Higher Education Funding

Debate between Lord Willetts and John Denham

Thursday 8th January 2015 Commons Chamber

[Mr Denham]

That is an interesting point. Germany had a fees system and got rid of it, but the German system is much more diverse. Far fewer German students study away from home. The Germans have a different way—I would not suggest we go down this route —of seeing the diversity of the technical degree-level qualifications and other degrees and allowing people to study over a longer period of time. In other words, they have designed a system that meets the needs of their economy, but I believe it also meets the needs of graduates. I reject those who say, “If you should work more closely with employers, you are corrupting the purpose of higher education.” There will be room in the system for the senior common room on which the hon. Member for Northampton South missed out, and room for those who want to study hard for two years to get an employment-related degree. There is space in the system for everyone.

[Mr Willetts]

Will the right hon. Gentleman confirm that Germany has lower levels of social mobility than us? Many fewer people from low-income backgrounds go to university in Germany, because access in Germany is very restricted compared with access here.

[Mr Denham]

We should therefore not say that there is a simple model to pick off the shelf from somewhere else, but, as I shall say in a moment, we should pick up the elements of our system that work and take elements that work from other systems. We could even invent things of our own that are appropriate to our needs. We have the most expensive model of higher education. Ten years ago, when we first aimed for 50%, very few people, including Labour Members, assumed that the expansion would be done through having so many young people in such an expensive model of higher education.

Because teaching funds have been deliberately cut, fees are higher than would otherwise need to be the case. The private cost has risen, which is important because we should be stewards of what happens to people’s private money just as much as we are stewards of public money. Those who repay do not just repay their own course costs. Their fees help to subsidise research and to pay the fees of those who will never repay in full. I predict that there will be a point at which those graduates kick up against the bills they are being asked to pay for other people.

That is wasteful because the introduction of increased fees has caused politicians on both sides of the House to introduce new elements of public spending that do not teach students anything—Government’s of all parties have made maintenance systems more generous. The current Government required universities, under the Office for Fair Access, to put back 30% of all fees above £6,000 into widening participation, much of which was in fees and bursaries of completely nugatory value, which does not encourage universities at all—they just make universities compete for the same students. We have built waste into the system because politicians have been afraid of the consequences of their decisions. There is huge potential to use public and private money more efficiently to deliver a better system.

I have had a lot of support from the House of Commons Library, for which I am very grateful. Apart from my colleagues, one of the things I will miss most about being a Member of the House is the excellence of the House of Commons Library staff. I asked them to look at a model that would retain current levels of public spending; maintain institutional income to the sector from public and private sources; protect low-income students, so that no one in future would pay as much as people pay today, whatever the mode of study; have more intensive and flexible two-year and part-time courses; and have more employer-funded courses. I asked the Library to consider a system in which 70% of students do the traditional three-year residential degree and 30% study more intensively, have employer-sponsored courses and so on.

I also said to the Library, “Let’s be radical. Let’s spend public money on higher education to teach students something. Let’s strip away as much as we can of the money that is not spent on teaching students something.” That has the effect of reducing fees dramatically and reducing the cost of debt cancellation. In the spirit of my idea of keeping what is good, I said, “Let’s keep the current system that allows students to choose the university they want and take their resources with them—let’s not go back to a fixed allocation of numbers.” Having created a much larger fund for teaching, I would grant every English student a student entitlement that goes to the university that accepts them towards the cost of their fees.

In summary, in my model, public spending is at current levels and university sector income is unchanged, but spending on teaching increases from £0.7 billion to £5.5 billion. RAB charges fall by £3 billion a year. The student entitlement for each student, irrespective of the type of course they do, is £15,000, meaning that fees at full-cost universities, which currently charge £9,000 a year for a three-year degree, would fall to £4,000 a year. A two-year intensively studied degree costs just £4,500 in total—the student would probably study from home. Employers could co-sponsor a degree for an average contribution of £5,000 towards fees, less than typical recruitment and retention costs for a graduate. The same number of people would graduate because intensive study means fewer students at any one time. Spending per student would rise by 13%, an immediate and important boost to university finances.

More graduates would pay for their course in full. Let me be clear that I happen to believe that that is morally right: if we ask people to take on a debt and buy something, they should pay for it in full. For every mode of study, average lifetime payments would be less than they are today. If under that new much lower-cost system the higher-earning graduates—the City high-fliers—were paying too little, there would clearly be scope to introduce a free-standing graduate tax on the highest earnings, which could provide a useful fund for reinvestment in higher education teaching and research.

[Mr Denham]

I take responsibility, as all hon. Members must, for the use of those figures, but I have done my very best to ensure that they and the modelling have been done by the House of Commons Library, using the simplified higher education model produced by the Department for Business, Innovation and Skills.

[Mr Willetts]

Will the right hon. Gentleman give way?

--- Later in debate ---

[Mr Denham]

You want me to finish my speech, Mr Deputy Speaker, but I will give way to the right hon. Gentleman.

[Mr Willetts]

Will the right hon. Gentleman clarify one important point? Is he therefore proposing that the maintenance grant goes and is not replaced by maintenance loans, and as a result that many more students do not travel from their home town to go to university?

[Mr Denham]

My proposals would replace the maintenance grant with the maintenance loan. In other words, the income available to the student would remain exactly as it is currently. The key thing is that, provided fees are low enough, the total graduate debt would be less than under the current system. Putting maintenance grant cash into teaching enables us to get the debt cancellation charges down.

I do not want to overstate my case. Producing an outline model with the help of the excellent people in the House of Commons Library is not a policy, but it shows that a different policy is possible. I would look to the Government to do the sort of modelling I have talked about, but properly, completely and within their resources. In the real world, we would not, as I have done, separate honours degrees from level 4 and 5 apprenticeships, and we would not separate higher and further education study in an integrated system, but it is clear that there should be a review, because things could be different and better than they are at the moment.

--- Later in debate ---

[Mr Willetts]

On write-offs, I hope people can accept that what we are talking about here is a forecast shaped with some rather peculiar assumptions, not an item of public spending today. On a review, a lot depends on what people mean. My view is that the last thing that the higher education sector needs is another equivalent of Robbins, Dearing or Browne. All three political parties represented in the Chamber today, when faced with how to finance higher education when money is tight, have all essentially reached the same decision: to go for a graduate repayment scheme. My right hon. Friend the Minister is entirely correct when he quotes Andreas Schleicher and the OECD in saying that this is the sustainable model.

In my experience as Minister—I am sure that it is my right hon. Friend’s experience as well—there were certain Ministers around the world who looked at us and tried to work out how to get something closer to what we have. The last thing we need is a review that throws all this up into the air, particularly if the anxieties that people are focusing on arise from an unfair comparison. The reason why there are so-called anxieties about the sustainability of this model is the forecasts, which are very peculiar indeed, and the assumption that everything is fixed until 2046.

When the advocates of a graduate tax stand up and say that they want a graduate tax, they do not then say, “It’s going to be 9%, and it’s going to have an earnings threshold of £21,000, and we commit now that that will be the threshold related to earnings for 30 years.” As soon as they did that, exactly the same kind of calculations would be possible and we could calculate the x billion pounds that they expect to collect in the next 30 years, and every six months we could recalculate and announce that they had just lost £3 billion and ask what they were going to do about the fiscal crisis in their scheme. In other words, the advocates of a graduate tax are of course assuming that it is a flexible device to ensure that people continue to pay for higher education, and that is what this graduate repayment scheme is. Although designed by Labour and adjusted by us, it is conceptually the same thing. The last thing we need is to reopen that question.

[Mr Denham]

I look forward to hearing the right hon. Gentleman, who I think is pursuing a debate about a pure graduate tax, which is of no interest to my proposals, as he will have heard. Could he tell us what the RAB charge represents? The only common-sense interpretation is that it is the best estimate we have at present of how much money will not be repaid. Does he accept that? It is not good enough to say, “It’s not very good, so I will ignore it.” Surely, the very least that he should be demanding from the Minister is a sensible projection of how much will not be paid back.

[Mr Willetts]

The only country that has a system like ours is Australia. The last time I was in Australia, comparing notes and discussing our two systems, when I asked the leading Australian expert what the Australian equivalent of the RAB charge was, he said, “I think when we launched the scheme five years ago, we did an estimate of write-offs, and come to think of it, we probably ought to have another look at it now.” The idea that every six months a new figure was churned out essentially based on what has happened to earnings in the previous six months compared with the OBR forecast in 2011 would have been regarded as absurd. I would happily have a much more credible set of assessments of write-offs, which would have to allow for the fact that this must be a flexible system.

Returning to the shadow Minister’s intervention, I accept that all of us in all parts of the House should openly recognise that the scheme will not remain unchanged until 2046. We do not sit around with our income tax system, saying, “Well, of course Geoffrey Howe decided income tax rates and thresholds in 1980, and now that 35 years have elapsed we can decide on a new set.” That is not how policy is conducted in this country. One of the reasons why I am unhappy with this focus on a particular way of calculating the RAB charge is that it brings with it a set of assumptions which, unlike any other area of public policy, have been determined until 2046, so the only thing to do if someone wanted to change it is to tear the whole system up and start again.

I completely accept that there will be a necessity—I am interested in this and I am doing something on it at present—for us to discuss the right balance of public and private benefit from higher education and the balance of public and private contribution to the costs of higher education. The graduate repayments must clearly reflect the private benefit from higher education, but nobody should be preoccupied with a set of calculations that are possible only because of some highly precise assumptions that bear no relationship to the real world of higher education over the next 30 years.

Oral Answers to Questions

Debate between Lord Willetts and John Denham

Thursday 24th May 2012 Commons Chamber

[Mr Willetts]

I am sure that there is always more we can do to promote LEPs, but they are already playing a crucial role in the allocation of the regional growth fund. I very much look forward to visiting Norfolk later today when I will have the opportunity of announcing further investment in that important county.

[Mr John Denham (Southampton, Itchen) (Lab)]

In the time that Ministers in this Government had dozens of meetings with Google, one of the few British IT companies to achieve global status, Autonomy, has been taken over and today tragically destroyed. May I suggest to Ministers that instead of spending so much time cosying up to American giants that just want to protect their monopolies, they should talk to people such as Mike Lynch, the founder of Autonomy, to understand why it is so difficult for British innovative companies to get the long-term finance on their own account that they need to become global leaders?

[Mr Willetts]

Let us make it absolutely clear. My fellow Ministers and I talk on an even and equitable basis with Autonomy and Mike Lynch, of course, and with HP and Google. Indeed, we have set up a council to plan our strategy for e-infrastructure and high-performance computing in which their advice is greatly valued. Yes, it is very important that we invest in high-technology companies, but I cannot believe that a former Secretary of State is actually saying that we should have direct controls to stop a company such as Autonomy being taken over.

Oral Answers to Questions

Debate between Lord Willetts and John Denham

Thursday 9th June 2011 Commons Chamber

[The Minister for Universities and Science (Mr David Willetts)]

I support the excellent work of FE colleges in providing higher education in Cornwall and elsewhere. I am concerned, as is the Secretary of State, by reports that some universities might be threatening to end their partnerships with FE colleges without good reason, but I reassure my hon. Friend that FE colleges are indeed eligible to apply for their own degree-awarding powers. In addition, our White Paper will propose making it easier for FE colleges to access a wider range of external degrees.

[Mr John Denham (Southampton, Itchen) (Lab)]

I welcome the good news from Nissan and BMW, which, despite the Secretary of State’s curmudgeonly response, built on Labour’s support for those companies’ investment in the UK. In 2006, he was very clear when he said:

“The DTI, and its army of Sir Humphreys, should be scrapped.”

Then he was offered the job of running it, and said that it would be the Department for growth. How is the Department for growth getting on?

Off-quota University Places

Debate between Lord Willetts and John Denham

Tuesday 10th May 2011 Commons Chamber

[Mr John Denham (Southampton, Itchen) (Lab)]

(Urgent Question): To ask the Secretary of State for Business, Innovation and Skills if he will make a statement on the proposals for students to buy off-quota university places.

[The Minister for Universities and Science (Mr David Willetts)]

Fair access to university is crucial for achieving equality of opportunity, and there is a clear issue of principle here. Access to a university must be based on ability to learn, not on ability to pay. There is absolutely no question of wealthy students being able to buy their way into university.

As the coalition prepares its White Paper on higher education, we are considering possible ways to allow universities to recruit extra students in addition to their student number allocation. Any such arrangement would have to comply with the principle that access to university must be based on ability to learn, not on ability to pay. That is why, in the Secretary of State’s speech to the Higher Education Funding Council on 6 April, he said:

“Another measure for the longer term could be to remove student number controls which inhibit universities’ ability to recruit students who represent no burden to the public purse. For example, I don't believe that universities should be prevented from expanding courses where employers cover students’ costs”.

We are considering two options: first, making it easier for employers to sponsor students at university; and secondly, making it easier for charities to sponsor students at university. Any such scheme would need to comply with the following conditions: the principles of fair access must apply; there would need to be genuine additional places; there would be no reduction in entrance standards; and, of course, rich individuals should not be able to buy their way into university.

Everything this coalition does is guided by our belief in the need to improve social mobility after it stagnated under the Labour party. We will set out our proposals in the White Paper, which will be published shortly.

[Mr Denham]

In The Guardian and on the “Today” programme, the Minister set out plans to allow students who have access to private funds to buy their way into universities that they cannot get into on merit. Why was the House not told of those plans when we voted on tuition fees? How many hon. Members would have trebled fees if they had known that he planned to allow students to buy entrance to selective universities? Or has the Minister just made up this plan? He has cut 20,000 student places, lost control of fees, £9,000 is the norm not the exception and access agreements have no teeth. There is a black hole in his budget and threats to cut more student places or teaching budgets.

Given that mess, why is it that every time the right hon. Gentleman puts a sticking-plaster on the wounds that he has caused he makes things worse? Yesterday he launched the communications plan for the new fees system. Can he not imagine the dismay that he has caused for thousands of hard-working A-level students today? They now know that hard work, ability and ambition will not be enough.

Students from low-income homes want fairness, not favours. Does the Minister not understand that a few places will not soften the brutal message that, for this Tory Government, access to wealth and privilege will always trump ability and ambition? Poor families have no chance of buying their way in, but is this not also a cruel betrayal of middle England—those hard-working, middle-class, middle-income families who want to do the best for their children and face agonising pressure to take on huge private debts to remortgage their homes to make sure that their children get what the kids of the wealthy take as a right?

Does the Minister accept that although there is nothing wrong with employers getting universities to provide bespoke courses for their employees and nothing wrong with employers paying fees once the university has decided whom to admit, his plans will corrupt university admissions with a two-tier system—one for the best qualified and another for those with access to fatter cheque books? And who will pay? The Minister’s response was remarkable, because it is clear from his interviews today that he wants to allow wealthy families to buy places: he did not deny that in several interviews. Now incompetent Government Ministers are arguing about it in public. Where are these charities that want to pay £70,000 per student? Who are the employers who want to pay for the second best, not the best?

I am glad that the Minister has been forced here today. We will study his plans to see whether he really has climbed down, because if so, it is the most humiliating and fastest U-turn in the history of this discredited Government. This House needs what we needed last December—a proper White Paper to tell us how this whole mess is going to be sorted out.

[Mr Willetts]

The shadow Secretary of State clearly has not been listening to what I have been saying. He has invented a policy and then denounced it. He has no excuse for that, because in every public statement I have made, I have made it absolutely clear that we are looking at employers and charities. Those are the actual words that I used in The Guardian this morning when I referred to the current rules which, for example, limit the ability of charities or social enterprises to sponsor students.

Let me make the position clear regarding the two proposals that we are considering. First, Members in all parts of the House have endlessly urged us to do more to get employers involved in sponsoring students at university. Only 6,000 students out of well over 1 million in total are currently sponsored by employers outside quota controls. That is why, yes, we are looking at ways in which extra places outside quota controls can be made available for students sponsored by companies, but they must meet the conditions that I clearly set out in my earlier response.

Secondly, we are pursuing another objective that I thought was shared by Members on both sides of the House—encouraging greater endowments for our universities. Many people who are considering charitable support for our universities like to know that real individuals will benefit. At the moment, if they identify and provide for any places for poor students, they come up against a universities quota limiting total numbers. That deters charitable giving. So, again, we are investigating whether charities and social enterprises can support people at universities outside quota controls.

Whatever we do will comply with the fundamental principle that rich individuals should not be able to buy their way into university. Labour Members left the public finances in a mess. They left universities with a £1 billion deficit and in a straitjacket, they restricted places, they fined institutions, and they blocked ambitions. We are determined to reform Labour’s broken system.