Post-18 Education and Funding Review

Lord Bassam of Brighton Excerpts

Tuesday 2nd July 2019 Lords Chamber

[Lord Bassam of Brighton (Lab)]

My Lords, like other noble Lords, I am extremely grateful to the Minister for leading off this debate, and for persuading his colleagues in the usual channels to have the debate in the first instance. I ought to declare my interest in this: I am one of those who had his education rescued by further education. I went to an old tech college, which served me well and meant that I did not end up at what is now described as a low-tariff university. I enjoyed the benefits of that university education.

The debate has been wonderfully illuminated by a stellar cast of speakers. I have enjoyed all the contributions that I have listened to, particularly those of our colleagues, the noble Lord, Lord Patten, my noble friends Lord Adonis and Lady Blackstone and others who have far more knowledge of, and insight into, the world of higher and further education than I can muster. A contribution from my noble friend Lord Blunkett on this is always worth listening to.

It is true that post-18 education funding is a highly politically charged subject, and fraught with difficulty. What is clear is that the current system is not working for students, particularly those from poorer, disadvantaged backgrounds, or of course for the FE colleges and universities as they struggle to plug the staggering funding gap of around £1.8 billion a year. Since the long-awaited Augar review was published on 30 May, noble Lords have had several, albeit brief, opportunities to question the Government on the various elements covered. I am in no doubt that colleagues around the House share my frustration at the lack of commitment on those occasions to implement, or indeed preclude, any of the 53 recommendations made. The noble Lord, Lord Kerslake, was right to say that we are unlikely to get any real answers to the Augar review until well past the initial spending review; it may be in October or November.

It is clear that decisions will certainly not be forthcoming while the Conservative Party is engaged in an internal conflict over its leadership. It is obviously not capable at this stage of taking action to ensure that the extra funding and reforms which our system of education urgently needs are put in place. I too observed, as did the noble Lords, Lord Bichard and Lord Storey, and others, that, interestingly, as yet neither of the two candidates vying to take over from Mrs May has approached the Tory money tree and given it a shake to see if more money for the FE and HE sectors will be forthcoming. No doubt they are worried that Philip Hammond will give them a wigging before they take office.

The review’s recommendations include some positive measures. We certainly welcome the focus on encouraging more flexible learning, including support for more bite-size courses, with improved opportunity to ensure that the most diverse range of learners can benefit from both further and higher education.

The report recommends the reintroduction of maintenance grants for disadvantaged students. Along with many others in this debate, I agree that a grant of at least £3,000 a year and an increase in the amount of teaching grant funding that follows disadvantaged students, as well as a greater focus on individual-level measures of disadvantage, such as free school meals and household income, in the allocation of funding through the student premium are advisable. As the Prime Minister now admits, the Government’s decision to abolish grants worth about £3,500 and replace them with additional loans that will have to be repaid was a huge mistake—a mistake which has left some of the poorest students saddled with a lifetime of debt. I hope the Government will accept these proposals with the commensurate level of funding required.

Inevitably, as colleagues have noted, the debate about the Augar review has been dominated by the proposals relating to universities, which included cutting tuition fees from £9,250 to £7,500; extending the repayment term from 30 to 40 years; and reducing the loan repayment threshold from £25,000 to £23,000. I must say that my youngest daughter did not welcome the idea that she would still be paying for her education as a pensioner. She thought that this was a signal failure in the report.

However, the modest reduction does little to address the problem of the expanding burden of student debt which puts many young people and families off seeking a university education. On the contrary, lowering the repayment threshold and extending the repayment period before the debt is written off is an inherently regressive proposal that will increase the total payments made by lower- and middle-income earners particularly —including the professions, teachers and nurses—while providing relief for those on higher incomes. Indeed, as other noble Lords observed, Universities UK estimates that those changes would result in middle-income earners paying back more—£11,000-plus over their lifetime—while higher earners would pay back less, saving in the region of £19,000 in repayments.

Other colleagues have observed that the LSE highlighted that this would disproportionately impact on female and black and minority ethnic students. For those who leave university owing £50,000 or more, with an interest rate of 6%, the cumulative effect can be eye-watering in terms of the impact on personal finances. The higher education finance system needs to be more progressive, not less. How can these changes, particularly for graduates paying off a debt that lasts 40 years, possibly encourage more talented, disadvantaged young people to see university as an option? This is why Labour supports the abolition of tuition fees completely.

Although the report recommends that the Government increase central funding, the fear is that these recommendations, if adopted, will generate costs to be borne by universities and colleges which are already struggling to plug the funding gap. The report contains scant analysis of how this wider reduction in headline tuition fees will impact on individual universities. These institutions are often big employers in their communities, and the risks it would create for their financial sustainability and stability are not to be underestimated. Although some universities will increase their efforts to recruit more lucrative high-fee-paying international students, the reality is that without a substantial and appropriate increase in central government funding, the shortfall will grow, to the detriment of students and the wider society, which benefits from a skilled workforce.

Of course, not every university has the option of seeking new student markets abroad. Some are commuter universities, reliant on a more local customer base. These smaller, modern local universities tend to have the most diverse intake of young people and are therefore core engines of social mobility. They are most vulnerable, as they do not benefit from alternative funding streams in the form of research grants or international and postgraduate students.

Other institutions, encouraged by the lifting of the student numbers cap, have ramped up significant support service costs too, expanding accommodation and teaching capacity. Budget shortfalls will inevitably mean reduced spending, involving redundancies, recruitment freezes and smaller annual wage rises. Any practical and reputational damage to universities will also decrease the number of highly skilled employees that business needs and reduce our international competitiveness precisely at a time when modern Britain needs it most, facing, as we do, a potentially disastrous Brexit. Cuts will also inevitably mean reducing the other services universities provide for their students, be that academic—courses offered, contact hours, resources and equipment —or support in areas such as mental health and employability.

It is hardly reassuring for students and parents, who are increasingly asking whether university courses offer value for money. Choosing to study with a higher education provider is a big decision, particularly given the cost of tuition fees and the commitment in time, with the commensurate loss of earning that comes from studying instead of working either part-time or full-time. Students and prospective students are increasingly questioning whether a university course represents value for money, and are looking carefully at what they can expect to gain from their education, both during and after their studies. However, the array of factors is not fully reflected in the review, which places a disproportionate emphasis on graduate salaries as a proxy for the value of study. While the panel claims to be making no judgments about the worth of different degrees, it parrots the common line that some courses are low-value because of the low salary levels of some graduates.

While graduate outcomes are undoubtedly a key consideration, such a measure is fundamentally flawed, as earnings data does not take into account self-employment or business ownership, which is the route for many graduates; nor does it account for long-standing structural inequalities in pay between men and women. Moreover, many graduates leave university and work in jobs that are vital to their community, wider society and the economy, or in regions that have lower than average pay. Determining the value of courses in terms of earnings ignores their contribution and importance. Education has always been more than simply a vehicle by which people can make more money for themselves. In our view, using such a crude metric would be a serious mistake, risking undermining student choice and creating incentives that could have profoundly undesirable consequences.

This can plainly be seen when we consider the importance of the arts to the rich cultural fabric of the UK. However, creative arts degrees fall foul of this approach, with the review questioning whether they,

“constitute good value for taxpayers’ money”,

given that they require more government subsidy than other degrees, because graduates are less likely to pay off their student loans as they do not earn enough over the current 30 years to pay back the full amount. The IFS estimates that the public subsidy amounts to about £30,000 per student for those studying arts and humanities subjects such as English, communications and media, and as much as £37,000 for those taking courses in the creative arts. The equivalent public subsidy is £28,000 for engineering students and £24,000 for those studying maths and computer science. The irony is that by extending the payment window to 40 years, this situation is much less likely to occur. The creative economy contributes significantly to the UK’s prosperity and comprises a large and growing share of UK jobs, with a substantial share in almost every UK region. Creativity also contributes to the wider public good. I hope the Minister can assure the House that future funding policy will be based on a broad range of factors beyond simply graduate salaries.

The review makes a number of recommendations relating to further education, proposing that the reduction in the core funding rate for 18 year-olds be reversed and that the Government should provide FE colleges with a dedicated capital investment of at least £1 billion over the next spending review period. The recommendations on improving the funding for further education and improving the grants and loans financing for vocational courses are, of course, welcome. While we welcome the overarching desire to change the relationship between further and higher education, we feel that the proposal to freeze HE funding for three years to help fund investment in other parts of post-18 education is unhelpful. Such a proposal represents a false choice, as it is a lack of parity with schools that has hit the FE sector harder in recent years. That is why Labour has committed to bringing funding for 16 to 18 year-olds in line with key stage 4 baselines and restoring the EMA for 16 to 18 year-olds from lower- and middle-income backgrounds.

The Augar review was designed by the Prime Minister to solve a problem of perception: that the current Government did not understand students and, in particular, student finances. Philip Augar was given a narrow range of options to work within to come up with answers to an impossible question. He has made a brave effort to answer other, wider questions about the financing of FE and HE education. Sadly, he has come up short, particularly on funding, although for our part we will continue to focus positively on those parts of the report worth looking at, especially those which make a start on undoing some of the damage that has been done to the FE sector over the last few years.