Higher Education

Lord Norton of Louth Excerpts

Wednesday 9th April 2014 Lords Chamber

[Lord Norton of Louth (Con)]

My Lords, I, too, welcome this debate. As my noble friend Lady Sharp said, it is some time since we last debated higher education. I declare my interests as an academic, as professor of government at the University of Hull and also as co-chair of the All-Party Parliamentary University Group and the Higher Education Commission.

Like other noble Lords, I begin by stressing the value of higher education to the United Kingdom. As has already been mentioned, we devote a smaller proportion of our GDP to higher education than our principal competitors, yet in research terms outstrip them all, apart from the United States. Recent research from BIS found that graduate skills contributed to roughly 20% of GDP growth in the UK from 1982 to 2005. The benefits that universities bring to society as a whole, through, for example, better health and interpersonal skills, have been estimated by the New Economics Foundation to exceed £1 billion. The latest research from Million+ shows the economic value to English regions of graduates taking up jobs in the regions where they graduated. Overseas students are not only valuable to universities but benefit enormously the United Kingdom in that they constitute the most important form of soft power that we have overseas.

We thus derive enormous value from higher education. However, the sector faces enormous pressures as a consequence of the new funding system, the ending next year of the cap on student numbers and the myriad new providers entering the sector. In 2012, according to BIS, there were 674 privately funded institutions, with a total of 160,000 students enrolled. These developments create significant challenges, not least for how higher education is regulated. Last year, the Higher Education Commission undertook an inquiry into the regulation of HE. We published our report at the end of last year. We are just beginning an inquiry into the financial sustainability of higher education, but it is the importance of regulation on which I wish to focus this afternoon.

The Government’s White Paper Higher Education: Students at the Heart of the System envisaged a higher education Bill. No Bill was forthcoming. The need for such a Bill is pressing. The regulatory regime for higher education is complex and difficult to sustain. We need a coherent and sustainable framework. That can be provided only by legislation. The present system has not kept pace with the changes I have mentioned and rests now largely on the good will of the sector. It is not clear that good will can be maintained. There are doubts as to how long HEFCE can continue to regulate the sector when it is no longer providing the funding.

Regulation is a means to an end, and the ends in this case are to protect investment in higher education, by both industry and students, to encourage innovation and to maintain and encourage excellence in HE. As we write in the report:

“For the Government’s reforms to be successful, a robust regulatory framework must be implemented to support the sector to be sustainable, enhance the student experience, and widen access”.

It is not a case of advocating more regulation, but rather better regulation. The uncertainties of the present regime militate against investment—the Government have acknowledged that,

“economic regulation is a critical enabler of infrastructure investment”

—and tend to make universities risk-averse. We need a regime that encourages universities and other HE providers to be innovative. The briefing for today’s debate from the Association of Colleges stresses the need for greater flexibility and a more dynamic system. We need a framework that enables students to make informed choices and know that they are receiving a high quality of education. That point is essentially made by Which? in its briefing for today’s debate.

What, then, is the most appropriate regulatory framework? In our report, we do not agree with the Browne review that there should be one consolidated regulatory body. We agree with the Government that a single body is neither desirable nor feasible. It is not desirable because bodies such as the Quality Assurance Agency derive their legitimacy from being independent. It is not feasible because some of the bodies have a UK-wide remit and others apply to England and Wales only. It is also a requirement of the Bologna process that funding and quality assurance remain separate.

We favour a more pluralist approach and one that takes on board the entry into the sector of new providers. We thus see the need to achieve not so much a level playing field as a more equitable playing field encompassing all providers. We took as our model the Legal Services Board. We put forward the proposal for HEFCE to be superseded by a council for higher education, encompassing an office for student loans, the Office for Fair Access and a new office for competition and institutional diversity. We believe there is a case for retaining the independence of the Higher Education Statistics Agency, the Quality Assurance Agency for Higher Education, the Office of the Independent Adjudicator and UCAS, but in order to ensure the complementary nature of bodies across a pluralist system, the council for higher education should have a contractual relationship with HESA, the QAA and UCAS.

We favour the council generating a common regulatory framework, encompassing all HE providers in England. This would enable providers to be subject to the same regulatory framework, but not necessarily the same regulatory requirements. All HE providers would be required to register in order to operate. Once registered, if institutions wanted to recruit UK or EU students and/or to teach recognised degrees, they would have to comply with further quality assurances and data submission requirements. Those that did so would receive a seal of approval from the council, enabling them to use a kitemark on their literature and display it as a demonstration of their quality assurance.

We take the view that risk cannot be avoided entirely and that the lead regulator should adopt a risk-based approach to regulation, enabling regulatory attention to be focused where the risk is greatest. Risks are not avoided, but rather assessed and managed properly. This applies at both a systemic and institutional level.

The greater competitiveness in the sector and the new funding regime enhance the possibility of institutional failure. Risk-based regulation is designed to reduce the likelihood of such failure, but there is always the possibility of an institution failing. That would clearly have a major impact on those directly affected, for whom it would be an upheaval and might involve financial loss. It would also tarnish the reputation of British higher education, and a reputation once tarnished can take a long time to restore. To cover against failure, we recommend a levy similar to that applied by the Civil Aviation Authority, with each institution paying a sum per student to cover costs in the event of failure. This would be designed to benefit the whole sector, since institutional failure would affect the reputation of the whole sector, traditional universities and new providers alike, especially among overseas students.

These proposals are designed not to increase regulation, but rather—as I say—to provide for better regulation. The present framework is piecemeal, complex and no longer sufficiently robust to protect the reputation of higher education and enable students and business to invest with confidence. HE institutions are presently too risk-averse and uncertain as to the future. A clear, robust regulatory framework providing coherence within a pluralist setting would be the most sensible way to proceed.

What I have detailed provides the basis for a higher education Bill. The ideal would be for one to be included in the next Session, but I appreciate that the reality is that the most that can be hoped for is one at the start of the next Parliament. Perhaps my noble friend the Minister can give some indication of the Government’s thinking, in terms of both the proposals I have outlined and the intended timescale for action. Doing nothing is not really an option if we are to ensure that higher education in the United Kingdom remains a world leader.

I end on a separate point. What I have said so far relates directly to higher education and to the responsibilities of BIS. I turn to a proposal that falls within the interests of DfID and the Foreign Office; I am not speaking here for the Higher Education Commission or any other body. I have referred to overseas students studying in the UK as a—indeed, the—major source of soft power. I suggest that we devote more of our overseas aid budget to providing bursaries for overseas students to study in the United Kingdom. This benefits the nations from which they are drawn: they acquire a greater body of university-educated students, better able to assist the country in economic and political development. It assists the United Kingdom in terms of bringing more overseas students to British universities, something likely to be more important over time as the number of overseas students declines, and it ensures that aid is used effectively and as intended, and is not siphoned off for the benefit of the regime or particular leaders. It creates, in effect, a virtuous circle. I know more money has been channelled to scholarships, and I very much welcome that, but I would make the case for extending it on a major scale.

We have an HE sector that has a world reputation, that continues to perform not only effectively but efficiently, outstripping virtually all of our competitors, and which has the potential to remain a world leader. The sector faces major and disparate developments. If we are to maintain our record and, indeed, improve upon it, we need better, risk-based regulation, not only to protect students, but also to encourage universities to innovate. The sooner we have a higher education Bill, the better.