to quality in exactly this way exists already in law in the Higher Education and Research Act 2017. Schedule 2 to that Act allows fee caps to be set at differing levels based on a provider’s teaching excellence framework award, subject to overall limits prescribed by regulations that are scrutinised by Parliament. This amendment would ensure that the mechanism is used automatically each year, ensuring that high-quality providers can continue to deliver great teaching and student outcomes without their tuition income being relentlessly eroded by inflation. There is nothing new in it.

As noble Lords may recall, the Cameron Government used this exact method to enable fees to rise with inflation from £9,000 to £9,250, some five years ago. In my view, we should have continued with that approach, as it would have maintained university funding on a more sustainable footing than it is at present and entirely avoided the current crisis. Gold-rated and silver-rated providers would today have been able to charge fees of approaching £12,000. The University of East Anglia, for example, would have had an extra £38 million, which would wipe out the black hole in its finances. Such a system, linking funding to quality, aligns the interests of students, taxpayers and providers, and is an immediately deliverable solution which can be implemented as soon as the next TEF results come out this September.

We do not need a big review. We should not wait for our universities to start falling over one by one. We need to get on and use the mechanism that already exists.

[Baroness Barran (Con)]

My Lords, I will respond to Amendment 2, tabled by the noble Baroness, Lady Garden of Frognal, and Amendment 5, tabled by the noble Baroness, Lady Twycross, and also in the names of the noble Baronesses, Lady Garden, Lady Wilcox of Newport and Lady Thornton. I will speak also to Amendment 6A, tabled by my noble friend Lord Johnson of Marylebone. These amendments seek to put the number of notional learning hours that constitute one credit in the Bill, to limit the default credit value to a maximum of 20 credits, and to allow certain higher education providers to increase their tuition fees automatically each year in line with inflation if they have a teaching excellence framework rating.

Amendment 2 would define in the Bill a credit as equivalent to 10 notional learning hours. As has been set out in the other place, while it is crucial that the definition of credits in the fee limit calculation aligns to standard practice in the sector, the Government plan to set this out in detail in secondary regulations, rather than in primary legislation. The power to do so is provided for in new paragraph 1B of Schedule 2 to the Higher Education and Research Act 2017, introduced through Clause 1 of this Bill.

Specifying the learning hours in secondary legislation, rather than primary, means that providers which might choose to use a different number of learning hours per credit will simply have those courses treated as non-credit-bearing for fee limit purposes. If we took the approach of this amendment, those same providers could instead be considered in breach of the fee limit rules as a whole, with all the regulatory consequences that that might bring. The Government do not intend to change the number of learning hours in a credit unless standards in the sector change: learning hours are, and should continue to be, based on sector-led standards. Regulations on learning hours will follow the affirmative resolution procedure, so Parliament will always get the opportunity to debate and formally approve any changes to those regulations.

Amendment 5 queries the extent to which the Government are prepared to fund modules of fewer than 30 credits through the LLE. As I referred to in my response made at Second Reading, and as set out in the Government’s consultation response, modules must have a minimum size of 30 credits for funding purposes. This is in line with the recommendation in the Augar review. None the less, as the noble Baroness, Lady Thornton, pointed out, it will be possible to bundle two or more modules from the same parent course to meet the 30-credit funding requirement.

This amendment also refers to the default credit value. If your Lordships will permit, it may be helpful to provide the Committee with some further detail on the purpose of this value. The default credit value is intended to allow fee limits to be set on full courses that do not bear credits or on full courses that are more suited to annual fee limits than credit-based fee limits. For example, this could include some degree programmes at Oxford and Cambridge or sandwich years where the provider has not assigned credits. It could also include courses such as postgraduate certificates in education or first degrees in nursing. For these types of study, a default number of credits will be used in the fee-limit calculation, instead of any provider-assigned number of credits. These default values will be set at 120 credits per year for full-time courses, with other amounts for other intensities, all of which will align with sector-recognised standards. The default credit values will not apply to modules undertaken separately from their full course. As all modules funded through the LLE will be required to bear credit, they will always have the fee limit calculated using the provider-assigned number of credits, not a default number of credits.

To be clear, the default credit value applies only to full courses, not to modules. If default values are all set at 20 credits, that would mean that, for example, Oxford and Cambridge would be allowed to charge for only 20 credits a year for their degrees, instead of 120 credits, which I am sure is not the noble Baroness’s intention. We would not want providers to be limited to being able to charge for this number of credits per year.

I now turn to speak to Amendment 6A, tabled by my noble friend Lord Johnson of Marylebone. It is clearly vital that our higher education sector remains on a sustainable financial footing. It is an important contributor to our national economy, and it is something that we excel at as a nation. That is why the Government keep all elements of student finance and higher education funding, including fee limits, under constant review. We have said that fees will remain frozen until the start of the 2025 academic year. This ensures that students and taxpayers continue to receive value for money. However, we are also investing an extra £750 million in higher education teaching and students over three years to 2024-25 through the strategic priorities grant. This will help providers to fund their provision of high-cost subjects, such as medicine, science and engineering, and help students to succeed.

We provide support for the sector through subsidised fee loans. This is our investment in the skills, people and economy of this country, and one that is even more important in current circumstances. A continuous automatic increase in fees in line with inflation would undermine the incentive for providers to find efficiencies in their business models or to develop other sources of revenue to diversify their income and achieve sustainability in ways that benefit British students and British taxpayers. Despite current pressures, the Office for Students found in its latest report that the overall aggregate financial position of the sector remains sound, though there is variation between individual providers.

I remind the Committee that overall tuition fee income in English higher education providers has increased in cash terms from £13.7 billion in 2014-15 to £21.6 billion in 2021-22, an increase of around 58%, but there are significant differences in income and student number growth between providers. Some providers have increased their student numbers significantly in recent years, in particular in business and management courses, which have grown rapidly. With the public outlay to support students to go to university having increased so much in recent years in cash terms, the rapid, localised growth that we have seen in some courses and at some providers emphasises the need for us to ensure that the quality of provision remains high, so that students can achieve the employment outcomes that they are looking for and the economy benefits from our considerable investment in higher education.

As my noble friend understands very well indeed, fee income from domestic students is just one element of the income mix of higher education institutions. Obviously, there is income from international students, research fees and funding institutes, as well as commercial income. There are questions that the Government would be keen to work with universities on, and, if helpful, I would be happy to meet my noble friend or providers to think about the scale and breadth of courses offered by individual institutions and groups of institutions within an area, as well as about how the cost base of institutions will develop in future.

Lifelong Learning (Higher Education Fee Limits) Bill

Lord Johnson of Marylebone Excerpts

2nd reading
Monday 19th June 2023 Lords Chamber

[Lord Johnson of Marylebone (Con)]

My Lords, I echo others in saying what a pleasure it is to follow those two excellent maiden speeches this afternoon. I draw attention to my interests in the register, particularly as visiting professor at King’s College London and as chairman of FutureLearn.

I sincerely welcome this Bill as it addresses a very important problem with our current funding system for higher education. Our system, modified by my noble friend Lord Willetts, is one of an income-contingent, time-limited graduate contribution towards the repayment of heavily subsidised loans for tuition and maintenance. In my mind it is the least bad of all available systems, but it does have three flaws.

The Bill is important in that it address one major flaw: the impact that our current system has had—as we have heard from many Members this afternoon—on lifelong and adult learning, which has been in crisis in this country for a decade. On its own, however, it is not enough, because it does not address two prior problems with our student funding system: the fact that our system has not allowed for tuition fees to rise with inflation, which has led to the progressive defunding of our universities, and the increasingly precarious dependence of our universities on international student tuition income, cross-subsidising domestic tuition and the important research that goes on in our system.

Sadly, this Bill does not address that problem. Nor does it address a related issue: we have a system that has no link at all between the quality of provision and the fees that institutions can charge for that provision. It is very important to have alignment between quality and funding; it seems to me essential that we put such a system in place. The coalition Government did attempt that under David Cameron’s Administration when they instituted a link via the teaching excellence framework, which resulted in the only year of inflationary uplift to tuition funding over the last decade. Institutions that participated in the teaching excellence framework were allowed to raise their fees from £9,000 to £9,250. Sadly, however, that sensible innovation lasted only one year, because a snap election resulted in the Government losing the majority on which the policy depended.

Since that time we have seen, effectively, a crisis whereby our institutions, so important to our future as a knowledge economy, are becoming increasingly financially vulnerable. Had we stuck with the mechanism that the Cameron Government instituted, we would not have a situation where, for example, UEA had a £40 million deficit this financial year; tuition fees would have been allowed to rise to around £11,700 for those institutions that acquitted themselves well in the teaching excellence framework; and we would have a link between teaching quality and funding, which any sensible system should have.

So, all that aside, it would be better if this Bill reinstated a link between quality and funding and made automatic an inflationary uplift in the upper limit of our tuition fee system, to put our universities on a stable footing. But that is by the by. The important thing is what this Bill does try to do; that is what is important today. The Bill creates a framework for us to move to a much more flexible system whereby we fund credits rather than years of study and enable people to dip in and out of learning throughout their lives. That is really welcome. I thoroughly support the objectives of the Bill and the framework that it creates for a much more detailed policy that is, hopefully, to come.

My concern, though, is about a policy that is in development at the moment in the department. There are lessons that we need to learn from the short-courses trial, which a number of Members have already referred to today. The trial is clearly struggling, with only 37 participants to date. That really is a paltry number, and I do not think it is sensible for us just to plough on and not try to learn some lessons from what is going on right now with the pilot and from the rather lacklustre response from providers—universities—in coming forward with suitable content for LLE funding.

There are potentially three lessons that we might preliminarily try to draw from what is going on with this pilot, and they are as follows. First, it is a mistake for us to focus so narrowly on level 4 to 5 courses at the expense of level 6 and level 7—that is, master’s—courses. Obviously, levels 4 and 5 are important, and I am not trying to say we should not have people doing level 4 and 5 study, but it is disappointing that modular degrees are not going to be available until the academic year 2027-28, almost a decade after the Augar report was commissioned and eight years or so after it landed. That is an inordinately long time for us to be getting off the policy drawing board into delivery mode for modular degrees, and I think the department could actively look at ways of accelerating that.

In respect of level 7, as the noble Lord. Lord Rees, said, it is important that we make modular funding available for level 7. Of course, master’s loans are available in non-modular form outside the LLE, but many people in work who already have level 6 qualifications will want to continue to progress to higher levels of educational attainment and will want to access level 7 courses. So I strongly urge the Government to remove their mental block on making LLE funding available for levels of study above level 7.

The second lesson that I suggest can be drawn from the pilot is about the minimum size of funding for which LLE funding will be made available. As the noble Lord, Lord Stevens, said in his excellent speech, 30 credits is too large a block of funding both in terms of learning commitment and time and with regard to the amount of loan funding—probably over £2,000—that the learner will have to commit to taking out. Other countries’ experience is that blocks of study of 10 or 15 credits are a much more flexible way of getting this thing off the ground, and I urge the Government to be a bit more flexible regarding the minimum size of funding that LLE will make available.

My third lesson, and this is probably the most important one, is about the kind of provision that will be eligible for LLE funding. At the moment the Government are determined, as far as I understand, to replicate provision that already exists; it has to derive from an existing HE qualification. In effect, we are saying that we want more of the same but in smaller pieces. This is a big missed opportunity. We want to enable learners to access different kinds of provision from different kinds of providers in different shapes and forms. We do not want to create a policy framework that completely chokes off innovation at this stage. Learners, as Andreas Schleicher from the OECD put it in his recent HEPI lecture, will want to access many different types of provision from many different types of provider in lots of different ways, so I urge the Government to be a bit more flexible in the range of providers and the types of courses that they allow into the LLE funding regime.

Those are three early lessons that I would draw from the pilot. I do not think it is irremediable at this point. We are not going to launch the LLE until 2025-26, so there is plenty of time to get the policy right, but we need to crack on with it. In the meantime, I strongly support the Bill for providing the legislative framework for what I hope will be the skills revolution that Ministers want.

Higher Education (Freedom of Speech) Bill

Lord Johnson of Marylebone Excerpts

Committee stage
Monday 14th November 2022 Lords Chamber

[Lord Johnson of Marylebone (Con)]

My Lords, I rise to support my noble friend Lord Willetts, who seeks to prevent the creation of a new statutory tort. We have heard a couple of criticisms of the tort that are a little inconsistent. We heard that it will, on the one hand, lead to a flood of vexatious claims that will bog up our legal system and be very costly for our universities; and, on the other, that it is otiose, because the right for people to make claims to the courts already exists. It surely cannot be both at once.

My objection to Clause 4 is that I think it will undermine the regulator, the Office for Students. I speak not as a lawyer or an expert jurist, so I enter into this terrain with great trepidation. From a very practical point of view, my concern is for the work of the director for free speech and the authority of the Office for Students if we put this new statutory tort into law.

Having been involved in helping to set up the Office for Students through the Higher Education and Research Act with my noble friend Lord Younger, I am acutely aware that we have already created a very powerful regulator. The reporting structure that this Bill creates around the director for freedom of speech is none the less extremely useful. That is why I support this aspect of the Bill, which creates this new position in the leadership team of the Office for Students.

However, once the director for freedom of speech’s position is created, his or her position will be very strong and he or she will have sufficient powers to do the job that we expect him or her to do in promoting freedom of speech in our system. That is because the director for freedom of speech will be able to impose conditions of registration on any provider that falls short of the enhanced duties created by this Bill.

These conditions of registration are an extremely powerful regulatory tool, because they consist of far more than just the nuclear option that HEFCE used to have, which was just to withhold funding from a provider. The Office for Students has a very subtle suite of regulatory tools at its disposal. They run a full range from simply seeking an action plan from a university all the way through to imposing fines on an institution if it does not deliver on the action plan it has agreed with the director for freedom of speech. They do not need to consist simply of suspending a provider from the register and therefore effectively dooming it to failure, or taking away its university title. Those are nuclear options that no regulator really has any credibility in threatening, but the director for freedom of speech will have many other more useful tools at his or her disposal.

A statutory tort on the statute book will not help the regulator in any way at all; it already has the tools it needs. I strongly support my noble friend Lord Willetts. I hope the Government will listen to the debate and the excellent interventions that we have heard this afternoon and accept Clause 4’s removal from the Bill.

[Lord Triesman (Lab)]

My Lords, it is a pleasure to follow the noble Lord, Lord Johnson. Like so many other people in the debate, I strongly agree with the comments made, from the speech by the noble Lord, Lord Grabiner, onwards. I also do not believe that this clause should remain. I do not believe it will do the job it is supposed to, and it will almost inevitably lead to the chilling effect that the noble Lord, Lord Willetts, and others have described.

My noble friend Lord Blunkett asked why the not entirely fictitious person Kathleen could not pursue an action for unfair dismissal because she was compelled into a position that was intolerable. I believe that there was a time when she would have been advised to do that, would probably have done so, and could have counted on the support of her trade union in pursuing that course of action—I can say this directly, as my interest has been declared any number of times. Of course, she found that she could not count on the support of her trade union. I submit to your Lordships that one of the reasons she could not now count on its support is precisely the reason that my noble friend described. If you go back seven, eight, certainly 10 years, the battle that would have taken place in that union to make sure that someone’s employment rights had been sustained without having to resort to any other regulator or court would have been absolute. It would have been the determined position of that union. Some may say that if that would no longer happen, maybe we need something else.

I submit that the “something else” we need is certainly not Clause 4 and this tort. There are those who might say that they are not so concerned about the chilling effect because they do not believe that enough of these things will happen. I say to your Lordships’ Committee that if it wanted to hand-pick a group of its fellow citizens who would argue in the most tortured way about absolutely anything, it should go to one of our universities. There they are: serried ranks of people whose day-by-day enjoyment is to have furious arguments about matters of little consequence. [Interruption.] I have been one for many years.

I will tell the noble Baroness, Lady Smith, that at Cambridge University, after the faculty of economics was redecorated, I was inveigled into taking part in a debate as to the order in which the portraits of its Nobel prize winners should be rehung and whether it should be Marshall or Keynes in the pre-eminent position. I left that debate after eight hours. No one was an inch further down the line of resolving it and, to my knowledge, the portraits have never been hung, because 20 years later no one is any further down the path of resolving it. I hate to say this: the only place where I have seen disputes followed with the same tenacious interest and complete unwillingness to give an inch is in my synagogue, but that is because it largely comprises lawyers. I do not make this point to be frivolous or humorous. The truth is that this is a most vexatious and disputatious group of people. They are employed to have arguments with each other; it reaches into every corner of their lives. If we think that they are unlikely to do so in these circumstances, we mislead ourselves completely.

Some people will be very well backed in pursuing this course of action. I think the noble Lord, Lord Willetts, made the point that some will be at a great disadvantage financially. The student unions that we are talking about are usually run by a small group of young people with no experience whatever of the law. Generally speaking, they are unable to exert any control over all the clubs that form the diaspora of their organisation—the Minister made that point. They will be put in a position that they cannot afford or control, and to which there will be no satisfactory long-term resolution.

All this brings me to say that the points that have been made, including by the noble Lord, Lord Johnson, about having a regulator that can manage these things, and build on knowledge of how to manage them, is a route to a sensible solution. The rest of it—and I apologise if this is thought to be offensive; I do not mean it to be—is completely fanciful, and anybody who has spent more than a few weeks working in a university will know it.

--- Later in debate ---

Moved by

[Lord Johnson of Marylebone]

63: Clause 9, page 12, line 39, at end insert—
“(3A) The duty in subsection (1) includes a duty to consider whether a registered higher education provider or any constituent institution is overly reliant on overseas funding from a single country of origin.”Member’s explanatory statement
This amendment, together with the other amendment to this clause in Lord Johnson’s name, would include income from international tuition fees in the definition of overseas funding and ensure that the Office for Students has a duty to monitor over-reliance on overseas funding from a single country.

[Lord Johnson of Marylebone (Con)]

In rising to speak to Amendments 63 and 64 in my name, I draw attention to my interests in the register as a visiting professor at King’s College London, chairman of Access Creative College and chairman international of ApplyBoard.

I am not sure we are capturing exactly what we need to in this section of the Bill on overseas funding. If we are to legislate afresh, as we seem to be doing, on freedom of speech in higher education, the chilling effects arising from the excessive concentration of international research and tuition income surely need to be part of the discussion. The four categories of relevant overseas funding in Clause 9 are all good as far as they go, but they manage to exclude altogether the largest single source of such income. That is, of course, the income that universities receive from the uncapped and unregulated tuition fees charged to international students.

Like so many in this place, I strongly support the contribution that international students make to the success of our higher education system, and I am very pleased indeed that we met the Government’s target of 600,000 international students in this country by 2021, 10 years ahead of the 2030 target. There are many critics of international students in the country today. I note only that the proportion international students represent in the overall student population has not changed markedly since 2014. While the actual number has increased by 28% since that time, that has been matched by a similar growth in the UK student population, meaning that their proportion of the mix has stayed broadly the same.

--- Later in debate ---

[Baroness Barran (Con)]

My Lords, I would like to address the group of amendments relating to overseas funding.

Amendments 63 and 64, tabled by my noble friend Lord Johnson of Marylebone, seek to amend the transparency measures concerning overseas income received by higher education providers. They would add tuition fees to the categories of overseas funding in scope and require the OfS to consider whether a provider or college was “overly reliant” on funding from a single country of origin.

Increasing awareness of foreign interference risks in higher education is of course vital. That is why we have already added measures to the Bill that will require the OfS to monitor the overseas funding of registered higher education providers and their constituent institutions so that it can assess the risk that the funding may pose to freedom of speech and academic freedom in the provision of higher education within a given institution. However, we have ensured that the scope of these measures is proportionate to the risk, in order to ensure that our universities remain a place where freedom of speech can thrive.

The Government consider that these further amendments are unnecessary and potentially overly bureaucratic. Providers are already required to submit data to the OfS on course fees by broad domicile, broken down by UK, other EU and non-EU. In addition, international student numbers are reported to the Higher Education Statistics Agency and published online, broken down by country of domicile and by provider. This means that information about international tuition fees is already available to the OfS. If the OfS considered that a provider was overly reliant on student tuition fees—the noble Lord, Lord Collins, talked about the business case for overseas students—it could take steps if it thought that this would threaten the financial sustainability of the provider. That is included in the registration conditions that providers must already comply with. The OfS can issue sanctions for breach of these conditions.

Amendment 65, in the name of my noble friend Lord Willetts, seeks to increase the financial threshold for reporting required by higher education providers under Clause 9. This would require that no less than 1% of the total income of a higher education provider would fall to be reported, thereby reducing the burden of reporting on providers.

For many large providers, 1% of their total income could represent tens of millions of pounds, but I am sure noble Lords will agree that, for example, £1 million would be a very significant amount of money if an individual member of the academic staff received it as a research grant. Amendment 65 would mean that such instances might not fall to be reported.

The aim of Clause 9 is to increase the transparency of overseas funding. The OfS will require providers to supply information to them on relevant overseas funding. Relevant funding is defined as certain specified types of funding received by the provider, a constituent institution or a member or members of staff from a relevant overseas person, where that exceeds a threshold—to be set out in legislation—within a period of 12 months. The current intention is to set this at £75,000 in a 12-month period for providers and colleges.

We recognise that the risk of undue influence arising from smaller amounts of overseas income is likely to be lower. We have therefore ensured that the scope of these measures is proportionate to the possible risk to freedom of speech. We believe that the intended threshold of £75,000 for providers and colleges is appropriate, as it will strike the right balance by increasing the transparency of significant transactions without creating undue bureaucracy by requiring the reporting of smaller transactions that are less likely to pose a risk. The information required is further narrowed in scope, as “relevant overseas person” is a limited category and there will also be countries that are excluded from this provision that will be set out in regulations.

We take the impact on the higher education sector seriously, which is why the Bill includes the measures that I have just described to reduce the level of reporting required. We are therefore ensuring the proper targeting of the measure to the risk to freedom of speech, and that the burden on providers will not be too great.

I now turn to Amendment 66 tabled by the noble Lord, Lord Wallace of Saltaire, and spoken to by the noble Baroness, Lady Smith of Newnham, which seeks to clarify why students’ unions have been included within the scope of the overseas income measure in Clause 9. The overseas funding measures in the Bill seek to increase the transparency of overseas donations and other income received by higher education providers, their constituent institutions and students’ unions to better enable the OfS as a regulator to understand the possible extent of financial leverage from a foreign source, which may influence behaviour to pose a threat to freedom of speech and academic freedom. The information reported will enable the OfS to monitor and report on any sector trends and patterns.

In order for these measures to have the maximum intended effect on countering the threat of foreign interference in higher education and to increase public confidence in the sector, we considered it vital that the overseas funding duties extend to students’ unions, as other measures in the Bill do. Students’ unions across England are in receipt of a variety of overseas income every year and there is diversity across students’ unions in the ways in which they are funded. Information published by the Charity Commission demonstrates that a large number of students’ unions are very reliant on the annual donations and legacies that they receive. Therefore, it would be remiss not to include students’ unions in Clause 9.

The scope of the measure—noting in particular the threshold amount, which we anticipate will be set at an appropriate level for students’ unions—means that the burden on those unions will not be too great and will ensure the proper targeting of the measure to the risk to freedom of speech. I trust I have given reassurance that Clause 9 as drafted offers sufficient and proportionate protection against undue foreign influence on freedom of speech and academic freedom within higher education.

[Lord Johnson of Marylebone (Con)]

I am grateful to my noble friend the Minister for her response and to noble Lords for their excellent contributions. I will reflect on the debate and particularly on whether this was the best place for my amendment, which I recognise I have rather contrived to attach to this Bill. In the meantime, I am very happy to beg leave to withdraw it.

Amendment 63 withdrawn.