Examination of Witnesses (Questions 40
MONDAY 29 JANUARY 2007
Q40 Mr Marsden: Forgive me for saying
this. I would agree with you on that and I would say actually
that the engagement by regions of universities is stronger in
some parts of the country than others. In my own area of the North
WestI would say that, would I not, as a north-west MP?I
think there is a particularly good engagement. Is not one of the
problems that your current mechanisms for teaching funding slightly
work against the grain in this respect? Let me put an example
to you. You are talking about social exclusion and re-skilling:
what is the incentive for younger academics, people in their thirties,
particularly perhaps in the humanities and the arts, who want
to do things in their universities, want to do outreach stuff
with schools, want to do interesting social exclusion projects?
Apart from people patting them on the head and saying that is
a great thing to do, there is no financial incentive. They are
all being directed lemming-like down the RAE scores, are they
Professor Eastwood: I think that
may well have been a charge that could have been levelled at some
institutions at some point. I think the combination of the changes
that are forthcoming in RAE methodology on the one hand and also
institutions' increasing sensitivity to the variety of their funding
streams means that institutions are starting to change the incentive
structures that they have. So clearly, in the new environment
teaching is in every sense a more valued activity, quite properly,
because teaching is at the core of what universities are about,
but one can see that premium on teaching starting to feed through
in the way that even very research-intensive universities are
prepared to promote now all the way to professor on the basis
of excellence in teaching rather than excellence in research.
I think too there is both within universities and within government
an increasingly strong emphasis on the civic role of universities,
which is being valued in a number of ways. I do not want to sound
complacent because I think there is something in the challenge
that you lay before the sector, but I do detect over the last
couple of years a significant move. You instance young academics;
in young academics I think there is a strong willingness to embrace
the diversity of the challenge or, using older language, the diversity
of the calling of being an academic, where that passion for taking
out your subject, your understanding and indeed, your research
to engage with a variety of communities is something which I think
is driving a number of academics.
Q41 Mr Marsden: You say the Government
increasingly recognizes the civic role of universities but one
of the concerns that is being expressed is the differential that
was indicated in the Secretary of State's grant letter for 2007
between the increase for research and the increase for teaching.
The increase for research was 6.9% and for teaching 4.4%, and
the CMU have quite specifically said that they are concerned about
this and have said that it is going to have a negative effect
on widening participation. What was your reaction to that differential
in terms of the increase between research and teaching? Did it
Professor Eastwood: We were not
surprised, because it came at the end of a Spending Review period
and we knew that the increase in the research allocation was driven
by the 10-year framework and the teaching allocation was driven
by other aspects of the Spending Review 2004. It was absolutely
in line with what we had anticipated. If you couple the increase
which has enabled us to sustain the unit of resource for teaching
on the one hand with the new fee income on the other, what we
are seeing is a pulse of resource into teaching on a scale that
we have not seen for a generation.
Q42 Mr Marsden: So you are not worried
this differential is going to continue and widen?
Professor Eastwood: What I think
we should do in the new funding environment is look at the totality
of resource available for particular activities, whether it be
teaching or whether it be research. For us, the ability to maintain
the unit of resource for teaching was very important and I believe
we will be able to announce next month that we are doing that.
Alongside that, institutions are seeing the benefit of the new
fee regime and sitting behind that is the other side of this funding
equation, which is the student support regime and if you look
at the resource going into student supportnot my responsibility
directlythat represents a very considerable investment
in undergraduate programmes.
Q43 Mr Marsden: That is all well
and good, but the reality is that we know already from what Ministers
have said before this Committee and what has been said elsewhere
that the Comprehensive Spending Review settlement in terms of
DfES this year is likely to be very tight, certainly tighter than
in previous years. The Treasury would not be humansome
people may think not think it is human anywayif it were
not looking at this income stream of extra fees coming in and
thinking "Maybe we can cut back a bit further in terms of
teaching funding." Ministers say they want this holistic
social participation process but it has to be paid for. What are
you going to do as an institution to try and head those Treasury
impulses off at the pass?
Professor Eastwood: If we go back
to Dearing and if we go back to the 2003 White Paper, if we go
back to the rather anguished debate which some of you will remember
in 2004, what was at the heart of all that was trying to find
a way of ensuring that teaching in universities was appropriately
funded. I do not think that the Government went through the difficulties
of 2004 and coming within five votes of something else happening
in order not to sustain a contribution to the appropriate funding
Q44 Mr Marsden: So you are relying
on us lot to do it for you, are you?
Professor Eastwood: We have given
our advice confidentially, as you would expect, to Ministers in
the context of the Spending Review. If you read our documents
and our strategic plan we have been working with government to
continue to grow the sector, to continue to make progress towards
the 50% target and to continue to ensure that teaching is properly
Q45 Chairman: But, Professor Eastwood,
going back to Dearing, when you get to his bullet points he says,
"That future will require higher education in the UK to:
encourage and enable all students [. . .]" and so on, and
then we come down to, "be part of the conscience of a democratic
society, founded on respect for the rights of the individual and
the responsibilities of the individual to society as a whole".
That resonates for us when we are looking at citizenship education.
We have not done enough, I have to confess, on citizenship in
higher education. As my colleague has just been asking you, if
something is not funded it is likely not to be done as well as
it might be. On that theory where are universities and should
there be more funding for aspect of the activity of a university?
Professor Eastwood: We have taken
the view, and successive governments have taken the view, that
universities as mature and substantially autonomous institutions
are best funded by block grant and we expect, and I am sure government
expects, that from that block grant universities will be able
to sustain not simply the core activities of teaching and research
but also those other activities, qualities and values that make
universities what they are. We would not be particularly enthusiastic
for the salami slicing of funding in order to drive certain forms
of behaviour in universities, not least because I would argue
that universities are substantially successful in terms of that
cultural role, that they are substantially successful as places
where culture is going to go.
Q46 Chairman: But, Professor, we
would like to see the evidence for that. Some of us get rather
dispirited when we visit some of our premier universities and
you are walking past the hallowed turf with a master of the college
and you say, "How many graduates here will go into teaching
or public service?", and the master says, "Oh, no, they
all go into the City now". If we are spending a lot of taxpayers'
money, a lot of my constituents' hard-earned money, to fund higher
education, is that what it is all about, that we are just feeding
some of the brightest people in the most competitive universities
to go into the City at high salaries? Are we not feeding them
into public service, into the Civil Service, into running our
hospitals and our universities and our local government? What
on earth are you funding things for if that is all it is about?
If masters of colleges can say to me and to my colleagues that
they all go into the City, what is the point of higher education?
Professor Eastwood: Having taught
in one of those universities that had quadrangles and played croquet,
it certainly was not the case that all of my students went into
the City. They went into a variety of activities, including a
substantial number into public service.
Q47 Chairman: Very few now go into
teaching, Professor. You know the stats as well as I do.
Professor Eastwood: There are
clearly particular issues around teaching which we need to address
and address in an integrated way, and we may or may not come onto
the teaching of particular subjects, and so I freely accept that
there are challenges there. I think the responsibility of a higher
education system and therefore the responsibility of a higher
education funder is to facilitate a range of social and economic
activities, from universities being beacons of liberal democracy
on the one hand through to being places of blue-skies research
on another to being places where individual lives are transformed
through dynamic and stretching teaching.
Q48 Chairman: Professor, that vision
fills me with enthusiasm, but so does "to be part of the
conscience of a democratic society, founded [. . .]" and
so on, and yet so many of the young people that now go to our
universities do not seem to learn anything else but that they
must get out as fast as possible to earn the largest salaries
they possibly can. That means that that job is not being done
well enough, does it not? What is the ethos of living in a civilised
society? Is it only that they should go into the City to earn
as much money as possible?
Professor Eastwood: It clearly
is not, but I do not think that is what I was saying, or indeed,
Chairman, probably what you were saying. It seems to me that the
ethos of a liberal democracy is that a range of graduates will
do a range of things. One of the things that our funding does
not do, except in certain particular cases, is constrain the choices
that graduates make. Clearly there is a whole range of graduates
that come out of universities who are on vocational programmes,
from the medics and the vets through to the social workers, and
who all go into public service.
Chairman: I am just worried, Professor
Eastwood, that my constituents, and I think a lot of people out
there who pay their taxes, sometimes wonder about the priorities
that we have in higher education if we are not providing the teachers,
the public servants and those other people that our country so
desperately needs, but we will move on.
Q49 Stephen Williams: You were asked
initially about the 2009 review, and perhaps I can pick up on
some of the points you made. Has HEFCE actually been commissioned
by the Government to be the leaders of this review in 2009?
Professor Eastwood: To the best
of my knowledge the shape of that review has not yet been determined.
Q50 Stephen Williams: It is at early
Professor Eastwood: Unless somebody
better informed than I tells you otherwise that is my understanding.
Q51 Stephen Williams: Do you anticipate
that your organisation will be the main source of data and evidence
for the Government when they have that review?
Professor Eastwood: As with Dearing
and other major inquiries, we will have a substantial role in
providing evidence and data and we will make sure between now
and that inquiry that we are collecting and processing appropriate
data which will inform that inquiry's considerations.
Q52 Stephen Williams: As I understand
it, if this review is going to be done before the end of 2009,
which is what the Government promised back in 2004, which seems
to be a political timetable more than anything, we will have the
current cohort of students, 2006-07, who have just started off,
and we know that that is a mixed-up group of people because of
distorted behaviour when we were trying to avoid the introduction
of top-up fees, so if we set that cohort aside we will have next
year, 2007-08, and that is all we will have because 2008-09 will
not be ready by the time the Government comes to do the review
if your normal reporting timetable via HESA is followed, so we
will only have one complete cohort of students who will be second-year
undergraduates by the time this review takes place. No-one will
have graduated under the current scheme, there will be no trend
in data. Is that enough evidence on which to base quite a fundamental
review of higher education?
Professor Eastwood: What we will
have is considerable evidence about the trend in applications.
We will have data on admissions, we will have data on the relative
success of different subjects and we will know whether or not
some of the discincentives which critics of the new regime thought
would occur have come to pass. You are quite right that we will
not have, as it were, cohort data on the career choices that the
students going through the new funding regime make, but to get
really hard and serviceable data of that kind we will need to
look quite a long way forward, not just at the first destination,
in other words, but further downstream. Those data in due course
will be important but as a date for the review 2009 was late enough
to allow the new system to start to take shape but early enough
for interventions to be made if the new system was having unanticipated
Q53 Stephen Williams: So would it
be fair to say, given the lack of long term evidence, any decisions
resulting from this review that have long term implications, such
as a large rise in fees or taking the cap off altogether, which
some of the more enthusiastic people in the sector for variable
fees might be advocating by the time we come to that date, that
that would be too much of a risk to take in the absence of sufficient
data to base that decision on?
Professor Eastwood: I do not think
that, as I sit here or as others sit here, we can anticipate what
that review is going to conclude. What I do think though is that
we will have a range of information which will be robust and helpful
and we will certainly know more about the new fee regime in 2009
than we did when the legislation went through in 2004. In other
words, in summary, I think we will be in a position where some
medium range recommendations can be made.
Q54 Stephen Williams: Can I change
topic to HEFCE's role in the financial management of universities?
Obviously, universities are autonomous institutions, they have
their own auditors to appoint and so on to look at how they spend
their money, but once HEFCE decides via this Schleswig-Holstein
Question method of funding teaching that Gordon Marsden has mentioned
what funds go to universities, at that point, if I understand
it, you let go and it is up to universities how they spend the
money. If HEFCE gets a suspicion that certain institutions are
perhaps struggling or not spending funds in the right way, let
us say the University of Whitby, to take an example that does
not exist, what would you do with the University of Whitby or
Lindisfarne if they were in that situation?
Professor Eastwood: It would depend
on what was happening. Probably the most helpful way in which
I can respond is that we have a series of informal engagements
with universities, notably through our regional teams, so we are
well informed about what is going on on the ground, and if through
those informal contacts we had some anxieties we would make appropriate
inquiries. We have a number of formal instruments at our disposal
and they include our own audit process, they include compliance
with our financial memorandum, and they would enable us in
extremis to make certain requirements of the university as
a condition of grant. There are a number of stages where we would
be able to intervene. In practice what we try to do, through a
number of elements in our financial memorandum, is ensure that
university governing bodies reflect on decisions that they are
going to take, that they appropriately manage the risk, that if
they are going to borrow heavily they require HEFCE approval to
do so, and I think it would be reasonable to characterise the
relationships between HEFCE and institutions as strong and open
and mutually supportive.
Q55 Stephen Williams: One of the
outcomes of a market and the variable fee system, if it does develop
after the regime into a fully blown market, is failure, by the
way, so it is not a market. Do you think the sector and HEFCE
as the funding body are prepared for that, that institutions may
well fail if they do not attract the students or set their fees
in the right way?
Professor Eastwood: One of the
things we have been trying to do is ensure that institutions have
appropriate management information to operate in that kind of
environment and that is why we have developed things such as the
transparent methodology for looking at costs of teaching and research,
so we think it is very important that universities first have
the kind of financial management information that they need to
operate in a more marketised environment. Secondly, insofar as
a market is developing, it is different from other markets. We
are not talking about businesses that produce, as it were, a single
product which could go bust overnight as a result of something
that happened somewhere else in the world. Where institutions
need to adapt, need to change, need to refocus, they will have
a period of time to do it just because of the sorts of business
cycles that universities operate on, and we have means of working
with them to enable them to do that, including our Strategic Development
Fund which does enable and is enabling institutions to shift their
priorities in response to new challenges.
Q56 Stephen Williams: We know there
is going to be democratic change in the next decade, the number
of teenagers who will be available to enter university for the
first time is going to fall, so there is going to be a shrinking
number of consumers/customers for higher education, and therefore
the risk of market failure of some institutions that are less
financially well managed must be greater.
Professor Eastwood: As we sit
here now the majority of students are over 21 at the point at
which they enter universities, so there is a danger of over-emphasising
the characteristic, traditional 18-year old student. You are absolutely
right, that the demographic curve for 18-year-olds turns down
after 2010-11 but, as I was saying earlier in response to Mr Chaytor's
questions, there is the Leitch agenda, there is the new skills
agenda and there are other challenges for universities for which
they will need to change and flex on what they do to respond,
but that will mean that in the next decade there is still plenty
of business for universities to do.
Q57 Chairman: Professor Eastwood,
how many institutions cause you sleepless nights? How many higher
education institutions at the moment cause you to think very seriously
about their future?
Professor Eastwood: At the moment
I do not lie awake at night wondering about particular institutions.
I think there are always institutions which are going through
periods of transition, of refocusing and remodelling. There are
always going to be institutions, particularly some of the smaller
and more specialist institutions, which are looking at forms of
strategic alliance, so we will always see that kind of dynamism,
that sort of plasticity, if you like, within the sector, but the
financial health of the sector overall, though it is tight and
this year is particularly tight, is such that it remains a well-managed
sector and I do not think we have particular causes for concern.
Q58 Chairman: Are there any causes
for concern in terms of the over-reliance on a single but volatile
part of the market, such as international students?
Professor Eastwood: If you had
asked that question in 2004 I or my predecessor would have said
yes. I think the shake-out in the international market since 2004
has meant that institutions which were very reliant on international
student recruitment, where they have not been able to recruit
to those numbers, have had to make adjustments. My response to
the greater volatility we see in the international market is to
suggest to institutions that they will need to derive higher margins
from that activity in order to buffer themselves against that
sort of volatility downstream, and I think there is evidence that
universities are beginning to do that though it is not something
you can do easily overnight.
Q59 Mr Pelling: Professor, I mentioned
earlier the kind of diversity that one could aspire to within
the sector, and indeed that was very much what was behind the
Dearing Report, comments like, "It will include institutions
of world renown and it must be a conscious objective of national
policy that the UK should continue to have such institutions.
Other institutions will see their role as supporting regional
or local needs. Some will see themselves as essentially research
oriented; others will be predominantly engaged in teaching."
Based on those recommendations, Sir Howard Newby sought to re-engineer
the HEFCE's funding model "to encourage, rather than discourage,
a greater diversity of mission within the sector". Was Sir
Howard successful in achieving that aim?
Professor Eastwood: We have certainly
seen some refocusing in the last three or four years. That has
been facilitated by our Strategic Development Fund and the way
in which we have made certain interventions through that. It has
also been facilitated by an initiative that Howard took in establishing
Lifelong Learning Networks which enabled, within regions and sub-regions,
HEIs and others to come together. I think the Dearing vision remains
the right vision. As I was saying earlier, I think it is important
that our funding in our steering of the sector gives institutions
the confidence to continue down that road of identifying and pursuing
their own areas of comparative advantage.