Examination of Witness (Questions 420-439)
WEDNESDAY 5 MARCH 2003
SIR HOWARD
NEWBY
420. But there is a worry, is there not? As
I said and as the members of this Committee said to the AUT and
NATFE, they seem to be the least successful unions in the history
of trade unionism because the wages of university teachers have
not risen for 25 years in real terms and of course they are very
keen to be noble and public-spirited and they do not want, for
example, to see top-up fees. What do you think about this diversity
of income streams into universities? Do you think it is a good
thing? Do you applaud it? Or would you prefer all the money to
come from the taxpayer through income tax?
(Sir Howard Newby) I well remember on a previous occasion,
Chairman—and you may remember this as well—when I
said that I cannot see any political party going into an election
campaign saying, "Vote for us and we will raise taxes to
give more money to higher education."
421. I remember it well.
(Sir Howard Newby) You may remember that one member
of your Committee put his hand up and said, "Actually, that
is our policy".
422. Yes.
(Sir Howard Newby) However, I stick to my guns on
this. I think that, in terms of practical politics, that is the
reality we are facing for the foreseeable future. So, what is
the alternative? The alternative is to see what we can do to bring
in resources from the students themselves or their parents as
proxies for the students and that of course is what the Government
are setting out. We do need to protect the interests of students
from poor backgrounds. I think the whole sector is united on that.
We do need effective ways of ensuring that students are attracted
into higher education and not deterred by the particular student
funding arrangements.
423. But, in principle, would you like a more
diverse income stream into universities?
(Sir Howard Newby) Yes.
Paul Holmes
424. We have tried to get from ministers an
estimate as to what they think the funding gap is. There is a
higher education policy paper saying that this is going to sort
out higher education for five years, 10 years, three decades or
however long. The funding gap is going to be met partly by the
Government's increase in spending and partly by differential fees.
However, we could not get any figure from ministers as to what
the gap was at the moment for capital, for pay, for research,
for expansion of student numbers and so forth. What do you think
the gap is?
(Sir Howard Newby) I think we are looking forward
to 2010 which implies hitting the Government's own target for
participation in the sector of 50%. We have costed that out at
the Funding Council as representing, by 2010, an additional £1.8
billion per annum recurrent and £2.8 billion is a one-off
capital spend. That, I think, is the funding gap because our spending
settlement this year has really delivered very little indeed with
regard to student growth/growth in student numbers. It is tiny.
Chairman
425. The growth in student numbers?
(Sir Howard Newby) The growth in student numbers is
tiny: 19,000. We will not hit the Government's target or get anywhere
near it unless there is a very significant expansion through the
next spending review and thereafter. I am not complaining too
hard about this because, at the moment, as you know, developing
demand for higher education amongst students is very dependent
upon improving achievement rates at 16 to 18. At the moment, the
sector is more or less in equilibrium in terms of supply and demand.
So, if we had more places, significantly more places, I am not
convinced that we could fill them. As we move forward, I hope
we will see both our policies at HEFCE and the Government's policies
in schools delivering more students at-16-plus who are fit to
participate in higher education, but then we will need a very
significant expansion indeed by the end of the decade, over 350,000
more places.
Paul Holmes
426. So the £2.8 billion capital is to
provide for the expansion of numbers? It is not the historic backlog
of capital repairs and investments?
(Sir Howard Newby) No. I think it is an interesting
question to see whether the Government's current proposals—and
I have to say that the settlement has been quite generous on the
capital side—will, at the end of this three year period,
be regarded as sufficient to meet the capital backlog. I personally
think that it probably will not be. We will probably need one
further round to have dealt with that and then we can bring the
whole thing into steady state, so that the capital needs of the
sector are being met out of revenue.
427. So, in total, there is a £4.6 billion
gap for capital and for student numbers in general and you were
saying previously that pay is really only going to rise with inflation.
So, is there a gap there?
(Sir Howard Newby) I did not quite say that, with
respect. I said that I could not see across-the-board pay increases
rising much above the general inflation rate. There will be additional
pay increases to that, but they will be channelled into areas
of market shortage on the one hand and rewards for excellent performance,
especially in teaching, on the other.
428. So, if you wanted to make up the 20/25
year deficit for academic pay, there would be a further funding
gap if you were going to do across-the-board increases.
(Sir Howard Newby) Yes but, as I am sure you realise,
it is not so much filling up a 25 year funding gap, it is whether
we can recruit, retain and motivate sufficient numbers of staff
of sufficient quality in the sector. That is really the issue.
As you know, there are some shortage areas appearing, which is
why I refer to the issue of providing resources in areas of market
shortage.
429. Is the gap that you identify for expansion
on top of the money that will come from differential fees or is
that what you think differential fees has to meet?
(Sir Howard Newby) No. To my mind, that is on top
of the funding that will come through differential fees.
430. How wide spread are you assuming the differential
fees will be?
(Sir Howard Newby) That is an interesting question.
Is a £3,000 cap on the fees sufficient to create a real market
in higher education? I am actually rather sceptical that it will.
I think that, if you like, Newby's law is that the higher the
fee, the greater the variability between institutions. I think
if it had been £2,000, everybody would have charged it and,
if it had been £5,000, only a few institutions would have
charged it, but I think that at £3,000 it is quite difficult
to make a judgment but I would say that possibly between two-thirds
and three-quarters of institutions will charge it. That is my
guess. So, not quite really sufficient to differentiate the market.
431. We have had several witnesses who have
been fairly sceptical that once money comes in from differential
fees, the Government will offset that by cutting the general grant
to the universities. What is your opinion?
(Sir Howard Newby) I am absolutely certain that the
present Government are absolutely sincere that they will not do
that. However, no government can bind their successor. We have
seen the experience in Australia where, despite those assurances
having been given, that money was indeed cut. So, it remains to
be seen whether a change in government or a renewed economic crisis
might lead to what you are describing. There can be no guarantees
in this world, can there?
Valerie Davey
432. Of the 350,000 extra places you are talking
about, what percentage of those would be in further education
institutions and which in higher education institutions?
(Sir Howard Newby) In the White Paper, as you know,
the Government have stated that they believe the vast majority
of additional places will come through foundation degrees which
will be predominantly located in further education colleges. We
can perhaps come back to that in a moment. I do see a very significant
proportion of the expansion taking place in FE colleges and I
hope it will take place in such a form that there are what I would
call natural pathways from FE into HE. At the moment, it is rather
hit and miss, not least in our part of the world.
433. The Committee were told last week by Dr
Michael Thrower that in fact HEFCE is not responsible for the
capital within further education colleges. So, given your emphasis
on the need for capital development to assist these places, what
happens in further education?
(Sir Howard Newby) That is the responsibility of the
Learning and Skills Council and I think there is an issue here
about the fact that, at the very least, we need to coordinate
our policies or make our policies rather more consistent and compatible
than they have been in the past. Personally, I would like to go
beyond that and see a single funding stream that deals with not
only HE in HE institutions but HE in FE institutions in such a
way that—and it is not just a financial issue, it is a management
issue—we can manage progression into FE through FE and through
FE into HE.
Chairman
434. Just to recap, you think that a more sensible
level of fee to be charged would have been £5,000 to allow
greater flexibility and more of a market in terms of the diversity
of university course provision?
(Sir Howard Newby) Chairman, this is not HEFCE business,
as you will understand. We are not responsible for student funding
and I think this is really a matter—
435. You are one of the most experienced HE
people we are ever like to get in front of this Committee, so
we very much value your renowned independent opinion.
(Sir Howard Newby) I think the bold move would have
been to pitch the fee at around £5,000 per annum—that
would have created a real market—but to have a rather more,
dare I say it, generous system of student support through maintenance
allowances than were set out in the proposals in the White Paper.
436. Would you have liked, along the lines of
the work that Nick Parr has done, to have got into your sticky
little hands, if I can call them that, in HEFCE the £1.2
billion that is the subsidy in terms of interest-free loans to
students?
(Sir Howard Newby) No, we do not have any ambitions
in HEFCE to move into the area of student finance.
437. Do you think that is a good use of £1.2
billion of taxpayers' money?
(Sir Howard Newby) That would have been very helpful
in terms of the figures I just set out to Mr Holmes, yes.
Jonathan Shaw
438. Thank you very much for advising the Committee
that you were overruled effectively by ministers, and Margaret
Hodge told the Committee that it was their intention that the
research funding would change prior to 2008 in the next round.
What is the future for HEFCE? If you are being bounced now, what
is the future?
(Sir Howard Newby) Let me perhaps correct you. You
used the word "overruled" and I think that was perhaps
going rather too far. I am quite content with the settlement that
we arrived at with ministers over the distribution of research
funding. It is not something that I virulently object to. There
were a number of proposals floating around at the time, some of
which would have worried me, but I am pleased to say that we ended
up seeing eye to eye on these matters, so I do not feel that I
have been "overruled". The initial proposals my board
agreed to were changed as a result of discussion. Having said
that, with regard to the future of HEFCE, I do believe that we
will continue to retain for the foreseeable future an important
role to protect the public interest in higher education and I
am sure you will come back to this phrase. We do act now as a
regulator with regard to financial probity and with regard to
good governance in the sector and of course the Secretary of State
has said publically that he believes that proposals for an access
regulator might well be housed within my Council and we very much
welcome that. However, there will, for the foreseeable future,
need to be a body which is accountable to Parliament and to ministers
that is protecting the public interest in higher education and
I think that is where HEFCE's future will lie.
439. The research rating 4 for institutions
has been top-sliced effectively. What percentage of medical schools
are at Level 4?
(Sir Howard Newby) If I say Level 4 and below because
some of them are below 4, I would say something in the order of
from memory—and I could check this for you—between
half and two-thirds.
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