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21 Oct 2008 : Column 12WH—continued

Like the hon. Gentleman, I am proud of the achievements of the university sector. As illustrated in the recently published QS world rankings, and as he said, 17 of our institutions were in the top 100 universities around the world. The excellent Reading university—my
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local university—was just outside the top 100. That is pretty good, because more than 9,000 universities around the world are eligible to enter.

Looking at the situation positively, such figures prove that our top universities are globally competitive, in spite of the comparatively lower funding relative to some of our international competitors. It is clear that to maintain our international position the sector will continue to need sustainable funding from a variety of sources and that, in a time of economic downturn, public funding will continue to play an important role.

The Government are obliged by legislation to review the student support regime before the end of 2009. We Conservatives have consistently argued that the earlier that starts, the easier it will be for the sector to prepare the relevant evidence. As my hon. Friend the Member for Havant (Mr. Willetts) recently said, the Government’s approach is to treat the review a bit like the start of one of those bicycle races where the competitors go as slowly as they can. There seems to be an endless stream of preludes to the review, pre-reviews and preparatory investigations. These are all very well, and we will co-operate where we can, but Ministers are moving so slowly that they are in danger of falling off their bicycles.

When the student finance review begins, I hope it will be based on hard evidence rather than on any preconceptions. There are rumours that some institutions are planning for the future on the firm assumption that the tuition fee cap will rise. If enough institutions plan on that basis, so the argument runs, a rise in the cap will become inevitable. My advice is that it would be folly and error to take anything for granted at this stage. The funding regime needs to be genuinely and openly reviewed based on the evidence.

Dr. Gibson: I would like the hon. Gentleman to tell hon. Members what his party’s position is on tuition fees now. I remember that the Conservatives had a strong policy in 2004 against increases in tuition fees. Why have they changed their mind and what happened to change it, if they have done so?

Mr. Wilson: I hope the hon. Gentleman will not mind if I come to that later.

Dr. Gibson: I’ll stay.

Mr. Wilson: Perhaps further interventions will be saved for then.

Speculation in the sector remains rife, with a recent Higher Education Policy Institute report addressing some of the implications of a rise in the fee cap. That report concluded that allowing fees to rise would be expensive for the Government if they kept to the current system of student support. HEPI proposes several options: charging a higher rate of interest, subsidising only part of the loan or cutting back on grants in the expectation that universities will use their higher income to offer bigger bursaries. None of those options is without controversy, but all require careful deliberation and I am sure that the Government will include them in their forthcoming review. HEPI is just one of the organisations that have expressed a view, but I am keen to stress that we Conservatives will approach the review in an open-minded way, although our full reaction will be reserved until we know more about its terms of reference.

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If possible, today would be a useful time for the Government to provide more clarity on time scales for the review and more information on who will be leading it. All the questions that my hon. Friend the Member for North-East Milton Keynes (Mr. Lancaster) asked in his eloquent speech—

David Taylor: Further to the question asked by my hon. Friend the Member for Norwich, North (Dr. Gibson), it would be helpful and interesting for the wider public watching and reading this debate to know whether the Conservative party is still of the view that the number of places in higher education needs to be reduced significantly. Where does the hon. Gentleman think that the impact of those cuts would fall? Would it fall mainly on the least well off and those who have, traditionally, not been able to get into higher education?

Mr. Wilson: For the benefit of both members of the watching public, we have no intention of cutting the number of places. In fact, as the hon. Gentleman will see in a few minutes, we intend to increase the number of places available for students at universities.

While we recognise that university is not for everyone, we want a further expansion of the sector. The sector has experienced unprecedented growth over the last 20 years, but we will go further. It is imperative that our universities continue to generate increasing numbers of skilled graduates to meet the needs of a globally competitive economy. The UK lags behind some of its competitors—for example, the United States—and we must be concerned about the extent to which we are falling down the OECD league for the number of young people going to university.

It is important to remember that any expansion must be properly funded. The student support regime has problems, and hon. Members have referred to many of them, including low take-up of bursaries. It is only right that graduates should pay something towards the cost of their studies, even if the mechanism and the level of repayment will always be a matter for genuine debate.

Without prejudging the outcome of next year’s review, it is clear that several areas will need special attention. One of the most important is the relationship between student support and widening participation. Despite bold rhetoric, the Government’s record on widening participation leaves much to be desired. Our young men in particular are missing the boat, and the proportion of young males going to university is lower than it was in 1999. The latest figures show that in 2006-07, the proportion of males participating in higher education for the first time was just 34 per cent.

People in lower socio-economic groups are also under-represented, and elements of the funding regime, such as the bureaucratic application process for bursaries, have done little to help. In the months ahead, we will carefully examine the financial and non-financial barriers to higher education for our under-represented groups.

We must also consider whether we have the right balance of support between full-time and part-time learners. It is a great shame, as my hon. Friend said, that £100 million was cut from second-chance learning without consultation with the sector. Some of the country’s best
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institutions, which have done a great deal to broaden access, are seeing their finances severely strained as a result.

As my hon. Friend also said, the unintended consequences of the equivalent or lower qualifications policy could be with us for a long time. That is why Conservatives called for the £100 million funding cut to be postponed and reconsidered as part of the larger fees review. My hon. Friend made some important observations about the credit transfer system, and all parties would do well to consider that carefully.

The hon. Member for Derby, North (Mr. Laxton) spoke proudly about his local university. He is right to be proud, and to fight on its behalf for research funding. Derby has a growing reputation for its work in flexible learning, offering modes of learning that suit students rather than the university.

We are considering other ways of channelling funding into our universities. The recent revelation that Harvard’s endowment fund is greater than the total annual public funding for all universities in England has highlighted the fact that we need to encourage a culture of greater philanthropic giving. Only five of our universities have endowments worth at least £100 million, compared with 207 in the US. A report entitled “The Future of Higher Education”, produced by the Select Committee on Education and Skills, of which I was a member, recommended that the Government explore ways to encourage a more substantial contribution from business and individuals through the taxation system. In the US, people think nothing of giving to their university, and it is regarded by many as a way to give something back for the opportunities that higher education gave them.

Here in the UK, the Sutton Trust has led calls for increased match funding initiatives, and its 2006 report argued for an annual fund of more than £120 million. The Government’s response announced a three-year programme with an annual £67 million fund for match funding, which was implemented last summer. We support that initiative, and although such matching schemes have a public expenditure cost, we believe that we could make it easier for British universities to raise more money without relying on Government handouts.

We also believe that increased business collaboration should be encouraged. Many universities are now actively engaged in their local communities, but we must go further in encouraging true knowledge transfer between business and universities. The Government tend to believe that knowledge transfer is solely about spinning out companies from research. I do not dissent from the view that that is part of the picture, but universities may boost the economy in many other ways.

Many small and medium-sized enterprises are unaware of the value of their local university, and its research capability and cost-effective assistance. Real collaboration would occur if investing businesses had a greater say in the course content at their chosen universities, and universities could in turn use their private investment to best advantage.

I would like to congratulate Liverpool John Moores university on being the first ever university to reach the high level required to achieve an award for European business excellence under the European Foundation for
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Quality Management’s excellence model framework. I am due to visit its campus in the coming weeks, and I hope to learn more about that supranational achievement.

I would welcome a move to give universities increased opportunity to emerge with a different leadership role: economic leadership in their local community. In the US, community colleges, which are widely regarded as part of the higher education sector, receive upwards of 20 per cent. of their income from local business agreements. Local businesses could use their local institutions to train their local staff.

Increased business collaboration could not only be a much-welcomed additional source of funding for universities, but bring with it an increased sense of responsibility in the problem-sharing of their region. However, increased business collaboration does not mean that we should not recognise the value of learning for its own sake. It is important to emphasise that we are not opposed to the learning of mediaeval history or theology, for example, and indeed we advocate all sorts of learning.

The past 11 years of Labour government have shown us that the university sector is in need of a fresh approach. Conservatives are committed to supporting our excellent universities in the challenges that they are set to face. Many parts of our university sector are world class, and we shall do everything we can to keep them that way.

10.26 am

The Minister of State, Department for Innovation, Universities and Skills (Mr. David Lammy): I start by congratulating my hon. Friend the Member for Sittingbourne and Sheppey (Derek Wyatt) on securing the debate. It has given us a timely opportunity to discuss an important topic that is always of major concern to hon. Members throughout the House.

I thank my hon. Friend the Member for North-West Leicestershire (David Taylor), the hon. Member for North-East Milton Keynes (Mr. Lancaster), my hon. Friends the Members for Norwich, North (Dr. Gibson) and for Derby, North (Mr. Laxton), and the hon. Members for Reading, East (Mr. Wilson) and for Bristol, West (Stephen Williams) for their contributions.

When we took office, universities were complaining about the funding that they received, and with good reason. Public funding per student had fallen by 36 per cent. between 1979 and 1997, and there was real concern in the sector about the health of higher education in this country, what it is for, and who it is for. Against that backdrop, this debate is so important.

Since then, funding for higher education has risen in real terms by 24 per cent. By 2010, it will have increased by more than 30 per cent., and that does not include the money available through the science budget, which will have trebled from £1.3 billion in 1997 to £4 billion by 2010. That means that we have been able to maintain funding per student in real terms over a decade during which student numbers have increased by nearly 1 million to 2 million in England. It means that we have been able to tackle the chronic £8 billion backlog of under-investment in infrastructure that existed in 1997, and it means that we have been able to sustain a world-class higher education system that punches above its weight in research reputation, demand from international students and our position in international league tables.

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Any discussion about the future funding of higher education must start with an understanding of the system’s diversity, which is one of its strengths. Institutions range in size from the Open university, which the hon. Member for North-East Milton Keynes mentioned, with more than 200,000 students and distance learners, to small colleges of further education catering for a few hundred students who wish to progress from further to higher education, and value the opportunity to study locally.

Higher education providers also vary in mission. When debating this subject, it is important to emphasise the autonomy of our universities and the broad mission that can range across them: some universities are research intensive; some concentrate on excellence in teaching and widening participation; and some are remodelling what they do to engage with business. Let me say clearly that we value them all and want to recognise excellence wherever it is found and whatever the different mission of different providers is. However, the mission and the size of institutions vary, and so do the funding streams.

It is also important that I describe the national position.

Mr. Lancaster: If the Minister values all students equally, why did the Government cut £100 million from equivalent or lower qualifications?

Mr. Lammy: I will come on to discussing part-time education and ELQs shortly.

Given the contribution of my hon. Friend the Member for Sittingbourne and Sheppey—I understand the nature of his remarks—it is important to say that we are second only to the United States in these league tables. The Shanghai league table measures only research excellence and has been criticised for measuring inputs, not outputs. Our market share of overseas students is second only to that of the US.

We have a world-class research base and our science is the most productive and efficient in the G8. I think that the following point was made by my hon. Friend the Member for North-West Leicestershire: it is important to recognise that although we have 1 per cent. of the world’s population, we carry out 4.5 per cent. of the world’s research and can claim 8 per cent. of scientific publications. Against that backdrop, we can be proud of our universities’ contribution.

Dr. Gibson: Just for accuracy, we should point out that much of the research is done by high-class institutes that might or might not have an affiliation to a university. The Government have been trying to obtain those affiliations because if there is an association, some of the papers done in those pure environments count. I remember using John Innes papers to help my department to receive an increase in its grade from a five. We must point out that there is a combination of factors to consider and that the research structure is pretty good, which can also lead to Nobel prizes.

Mr. Lammy: My hon. Friend is exactly right and, in a sense, that underlines the point that knowledge transfer between research and business continues to grow. Since 2003, 30 university spin-out companies have been floated on the stock exchange at a value of £1.5 billion at the initial public offering. University income from business and user engagement has risen rapidly and stands at
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£2.2 billion per annum. It is important to continue to argue the case for both fundamental and applied research. However, the cornerstone of our success is the quality of our fundamental research and the Government are, of course, always interested in how that research is exploited in going forward.

Last week, I responded to a debate in the House initiated by my hon. Friend the Member for Sunderland, South (Mr. Mullin) about the research assessment exercise. I recognise what hon. Members who represent universities have to say, particularly about local and regional business engagement. I hope that hon. Members are aware that there have been changes to that new exercise, although I am waiting to hear what the Higher Education Funding Council for England will say to me in December. There is recognition of the importance of applied research within the new formula.

On returning to the national position, English institutions generate about £17.5 billion each year. More than half of that comes from the Government via HEFCE and the research councils, which decide how individual institutions should be funded. About a quarter of that figure comes from all forms of tuition fees, but only about 10 per cent. comes from the fees that we regulate: those for UK and EU full-time undergraduates. At some of our more research-intensive universities, that figure is closer to 2 or 3 per cent. So, the forthcoming fee review, about which I shall say more later, is absolutely not the be-all and end-all of funding for higher education. About 2 per cent. of income comes from endowments, and the remaining £3 billion comes from other funding sources—everything from training contracts for employers to intellectual property rights and the income from conferences and lettings.

That is the national position. Let us now consider the range of funding for different higher education providers. The biggest fish in the higher education pond operate on budgets of nearly £1 billion; the smallest have budgets of about £5 million. Some institutions rely on their HEFCE grant for nearly 80 per cent. of their total income, and for others that figure is under 10 per cent.

Tuition fee income as a proportion of total income varies in different institutions—from virtually nothing to more than 70 per cent. The institutions at those extremes are, of course, specialist institutions rather than universities. However, their position should not be overlooked if we want to continue with that diverse system.

Why do we want diversity of funding? There are two reasons. First, it encourages each provider to identify and play to its strengths. Secondly, in these uncertain economic times, it helps providers to remain competitive. Happily, universities in this country are well run, but we live in challenging times. We cannot say exactly what economic conditions there will be during the next period, so in looking forward, it would at least be prudent for universities not to count on having the substantial increases in public funding that they have had in the recent past. A sensible strategy is for universities to continue to look for different ways to generate income. I want to mention some of the things that we are doing to encourage universities and higher education providers to do that.

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