Post-18 Education and Funding Review

Lord Mair Excerpts

Tuesday 2nd July 2019 Lords Chamber

[Lord Mair (CB)]

My Lords, I draw attention to my declaration of interests in the register. In particular, I point out that I am an emeritus professor of civil engineering and director of research at Cambridge University.

When the Augar review was published, the headline recommendations were that the cap on higher education student tuition fees should be reduced from the current £9,250 per year to £7,500, and that the term of repayment should increase from the current 30 years to 40 years. However, there is significantly more in the comprehensive, 200-page report, with potentially very important consequences for higher education and substantial benefits for provision in further education. The report’s findings and recommendations for further education—which has been overlooked for so long—are most welcome aspects. This has been noted by many of your Lordships in the debate. Yet almost all the media coverage has been focused on the impact on higher education.

The recommendations in relation to further education could have a potentially major impact on reviving the fortunes of vocational and technical education; these are also critical for engineering. It is highly significant, for example, that in Germany 20% of 25 year-olds have a higher technical qualification, whereas in the UK the figure is only 4%. I therefore warmly support the report’s recommendation that the Government should provide FE colleges with a dedicated capital investment of £1 billion over the next spending review period. This is in addition to funding for T-levels, allocated in line with industrial strategy priorities. I also strongly support the recommendation that the Government should restore maintenance grants of at least £3,000 per year for socio-economically disadvantaged students.

These two recommendations alone clearly have important financial consequences for the Treasury. However, there is a danger that other important financial recommendations in the report will not be adopted, particularly in the current uncertain political climate. Reducing the higher education student tuition fee from £9,250 to £7,500 would mean a very considerable reduction in fee income to universities. The Augar review clearly recommends that the Government should replace in full this lost fee income. If the Government decide to reduce the tuition fees as recommended but not to replace in full the lost fee income, there will be considerable financial strain on the universities.

If the lost income is not replaced by the Government, universities will be faced with tough choices. Faced with a cut in income for teaching, there is a risk that they will decide to cut provision in expensive courses such as engineering, despite the country badly needing more engineers. There is potential for the unintended consequence of universities reducing the cost of engineering and other physical science courses by reducing or removing the most expensive elements, such as practical, design-based, hands-on, active- learning modules, and instead increase the classroom-based content. This would be a regressive step that would mean graduates would not have the practical experience increasingly demanded by industry and by the industrial strategy. The damaging effect might be felt most acutely by post-92 universities, which are using industrial, hands-on experience as a selling point and do not currently have the reputational protection of Russell group engineering courses.

It is very clear that the Augar review has taken a systems approach to the funding of the whole post-18 landscape. In Dr Augar’s own words to the Science and Technology Select Committee of this House, it is,

“a coherent package, and all parts are intended to fit together”.

The report’s recommendations make sense for financial sustainability only if implemented as a whole. It would be highly risky to cherry-pick and implement only individual recommendations in the report.

The key principles of the recommendations for higher education are a proposed fee cut and a directed top-up; in other words, a managed market. There may well be difficulties with the directed top-up, which entails the adjustment of teaching grants for different subjects. The Augar review recommends that the teaching grant attached to each subject be adjusted to reflect more accurately the subject’s reasonable costs and its social and economic value to students and taxpayers.

How is the social and economic value of a particular subject to be determined? The review recommends that this be determined by the Office for Students—OfS—taking account of the subject’s relative importance with respect to alignment with the Government’s industrial strategy and a range of other factors, such as the financial viability of the university and its contribution to the local economy. This exercise by the OfS will be far from straightforward and is bound to be controversial, as has been highlighted by the noble Lord, Lord Kakkar, and the noble Baroness, Lady Young of Old Scone.

Any measure that seeks to assign value to courses based on social and economic value is likely to favour engineering. Engineering courses typically offer some of the best value for money for the taxpayer in terms of economic returns and graduate salaries. However, while more money for underfunded engineering courses is to be welcomed, it must be understood that modern engineering is a multidisciplinary endeavour that increasingly relies on close collaboration with the arts and social sciences. Any changes in funding must not adversely affect universities’ ability to produce outstanding graduates in these sectors.

It is imperative to guard against a Soviet-style approach in which only science and engineering are regarded as worth while. There must not be a risk of penalising important disciplines such as languages, social sciences, humanities and arts in favour of STEM subjects. I fully agree with the noble Baroness, Lady Blackstone, and the noble Lord, Lord Patten of Barnes, on this point. By assigning to the Office for Students the task of assessing which subjects should receive larger teaching grants, which may affect the viability of putting on certain courses, there is a real risk of undermining the autonomy of universities. This is surely highly undesirable.

My final point relates to the effects of the Augar review on research. This has already been addressed by the noble Lords, Lord Patel and Lord Kakkar. It is important to note that many, if not most, universities already lose money on two core activities: home undergraduate education and research. This is because they do not recover the full costs of these activities through tuition fees and public grants, nor through charity and public research contracts. They therefore subsidise both these activities, as well as access work and bursary support, from their own resources, distinct from student fees and public grants. Although no cuts are envisaged by the Augar review, what the Government decide to do is another matter. In the event of any funding cuts, universities would need to switch a greater proportion of their own resources to subsidising education and student support. For example, at Cambridge, my university, a £1,000 cut in the funding currently received for each home undergraduate would mean a net loss of £10 million per annum to the university. This would represent a considerable opportunity cost for other crucial activities. It would be at the expense of not only funding outreach and access initiatives but meeting the costs attached to research.

It is therefore most important that any changes to the funding resulting from the Augar review do not impact on the sustainability of research and innovation activities within UK universities. It is also important that changes in funding do not discourage the young from pursuing STEM subjects. If the Government’s stated ambition of 2.4% of GDP being spent on research and development in science is to be met, this will require a 50% increase of active researchers in the UK. That means we will have to attract considerably more people into STEM subjects. If this does not happen, we will not deliver the 2.4% agenda.

In summary, the Augar review is comprehensive and contains important recommendations. It is excellent on the long-underfunded further education sector, which stands to benefit substantially from the review. This is to be welcomed, and it is crucial for higher education that the Government fully compensate universities for the recommended reduction in tuition fees. A pick-and-mix approach will have serious consequences. The proposed adjustment by the Office for Students of teaching grant for different subjects is far from straightforward, and bound to be controversial. Finally, it is vital for the country that our world-class research is not jeopardised in any way by the Augar review.