Higher Education Funding

Lord Johnson of Marylebone Excerpts

Thursday 12th September 2024 Lords Chamber

[Lord Johnson of Marylebone (Con)]

My Lords, I congratulate the noble Lord, Lord Krebs, on securing this important debate. As ever, I find myself in very strong agreement with my noble friend Lord Willetts, who I note incidentally may not be the only candidate in this House for the role of Chancellor of the University of Oxford but is the only one who, day in, day out, demonstrates his commitment to the future of the sector and would be absolutely splendid in that role, were he to be successful in that campaign.

I turn to the issue at hand. I want to say right at the outset that I truly welcome the change in tone from the new Government towards the university sector. It is a wonderful breath of fresh air not to have the negativity and university-bashing that has characterised too many of the airwaves from the previous Government.

In particular, I warmly welcome all the positive messages that the new Government have been sending out about international students, who make such a huge contribution to the success of our higher education system, society and broader economy. That said, I of course agree with others, including the noble Lord, Lord Krebs, who have pointed out that we should avoid an excessive dependency on the fee income from international students. We need to put in place a funding system that is sustainable and does not leave us exposed as a country to volatility and factors well beyond the control of the sector itself.

However, I do not think we need a long, two-year review to come to a conclusion as to what a sustainable system is. My view remains very much that the current model, as Winston Churchill might have put it, is the worst imaginable—except for all the others. There is essentially nothing wrong with it. It does the job you need a funding system to do in three key respects: it maintains the unit of resource, potentially, for what we need to have a world-class HE system; it is fair to the taxpayer; and it removes barriers to access because, as my noble friend Lord Willetts said, fees are not paid upfront by the student but underwritten by the Government in the form of a loan. There is nothing structurally wrong with the model we have, except for two flaws, which are fixable: first, it is not inflation-proof and, secondly, there is no link to quality. We fund volumes—bums on seats—rather than outcomes; clearly, that is unacceptable.

The Cameron Government tried to address those two flaws and, in 2017-18, we allowed a system whereby fees were indexed with inflation, but only for institutions that were able to demonstrate high-quality outcomes as assessed by the teaching excellence framework. I strongly think that we should return to that model. Had we continued with that system over the past six years, many of the institutions that are now forced to make these rationalisations would not be doing so. A mid-sized institution such as Teesside would have £30 million a year of additional tuition fee income, had we continued to upgrade tuition fees in line with inflation over recent years. Such a system is, frankly, the only game in town and everybody needs to get real and recognise that, given the current fiscal environment.

There is not a chance in hell that we are going to return to a system of funding tuition fees through the teaching grant. There is a political window now, early on in the Parliament, for the new Government to put in place a progressive ratchet of fee uplifts with inflation over the next few years, and I urge them to do so.