Higher Education: Affordability and Quality

Baroness Smith of Malvern Excerpts

Thursday 2nd July 2026 Lords Chamber

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

My Lords, I thank the noble Baroness, Lady Deech, for raising this subject. In my two years in this place and in this job, it has become very obvious to me that there is nothing that the House of Lords likes more than a debate about higher education, perhaps because people are able to bring such expertise and experience, as we have seen today.

I begin, as many noble Lords have, with a recognition of the value of higher education, and of our higher education sector. It is, as many have said, world leading. It includes four of the world’s top 10 universities and has educated 59 current or recent world leaders. It generates significant economic value, contributing over £265 billion to the UK economy and supporting around 750,000 jobs. The noble Baroness, Lady Freeman—who I congratulate on her relatively recent appointment as principal of my former college, Hertford—was absolutely right in identifying that the sector enables the development of critical, independent and creative thinking. I recognise the point by the noble Baroness, Lady Cash, that this is also something that we need to safeguard within our universities.

Beyond its economic impact, higher education is, as others have argued, associated with substantial social benefits, including better health outcomes, longer life expectancy and higher well-being among graduates. Higher education providers also play a vital civic role, strengthening local communities and contributing to public services, place-making and regional development. That is why this Government are committed to maintaining a world-class higher education sector that delivers for students, our society and the economy. I share the view of my noble friend Lord Liddle: however powerful the overarching speech of the noble Baroness, Lady Deech, we disagree that we should be aiming to reduce the opportunities to benefit from higher education in this country and the number of universities.

An analysis of our skills need shows us that we need more higher-level skills, not fewer. That is why the Prime Minister has set a target to increase the proportion of young people with level 4 and above skills to two-thirds by the age of 25. I hope that also reassures the noble Lord, Lord Trees, the right reverend Prelate the Bishop of Leicester and my noble friend Lord Liddle. Having a variety of opportunities to gain higher-level skills—through higher education but also through apprenticeships and other technical education—is very much part of this Government’s approach to seeing the tertiary sector as one and interrelated. That is particularly in terms of co-operation on modular courses and new pathways into higher education. The relationship between higher education and further education is at the heart of our plans, as is the development of the lifelong learning entitlement, which will enable people to come back to learning in both HE and FE for higher-level courses throughout their lives.

We of course recognise that the sector’s financial environment is challenging, but the sector is rightly independent from government. That means that it is providers’ responsibility to manage their finances and ensure that their business models provide long-term sustainability. Nevertheless, we remain committed to securing the sector’s future. That is why, after them having been frozen for eight years, we increased tuition fee caps in line with inflation in 2025-26. We will increase them once again in line with forecast inflation in 2026-27 and 2027-28, and then legislate, when parliamentary time allows, to increase tuition fee caps automatically for future academic years. That is, over the coming years, £6 billion-worth of safeguarded index increase in income, underpinned by the Government. That is a quite different position to be in than for many public sector organisations at the moment.

We have been clear, however, that future uplifts will be conditional on higher education providers achieving a higher quality threshold through the Office for Students’ quality regime. More broadly, the Post-16 Skills and Education White Paper sets out our commitment to placing the sector on a more sustainable footing, supporting providers to drive efficiency, strengthen financial resilience and adopt more effective operating models.

I agree with my noble friend Lady Warwick on the importance of UUK’s future university work. This is an important piece of work. I also agree with the noble Lord, Lord Mohammed, on the diversity of the higher education sector being one of its strengths. We spelled that out in the White Paper that we produced last year.

The noble Lord, Lord Stevens, invites me to comment on stories in the Daily Telegraph. He knows not to believe everything that he reads in the Daily Telegraph. He also knows that I will not be giving, to use a cliché, a running commentary on what is happening within discussions about the EU reset. He is right, however, that we should not penalise UK students or university finances through any agreements that we might make as part of that reset.

Several noble Lords rightly identified research as a very important element of the work of our universities and talked about the funding that is available for it. This Government are investing a record £86 billion in R&D from 2026-27 to 2029-30. As part of this, UKRI will deliver an expected £38.6 billion of research investment, rising to nearly £10 billion per year by the end of that period. In the Department for Education, we are working closely with DSIT to deliver the White Paper’s commitments, which include research funding reform and improvements to research grant cost recovery. Early action includes reforms to the Research Excellence Framework 2029 to reduce the burden and place stronger emphasis on institutional strategy and areas of strength, supporting more sustainable research planning. I agree with the noble Lord, Lord Bew, about the significance of the REF and the contribution it makes. That was an important point.

The noble Baroness, Lady Freeman, raised the issue of support for postgraduate and doctoral students. The Government are working with UKRI through the new deal for postgraduate research to strengthen financial support and the overall student experience. We have increased the minimum stipend by 40% in cash terms between 2021 and 2026 and have provided better support to students through revisions to their standard terms and conditions of training grant, with changes implemented from October 2025. I also recognise that for our higher education sector to remain world-leading, it must continually uphold the highest standards of quality, integrity and student outcomes. It must also remain accessible and affordable, ensuring that students from all backgrounds are able to benefit from the opportunities that higher education provides and from the undoubted outcomes and lifelong benefits that higher education brings.

The noble Lord, Lord Willetts, and others, referenced the work of the IFS, commissioned by the Department for Education and published last week alongside the LEO statistics. The noble Lord worked hard to make it as detailed and wide-ranging as possible. There is a clear message there. It is still very worth while to go to university. In terms of the lifelong returns, that varies by subject, but the vast majority of people who go to university will gain, as well as all the social benefits that noble Lords have identified, a considerable return over their lifetime from having done that.

Having said that, and given the work that we are doing and the differential between subjects that the research identifies, it is the case that, for some subjects, the financial return is not as great, and for some it is actually negative. Of course, that does not mean that people should not continue, for example, to train to be teachers—as I did—or social workers. Of course it does not mean that people should not study performing arts of creative subjects—for all the sorts of reasons that the noble Earl, Lord Clancarty, spelled out. What it does mean is that everybody should make those choices, particularly given the investment they are making, on the basis of the best possible information. We are determined, working with UCAS and Discover Uni, to provide much clearer information to people making those decisions about what they can expect from a higher education course and where they can expect that to enable them to go.

We have committed to increasing the number of starters on courses that lead to priority occupations related to our industrial strategy. That is the reason for producing, as we have, what we have called our Pathways to Priority Occupations document. We will use that and a whole range of other information and data to make decisions on support for higher education. We want to make that available for people making decisions about which courses they will do.

In relation to the point made by the noble Lord, Lord Willetts, and the noble Baroness, Lady Cash, about the returns to apprenticeships, there is already a variety of evidence on the economic returns to apprenticeships that has been published by the department, the Centre for Vocational Education Research and others. We will be considering how to apply a methodology similar to that used by the IFS to apprenticeships as we go forward.

We are committed to raising teaching standards in higher education, so that every student receives the high-quality education and strong outcomes that they deserve. We continue to support the Office for Students as it implements a stronger and more integrated approach to assessing the quality of teaching. Where lower-quality provision is identified, it should be improved for existing students before it expands further. We are working to ensure that the Office for Students can impose recruitment limits on those providers. As I have already said, the White Paper sets out plans to reward and incentivise excellence through measures such as linking tuition fee uplifts to the Office for Students’ high-quality ratings.

Several noble Lords, and the noble Baroness, Lady Deech, raised questions about how we protect academic standards. It is right of course that confidence in degree outcomes is key to maintaining the reputation of English higher education. That is why we have committed to a range of actions to explore risks to standards, including whether recent patterns of improving grades can be explained by an erosion of standards rather than improved teaching or assessment practices. I am sure that there is continuing improvement in both teaching and assessment. We are also looking closely at assessment integrity and the external examining system, including the threats and opportunities that artificial intelligence presents. Alongside this, we are working with the Office for Students to understand the risks presented by generative AI to academic standards.

I agree with the noble Lord, Lord Tarassenko, and I recognise the point made by the noble Baronesses, Lady Finlay and Lady Cash, that there are important opportunities in the use of AI within higher education. I do not believe that the primary opportunity is to reduce the number of staff, but there is a range of ways. I know, from having spoken to vice-chancellors, that there is a lot of work going on in higher education on how the benefits and opportunities from AI can be recognised.

I want to say something about how, in considering how we protect academic standards, we address the risks posed by certain delivery models that have developed in the sector. In particular, we have seen an enormous growth over recent years in franchised provision. This is why we are taking forward proposals to strengthen oversight of franchising in higher education by requiring large franchise providers to register with the Office for Students. The response to the consultation on that, published last December, sets out the details which will ensure that student loan funding is better protected from misuse and that students studying at franchise providers can have confidence that their courses are subject to rigorous quality requirements.

The changes we are making through regulations will ensure that large, unregistered provision is brought within the OfS’s strengthened regulatory regime while not increasing the burden on smaller providers. These regulations are the next step in the Government’s programme of work to strengthen the integrity of the student finance system and ensure that franchise provision operates in students’ interests, with clear accountability and robust safeguards for public money. The lead providers must also take responsibility for ensuring the quality and governance of their partnerships and act swiftly where standards fall short, as will the Government and the Office for Students.

These risks to quality and oversight also underline the importance of safeguarding the proper use of public money. This Government take very seriously the need to ensure that we protect the student finance system from exploitation. That is why we are bearing down on any misuse or risk of misuse of that system. Where that occurs, and I am afraid we have seen some evidence of that through the Office for Students, it undermines student outcomes, damages public trust and diverts funding away from legitimate higher education.

Further, we intend to consult on a new minimum English language requirement that will ensure those receiving student finance are able to engage fully with their course. We want to ensure that public funding supports students who are able to benefit from the investment the Government make in higher education. I know that mature students, in particular, may come to higher education through different pathways and different academic routes. We are really keen to ensure that access to higher education remains open, but the aim also has to be to ensure value for money and protection for those students. Frankly, students should not be mis-sold courses that they are not equipped to undertake. We will not set up arbitrary barriers to participation but will, in consultation and in the light of evidence, think carefully about the potential impacts on students and providers as we take forward this approach to safeguard students, safeguard our student finance system and balance access with successful participation in higher education.

Several noble Lords raised student finance, including the noble Lord, Lord Isaac, and my noble friend Lord Liddle. Our student finance reforms are already regearing that system to better support disadvantaged students, make things fairer for graduates and create a more flexible, responsive post-18 education system, as I have said, through the introduction of the lifelong learning entitlement. We are also future-proofing maintenance loans by committing to increase them in line with forecast inflation every year. We are making care leavers automatically eligible for the maximum rate of maintenance loan from the next academic year, providing vital support for one of the most vulnerable groups in society. We are reintroducing targeted means-tested maintenance grants from the academic year 2028-29 to provide disadvantaged students with up to £1,000 per year on top of existing maintenance loans, funded by a levy on providers for international students.

We know, as we have heard today, that some graduates are concerned about the cost of loan repayments, and that is exactly why we are making the system we inherited fairer. Maximum interest rates on plan 2 and plan 3 student loans will be capped at 6% for the academic year 2026-27, delivering stability and protection for graduates from escalating student loan interest. We increased the repayment threshold for plan 2 loans in April 2025 and have increased it twice again. This is higher than the average graduate salary of £28,100 three years after graduation. I have already this week argued why I do not believe a graduate tax is the answer to the problems of student finance.

As I am coming to the end of my time, let me close this debate by thanking the noble Baroness, Lady Deech, for bringing this important and timely issue before the House. This Government remain firmly committed to a higher education system that is both world-leading in quality and fair in its access, and one that delivers value for students, graduates and taxpayers, including those who do not go to university, and that equips learners with the skills they need to succeed throughout their lives. I look forward to continuing to work with noble Lords across the House to ensure that our world-leading higher education sector continues to thrive.