Higher Education: Funding

Lord Butler of Brockwell Excerpts

Wednesday 27th October 2010 Lords Chamber

[Lord Butler of Brockwell]

My Lords, I find myself in agreement with a great deal of what the noble Baroness, Lady Falkner, has said. I warmly welcome the proposals in the Browne report, and I congratulate the noble Lord and his team on them.

It must have been tempting, and the noble Lord referred to this, to tinker with the details of the tuition fees scheme in the hope of not offending anyone too much. If that had been done, a great opportunity would have been lost. By approaching the issue from first principles and basing its recommendations on those principles, the Browne review opens up the possibility of freeing universities to meet the needs both of students and of the national economy and—if the Government hold their nerve; I will return to this—of extricating the Government from their present invidious position.

Of the six principles on which the Browne report is based, I think many of us would agree that the most important is the third:

“Everyone who has the potential should be able to benefit from higher education”.

That was the principle of the Robbins report nearly 50 years ago. Sadly, however, as the noble Lord, Lord Norton, pointed out, the Robbins principle that higher education should be provided at taxpayers’ expense to all those capable of it was a practical proposition when fewer than 10 per cent of young people went into higher education, but is totally impractical when over 40 per cent do.

I differ from the noble Baroness, Lady Blackstone, and the noble Lord, Lord Giddens, not on their principles but on what experience shows us. Successive Governments, unable to ask the taxpayer to provide the necessary resources to fund a free higher education system but unwilling to grasp the political nettle of asking students to make a contribution, have been slowly strangling our higher education system, as the noble Baroness, Lady Falkner, said. The cap on tuition fees has produced some absurd anomalies. Universities suffer a loss on almost every UK and EU undergraduate they admit, which the universities have to meet by diverting funds from research or by being forced to subsidise students from wealthy families with funds which they could use to support students from less wealthy families. Universities also have a strong, almost overwhelming, incentive to recruit foreign students, to whom they can charge realistic fees, rather than our own UK and EU students, to whom they cannot. This has been bad for our universities, but it has also been bad for successive Governments caught between the rock of asking the taxpayer to provide more and more funds and the hard place of turning to the only other source—the students themselves.

The Browne report provides an opportunity for the Government to get their fingers out of this mangle. By providing for a direct relationship between the student and the university, as the noble Lord, Lord Maples, pointed out, it will produce an energising stimulus to both—to the student to demand the best and to the university to provide it. The recommendations ensure that no student is prevented from attending university by having to meet the costs up front.

Of course, we would all prefer that no student had to accumulate liabilities to be met from their future incomes, but, as the noble Lord pointed out, and as history tells us, that is no longer a practicable possibility. Graduates have to meet those liabilities only if, consequent upon their degrees, their income is sufficient to enable them to do so. When we talk about a progressive system we should remember that, if the beneficiaries of higher education did not meet the cost, the taxpayer would have to do so. As the noble Baroness, Lady Falkner, pointed out, there is nothing progressive about the half of the population who do not have the benefit of higher education having to pay for the advantages of those who do.

There is one other point that I want to make about progressivity. Some have criticised the proposals of the noble Lord, Lord Browne, on the grounds that an interest rate is to be charged to graduates who pay back over a period and, in consequence, they will pay more than those who pay back immediately. However, the interest rate proposed is the rate at which the Government borrow—2 per cent over inflation. You could not get a rate like that from any other lender. Those who could pay back immediately would be well advised not to do so, and to maintain the loan.

Just as I have been delighted by the thrust of the Browne recommendations, I have been dismayed by subsequent hints that the Government will keep their fingers in the mangle by imposing some sort of ceiling on fees. I beg the Minister to advise her colleagues not to do so. If they do, they will regret it. All too soon, they will be faced again with the need for the cap to be raised and they will incur the political odium of having to do so. This really is a situation where, with one bound, our hero could be free.

If the Government want to make the system more progressive, I would urge them to do it by looking at the interest rate on outstanding debt for high earners. I also urge the Government, in introducing this new scheme, not to offset every pound reaching the universities from higher fees by corresponding reductions in the teaching grant—especially the teaching grant to arts subjects. It is wrong in principle for the Government to discriminate in that way—many speakers have made that point—and it is also likely to be ineffective. Universities will simply recycle money from the science subjects to the arts, which they are already being forced to do by this year’s HEFCE grant. It would be better to freeze the teaching grant or make a smaller reduction in it, which would in turn reduce the hike universities may feel they have to make in tuition fees, and consequently reduce the political odium for the Government. Given that, in the short term, teaching grants and tuition fees come from the same pot—notably the Exchequer—the short-term effect on the national finances would be neutral.