Higher Education: Funding

Lord Bilimoria Excerpts

Wednesday 27th October 2010 Lords Chamber

[Lord Bilimoria]

My Lords, two years ago, I shared a platform in India with one of India's brightest young best-selling authors, Chetan Bhagat, and he said that what young Indians wanted above everything else—what they really craved, what they were hungry for—was education. India has some of the brightest people in the world and many are now leading education institutions such as the Harvard Business School, where the dean is Indian, and some of the largest companies in the world, such as PepsiCo, where the chief executive is Indian. Yet, in the latest Times Higher Education world university rankings, India, a country of 1.2 billion people, did not have one institution in the top 200. Fifteen years ago, China did not have one university in the top 200; today, as the noble Lord, Lord Parekh, told me yesterday, it has five in the top 100. What is the bet that 15 years from now India will have several?

In this country, we have been fortunate enough to have had a head start of 900 years. Education in this country rests on an esteemed and ancient foundation. Oxford and Cambridge were among the first universities established in Europe during medieval times, and over the centuries that followed we never stopped innovating, developing and enhancing higher education. Students and the importance of study have rightly been held in the highest regard, and today we can look around this country at several world-class higher education institutions and justifiably feel very proud.

Earlier this month, on 1 October, at Cambridge University, where I am privileged to have studied and where I currently hold four positions, our new vice-chancellor Sir Leszek Borysiewicz—known as Boris—in his opening address as the university's 345th vice-chancellor, quoted the university's mission statement, which is,

“to contribute to society through the pursuit of education, learning, and research at the highest international levels of excellence”.

That is what Cambridge and so many other universities in this country do. Britain constantly punches above its weight. We have under 1 per cent of the world's population and are five times smaller than the United States, yet we regularly have four or five universities featured in the top 10 worldwide. We have produced the second highest number of Nobel laureates and are bettered only by the United States. We have the highest number of publications within the top 1 per cent of citations in Europe, above Germany and France.

It is incredible that we can say any of this. It is incredible that higher education in this country is such a success story because, despite having top-class higher education institutions, our annual spend on education as a percentage of GDP has been very average over the past decade. In 2006, 10 EU countries spent more on higher education as a percentage of GDP than us. With spending as a percentage of GDP at 1.1 per cent in this country, the United States soars ahead of us at 2.9 per cent—nearly three times higher—and a staggering 1.7 per cent of that is generated through private giving. Therefore, even the American Government’s spending on higher education of 1.2 per cent of GDP is higher than our entire spending on higher education. It is incredible that we have been able to do so much in Britain with so little and that we have been able to compete with universities in the United States, where tuition fees are often tenfold what students pay in this country. Compare the two countries' top universities: Harvard's endowment is $25 billion, while Cambridge's endowment is $6 billion.

Taking all this into consideration, can we truly justify a fall in the higher education budget—excluding research, which I am glad to hear—from £7.1 billion to £4.2 billion by 2014-15 as proposed by the CSR? That is a 40 per cent reduction. This is sheer lunacy. I know that this phrase is overused, but it seems to be falling on deaf ears: an investment in education is an investment in our future. We talk about ring-fencing certain areas of spending, and education should have the strongest and highest of fences. I am all for increasing universities' power to make their own decisions and, as the Minister said, the great level of autonomy in our universities is partly responsible for their success and a major reason why we have been able to maintain a competitive edge against our European competition, such as France, where state control is at a much higher level. However, there is a big difference between state control and state funding. There is a big difference between regulation and support.

We are all well aware that this country’s public sector spending was out of control under the previous Government, that we have lost our sense of balance and that cuts need to be made. Where are our priorities when we spend £190 billion on welfare and pensions when we know that tens of billions of pounds of that is being abused and taken advantage of? Fortunately, the coalition Government are beginning to address the welfare issue, and I am delighted about that, yet we are trying to cut the higher education budget by 40 per cent over the spending review period. This is being penny-wise and pound-foolish. We are not the only country in hard times right now, we are not the only country that has to face the harsh reality of cuts, we are not the only country with several dark years ahead of us, but we are in the minority when it comes to slashing away at higher education spending. Our competition is investing at this time, not cutting. How much lower than 1.1 per cent of GDP spending are we going to go before we realise it was far too low in the first place?

Benefaction created the great colleges of the great universities of Oxford and Cambridge; it was benefaction that built the great universities of Harvard and Stanford in the United States; and what better example of benefaction can I give than Cambridge celebrating its 800th anniversary in 2009 by launching a campaign to raise £l billion by 2012? I am delighted to say that we reached that target in June this year, two years ahead of schedule.

Over the past 50 years, as the percentage of the population going into higher education has gone from 6 per cent to 45 per cent, we have developed a mindset where we have relied on government for university funding. It is amazing that only now have we woken up to the importance of benefaction and universities raising their own funds alongside the government support. The Browne review enables universities to do so through charging their own fees, in the way that we already charge our foreign students—and what a contribution they make. In 2005, the UK made £1.39 billion in tuition fees and an additional £2.35 billion in living costs. Foreign students are one of our best export earners, but unlike other exports where our goods are shipped out of this country, we bring our foreign students into the country and build lifelong bridges with them, the generations after them and their countries. I am proud to have been one of those students years ago. Ten per cent of academics in our universities were born outside the United Kingdom. Five of the past six Nobel laureates based in the United Kingdom are foreigners, and we were on course to continue in this profitable and successful vein with levels of non-EU international student enrolments increasing by 25 per cent between 1998 and 2008 until the Government introduced their cap on immigration—what a mad cap idea!

It is quite obvious that public spending has to come down and I applaud the Government for aiming for a target of 40 per cent of GDP in public expenditure. But let us consider what we are gaining from an investment in education: it is way above the £60 billion of output about which the noble Lord, Lord Browne, spoke. Just look at the brilliant Eureka UK report, published by Universities UK, on 100 discoveries and developments in UK universities that have changed the world. The contraceptive pill, the MRI machine, stem cells, fibre optics, combating modern slavery, plate tectonics, keyhole surgery, black holes and pulsars are all from British universities, and the list goes on.

Over and above that, we have the breadth of universities in this country. I was privileged to be chancellor of Thames Valley University for five years. It is now called the University of West London. This modern university had centres of world excellence, including the London School of Hospitality and Tourism, which is one of the best institutes of its kind in the world. Its alumni include the head chef at Buckingham Palace and the secretary of the Oxford and Cambridge Club. In our banqueting department, there is our deputy manager, Stefane Portes, as well as Pawel Pietraszewicz. Our nursing college is the number one in England. The university also has the famous London College of Music, where the father of the noble Lord, Lord Lloyd-Webber, was principal.

We need to review the future of higher education in this country, but we need to do it in tandem with higher government investment. That is what our competitors are doing. I congratulate my noble friend Lord Browne on his excellent review. Its presentation, thoroughness and rigour, intentions and content are all superb. I agree with the rejection of a graduate tax programme. I appreciate the review’s opinion that higher education institutions,

“safeguard knowledge, catalyse innovation … strengthen civil society. They bridge the past and future; the local and the global”.

However, charitable giving accounts for only 0.2 per cent of higher education’s income streams in this country, compared to 8 per cent in the United States. In other words, it is 40 times higher in the US. Where relevant, we also need to look at corporate sponsorship and overseas income. The more funding that is available, the more that there will be to allow access for students from disadvantaged backgrounds.

The noble Baroness, Lady Wilcox, mentioned the context of the report. In the Browne review, the Government let the cat out of the bag in the last sentence, which states:

“These measures create the potential to allow the numbers of student places to increase by 10% and enhance support for living costs while still allowing public spending reductions to be made”.

There you are: the timing and circumstances surrounding this review speak for themselves. This, I believe, is the issue most of us have with the review. All its brilliant qualities are overshadowed as it opens itself up for interpretation as a tool to justify cuts, as opposed to a tool of positive reform.

The report could also have addressed the global reach of our universities. We need to be enterprising and to take advantage of opportunities to collaborate with universities abroad in countries like China and India. We have to wake up to these possibilities, as the additional income stream that this could provide is vast, as well as enabling us to continue to be competitive. This is the future and it is not too late for us to get on board. By cutting our higher education spending we are being foolish. Instead of enhancing and bolstering our competitive advantage, we are handicapping ourselves, which is sheer madness.

In business, when building a brand or a company, you talk about your unique selling proposition, your core competence and what gives you the competitive edge. In our tiny country, our higher education institutions form, as the Treasury's spending review 2010 quite rightly puts it, the jewel in our crown. Nothing must be done to jeopardise this because the returns we get on this investment will ensure the future security and competitiveness of our country. What is more, you can calculate percentages of GDP—you can crunch numbers—but you cannot put a price on, quantify or compare the value of education. The returns that we receive from every penny we place into higher education are unequivocally, unquestionably, truly priceless.