Examination of Witness (Questions 1-19)
MONDAY 10 FEBRUARY 2003
MARGARET HODGE
MBE, MP
Chairman
1. Minister, can I welcome you to our deliberations.
It is a pleasure to see you again. It has been, we know, a rather
hectic period for the ministerial team but you have certainly
been in the lead on this recent White Paper, and in a sense we
limbered up last week by having a seminar on higher education,
and you are now our first witness in the present very short inquiry
because we intend to "top up", dare I say it, our previous
inquiry, and that we hope will be useful to the Government and,
if it is to be useful, we understand we are on a short time frame.
Minister, I hope it is not quite a disagreement between us what
"short" was in the last inquiry—we hurried with
our last one—
(Margaret Hodge) I think you reminded
me of the times I said we would publish the document and fortunately
I had not promised to resign on the basis of not meeting the timetable!
Can I start by saying "Thank you" to you because you
have been incredibly tolerant, both in waiting for our response
to your inquiry to student funding—and I hope that is with
you—and also for ensuring I came at an appropriate time
before the Committee when I had something to say rather than the
usual "Wait and see". So thank you for your forbearance
in those matters.
2. Thank you for that. You will recall that
this Committee lost a day's debate on your response to our original
inquiry, and I do hope that part of your influence and ours will
bring back that debate so we can have a proper one at least in
Westminster Hall on the White Paper and the two reports that we
are going to be producing.
(Margaret Hodge) I certainly welcome that and probably
both you and I can put that view to the powers that be that determine
the business of the House.
3. Do you want to make an opening statement?
(Margaret Hodge) Not particularly. I think you have
heard me bang on about it for ever!
4. We will go straight into questions then.
Many people think that this recent White Paper is a very generous
settlement for higher education—I think some ministers have
described it as the most generous HE settlement ever—but
in a sense does that not depend on who gets the money? What we
have said in the three reports on Higher Education is that there
is a balance between what monies flow into universities for teaching
and research and other core activities, and it is very important
to keep that balance right, and then what goes to student support.
If there is an imbalance, and from the figures we have seen and
from the White Paper it is not quite clear, but presumably the
Treasury has done its sums, and the figures are £7.5 billion
in 2002-03 to almost £10 billion in 2005-06, how much of
that is going to go into universities' core funding for any purposes
and how much of that into student support?
(Margaret Hodge) If you look at the White Paper on
page 19 we spell out in I hope a very open way the distribution
of the additional resources. What I would say to you is that it
is an 18% real terms increase in funding for higher education
across the piece, and if you now look back at what the Labour
Government has achieved since we have been in government we will
over the period of our Government have had a 34% real terms increase
in spending. If you compare that to the 36% cut in unit funding
that happened under the previous Government, I think we have made
good progress. Some will go into student support both to fund
the support for the additional numbers that will go to higher
education and to fund the grants that we are going to introduce
from 2004-05, but the rest will go into the sector direct. I know
one area where there have been particular issues raised—there
is an increase in the per unit/per student funding for teaching
over this period of 4% in real terms if you cut out everything
else—and I am cutting out the money we are spending on research
and on some national projects like the Golden Hellos or the e-universities
and the money we are having to put into funding pension settlements.
So the real terms increase in teaching alone is 4%, and I know
there has been concern expressed by both Universities UK and others
that that is not the case, but I can assure you it is.
5. There seem to be some rather fuzzy numbers
here, because there are quite a few of these proposals that might
not occur. There has been quite a history in the Department of
allocating funds for specific courses—for example, science
and technology—and while there has been supply for those
courses, the demand has not been there so the money has never
been used—or perhaps used for other purposes. But what about
this area? A lot of the investment in your suggestion of the huge
expansion of 43/50% is mainly being taken up by foundation courses,
yet there is quite a chequered history of foundation courses in
terms of there being non-degree courses being attractive to the
people we represent and their children.
(Margaret Hodge) To give you two key answers to that
question, firstly, we are encouraging much stronger, demand-led
market forces to affect the determination of supply in higher
education. We have done that over the last year or two, the raising
of the cap that was placed on student numbers by HEFCE, which
allows flexibility at institutional level to recruit up to 5%
above the cap. Secondly, we have said that we want the growth
in additional student numbers to come out of foundation degrees.
I think it is not right, if I may say so, to say that they have
a chequered history because they are still a relatively new qualification.
All I can say to you is that in the first year, when we first
introduced the qualification, we exceeded the numbers taking the
qualification that we had estimated. The money we put in for the
first year was to develop 40 prototypes. At present we reckon
we have 12,000 students studying for foundation degrees. I will
be putting a lot of energy into this, and I do see it as a priority
that we should ensure at both the institutional level in creating
supply and at student level to create the demand that we expand
those foundation degrees. Where they work they are absolutely
brilliant and the best example which I would invite the Committee
to go and look at—and, in fact, there are lots but there
are probably two or three that I would invite you to look at—is
the one at Kingston University where they developed a two-year
foundation degree around service engineering for aeroplanes, and
they have massively exceeded the demand for that degree. It is
a complete win/win for everybody involved—it is a win for
the institution because they get the extra numbers; it is a win
for the employers because they get the people with the appropriate
skills to meet their skill shortages; and it is a win for the
student because they know that if they go through the qualification
and succeed they have in effect a passport to a job, so in areas
such as that it has been extremely successful. Ravensbourne College
is another one that has worked with Carlton Television to develop
a foundation degree around the skills that are required in multimedia
technology and those sorts of areas, so I have huge confidence.
I would also say that in the public sector we are working very
hard with a number of public service providers to develop foundation
degrees. For example, the Health Service has given a commitment
that anybody who has worked in the Health Service for more than
five years will be entitled to continuous investment in training
and education leading to a foundation degree, and we have seen
quite a lot of foundation degrees emerging—most recently
one in Southampton. We ourselves in the Department for Education
and Skills are looking at foundation degrees in the early years
field. Indeed, when I had that portfolio I played a part in developing
that degree, and in the whole workforce re-organisation that is
now taking place in schools, foundation degrees will be an important
avenue for those that will be assistants in the classroom. I can
go on and on—there are loads. The Ministry of Defence is
also working closely with us to develop foundation degrees—
6. So they are going to be a great success.
(Margaret Hodge) We will have to work hard—
7. Let me put the question which is this: if
they are a great success, you are going to get to the 50% target.
We are trying to extrapolate, and one of the things we are trying
to extrapolate is whether there is going to be the money there?
If everything that is suggested in the White Paper does come on-stream
and is a success, do you get to the stage where there is quite
a large funding gap?
(Margaret Hodge) We will have to put effort into ensuring
that what is a new qualification does gain the confidence of both
employers and students, so we have to establish the credibility
of that new qualification and we will work hard to do so, and
time will tell whether we have been successful. So far the indications
are that we can be successful and it certainly meets the skill
needs in the economy. Is there enough money? There is certainly
enough money in the 2003-06 budget settlement to fund the expansion
in numbers that we have laid out in our document—the money
is there. We will then over the following settlement period see
a more rapid expansion of numbers and we have always seen working
towards that 50% target as being towards the latter end of the
ten-year period because whether or not students go on to higher
education depends on whether or not they get prior qualifications,
and that depends on our reforms of secondary education.
8. What about the gap between 2006, when your
upfront fees disappear, and 2010 when some of the money will then
start to be repaid?
(Margaret Hodge) From 2006, and that will be an issue
for the next comprehensive spending review, the universities will
get the income for the fees upfront, so the Government will have
to fund the repayment period, that is all. We will get the repayment
after graduation but there will have to be a cash upfront payment
to meet that government funding upfront, but because it is a loan
it will be below the line in terms of PSBR accounting, as you
know.
Mr Chaytor
9. Does that not depend on assumptions made
about the number of universities who choose to raise the fee to
£3,000?
(Margaret Hodge) No. From 2006 we will no longer be
levying an upfront fee—we will abolish it, so whether or
not universities then choose to vary their fees above the £1,100,
or by that time probably £1,200 with inflation, the additional
upfront income for the university will be met by government.
10. And has the Government made any assumptions
about the numbers of universities that will levy the full £3,000?
(Margaret Hodge) No, because it is very difficult
when you are opening up the market to variable fees to know how
the market is going to respond to that.
11. What happens if they are proved not to be
variable but all universities choose to operate as a cartel and
they all raise them to £3,000?
(Margaret Hodge) We will clearly have to look at the
issue of cartelisation because that is not what the intent of
the policy is.
12. So it is within the power of each university
to choose?
(Margaret Hodge) My own view is that early comments
made by some vice-chancellors will probably change over time as
they begin to understand the impact of market pressures on demand,
and I think this is just people at an early stage flying kites.
13. And in respect of the other dimension of
the fees policy, the possibility of differential fees within universities,
does the Government have a view on the desirability or otherwise
of that? Are there dangers there that you could anticipate if
each individual course attracted a different fee within the same
university?
(Margaret Hodge) Do we have a view? Not particularly.
We have always thought that, if you are opening up the market
a little bit through varying fees, there is bound to be a difference
in the way the market responds over different subjects and different
institutions, and I have always said in the past that there are
some institutions which may well, because they are particularly
popular in some subjects and are particularly good at delivering
some courses, choose to vary their fees in some subjects.
Chairman
14. Minister, you have been stomping up and
down the country talking to university students and vice-chancellors.
What have you been saying to them when, like Mr Chaytor, they
say, "What is your argument about flexible fees or top-up
fees?", and what are you picking up in terms of reaction?
(Margaret Hodge) It depends on the audience to whom
I am talking, is the honest answer, Chairman, but what I am trying
to talk about in the beginnings of our tour around university
student unions and further regionally—indeed, I am starting
in a couple of weeks talking to other stakeholders—is the
context in which we approached our White Paper, our strategy document,
and the legacy that we inherited and the lack of funding, the
36% cut in unit funding; the challenges that face the higher education
sector over the coming decade, particularly competing in a much
more globally competitive higher education market; the ambitions
we have for the higher education sector, and that is around delivering
world-class research to retain our competitive edge there and
provide the growth and productivity that we want in the economy;
expanding numbers and widening participation and engaging in the
local and regional economies—so I talk about all that—and
then in that context we talk about how we are introducing a real
massive raft of new policies right across all those areas in teaching,
in research, in knowledge transfer, in how we are going to meet
the 50% target and in how we are going to widen access, and then
student funding comes into that context. So far I have talked
probably mainly to student unions and when I have talked to them
there are some things they welcome—the introduction of grants
for next year; the fact that we are raising the threshold when
payments lock in from £10 to £15,000 which means payments
become more affordable particularly for those on low income; the
fact we have been able to maintain zero real interest charges
on the loan, and that I think has been very welcome; the fact
that we have abolished upfront fees has been welcomed by many,
and we talk about the introduction of varied fees, which is probably
the contentious issue when you talk to a student body. What I
have found, and this is interesting, is that there is no unanimous
view coming back on how best to square the circle that we have
had to square between the investment in student funding and investment
in universities and the various options that we have looked at
on how to best determine the student support regime. There is
no unanimity. Let me give you an instance: as many people are
hostile to the graduate tax as those who would have preferred
that as an option.
15. But this Committee was picking up, not only
at the seminar last week but round the country, a group of people
that feel that you have really failed to be dramatic enough on
the one side or the other. On the one side people want you not
to have ever introduced flexible top-up fees: on the other there
is very strong opinion that we have heard that you have missed
out on really giving universities the flexibility to increase
their income for both research and teaching, because the £3,000
figure is far too low.
(Margaret Hodge) I have not met that, to be honest.
I think on the whole the response I have met is that we have done
a rather good job tackling some rather difficult issues, so I
cannot say that we have failed to grasp the nettle. That is not
an accusation I have met as I have gone around. Even on variable
fees I meet a mixed response, even among the student body.
Paul Holmes
16. Following on from what David Chaytor said,
he asked what would happen if all the universities wanted to charge
top-up fees, and you said that the Government does not envisage
that they would do that. There is that dreaded word "target"
looming there. What is the Government's expectation on how many
universities will charge differential fees? Is there a percentage?
Is it regional? National?
(Margaret Hodge) I know you might find this difficult
to believe but if you try to introduce a market into the issue
of determining fee structures it is very difficult to predict
how the market will respond, so we will have to wait and see.
I think we are waiting as much as you to see how different institutions
and different departments within institutions do respond to the
new power that we will give to universities to vary their fees.
We have not got a view in our head as to how that will go.
17. So it could be 5%, it could be 95%—we
do not know.
(Margaret Hodge) We will have to wait and see. My
own guess will be that it will be the more prestigious universities
that will decide to vary their fees in the first instance—that
would be my guess—but we will have to wait and see.
18. And will the access regulator be given the
freedom to decide on this, or be given strict guidelines by the
Government to operate within?
(Margaret Hodge) We hope to put forward our consultation
document on the access regulator pretty soon. We are working on
that as a priority because we would like to see that in place
well before we move into the situation where institutions are
given the power to vary their fees, but the access regulator will
not determine which institutions choose to vary their fees. It
will be up to the institutions themselves or departments within
the institutions to decide whether or not they would wish to vary
the fee. The access regulator will then play a role where institutions
wish to vary their fees upwards, and will have to satisfy himself
or herself that the university or the department has got admission
arrangements, bursary arrangements links with local schools and
colleges and so on which are appropriate to ensuring fair access
if there are to be varied fees.
19. So as many universities or departments as
want to could apply and say, "We would like to increase our
fees", and the access regulator's only control will be to
say, "Well, you do not have good enough access performance
so therefore we will not let you", but that will be the only
restriction?
(Margaret Hodge) Yes.
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