Higher Education Funding

Lord Howarth of Newport Excerpts

Thursday 12th September 2024 Lords Chamber

[Lord Howarth of Newport (Lab) [V]]

My Lords, the Government are readying us for grim times ahead, though my noble friend the Minister remains genial and I am so glad to see her in her place.

I gently submit that we cannot afford not to refund our universities. It was an extraordinary dereliction on the part of the previous Government, by freezing fees for years on end, to allow the present crisis in the funding of higher education to develop. An extensive and thriving university sector is crucial to our economic, social and cultural progress. The new Government should not contemplate institutional bankruptcies, market exits or enforced mergers. These would be too damaging for students, staff, the academic enterprise, host communities and local and regional economies. The Government should treat investment in the HE system—and schools as well—as capital investment. Human capital, intellectual capital, is the capital that is most valuable in the 21st century. If the accounting conventions do not permit this, disregard them. The markets will not mind.

In those relatively carefree days of opposition back in March when she delivered her Mais Lecture, my right honourable friend the Chancellor distinguished between the then Government’s indiscriminate constraint on all government borrowing and Labour’s willingness to allow a greater freedom to borrow to invest. She spoke of the virtues of supply-side policies to enhance human capital and spur innovation, and of the wastefulness of excessive austerity. Her vision was of a smart and strategic state which would identify sectors in which Britain could enjoy comparative advantage in a global marketplace. Higher education is an obvious instance. Investment would be fostered in partnership with business and the OBR would report, as indeed it already has, on the long-term benefit of capital spending decisions. She said:

“Investment matters not just for what it can physically build, but for the ideas it can nurture”.


She praised the part played by our universities in enabling Britain to rank in the top five countries in the Global Innovation Index and made the point that innovation must be nourished with reliable sources of funding. To grow our economy, she also noted, we cannot rely on just a few pockets of the country but must mobilise the human potential in every town and city.

So the Chancellor herself has provided the clear rationale for borrowing now to invest in a rescue package for our HE system. Of course, it must be a well-designed package, drawn up not only with Universities UK but with business leaders and others, and not a bailout of poor academic leadership and weak management.

As for the ongoing funding of university teaching, there is now nothing for it but to bring in a graduate tax. It would be less of a deterrent to young people contemplating university-level education than student loans at their present atrocious rates of interest, and it would have the merit of being what it said on the tin. I would prefer HE, being a public as well as a private good, to be funded from general taxation, but that has been ruled out for the foreseeable future.

Domestically generated funding must be sufficient to end the distorting and demeaning dependence of our universities on charging exorbitant fees to foreign students. When the Government turn their attention to alleviating poverty in our society, they should not omit to consider the hardship faced by some students.

As for the funding of blue skies research, the Government should not stint in providing funding via the research council to the ablest academics in all fields of inquiry. What will transpire can never be predicted, but the Government should not hesitate to invest in the brilliant academic talent that, somehow or other, we still have in our universities. The cost is trivial; the potential benefits are immense.