WEDNESDAY 30 JANUARY 2002

__________

Members present:

Dr Ian Gibson, in the Chair
Mr David Heath
Mr Mark Hoban
Dr Brian Iddon
Mr Tony McWalter
Dr Andrew Murrison

Memorandum submitted by Department for Education and Skills

Examination of Witness

MARGARET HODGE, a Member of the House, Minister of State for Lifelong Learning and Higher Education, examined.

Chairman

Thank you for taking the time to come and visit us today. I do not think you have been in front of this Committee before. You know that we are doing the research assessment exercise and you have heard how important that is in determining allocations of funds and so on - never 100 per cent popular but we are looking into the whole process. The previous witnesses described parts of this as a slap in the face to the academics - I think it was the grade 3s and so on - so there is a little disquiet out there and yet you have announced 30 million extra to fund it next year which is about 3.5 per cent or so. How did you get to 30 million? How hard did you fight for that? Should it have been 60? How did you get to that figure?

(Margaret Hodge) First of all, let me say that there is a misunderstanding about the purpose of the RAE. The RAE is not there to determine the quantum of money that the government invests in the research infrastructure; it is there to assess the quality - the relative quality - to give a mechanism for then distributing the quantum decided by the government. I do not get the vibes you do, Chairman, about it being a hated exercise by academics - maybe we talk to different academics. I think it is a peer review exercise which has a lot of credibility in the HE sector, and I also think the vibes I got after the results were announced this time were that a lot of people were chuffed with themselves. If I can give you a few statistics, the number of staff who are now in 5/5* departments has risen to 55 per cent of those who were entered compared to 31 per cent in the 1996 exercise, so that is something of which the research community should be proud and which UK plc should be proud. Clearly, within the quantum, it became impossible to maintain the formula that had been used for the 1996 distribution. We are anxious to sustain a good research capacity in the UK. I heard when I came in how well we are doing in terms of citations worldwide and so on, and we want to sustain and maintain that, so we found 30 million from an underspend which was the maximum we could find which will hold the fort. It is a one-off but it will hold the fort between now and the comprehensive spending review settlement when it may not surprise you to learn we are going to be seeking additional resources for research and other things in universities.

The Welsh Assembly went up 11.5 per cent. How do you feel about that? Have they allocated more money to their research? That is lucky, I guess, is it?

(Margaret Hodge) Devolution!

Well, I think there is the answer for London and East Anglian universities. Was it your decision or HEFCE's to fund the 5 rated universities?

(Margaret Hodge) The decision is one for HEFCE. Of course there are discussions with us but it is one made by HEFCE. It is one I feel perfectly comfortable with because it is vital that we do sustain those research departments that excel internationally and the 5/5* ones have an international position so, in terms of priorities for funding, the sustaining of that international position must be our first priority.

I have two problems and I wonder if you have a position on them at all. Some of the new universities have no development funding next year. How are they going to be prioritised - their problem in relation to the 5 and 5* funding? The other issue is medical schools which are highlighted in government activity to get new doctors and so on into the NHS, and some of them have not got an RAE rating yet so they start from a very low base. Do you not think they might have an injection of funds to help them kickstart their research, or are we not going to have medics who have no research orientation whatsoever, because it is generally agreed you need to have that in good medical schools?

(Margaret Hodge) Let me step back a bit from your first question. Having now had the portfolio for six months or so and thinking about how we fund research in the UK, we are trying to do a lot of things out of probably one pot of money which does not quite work. We are trying to fund basic research capacity where we can: we are trying to fund and promote and foster international excellence, which we must do: and we are trying increasingly to fund a knowledge-transfer capacity in regional economies. At the moment we probably try to do too much out of the one stream of money and too much out of that one assessment. One of the reasons I welcome the review that HEFCE is now undertaking is that it will give them an opportunity to step back and think a little bit about the sensitivity of the current regime to funding those three purposes, and whether it is fit for purpose. One of the things we are reflecting on as we prepare our CSR bid is again, if we are going to concentrate resources on the internationally excellent research departments, how we then keep a flow of growing departments and have most universities in all regions making a contribution to their regional economy. It may be that we need to look at a new settlement, a new way of funding, building perhaps on HEROBC/HEIF funding for some of the new universities, for example, who may not have done so well out of the RAE exercise, looking at whether or not, given the bunching up at the 5/5*, that is sensitive enough to those that we want to promote internationally. Also, of course, it all depends on the total quantum; the more money you have, the more generous you can be across the board. On your second question about new universities emerging, one of the interesting things and one of the successes of the RAE and all the funding research is that there has been quite a lot of fluidity in the system and Oxford Brookes, as an example of a new university, has done pretty well out of the RAE exercise this year and does very well out of the HEIF funding as well, so there is some fluidity in there. We have to keep maintaining that but remember that the purpose of the RAE is to measure relative excellence and distribute according to that.

Mr Heath

Of course I understand that you can only distribute the money that you have available but you said you were content with the distribution this year. Surely it cannot be right that a department which has already established its excellence and maintains that excellence is rewarded with a cut in funding, as a simple proposition?

(Margaret Hodge) What do you mean?

Because the money is distributed to more departments, the amount of money they have available is less despite the fact they have maintained a research institute of excellence?

(Margaret Hodge) The options open to HEFCE were to ignore the results of the 2001 RAE exercise because they have to live within the quantum that was given them. We have moved on. It needs to be given a three-year settlement not a one-year settlement so they know the amount of money that is in the pot until the end of this spending review period, 03/04. You cannot suddenly magic - it is not a demand-led budget.

I understand. So you are content with it. I am not, and I would suspect you should not be either.

(Margaret Hodge) I think they use the additional resources that we were able to find mid-spending review period for them sensibly. Do I think that we ought to try and get more money for research overall? Yes. How should it be distributed? Well, I think that is for the RAE review and I still need to think about whether, over the longer term, we ought in that mechanism to be funding as wide a distribution of quality as we have in the past, and I think that is one of the issues up for debate in the review

Dr Murrison

On 5 and 5* grades, 23 per cent to 55 per cent in nine years is going the same way as A level results, is it not?

(Margaret Hodge) What are you suggesting?

I am suggesting that one interpretation that could be put on this is it is departments working the system rather than a reflection of excellence?

(Margaret Hodge) We have thought about, and no doubt you will reflect on that too. I think what the RAE has successfully done is focused universities on improving the quality of their research and I think, if you look at the benchmarking and you see what has happened to management research and what has happened to the composition of staff working on research, there has been an improvement in that management of research. Secondly, if you look at the citations, for instance, which is one of the measures we have to look at our relative success in research, we have gone up to 18 per cent in the last four or five years or something, which has been quite a considerable improvement, so if you look at quality as measured by that, the RAE reflected the improvement in quality and so did that. Is there an element of the clever old researchers in the HE sector learning how to manage the system that they themselves have put in place? There is probably a slight element but I do not want to overplay that. I think it is difficult to pull out and say, you know, that created a percentage improvement in people's RAE ratings. I think the prime reason that more departments did better is that they have got better.

Humanities get seven years in this exercise: science and technology gets five years in order to produce material. Can you justify that?

(Margaret Hodge) That is again a matter for HEFCE to determine and I think they have been persuaded by the humanities academics that it takes them that long to find the fruits of their research. Interestingly enough, one of the things I hope that the review will do is look at that timeframe in which we undertake the reassessment of quality. There are various options: is it right? How can it possibly fit in better with government budget review timetables? Also, you might argue whether 5 stars need to be reviewed that often. These are all questions, I think, up for the HEFCE review and they will be looking at that and we will be talking to them about it, but I do not think there is a sort of, "If everybody accepted that in the world, why should we question it?"

Strengthening research excellence is one of your department's four priorities along with increased participation, teaching and technology transfer. Can you rank those in order of importance?

(Margaret Hodge) No, I think they are all important. We have strong ambitions for the higher education sector. You have probably heard me say before that I think it is a sector that has suffered from massive under-investment for a generation: if you look at the cuts in unit funding in universities 36 per cent over the last decade is massive, and what is so pleasing really is that they have managed, despite that cut in funding, to sustain quality and expand numbers - quality both in teaching and quality in research - so I think interestingly enough for me, with all my experience of various bits of the public sector, this has been one of the more successful parts of the public sector in maintaining itself despite expenditure cuts.

I have to press you because we hear lot about priorities and difficult decisions and I am asking you to prioritise those four things that your department has suggested. I must press you and try to establish a rank order?

(Margaret Hodge) Why? All I can say to you in response is our priorities are to expand wider participation and to have fairer access to universities, so there are two elements to that, so it is not just more numbers but from a much wider socio-economic profile of people, so that is one aspect. Increasing teaching excellence is another: maintaining our position for UK plc in terms of research pre-eminence internationally is another: and strengthening the links between the HE sector and their regional and local economies is a fourth in the business sector, so they are all our priorities. There is nothing wrong in such a broad sector spending quite a lot of money in having a lot of priorities

Mr Hoban

But how can you allocate money if you cannot rank your priorities?

(Margaret Hodge) First of all, at this point we are in discussions across government as to how much money each of those priorities will require, and I cannot see us going for one and not another. We want to achieve progress in all four. I am surprised at your question - I am surprised that you see that one has to prioritise between them. I do not see that. I am trying to think of another analogy across another service, but if you were asked which is more important, your constituency role or your Parliamentary role, you would say you wanted to do both jobs properly.

But if I have a million pounds to spend I will decide how best to spend that money in accordance with my priorities.

(Margaret Hodge) So will I when it comes to it, and what we will want to do is to have sufficient resources to support those four very clear objectives we have set ourselves. I do not think that is a problem. You have several objectives in your job: you try to achieve more than one.

But I suspect the Chancellor will not allow you to achieve all your objectives equally and, therefore, there must be a ranking used to determine how you best spend the money the Chancellor will give you.

(Margaret Hodge) You are putting some presumptions behind that. I think across government there is a desire both for the purposes of inclusion in the economy to widen and broaden participation, and a desire to strengthen the research-base within universities, and both are necessary elements in achieving our overall economic objectives and our overall social inclusion objectives. It is not an either/or: we need them both. Whether we get enough money at the end of the day to meet, entirely, programmes that we might be able to pull out of a bottomless pit is another issue, but if you are asking me whether I will do one rather than the other, the answer is no

Dr Murrison

Following on from that, what interest does the Treasury take and how is the education budget allocated?

(Margaret Hodge) We work very closely, in a very joined-up way, with the Treasury and with the DTI on many of these issues and with No 10, so I am in very close discussions with my colleagues in DTI, Treasury and No 10 discussing what sort of programme we wish to put together for the next spending review period and how the money should be allocated. A lot of research money this time, for example, the infrastructure money, JIF/SRIF money came through DTI, the research councils' money goes through OST - there is a huge importance in getting proper joined-up government and I have frequent conversations and meetings and everything you can imagine with colleagues in DTI, OST and the Treasury and No 10.

Changing the subject slightly, Universities UK has said that higher education needs an extra 10 billion over the next spending review period. Do you feel that accurately reflects the funding for higher education?

(Margaret Hodge) I have said to Universities UK they are a very good trade union. If you are at a starting point as a trade union, you put in a big bid. I think it is slightly over-ambitious as to where we will end up but I do come from the perspective that I do think universities have been seriously under-funded over the last generation. I also think quite properly, in the first term of the Labour government, we focused our investment in education in the nursery and primary sector, and we recognise this time as a team that we have got to strengthen our investment and focus more to the secondary, post-16 and HE sector, and I think that will be reflected in our discussions ---

So you prioritised the nursery sector?

(Margaret Hodge) Yes, we certainly did.

In that case, can I draw you back to my first question which was about ranking those priorities that you quite rightly put before us?

(Margaret Hodge) Let me put it to you this way: we prioritised nursery education and did brilliantly on it. We are finally going to be the government, as somebody who has campaigned for it since my son was born some 30 years ago, that has free nursery education for all 3 and 4 year olds and I am incredibly proud of that - as indeed, I hope, are a number of my colleagues round the table. Equally, we put an 18 per cent increase into the HE sector - we did not ignore it. Over the spending review period they have 1.7/1.8 billion which is an 18 per cent growth, so we did not completely put all our eggs in the nursery basket: we spread it across. Having said that, however, I think the focus in this spending review period has to be on addressing some of the serious under-investment in FE, HE and secondary schools, and that is where we are putting a lot of our energy. That does not mean we are going to stop implementing our policy on nursery education which will require additional resources for us to get all free nursery places by September 2004.

Chairman

Let us turn to joined-up government again. You mentioned lots of departments there - they were flooding out at one point. In your submission, it says you work closely with OST to ensure a co-ordinated government approach to the funding of research. On the other hand HEFCE says that the dual support system has become unbalanced and research infrastructure has not been maintained at a pace commensurate with the increase in project funding. Is it unco-ordinated, in your opinion?

(Margaret Hodge) It is not unco-ordinated but I think that the JIF and SRIF investments in particular that came through the DTI were not matched by equal increases in the QR funding and, therefore, the ratio of QR to other investment has altered and that is one of the things we need to address. So it is not that its unco-ordinated but in a sense it is very difficult to say what we should have done first, and I think that capital investment, although it required the institutions, as Universities UK said to you, to find 25 per cent of the money and that caused some distortion in some budgets of some higher education institutions, nevertheless that was warmly welcomed and has been a good step forward. We now have to build on that and consolidate, and make sure we have the proper revenue funding and that is why there is a cross-cutting review on these issues and why there is also the transparency review, to look at the real costs of research.

I am sure the Committee welcomes that that is going to be addressed. We have a memorandum which I am told is fairly unique from the OST on this very issue of your co-ordinated approach and so on, and it is very heavily Civil Service speak ---

(Margaret Hodge) I have not seen it.

It is never critical but you read between the lines. It has said that the recognition of cross-disciplinary research, the weight accorded industry-funded research and the ability of universities to exclude active researchers from the assessment are all problems they would like to see addressed. Will the OST get involved in HEFCE's review of the RAE process?

(Margaret Hodge) Yes, because they are represented on HEFCE. John Taylor sits on the HEFCE board.

So he speaks for the OST, you are saying, on that board?

(Margaret Hodge) On that board, yes. He is a member of the board and HEFCE is very consultative. There really is good collaboration on trying to get these things better and right.

So John Taylor will have a very important role in communicating the OST view, so it may be that we ought to ask him what his role will be in that process, and you are confident the views of OST will be expressed?

(Margaret Hodge) Yes.

Mr McWalter

The fact is, then, that if the current HEFCE decisions about funding go ahead there will be quite a significant increase overall in funding for history research but there will be a severe decrease in funding for research in science and technology, where there has been nothing like the same degree of increase in schools, and there has been a decrease overall in the number of researchers who are actually included? To give just one example, in civil engineering you will not get any research funding in England at all outside the south of the country because there is not a civil engineering research university in the north of the country which has a 5. I do wonder whether it has been fully taken on board how prejudicial to research and engineering and science and technology the current suggestions about research made by HEFCE are likely to be.

(Margaret Hodge) I think you are laying at the door of the RAE blame for something which is not really related to that exercise at all. I have got the figures here which show - I have not got the history figures with me - that across all sciences the increase in research income between 1995/96, 1999/2000 was 27.5 per cent. The increase in research income across all arts in that same period was 28.1 per cent so it is about the same. Within that you are right that the increase for engineering was well below the science average, 17.6 per cent, and, if you take the other level, the increase in pure arts funding was 128.9 per cent - a very low base, they only started with less than 17 million ---

Chairman

They only need a pen and pencil really!

(Margaret Hodge) I do not think they would say that - not modern art - but that reflects this whole issue of careers in engineering and people right the way through from school and the lack of new people coming on in the engineering field, and that is an issue of real concern. You are right as well ---

Mr McWalter

But you cannot look at a 28 per cent fall in electronic and engineering as being something where you can just say, "Well, that is how the formula works and there is going to be a catastrophic fall in research funding"?

(Margaret Hodge) But the answer does not lie necessarily either within the university sector and certainly it is not the fault of the RAE exercise. The answer lies in the schools, in encouraging more young people, women, to go into engineering. That is where we have to start it. You will not solve it by giving a different set of rules at the RAE level.

Mr Hoban

Your department in its written evidence says that it sets the overall framework and policy objectives for Higher Education Funding Council for England. You said earlier you were content with the decision HEFCE took in terms of allocation of funding. Did it tell you or consult you about the decision?

(Margaret Hodge) They take the decision. The HEFCE board take the decision; it is a matter for them. In a good working relationship, there are a lot of conversations that take place before those decisions are taken but, at the end of the day, the decision rests with HEFCE and it is theirs to take.

In that context, and you are probably going to give me a slightly elusive reply here, how much freedom does HEFCE have in deciding how it spends its budget?

(Margaret Hodge) On that it exercised its own judgment. We happen to agree - which is not an unhealthy way to be doing business with a non-departmental public body, which is what it is - that the priority must go to sustaining as best we can the world excellence of 5s and 5*s, but it could have decided to give it all to 1s and 2s.

What would have happened then?

(Margaret Hodge) It would have decided. That is its prerogative.

Mr Heath

I want to take us on to the discussion that you will have heard earlier with previous witnesses which is the interface between research and teaching in the universities. First of all, I would like your view: do you see a connection between good quality research and good quality teaching or are they different attributes which are not necessarily linked?

(Margaret Hodge) I think, looking at the QAA outcome of the subject reviews, you tend to get a link between good quality teaching and good quality research. Having said that, we are thinking very much about that in reviewing where we think higher education should be in ten years' time. We have so far funded the higher education sector very much as if it is one-size-fits-all, so you get money through bodies and money through the RAE, two avenues, and you do not really get money for excellence in teaching. As we widen and extend participation it is going to become increasingly important that excellence in teaching is a feature in the HE sector and it needs to have a set of incentives around it so that some institutions can focus on that. So whilst traditionally if you look at the past there may be a connection, there is no reason why in the future you cannot think of not having a one-size-fits-all solution: having universities focusing on things they do best and then having a set of incentives to ensure that you reward them for doing that well.

That is a very interesting answer. It pre-empts my next question because that is what I was going to ask: is there an imbalance in the incentive which means that all of the funding, apart from undergraduate levels, follows research rather than teaching? Is the corollary of that that there is the potential at least for universities to diverge into those which are research universities and those which are teaching as their prime focus? Does that worry you at all? Do you see it as a positive development?

(Margaret Hodge) It does not and I do see it as a positive development. I think if we can encourage greater diversity in the higher education sector, that is great. I think there are some really strong, difficult issues we have to think about and that is something you have touched on - for instance, a new medical school. How do you provide the incentives there so that, if an excellent research capacity emerges, you nurture it and grow it. So I think there are some really tough issues you have to think through but I am very keen, particularly looking at our widening participation priorities, that one of them should be that we should focus on teaching. I really feel strongly that the cohort of young people who we want to encourage into higher education in the next decade, both to meet our target and to meet the skills needs that are required in the economy, will probably need a very different sort of teaching from the teaching I experienced when I was one of the 6/7 per cent to go to university, so we have to reflect that in the quality of the staff. I see nothing wrong, therefore, with having a diverse set of institutions but we need to have some permeability in the system a bit like the old football league, so they can go up and down and switch around as and when. Also, the reason I talked so much about the distinction between different sorts of research is that you do not want to end up with all your basic research being done, for example, in one area of the country; you want to have a knowledge transfer capacity really well spread across the region and economies.

Chairman

Do you think universities have changed over the years since we were young ---

(Margaret Hodge) I hope so!

--- in terms of the persona they put out to the public, for example? They are still called places for brainy people, but do you think that has changed at all?

(Margaret Hodge) I think it is beginning to change; I think it needs to change more. All universities are trying to link themselves into their regional economies better than they used to and that is to be welcomed, and the incentives we put in the system to achieve that are beginning to work and we need to do much more of that. It is interesting that only 3 per cent of UK companies use the HE sector in their businesses and we have to grow that. You have probably heard me going on about this terrible business of young people from the lower socio economic groups and their aspirations in relation to university, and there is this awful research that shows that over 40 per cent of people from C2DE socio-economic groups never think about university as an option for them during their school years. That is partly about the school sector getting itself sorted out; it is partly about what we do - the aim-higher campaign; promoting, raising aspirations; but it is also about universities going out and down into their communities.

Mr Heath

I think I accept what you are saying there but there is a concern that, if we allow this dichotomy which I suggested between those universities who have their focus on research and those who focus on teaching, there is a danger that the staff who we might want to be at those universities which they are best suited to, for concentrating on teaching, will nevertheless be attracted, particularly in the sciences, by the quality research foundation along the road and that you end up with not just a dichotomy of purpose to an extent but a dichotomy of standards as well. That would worry me because it would introduce a new divide which was not there previously and might work against the quality of access which you are quite rightly advocating as a fundamental bit of policy?

(Margaret Hodge) That could emerge so, again, we need to see what incentives and structures we put in place to prevent that happening. Whilst it might be sensible, particularly in the sciences to concentrate on the funding because of the massive cost of much of the investment, you might think about opening up those facilities to be used by staff working in other institutions as a much more open way than currently happens. Making that a condition of grant might be one way of trying to ensure that we maintain some sort of permeability between institutions and allow new research capacity to flourish. There are issues and particularly in the sciences it would be crazy to think you can spread what will always be a limited pot too thinly, so you cannot get the real investment you need to succeed internationally.

What you are suggesting there is that there is a much more directive approach from government to the academic community than perhaps we have seen before. That may be good or bad but it is I think steering universities down very clear avenues.

(Margaret Hodge) If the Committee has any ideas of mechanisms that we could employ which would allow the concentration of resources which we require and yet the permeability that we also desire, let us know, please.

One area which I know this Committee is concerned about is the shrinkage of the number of science departments, which we have already heard this evening is largely a function of undergraduate recruitment. Does the government, at the same time as wanting to concentrate resources on the elite departments quite rightly and to maintain the science base, etc, see a need also to maintain, against the pattern of undergraduate recruitment and, indeed, the difficulties which we know apply in selection of sciences in schools, a variety of departments across the country in larger numbers than might be the case than allowing natural selection to take place? There is a national incentive to maintain a variety of science departments around the country which is greater than that which sheer market economics in terms of undergraduate recruitment will require.

(Margaret Hodge) There will always be a regional dimension to a sensible higher education policy so we will want always to ensure a proper regional offer across the country. Beyond that, I have to say that I am not convinced that sustaining uneconomic departments where there simply is no demand for places is a sensible way of our using resources. If you think of how much money we do need and the under-investment over such a long period, I can think of other really important priorities to which I would put that money, so I am not sure it is a sensible way of doing it.

Mr Hoban

In your memorandum to the Committee, it is suggested that 5* departments could be selectively funded on the basis of their value to the British economy. Could you give examples of departments that might be funded and how you would choose them?

(Margaret Hodge) Actual departments and their value to the British economy? Can you re-read the passage, please?

It says that 5* departments could be selectively funded on the basis of their value to the British economy. Following on from that, could you give examples and how would you choose them?

(Margaret Hodge) Well, I think they are funded on the basis of their value to the British economy so it was a sentence that passed me by, I have to admit, in the drafting of that particular bit. I probably need to see the context.

Chairman

You would never let a civil servant slide that past you ---

(Margaret Hodge) I read it and I had a big hand in drafting it, Chairman, but I just cannot remember that particular paragraph.

Mr Hoban

It is paragraph 17(a): "The future development of selectivity, and whether it would make sense in future to discriminate even between departments currently rated 5*, for example to identify those departments whose international..." ---

(Margaret Hodge) I know what we are talking about now, yes. What we are anxious about is this issue of concentration. There are only a limited number of departments, particularly in some of the science areas, where we need really heavy concentration of investment to compete internationally, and the 5* has almost become too bunched up now to enable you to select within it those three or four. We know that, for example, under the 1996 allocation, a third of the RAE money went to four institutions - it was that concentrated, similar to in the States but it was pretty concentrated - and that seems not an unsensible way of proceeding. Given the growth in number in the 5*, is it still sensitive enough for us to be able to extract from that those that really need substantial investment to be able to pay the sort of salaries and attract the sort of person that will keep our capacity going, and we worry about that. There are various ways in which you can address that. One of the options would be, again, perhaps to create a new grade, those that are internationally competitive, where we would give extra resources which would enable them to attract the brightest of people.

So it would be a process of grading so we can identify those that need more resources?

(Margaret Hodge) That would be one way. It is not desperately sophisticated. I think probably round this table you could all do it better than I can because you are all scientists.

Thankfully not all of us! Are there any particular departments you are concerned about, or is it a general concern?

(Margaret Hodge) I am very concerned about our ability to maintain our international competitive edge. As you know, we talk about all the Nobel prize winners but they came out of investment ten, fifteen, twenty years ago and we want to have the Nobel prize winners of the next generation. I am really worried particularly about the salaries we are paying in competition to the States, which is the key competitor, and that we have not enough money in the system to pay competitive salaries.

Is there not a slight problem with the bunching you talked about in that what we are seeing is departments with international reputations graded to 5 having reduced funding in relation to research, and the same is happening with those graded 4? Those graded 5 are losing 15 per cent of their funding; those at 4 are losing 30 per cent of their funding. Are you not seeing a diminution or weakening of this activity in the system as a consequence of the bunching?

(Margaret Hodge) Could you just repeat the last bit?

Are we seeing a reduction in the selectivity by virtue of the bunching of 4s, 5s and 5*s?

(Margaret Hodge) Yes, so that is one of the issues we need to address in the review of the RAE as a way of determining quality.

Mr McWalter

I am concerned because there are several aspects to what you said in response to David's question. We seem to have a picture in which you would be perfectly happy to have a university where there are not enough people who want to do chemistry and physics and electronic engineering and so on - they are not there any more - and where you have one great big faculty of business studies and call that diverse university provision. I worry about that, not least because so many of the things we need to do as a society require people to have a degree of scientific literacy which currently people are often quite desperate to avoid, and I think it is one of the reasons why we have problems getting nurses and so on. You need to know what chemistry is to have some idea what you are doing when you are giving drugs and so on. To say, "Oh, well, it is a regional involvement but there is no national strategy" - I think we need a national strategy for science and we need to promote it. I am also worried when you started saying that you can teach without doing research. I think all the best teachers give decent lectures or classes or whatever because they are at the forefront of their subject and thinking about their subject and are passionately involved with it, and communicate that passion and involvement with a sense of excitement and breaking new frontiers to their students, so I am very worried about that teaching and research divide. I hope you think differently about research when you reflect on some of those things, I will simply ask you to do that. You have also identified wider participation, teaching and knowledge transfers as your other priorities, can you think of a way in which, first of all, you can devise a system of funding which actually registers the fact that those are things you really ought to see developed while, at the same time, giving the proper financial reward for research? In particular, will you also accept that if we go down the line of saying 3a departments, which might have struggled over research exercise, a new university which starts at 1, gets a 2 and it now has a 3a, they are really beginning to get nationally recognised levels of research and the teaching quality is advancing in line with that and now we tell them they are going to get nothing for all of their investment, energy and effort in the difficult circumstances in which they are all trying to do it. Can you find a way of giving us a sense that that fourfold strategy will apply in all universities and that the four elements really will be funded in a way which means that all universities are real universities as opposed to some universities being, kind of, second rate universities in which they are funded on a shoestring?

(Margaret Hodge) I have to say I think I start from a completely different perspective on this, in that I think we have been kidding ourselves that all universities are the same anyway. A little bit of honesty about universities doing different things now might be a healthy way of learning about the future and a sensible way of how you can appropriately and properly fund the things that universities do. I do not want all universities to be the same, I do not think they have ever been the same. I do not think any of you round the table really do think they are the same. What we want to do is value and reward those things that we think are important.

We always thought that a first in history from Oxford was the same as a first in history from Oxford Brookes in terms of quality.

(Margaret Hodge) Did you? Did you honestly think that?

I did. If it is not we should be honest about that and tell people. I am an adviser at Oxford University, as it happens, and they get their external examiners from Oxford and they give them a brief to apply the same standards at Oxford Brookes as they apply at Oxford University. That is not just an item of theory, it is a practical way of demonstrating that commitment to the highest quality at every university.

(Margaret Hodge) We do not have a system of national standards and national examinations. I heard the Universities UK representative saying to you there are something like 50,000 courses, and I thought, poor old students having to wade through that lot to make a choice. Courses are independently set and although they are externally monitored I think we are kidding ourselves if we really do think or we have thought that every university is the same, it does not mean they do not all do great and important and good things and we should nurture and grow them. I really do not think anybody really believes they are all the same. Therefore, maybe we start from a different basis, from my basis what I want to do is ensure that we provide all of those things that we talked about; that we have a good research capacity throughout the United Kingdom; that we promote the excellent research that we need to compete internationally; that we grow a knowledge transfer role; that we start to foster through the various funding streams; that we widen participation; that we value teaching and that we reward excellent teaching. Those are probably the key things, some universities will do all, some will do some better than others and some will focus on some and do them extremely well. I think I start from that perspective. What I am anxious to do is to look at a funding mechanism which does reward all of those functions but does not force universities to try and be the same, which I think our funding mechanism has done to date. That is the first thing. The second thing is, I do not want to go back, I do not want to go to centrally planned places. There is a real, real problem about engineering in particular. I do not think the solution lies in growing or in maintaining the supply of engineering places in universities, the solution lies in what my colleagues in the DFES are doing through the school stage and preschool stage in encouraging more young people to go into engineering and other related subjects . Do not let us be too dismal, we are doing jolly well internationally on it, hence citations. I do not want to go back to that. The HE sector is an odd place because they are fiercely independent institutions who run their own affairs, yet we have never let the market flow within the institutions because we have had that control over places. HEFCE advised us last week on something that we have been thinking about as well - coterminous views - that they are thinking of lifting the control of student numbers as of 2002/2003. It will be interesting. We will have to watch it and see what happens, but I think it is quite a healthy way to foster student choice actually, which is very important, and we have not talked about that much this afternoon. I am not very attracted to the idea of centrally planning places or to deal with deficits in engineering or modern languages, let me take another area where there are lots of departments closing just at a time when we want more British people to learn European and other foreign languages. I do not think you can plan the university sector from the centre, you have to deal with it in other ways. Teaching and research are interconnected, yes, traditionally so, but that is because we have never valued and rewarded excellent teaching. Think, who has been promoted in the universities that you have been associated with simply on the grounds of their excellence in teaching? They are few and far between. We just need to think again about whether or not we cannot create different career structures, different incentives which will start rewarding teaching and that might change people's attitude. It does not mean they do not do some research as well, it just might change that. That is to the benefit of the customer in the system, which is the student, and, if we are going get to the 50 per cent target, that is a huge growth, it will be a change in the cohort and they will require much more focussed teaching and supported teaching than we did probably when we went to university. Can you devise a funding system which meets all of our objectives? It is back to the question of we have a number of priorities, I resisted prioritising them at this stage. I still think that however much money we manage to achieve out of the CSR we are going to have to do some of everything and we will just have to see that quantum will determine a lot, as, indeed, it would in research, because all of those decisions about selectivity and relative strengths all become much easier if you have a bit more money floating round the system. Again, those sort of decisions will have to be taken when we actually have the final determination on the next Spending Review. What we attempted to do, and what I think, if I can say this in the end, is that universities need a pat on their back for doing jolly well on the RAE. I do not think it has been a reflection of the great inflation exercise, I think it has been a real improvement in the quality of research. What we have attempted to do with the interim money we put in is just keep the show on the road until we get the outcomes of the Spending Review and we will have to take tough decisions, and we will take them.

Chairman

Thank you ever so much, Minister, for sharing almost an hour with us, it has been really good and very helpful to our inquiry. No doubt we will probably see you in the chamber when we debate the issue again.

(Margaret Hodge) Thank you very much indeed.

Chairman: Thank you.