Higher Education Bill

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Mr. Collins: I am grateful to the Minister. He is answering the debate well. He is also answering comments made by the hon. Member for Leeds, East, who referred to discussions involving the Prime Minister about a more wide-ranging commission that would look at higher education funding. Are there any circumstances in which that idea of a wider-ranging commission might re-surface?

Alan Johnson: I believe that there must be such circumstances. The hon. Gentleman will have to forgive me; I am not totally privy to the discussions that my hon. Friend the Member for Leeds, East mentioned. [Interruption.] That is interesting, but true. I think that that might lead on to other things.

The contribution made this morning by the hon. Member for Harrogate and Knaresborough was very powerful, as usual. He argued powerfully on Second Reading. The Liberal Democrats have taken a principled stance—they have taken it since they were last in Government in 1918, when there were 13 universities. They believed then that they should be free and they still believe it now, many years later. They have been consistent on that issue. However—[Interruption.] That is not the debate; the debate is about variable versus fixed fees. I understand the

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hippy commune in which the Liberal Democrats sometimes live, but I was surprised to see a letter to the Financial Times on 23 December, in which the Liberal Democrat Treasury spokesman, the hon. Member for Twickenham (Dr. Cable), criticised an article by Professor Giddens. He wrote:

    ''Where Professor Giddens . . . is absolutely right is in his criticism of flat-rate fees. This is the worst of all worlds: a poll tax on students totally unrelated to the quality of higher education provided or the preferences of students.''

That is amazing. I say with great affection to the hon. Members for Newbury and for Harrogate and Knaresborough that they cannot get round this principled stand of theirs. I mentioned it on Second Reading, and we should keep repeating it. Scotland is the one part of the UK in which they are in government. In Scotland, graduates make a contribution. They cannot get round that. I read the argument in his leader article that they contribute to the grant in Scotland, but that the teaching is free. Here, they contribute to the teaching, and the grant is free. I do not understand this issue of principle for which the Liberal Democrats would go to the wall.

Finally, we are hit two ways on the funding gap. First, we are told that flat-rate fees do not raise enough money and are not worth all the trouble because the funding gap is so wide.

Mr. Rendel: Will the Minister give way?

Alan Johnson: No, the hon. Gentleman has had time to think about this. I will come back to him.

We are told that the funding gap is too wide, so this is a drop in the ocean. We are then criticised the other way. I quite liked what my hon. Friend the Member for Leeds, East said, perhaps uniquely, about the funding: that we have been so generous to universities, why do they want more, and why do we need to jump to £3,000? I am not surprised that my hon. Friend has seen different figures on the funding gap.

Assessments of the funding gap differ. I mistakenly said that Dearing had made an assessment; he did not. The assessment that we have used, which I believe the universities also use, was made by JM Consulting on behalf of HEFCE in 2002. Its figures are not too different from the other figures that have been bandied around. It says that there is a £7.8 billion funding gap, which is often talked about as an £8 billion funding gap, of which £3.2 billion is in research. That is a cumulative figure, not an annual one.

As a result of the spending review and the enormous increase in the amount of money that we put into research, HEFCE now says that the backlog in research will be cleared by 2008. That means that £3.2 billion will be taken off the figure of £7.8 billion, which leaves £4.6 billion. This measure, together with the £800 million currently coming from fees, will produce around £1.8 billion a year. By 2010, if we are successful in expanding higher education as we propose, that figure will be worth £2.5 billion because more students will be paying fees. That leaves a gap of £2.1 billion, which is part infrastructure, part capital and part revenue. We have taken enormous strides to close that gap. I do not think that anyone believed it would be closed in

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one year, two years, four years or five years. Certainly, the Dearing report mentioned that we should recognise that part of its terms of reference was to examine the financial situation. Dearing would not have imagined that we could get this far.

Lord Dearing will have his own say in another place when the Bill is considered there. However, someone mentioned, quite justifiably, that Dearing did not recommend variability.

Mr. Collins: Will the Minister give way?

Alan Johnson: Not just yet.

Dearing has spoken about variability, however. He pointed out to me that his report mentioned variability. He said he did not rule it out, and that the Government may need to consider it, but he attached several conditions. In The Guardian on, I believe, 4 January, he wrote very elegantly about his belief that our proposals were right. He believed that the fee cap of £3,000 was right, but that there should be very serious safeguards against that fee cap being increased, if it had to be increased at all. He suggested that it might never have to be increased. I think that when the Bill is debated in the Lords, Lord Dearing will not only point out that he mentioned variability and did not rule it out, but will say—if he is still of the same mind as when he wrote the article for The Guardian in January—that the proposals are acceptable to him.

Mr. Collins: The Minister will be entitled to say in response to what I am about to say that Universities UK supports the Bill, which is perfectly true. However, I am sure he will be familiar with the speech made by Professor Crewe, in which he points out that the request from Universities UK for the previous spending review was £9.94 billion. He says that Universities UK welcomes the £3.7 billion that the Government provided, but goes on to say that for the next spending review, even after that £3.7 billion, it will still put in a request for a further £8.79 billion for England. Professor Crewe says—he takes four pages to explain it—that £8 billion minus £3.7 billion does not equal a request for £8.79 billion, but that none the less that is what they are asking for. The Minister therefore cannot deduct the £3.79 billion from the £8 billion or £9 billion.

Alan Johnson: The Minister most certainly can. The hon. Gentleman makes a fair point that other people have also made. There is a difference between Universities UK's bid in the spending review, going back to the point made by my hon. Friend the Member for Leeds, East about our trade union days—[Interruption.] I am secretary of its fan club, but there is a difference between the bid that Universities UK makes for the spending review and the funding gap independently identified by JM Consulting on behalf of HEFC, which is not too different from the figures that have been produced elsewhere.

In relation to the point that that would give just £1 billion to universities, we were told in contributions by the hon. Members for Westmorland and Lonsdale and for Harrogate and Knaresborough that we should just hand that money to the universities. However, the figures do not support that. The main cost is fee

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deferral for the current £1,000, and fee deferral for anything above that in relation to variable fees. That comes to around £600 million, and £1.8 billion will come in from these measures.

Another view is that all the money that we are spending in grants and in increasing the threshold should be taken into account. I was surprised that that point was made by the hon. Member for Harrogate and Knaresborough because that would mean there would be no grants, no bursaries, no abolition of up-front fees, no independent source of revenue for universities, and no 25-year cut-off. We should, in any case, be dealing with those issues as a matter of public policy, whatever the issue about fees. The hon. Member for Westmorland and Lonsdale made a genuine point, about the cost of deferred fees. That amount will be far lower than the money that universities will get back in total fees.

Chris Grayling: The Minister is saying that the measures will create an additional £1.8 billion, but that is not correct. According to his own figures, the measures will generate about £900 million, of which approximately £600 million will go on fee remissions, and the additional package of grants and student support, which, as Opposition Members have been arguing, compensates students only for the introduction of fees, will take the cost to well over that £900 million.

Alan Johnson: No, I did not get the figures wrong. The hon. Gentleman is under a misapprehension, as he was with the question of radiographers. The argument made by the hon. Member for Westmorland and Lonsdale was that the money coming to universities from fees should be given to them, because it is exceeded by the total cost of the package. The money that the universities receive from fees is £800 million now, and £1 billion from the increased fees—that is, £1.8 billion. The Opposition, in a situation in which the universities want more money, want to take that money out and not put anything back, whereas at least the Liberal Democrats say how they would put the money back.

Mr. Mudie: I just said quietly to a colleague that I can see why the Post Office lost a lot of money in negotiations with the Minister.

I should like to press the Minister on the figure of £800 million for the present income. The present income for £1,120 is always, in all publications, put at £400 million to £450 million. I asked when I raised the figures if they were net. Is the Minister standing by the figure of £800 million as the income?

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