Higher Education: Funding

Lord Liddle Excerpts

Wednesday 27th October 2010 Lords Chamber

[Lord Liddle]

My Lords, I, too, congratulate the noble Lord, Lord Boswell, on his maiden speech, and I thank the noble Baroness, Lady Wilcox, for initiating what, for me, has been as much a tutorial as a debate.

I agree with many noble Lords who have spoken that we should never forget that the pursuit of learning is a crucial hallmark of the good society. I agree with my noble friend Lord Giddens that university education makes a huge contribution to the spread of cosmopolitan values, which is important for the future of our civilisation. The public benefits of higher education extend far beyond the purely economic.

Having said that, the universities play a crucial economic rule. They are crucial to our success in the knowledge economy, which is particularly true in Britain at the moment when we need a new wave of entrepreneurial, science-based innovation to rebalance our economy away from its overdependence on the City and financial services. In the present circumstances the Government are right to prioritise research over teaching. I think it is what a Labour Government would have done as well, although I do not think they would have gone so far as to scrap the teaching grant for all humanities subjects, which seems extreme.

We have to recognise also that university education, in addition to its public benefits, brings huge private benefits to the individual. That is why the principle of student loans that are free up front but repayable on an income-contingent basis is sound. It was a reform made by the previous Government of which I was proud, and the public finance situation today makes its extension inevitable; a graduate tax is not a practical fiscal alternative.

The noble Lord, Lord Browne, is to be congratulated on the clarity and frankness with which he has set out the options for us. The test of the Browne report will be its impact on wider participation. I think that we are all agreed in this House that higher education cannot be an opportunity that is simply confined to an elite. A genuine opportunity to participate regardless of income, background and circumstance has to be on offer to every individual capable of benefiting from it.

I speak from this perspective with some passion. I must declare an interest as a director of the several-times-mentioned University of Cumbria, which was founded in 2007 to widen participation in an area where it has been historically low. I also had the privilege of getting into Oxford from what was then Carlisle Grammar School, on a full grant, from a railway clerk's family where no one had gone to university before. As with the noble Baroness, Lady Kennedy, that whole experience has transformed my life.

The University of Cumbria has been weak financially. Although we have turned things round in the past nine months, it is heavily dependent on teaching income—as many of the post-1992 universities are—with a core curriculum concentrated on the arts, education and health. For an institution such as this, which does not have significant research grants and receives very few overseas student fees and very little commercial income, the withdrawal of all HEFCE teaching grant except for STEM subjects is a devastating shock. The university will have to set a fee of more than £7,000 simply to survive.

No one can be sure what the long-term impact of such a change will be. How many working-class students will be deterred from applying by the prospect of running up more than £30,000 of debt at a minimum for a standard three-year degree? And, frankly, the debt will be more than £40,000 if their family income falls just outside eligibility for a living-costs grant. With these levels of debt, will such students feel confident that the job that they hope to get at the end of their course will justify the risks? Let us be clear: these are not kids who imagine they are going to be masters of the universe in high-rolling City jobs at the end of their university life.

I know that the answer of the noble Lord, Lord Browne, is that if their income is below £21,000 a year, they will be obliged to pay nothing. I accept the argument that his proposals are more progressive than the present arrangement. That is good, but it is not good enough. Will prospective students see university as a worthwhile investment if it raises their salary from the median income before tax, which a noble Lord mentioned is around the £21,000 a year threshold? If the consequence is that their salary is upped to the 75th percentile, which is £30,000 a year, will they think that it is worth taking on all that debt for that?

My fear is that the likely long-term consequence will be a narrowing of the higher education sector and tougher competition for students between institutions, one in which new institutions such as Cumbria University will be at the sharp end of change, both because of our geographical isolation and because we lack the long-established institutional reputation of other places. Is this sort of shake-out what the Government want? If we are to avoid this, there is a responsibility on both government and higher education institutions.

A more free-market system of higher education can work only, as it does in the United States, with a much more generous system than we have of grants and scholarships. Frankly, I regard the Government’s proposal to establish a national scholarship fund of £150 million as tokenism and deeply inadequate. Someone mentioned that Harvard has an endowment of more than $25 billion. Even in the financial bad times of the past five years, Harvard has had an annual income of 4.7 per cent on that endowment—well over $1 billion for a single institution. Of course, getting equivalent endowments for British universities may never be realistic, but we can make a start. I suggest a couple of things to the Government. In all seriousness, could we not hypothecate some of the revenues from the Government's new tax on banks, designed to curb bankers’ excessive bonuses, towards a university scholarships fund? That would be immensely popular in the country and would do a lot, if the banks accepted it, to restore their reputation in society.

The Browne review proposes a difference between those who earn less than £21,000 and those who earn more, in what they pay. I would add a further progressive twist. Why not charge all high earners a higher interest rate on their student loans than the one that the Browne report proposes? I was delighted that the noble Lord, Lord Butler of Brockwell, seemed to think that that might be a sensible idea. We could use that money to provide scholarships and grants for low-income families. I recognise the logic of the recommendation from the noble Lord, Lord Browne, to continue teaching grants for expensive medical courses, but three-quarters of the public servants who earn more than the Prime Minister are doctors and consultants who have benefited from those subsidised medical schools. Could they not pay just a little bit more on their interest rate on their loans to plough that back into their institutions?

Institutions will have to adjust as well. We will have to look at how we cater for part-time students—and I welcome the proposals from the noble Lord, Lord Browne, in that regard. We will have to restructure our curricula, expand overseas and be more commercial. But that kind of reconfiguration from a university involves time, and we need phasing and certainty about the path of future government support. At the same time, some very quick decisions have to be made, because universities must publish their prospectuses soon for 2012-13. We need to get on with making these decisions in the knowledge of what the financial position will be.

I add a final word as a Carlisle lad who went to Oxford on a full grant. I hope that the Government will be cautious about lifting the fees cap. It could be possible if we got to a situation whereby a much wider generosity was shown in scholarships and grants. But financial support is not enough; essential for me was the support and encouragement of my school. I am glad that Sir Martin Harris, who has studied this issue with great care as the director of fair access at the Office for Fair Access, believes that school support is the crucial factor in encouraging wider participation at all levels of academic ability. We need much closer engagement between Oxbridge colleges and state schools in certain areas, between the provincial redbricks and the estates which surround them and between institutions such as Cumbria University and their local communities. However, to do that requires dedicated funding for wider participation which must be preserved, not cut as 16 to 19 funding will be. This dimension of widening participation and sustaining the progress that we have made is lacking in the Government’s approach. It will be crucial to the long-term acceptability and political viability of the recommendations of the noble Lord, Lord Browne.