Lifelong Learning (Higher Education Fee Limits) Bill (Fourth sitting)

Toby Perkins Excerpts

Committee stage
Thursday 23rd March 2023 Public Bill Committees

[Matt Western]

It is a pleasure to serve under your chairship this afternoon, Mrs Cummins, and to welcome everyone back for this second sitting of the day. We had a constructive discussion on our various amendments under clause 1 this morning. We continue now with amendments 7 and 8, which have rightly been grouped together as they address a pretty thorny issue: financial sustainability. The amendments set out that in exercising their powers under clause 1, the Secretary of State should first have due regard to the additional costs associated with delivery and secondly look at financial sustainability in the round.

On the additional costs associated with the delivery of modular learning, we heard collectively a plethora of evidence from our witnesses during Tuesday’s sitting about how the impact of lifelong learning might affect providers. Indeed, when it comes to higher education providers, Professor Press from Manchester Metropolitan University made it clear that there were difficulties for institutions in the “mechanics” of the delivery of lifelong learning, partly due to the additional cost of delivery when moving from a full year or full three years of a course to a module. Quite understandably, that will introduce an additional cost burden, whether that be costs of onboarding or administrative processing. Worryingly, given the take-up for lifelong learning is so uncertain—the pilot programme did not attract high numbers at all—Professor Press found it difficult to predict what precisely the costs would be. That is concerning.

It is important that we have seen that uncertainty, seen what it might mean and seen the additional costs. There has been very low take-up of the apprenticeship levy, T-levels and accelerated learning. Accelerated learning and the apprenticeship levy certainly have real merits, but they can bring an additional cost burden, and a restructuring or reshaping of courses for institutions. That means more financial pressure on institutions when things are already difficult—as I am sure, Mrs Cummins, you will be aware, given that you have a university on your doorstep.

The effect may be far worse for colleges, as acknowledged by Liz Bromley of Newcastle and Stafford Colleges Group and David Hughes of the Association of Colleges. Colleges clearly have already been facing a dire financial settlement over the past 13 years—a point that I am sure my hon. Friend the Member for Chesterfield will want to build on and explore thoroughly in his comments, given his expertise in and knowledge of the sector. Certainly, almost all the witnesses representing the further education sector whom we heard from on Tuesday called for an injection of cash—presumably, to combat a gradual decline in the real-terms funding settlement for further education colleges. Lecturer pay, workload, staff retention, the administrative burden and regulatory costs were all cited as reasons why modular provision in the form of lifelong learning may hit roadblocks in the years ahead. The recent decision to take the further education sector into the public sector, denying colleges the ability to borrow and limiting their access to risk capital, will also dampen the supply of new course provision.

In the impact assessment as published, there is an estimated cost of £211,000 for all providers to familiarise themselves with lifelong learning, although it is worth pointing out that the Russell Group thinks that that is a large underestimation. Perhaps the Minister can explain how the figure of £211,000 was arrived at. When we look at how many institutions we have, whether they be further education colleges or higher education institutions, that figure probably works out at about 300 quid each. I am sure the Minister can explain how the figure was arrived at and, indeed, what the approximate cost will be for those institutions, but even that rough calculation suggests that the cost is massively understated by the Government in their impact assessment. That is concerning, because we all want to start this scheme on solid ground and ensure that it is being approached correctly and has the best chance of delivery and success. That example suggests that it has not been accurately thought out, but I will wait to hear what the Minister has to say.

Not only does the financial capacity of the sector affect the provision of courses; it also risks the financial sustainability of the whole sector. On Tuesday we heard from Dr Norton of Coventry University, who helpfully demonstrated that higher education providers work on a five-year forecasting model, which is made harder if students are opting for modular study over a several-years-long course. At a time when over one in three higher education providers are reporting a deficit, the real-terms value of tuition fees has crumbled to below £6,750—my understanding is that it is probably more like £6,400—and the Government’s own policy impact assessment for the Bill admits that the lifelong learning entitlement

“could result in providers having less financial certainty”,

the concern is that this mammoth reform may well be the straw that breaks the camel’s back. There is a real concern that it could bring down institutions in the sector. As of today, I am not entirely sure of the level of Government concern at that prospect. I hope the Minister will reassure us with his perspective of financial sustain-ability versus precarity of institutions in the sector—higher education and further education colleges alike.

This skeletal Bill introduces sweeping reforms to the way in which the student finance model works, and I would hope that the Minister would be totally assured that the reforms will pose as little risk as possible to institutional financial sustainability. That is why I was so concerned to read what I did in the impact assessment. What stress tests have the Department conducted ahead of implementation to ensure the sector can cope with the changes introduced in the Bill? What additional financial support, if any, does the Minister intend to provide to higher education providers and colleges seeking to implement modular study, given the limited financial capacity of the sector?

The amendments are important in establishing what risk there is to the wider tertiary education sector, and in ensuring sustainability. It cannot be logical that the costs per student unit will remain the same for modular learning provision. There will be a significant increase in the cost burden to institutions through the delivery of courses, but also in the administration and onboarding of students, and in managing departing students, and all the data needs around those changes. As we heard in our witness sessions, we have not even got to the wraparound support that students may require.

[Mr Toby Perkins (Chesterfield) (Lab)]

Has my hon. Friend reflected particularly on the evidence from Professor Rigby in the evidence session? She went into quite some detail about the administrative costs and the regulatory burdens of the modular approach, and the costs that that approach is likely to add to providers. Does my hon. Friend share my concern that the result of those administrative burdens might be that, without the additional funds he is asking for, colleges will find these courses unsustainable to run, and we will not get the amount of provision that we all want to see?

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[Matt Western]

My hon. Friend is totally right that one of the huge issues in the sector is the paucity of remuneration to further education college lecturers and staff. While going around the country, I have heard lots of anecdotal evidence about how difficult it is to recruit good staff. We clearly want the best, most inspiring people to deliver and impart information through their teaching. Whether it be in pure vocational education or in academic subjects, we want the best people, with expertise and talent, who can really inspire others to get into that subject and to succeed.

I hear, from talking to establishments around the country, that there is a huge remuneration or salary disadvantage—a difference between what people can earn vocationally in roles versus what they earn as lecturers in colleges. What I am hearing indicates that there is a 40% difference in pay between delivering a vocational role and teaching. That is really to the detriment of the next generation, and it is why we do not have the number of people coming into teaching as we should have across the board. I totally agree with my hon. Friend’s points, which highlight another immense challenge for the sector in the financial burden; the remuneration would ideally be greater.

Amendments 7 and 8 identify a real pressure point for the sector, in terms of the burden from this Bill. As I evidenced through the degree apprenticeships, institutions have to bear additional costs to deliver good-quality courses, but the yield—the cost cover—is not there. It is actually to the cost of the institution to provide them; it is the right thing to do, but it is coming at great cost to them to do that. With that, I will end my remarks.

[Mr Perkins]

It is a great pleasure to serve under your chairship, Mrs Cummins. I rise to speak to my hon. Friend’s amendments. I think that he has already made the case well, but there are a few points that I would like to add, particularly regarding the financial sustainability of further education colleges and independent learning providers.

The amendments absolutely speak to the heart of our reservations about the approach being taken. They are quite modest in their scope, but given the evidence that we heard in the evidence sessions, which was touched on in earlier discussions on other amendments, they do, as I say, cut to the heart of our concerns. Amendment 7 asks the Secretary of State to have regard for additional costs associated with the delivery of the course, and amendment 8 asks the Secretary of State to have regard to the financial sustainability of providers.

I will speak to amendment 7 first. In the evidence session, David Hughes explained that colleges,

“do not have any of what the private sector might call risk capital”.––[Official Report, Lifelong Learning (Higher Education Fee Limits) Public Bill Committee, 21 March 2023; c. 50, Q105.]

Given that FE college funding has fallen by 27% in real terms between 2010 and 2019, according to the House of Commons Library, and given the increasing financial pressures—with the booming energy prices and wage inflation all affecting colleges too—the financial picture for many of our colleges, crucial as they are, is very difficult indeed.

For that reason, David Hughes told us that the risk appetite of colleges for putting on courses that they do not know that anyone will study is likely to be pretty limited and restrained. As my hon. Friend the Member for Warwick and Leamington said, with colleges now being inside the public sector and therefore unable to seek private-sector borrowing, and being forced to run balanced budgets, colleges will just not be able to run courses that they cannot be pretty certain will have learners taking them.

[Andy McDonald (Middlesbrough) (Lab)]

My hon. Friend is making an excellent point about the difficult landscape that FE colleges find themselves in, but is he as surprised as I was to hear that Eton College was proposing to enter into the fray across the country—my own constituency included, notwithstanding that there was an oversupply in the sector already—thereby adding to the difficulties and undermining existing colleges? Is that not exactly the wrong way to go when the landscape is already so difficult?

[Mr Perkins]

My hon. Friend makes an interesting point. I am not specifically aware of the intended provision that he raised but, absolutely, the strength of his oratory on the issues facing further education colleges is absolutely right, and I would be very interested to learn more about what it is that Eton College believes it can offer that is not currently being provided.

Returning to the point I was making, there is a real need for somebody to step in and provide the certainty of funding that might allow more courses to be put on. Realistically, this legislation will not even come into force until 2025, so it will fall on the next Government to make this work, not the current Government, with all their best intentions. It will fall on the next Government to ensure that our constituents and learners across the country can actually take advantage of what is being offered.

Over the course of the 13 years I have been a Member of Parliament, I have become used to quizzing Ministers on pieces of legislation: “How is it going to work? What are you going to do?” This is one of those situations where the Minister is laying out what he anticipates might happen with the legislation, but all these questions will probably be for his successor. He may still be the Minister—no one knows the outcome of a future election.

However, as His Majesty’s Opposition, as a responsible Opposition, we have to think carefully about the fact that we might inherit this legislation and inherit responsibility for ensuring that these courses are available, that colleges and independent learning providers are sustainable, and that this provision is available to our constituents. It is therefore important for the Minister to confirm at this stage, given the recent Budget, whether any provision has put in place to recognise the additional costs for FE colleges or independent learning providers in delivering a more modular form of learning.

As we heard in evidence—I will expand on that in a moment—additional administrative and cost burdens will be placed on colleges. Will money be put aside to ensure that they are able to run these courses sustainably? If it is not the Department for Education or the Minister that will be ensuring additional funds, will it fall on local mayors to provide financial reassurance? Might the need for this kind of provision appear in local skills improvement plan? There would then be an expectation that a Metro Mayor would provide additional financial reassurance.

If not, I fear that this scheme will end up being something that largely happens in the private sector, where there is maybe a bit more risk appetite, and only with employers who can provide certainty about the economies of scale by placing several learners on courses. If a particular employer says, “Well, I want seven of my staff to do a specific course,” then someone might run one on that basis. But we are looking for colleges or independent providers to pre-emptively offer a course and see who signs up for it, so all these financial implications will only add to the potential nervousness around that. We heard several witnesses say that this measure has the potential to be a game changer for colleges, but only if they can afford to take the risk. This amendment, proposed by my hon. Friend the Member for Warwick and Leamington, offers some potential for the Government to illustrate that that risk has been seriously considered.

It will be useful for the Committee if I specify some of the additional costs that learning providers will face. We know that one of the Bill’s objectives is that someone who studies in this kind of modular way should not pay any more than they would have done had they studied in what you might call the usual way on a short-term, full-time course. Providers are saying that delivering in this new way will be more expensive, so there is a gap. Someone has to fill that gap, and it will either be some form of Government or the provider themselves. If it is going to be the providers, they will have to think carefully about whether that will be affordable.

If we think, for example, about the recruitment costs for any college that takes on lecturers—advertising a position, going through the interviews, all the administrative costs with collating CVs and going through and meeting to discuss those CVs—and all those things that might normally happen in advance of a three-year university degree, with all the revenues that will come in from that, all those costs still apply. However, it might be that those costs apply to someone who will actually be working for a short length of time and with far less revenue coming into the learning provider, and the barriers to recruitment will arguably grow.

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[The Minister for Skills, Apprenticeships and Higher Education (Robert Halfon)]

It is an honour to serve under you, Mrs Cummins. I am supportive of the sentiment behind these amendments and recognise the importance of considering the impacts on providers. The Government have been fully mindful of the financial sustainability of providers during the development of the LLE, particularly of FE colleges. The Government are also mindful of the additional costs that providers may incur when offering shorter modular provision at large scale.

We engaged with a wide range of stakeholders to gather input, to inform policy development and to build awareness of the LLE. We are grateful to the stakeholders that have engaged with the Department on the LLE and, of course, we will continue to work closely with the sector on its design and delivery. It is important to note that the LLE and its ambitions have been strongly welcomed by the sector for the most part. Stakeholders responded positively to the flexibility and the keenness of a simpler finance system.

The Committee will be aware that the Government published an impact assessment for the Bill, which included a consideration of impact on the providers. The hon. Member for Warwick and Leamington and the hon. Member for Chesterfield both asked how the cost was constructed. The basis of the calculation is set out on pages 36 and 37 of the impact assessment. That sets out the estimates of the potential implementation costs to providers, which is separate to the wider assessment of the benefits of the LLE.

The hon. Member for Warwick and Leamington also mentioned FE reclassification. He will know that the decision was taken by the Office for National Statistics, but we are supporting colleges with a package that includes an additional allocation of £150 million over the 2023-24 period, and we have invested £300 million in the reprofiling of payments before the end of the financial year, to eliminate the current deficit.

[Mr Perkins]

How does that capital allocation compare with the number of colleges that had, were in the process of negotiating, or have received offers for, private sector loans in advance of becoming public sector institutions? Will the amount of money allocated enable all those arrangements to go forward? Or is it likely that some will no longer go forward?

[Robert Halfon]

As well as the figures I mentioned, the DFE is working closely with colleges to try to deal with the difficulties that have come about because of the reclassification of FE colleges. I hope to be able to set out more on that in the weeks ahead.

[Mr Perkins]

Will the Minister give way again?

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[Mr Perkins]

Is the Minister saying that he is cognisant of the concerns, but that no additional money has been allocated in the recent Budget for the additional costs that providers have told us will be attached to this style of learning?

[Robert Halfon]

These things will be decided in future spending statements, and I have highlighted the extra money going into further education over the Parliament and over the coming Budget period.

The pilot scheme was mentioned briefly. I strongly recommend an article about the pilot scheme—the hon. Member for Warwick and Leamington has probably read it—by a witness to our Committee, the vice-chancellor of Nottingham Trent University, who says that the whole purpose of the scheme was to show the system working. It was not about quantity, even though there are 100 available courses. He writes that

“the effective administration of those received shows that SLC systems and processes are ready to support modular study.”

In the rest of the article, which I will not detain the Committee by quoting at length, he mentions all the other courses and pilots on modular learning that there have been, stating:

“The In-Work Skills pilot was also a pathway policy for the LLE. Delivered by Institutes of Technology (IoTs)…10 IoTs delivered the In-Work Skills pilot, which was a 1-year pilot that delivered high quality, higher technical short courses…The IoTs delivered a total of 59 short courses to 3,060 learners”.

He also cites other figures to show the extent of the move towards flexible and modular learning.

Importantly, as the hon. Member for Warwick and Leamington will know, the strategic priorities grant provides Government funding on an annual basis to support higher education providers’ ongoing teaching, and of course funding levels will be considered in the round at the next spending review, with the LLE in mind. Therefore, as the Government have been mindful of these concerns throughout the development of the LLE, and are confident that providers will be able to consider their own financial sustainability and costs when deciding which courses and modules to offer, we will not support the amendment.

[Matt Western]

We have had a pretty healthy debate on the amendments. I particularly appreciated the contribution of my hon. Friend the Member for Chesterfield, who has expertise specifically across the further education sector, but also in the delivery of apprenticeships.

I hear what the Minister says about the Government being mindful of the costs and so on, but when I look at the provision of further education and the costs at FE colleges, I wonder whether the Government are really being mindful of the cost pressures for them, and I wonder whether they are being mindful of the cost pressures that face the higher education sector, in which 32% of providers are currently in deficit, or of the cost of delivering degree apprenticeships.

[Mr Perkins]

This is a crucial point. We have already heard about the 27% cuts to the further education sector between 2010 and 2019. The Minister was at pains to say, “Well, there are some pots of money that we are looking at,” but he has also made it absolutely clear that, as things stand, this is being handed over to the next Government with an additional price tag on it and no money allocated. That is what we have heard in today’s debate.

[Matt Western]

Indeed, which is why the amendments are important. We want to start this policy on solid foundations, because we buy into and support it, but currently it just does not have the financial structure to make it deliverable, because these institutions are already facing massive costs. As my hon. Friend said, there are pots of money, but they are small pots of money when the sectors—particularly the further education sector—are already at a significant disadvantage.

I admire the Minister’s ambition in wanting to increase the retention of staff across the further education sector, but we are also seeing in schools a massive haemorrhaging of the staff—expert teachers and lecturers and so on—and the technicians who support so many of these courses, because they just are not getting the remuneration that they deserve so are leaving. To retain people, we must give them the right reward, and they currently feel massively undervalued by the way the Government are doing things.

As the Minister said—he mentioned his two favourite words—he believes in the sector and its value. I urge him, in future Budget negotiations, to get the support that education needs, particularly in respect of the sectors we are discussing. Too often, they are described as the Cinderella sector, and it is just not good enough. We absolutely must believe in delivering proper education, whether it be technical or otherwise, across society, and presently that is just not happening.

My hon. Friend the Member for Chesterfield reminded us of the issue of risk capital, as described by David Hughes, and the situation we have with the reclassification of debt. I am sure the sector feels completely financially handcuffed by where it is, because it just does not have the funds to do what it needs to do.

On top of that, my hon. Friend reminded us of the statement from Professor Rigby. When we think of an institution delivering a course once or twice a year—with a September, October or January start date for the delivery of courses—and suddenly increasing that from two to 12, it has six times as many. How does an institution staff that? How does it make that happen, as opposed to having modules and courses delivered by a certain number of staff at those start dates? It must lead to a multiplication of the resource, which comes with a significant financial burden. I just do not believe that the impact assessment underlines the reality of what the sector will face. As my hon. Friend reminded us, the context is the 27% reduction in real-terms funding in the FE sector between 2010 and 2019, which has made it all the more difficult.

Let me go back to the Minister’s point, because I love the words “degree apprenticeships” as well. They are fantastic programmes, but as I understand it the problem is that we are seeing a tailing off, and institutions are already saying they will not expand the programmes because of the associated costs. That gives the lie to the ambition, because if that is already beginning to reduce, what chance does this policy have? We will face the same sorts of challenges with lifelong learning, as it is currently set out, that institutions face with the delivery of degree apprenticeships.

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[Matt Western]

I thank my hon. Friend the Member for Middlesbrough for tabling this amendment and arguing for it so well. He is quite right that, given what we have been through over the past decade or so, the effective freeze in tuition fees has led to a significant decline in the value of the unit of resource, and he is right about the need for some form of futureproof guarantee that, should there be a rise in tuition fees, that should be matched by a consequent rise in the value of the lifelong loan entitlement.

Over the last decade, we have seen tuition fees reach £9,250 but they have essentially been frozen for the last five years, having had, as my hon. Friend explained, a marginal reduction back in 2017. We have seen a real-terms decline in their value. Indeed, Universities UK calculated that by the end of the 2024 academic year inflation would reduce the value of the annual tuition fee to £6,600 based on prices in 2012, when the fees cap was trebled to £9,000. That is a reduction of almost £2,500 in the unit of resource to an institution, which is putting huge pressures on those institutions. That was the point we were making in the debate on amendments 7 and 8. Institutions are under real financial pressure as there has been such a massive decline in the value of that unit of resource. London Economics has estimated that over the past decade, the overall income for students per unit of resource would be back at 2006 levels, when fees were £3,000. That gives some context as to just how much the sums involved have been devalued over time.

As I mentioned earlier, that devaluation is having a tangible effect on institutional financial sustainability, with many institutions reporting deficits and having to cross-subsidise their courses, take on more international students or borrow from the private sector. The amendment would seek to tie the lifelong learning loan to any rise in the value of tuition fees, as I have said. The point is that if this really is to be a lifelong loan entitlement, it is important that learners who benefit from a module in, say, two years’ time and who wish to return to studying 20 years later, in 2045, have access to the same quantity of learning as they would have done 20 years before. Otherwise, we will see the risk of individuals using their entitlement very early on in their lives paying the price of that and not being able to access further training or tuition later in life because they have used up their entitlements.

Given that there is a real need to make this work and to make the system as attractive as possible, we urge the Government to consider some form of indexation. Sir Philip Augar described this system as having

“the potential to be a game changer”––[Official Report, Lifelong Learning (Higher Education Fee Limits) Public Bill Committee, 21 March 2023; c. 45, Q89.]

We have heard that description before. But that potential can be realised only if the system is protected against the real risk of inflation. We saw inflation peak yet again yesterday—to, I think, 10.6%.

[Mr Perkins]

I want to come in at this moment, because we would all hope that learners who are looking for work and on universal credit might, as part of their efforts to get another job, take on courses and develop their skills. During the progression of the Bill that became the Skills and Post-16 Education Act 2022, we highlighted issues about the entitlement to study for those in receipt of universal credit, and amendments to the skills Bill in both the Commons and the Lords would have enabled some people in receipt of universal credit to study. Those were removed by the Government, but at the time, they offered the reassurance that they were consulting with the Department for Work and Pensions about the issue. I have heard nothing more since, so I hope the Minister might be able to tell us what happened with that consultation. Does my hon. Friend agree that in order for this measure to be as transformational and game changing as we hope, people who are in receipt of universal credit must be able to access a loan to develop their skills in order to get into another job, rather than being told, “No, you can’t do that because you’re not spending enough time looking for another job”?

[Matt Western]

My hon. Friend brings up a valid and pertinent point about the reality for so many people. The intent behind this legislation and policy is a good one, and it should be there to assist people in that particular predicament, but, as he says, it does not seem that that will necessarily be the case. However, I am sure that the Minister listened to his points and will address them in his response.

This amendment would ensure the long-term sustainability of the lifelong learning model and allow students who “bank” their credits to have the same chances later on in life to add to that bank. I will understand if the Minister is unable to accept the amendment as drafted, but given that he is planning on introducing long-lasting reforms to be used by people in the course of their lives, I would like to press him on how he envisages the value of the LLE being maintained over the years.