Select Committee on Education and Skills Minutes of Evidence

Examination of Witnesses (Questions 40 - 59)



  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 West—I 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 not?

  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 concern you?

  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 support—not my responsibility directly—that 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 human—some people may think not think it is human anyway—if 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 of teaching.

  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 funded.

  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 stages then?

  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 consequences.

  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.

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