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Higher Education: Funding

My Lords, the late John Masefield, poet laureate, once wrote that: "““There are few earthly things more beautiful than a university: a place where those who hate ignorance may strive to know, where those who perceive truth may strive to make others see””." I welcome this opportunity to debate the central role that higher education plays in our country so soon after publication of the outstanding report produced by the noble Lord, Lord Browne. Last week, my colleague the Minister for Universities and Science placed the noble Lord’s report on a par with those of two distinguished former members of this House: Lord Robbins and the much missed Lord Dearing. I very much echo that view. The noble Lord’s review has earned many plaudits, and rightly so. Of particular importance to me is the spirit in which he has conducted it. While the focus was clearly on funding and student finance, his abiding purpose has been to secure the long-term future of so many great institutions, that they may continue to be the beacons of wisdom and tolerance that Masefield praised. I cannot emphasise enough that our universities are and must remain centres of free thought and discovery, and seats of learning in both the sciences and the arts. While the Government, who are currently formulating a detailed response to the noble Lord’s report, are clearly concerned with universities’ contribution to our economy and skills base, they will never lose sight of the wider purposes of higher education. There are many experienced figures on all sides of this House whose opinions I look forward to hearing today. Although my own experience is more modest, I am familiar with the HE sector from a number of perspectives: as a graduate and, latterly, a governor of what is now the University of Plymouth and as a governor of Imperial College. I also take a close interest in the UK’s outstanding research base through roles in several organisations, including the Foundation for Science and Technology and some work with the Royal Society. Perhaps I may begin by reminding your Lordships of the context in which the noble Lord's report was published and by highlighting some of its central arguments. I defer to him, of course, on the detail. We should not forget that it was the previous Government who invited the noble Lord to undertake this review, but on a cross-party basis. The coalition Government hope that consensus on the future of HE will continue. What cannot continue, however, as the noble Lord concludes, is the current unsustainable system of funding, and any reform must be reconciled with the parlous state of the nation's finances, which the Chancellor addressed in last week's comprehensive spending review. The Chancellor has announced that the overall resource budget for HE—excluding public funding for research, to which I will return—will fall from £7.1 billion to £4.2 billion by 2014-15. This is because we have accepted the main idea in Browne—that money for universities should flow through students rather than the funding council HEFCE. The noble Lord’s was, of course, a review on higher education in England, but it is of interest across the UK. My ministerial colleagues and I will work with the devolved Administrations on how the proposed reforms in England might affect Scotland, Northern Ireland and Wales, so that they can decide how to proceed. The key point, though, is that money is not being withdrawn from the system but going into the hands of students by giving them loans to cover their tuition. With funding following students, whether they undertake degrees in Portuguese or particle physics, there will be stronger incentives for institutions to improve the quality of teaching and information that they provide. Indeed, it means that those universities which offer a better student experience from the lecture theatre to the careers service, from the library to the union’s bar, can expand to accommodate greater numbers of applicants. That process of universities responding to the expectations of more discerning students is a powerful means to drive innovation. It is also by far the best option for maintaining quality in the sector, something which would have been impossible had we decided to cut the unit of resource per student or introduced a graduate tax. The noble Lord rejected both as unviable. Neither is compatible with his desire, and ours, to preserve UK universities among our greatest national assets. Higher education continues to deliver a significant lifetime earnings premium to its beneficiaries. The noble Lord has concluded that graduates should make a greater contribution to the cost of their education, but within a system that is both fair and progressive. It is to these fundamental principles that I now turn. It bears repeating that the noble Lord, Lord Browne, was entirely right to insist that there must not be any up-front tuition fee for students. The Government are committed to social mobility. We know that going to university is often a transformative experience, opening new vistas for students and great opportunities. Initial costs would deter people from less affluent backgrounds from applying to HE. For the same reason, we welcome his ground-breaking recommendation that part-time students be exempt from up-front fees. This is not only fair in making HE more accessible to older students or people whose work or family commitments make full-time study impossible; it will also stimulate innovation in the sector as universities develop different modes of delivering different courses and degrees. The goal of social mobility informs other features of the noble Lord's report, including his recommendation for a more generous maintenance grant available through a simplified system which the coalition is now considering. Then there are the graduate contributions linked more progressively than under the existing arrangements to an individual's ability to repay. Not all graduates, of course, go on to lucrative jobs. The noble Lord has proposed raising the income threshold below which no graduate would begin to make contributions. Above the threshold, higher-earning graduates would pay a real rate of interest, but repayments would cease should their salary decrease, say, or they choose to look after a young family. His modelling would mean that the top third of graduate earners would repay more than twice as much as the lowest third. We believe that is fair and progressive. When it comes to setting higher tuition graduate contribution levels, the Government are keen, like the noble Lord, that institutions demonstrate how they will support the vital work of attracting applicants from less affluent or non-traditional backgrounds. Universities have undoubtedly made progress on widening participation. However, the Office for Fair Access has found that the participation rate among the least advantaged 40 per cent of young people at the top third of most selective universities ““has remained almost flat”” since the mid-1990s. The Government will support universities to raise their game on access by improving advice for young people at school and college, for example. Indeed, the Deputy Prime Minister has already pledged £150 million for a national scholarship scheme to improve access for students from families of modest means. It should be clear from this brief summary that the Government accept the overall thrust of the noble Lord’s report. We are currently looking closely at the detail. That is deliberate; it is crucial that we proceed on a sound and sensible basis. There are relatively tight deadlines to ensure that we can amend regulation around fee structures and student support in time for universities to include accurate information in their prospectuses. We will also need to make some changes to primary legislation to adopt the noble Lord’s proposal for a real rate of interest on repayments. At the same time, it is not only prospective students and their families who are dependent on our getting this right but universities themselves and a country urgently seeking to balance the books. We need to handle any transition with sensitivity. There was another dimension to the spending review that was of huge significance to universities: the decision to protect the overall level of funding for science and research programmes in cash terms. This ring-fenced settlement, worth £4.6 billion in each of the next four years, is unquestionably good news. Across the country we have excellent university departments with the critical mass to compete globally and the expertise to collaborate with businesses and other organisations. The settlement should mean that we can continue to support them. I remind noble Lords that the Research Councils cover the arts and social sciences, in addition to the physical and life sciences. Moreover, Sir Bill Wakeham, at the behest of the Research Councils and Universities UK, has identified a range of efficiency measures, which universities can now pursue to mitigate the effects of inflation and preserve research funding in real terms. From my association with Imperial College, I recognise the value of a stable investment climate. It allows teams of researchers to plan ahead and gives business, both domestic and international, reassurance that our excellent scientists will be able to complete projects. The same is true for medical charities and other investors. It is vital that we maximise returns on this investment, continuing to produce outstanding research more cost-effectively than any other country in the G8. The Government will continue to support capital investment in priority areas, hence the recent allocation of £69 million to the Diamond synchrotron in Oxfordshire, where scientists conduct ground-breaking research in the life, physical and environmental sciences. Elsewhere, my department and the Department of Health are co-funding the UK Centre for Medical Research and Innovation, alongside medical charities and University College, London. For similar reasons, we welcome the progress that HEFCE is making on developing an assessment framework that combines recognition of the highest levels of research excellence with reward for the impact it has on the economy and society. We will also work with HEFCE to reform the higher education innovation fund to increase the rewards for universities that are most effective in business engagement. It would be foolish to deny that much work remains to keep the country’s universities on a secure footing, and equally foolish to suggest that the Government have all the answers. Nevertheless, in adopting the bulk of the noble Lord's recommendations—in spirit, if not always in detail—we will not lose sight of what a modern university is for. That is certainly the case in seeking to improve the experience of students so that they may embark upon the next stages in their lives with the skills and confidence to do rewarding jobs, and I mean ““rewarding”” in the broadest sense. It is certainly the case in making sure that one's financial circumstances are no obstacle to a higher education and at an institution where one's talent and ability can best be realised. It is certainly the case in terms of allowing outstanding researchers, home-grown and international, in English literature as well as engineering, to carry on producing world-class work. However, I make no apologies for stating that the Government also want universities to help drive economic growth. As the noble Lord, Lord Browne, notes in his report: "““Higher education is a major part of the economy, larger in size than the advertising industry, and considerably larger than the aerospace and pharmaceutical industries””." In fact, almost every industry, and certainly the trio I have just mentioned, is influenced by the teaching and research that goes on in HE. We want university/business links to go from strength to strength in terms of R&D and in tailoring courses around the needs of employers. We must harness this valuable asset in a way that gives universities the best opportunity to thrive, and that is by respecting another defining feature of UK institutions besides their traditions and their capable staff. I refer to their long-standing autonomy. Our universities will make a greater contribution to society and the economy by pursuing their various missions with maximum independence from the state. Better teaching and world-leading research, improved access and social mobility, closer links to business and public services, affordability and autonomy are the principles that will underpin any reforms, and the Government will manage them cautiously with a view to a stronger, more vibrant HE sector. I look forward to the debate and beg to move.