House of Commons - Innovation, Universities and Skills

Select Committee on Innovation, Universities and Skills Third Report

2 Policy on public funding for ELQs

10. Support from public funds for ELQ students has been circumscribed for some time and has become increasingly restricted, with students who have previously received assistance from public funds subject to regulations to decide whether they were eligible for further assistance. Currently students who already have a degree from a UK institution are not eligible for support—such as access to student loans—to meet the tuition fees charged by institutions, unless they are studying for a postgraduate course in teacher training or taking certain two year courses such as foundation degrees. Loans to assist with living costs are only available for ELQ students studying designated courses such as social work, initial teacher training or medicine.[13] The rationale behind these rules—as the Secretary of State's letter of 7 September makes clear—is that the priority of the Government is to give all students the chance to do a first degree and that funding is therefore limited for students doing second degrees. The arrangements in place, before the changes announced in September 2007, therefore already affect ELQ students disadvantageously as they are not able to obtain the funding that first-time students can access (although, of course, they have previously benefited from such assistance).

11. Some of those who gave oral evidence[14] took the view that on principle a student with a current level 4 qualification[15] who wished to study for another qualification should be funded on the same basis as a first-time student. Public expenditure is limited and we cannot therefore share this view. We accept that it is for ministers to decide priorities for funding and that it could be reasonable that public policy should give priority to students who have not studied for a first degree. This does require, however, a full rationale for, and justification of, the policy, scoping of its effects and a proper examination of possible unintended consequences, such as reducing the potential of adult learners to retrain and re-skill, which Leitch and others have argued is so vital, both on economic and social grounds.

12. Where resources are switched in line with those priorities, it is the responsibility of ministers also to demonstrate that there is unmet demand and that the reallocation will produce outcomes in line with the Government's policy and without unforeseen or unacceptable consequences.

Justification for the policy

13. We asked the Minister why the Government had decided to withdraw funding support for the fees of ELQ students. The Minister gave two reasons.

a) The withdrawal was in line with recommendations of the Leitch Review of Skills.[16]

b) The withdrawal of funding for ELQ students would provide resources for 20,000 first-time students.[17]

14. He explained that it followed from the analysis in the Leitch Review of Skills that in order "to be internationally competitive, we need to move from today with 29% of adults educated to Level 4[18] to at least 40% by 2020".[19] The Minister continued that the whole thrust of Leitch's analysis was:

the higher you regard the qualification chain, the more you have to pursue an approach of co-financing where […] the State makes a contribution, but the individual and the employer make a contribution. We looked at the evidence and the fact is that there are 20 million adults within the workforce who are not yet at first degree level. Six million of those actually have A Level-equivalent qualifications and yet have not gone on to degree level, so we took the view that we wanted some further levers within the system to enable, and to ensure, that universities prioritised the recruitment of those students within the workforce who are not yet at first-degree level. In addition to that, within the [Comprehensive Spending Review] process, we had set ourselves a number of objectives. We wanted to maintain the unit of resource, we wanted to maintain, and improve, the student financial support package, we wanted to increase growth in student numbers and we wanted to improve the research base further. Given that policy impetus, but alongside it, the need to maximise our opportunities for growth, we took the decision that the best way to achieve that was to redirect that £100 million [from institutional support for fees paid by ELQ students].[20]

THE LEITCH REVIEW

15. Those who objected to the withdrawal of funding from ELQ students argued that it contradicted the conclusions in the Leitch Review supporting skills and lifelong learning and its pronouncements about nurturing talents.[21] UCU argued that the Government's policy on ELQs would "undermine, rather than bolster, the Leitch agenda and government objectives to raise higher level skills and widen participation".[22] UCU explained:

It is difficult to reconcile the ELQ funding withdrawal with Lord Leitch's call "to increase the higher education sector's focus on workforce development" and to encourage [higher education institutions] "to collaborate with employers in delivering training that meet employers' needs". This is because many of the threatened ELQ programmes focus on national and regional priorities for retraining and up-skilling adults. Coventry University, for example, is very concerned about the "negative impact on courses in management" especially as "improved management competence" is the "top priority for the Regional Skills Partnership under the [Regional Development Agenda]". Similarly, cultural regeneration has been vital to the revival of the North East economy and yet the ELQ cuts threaten Sunderland University's lifelong learning programmes with more than 40 cultural partners.[23]

Birkbeck College said that the ELQ changes would hit part-time students especially hard and would be in contradiction of the Government's stated policy.[24] Professor Latchman explained that the Secretary of State in his speech to Universities UK on 13 September 2007 had called for universities to introduce more evening courses to allow mature adults in employment to study part-time, arguing that "only in this way can the Leitch target be achieved in a situation where 70% of the 2020 workforce has already left full time education".[25] He said that the ELQ proposals would significantly impact on the institutions best able to deliver government policy and discourage other institutions from enhancing their part-time provision.[26]

16. With both sides in the argument claiming the Leitch Review supported their case, we wrote to Lord Leitch to ask for his view on the withdrawal of funding from ELQ students. He replied:

I set out clearly in my Review's recommendations that the UK urgently needs to increase the investment and achievement in HE Skills.

Higher level skills are critical to the future of the UK economy. We need to increase the number of people gaining these skills and effectively support people to retrain and learn flexibly, including alongside work. We need to increase investment in HE across the board: from employers, individuals and the Government.

Clearly, public funds are limited and we must prioritise investment. But any changes in funding streams and mechanisms must be effectively managed so that the excellent work that institutions such as the Open University do is not undermined.

I did not define any approach on ELQs as I believed that this was more of a tactical, implementation issue. […] I recommended the creation of the Commission of Employment and Skills to oversee such issues.[27]

17. In our view, there is little evidence that withdrawing state funding for students taking ELQs in itself goes either with or against the grain of the recommendation in the Leitch Review of Skills to provide professional development with up-skilling and re-skilling as priorities. Furthermore, Leitch does not impel the Government to withdraw funding for ELQs nor require it to be maintained. Nevertheless the imposition of a blanket withdrawal of support makes no attempt to discriminate between the different reasons for which people may be seeking an additional matriculation. It is a blunt instrument which threatens the viability of certain higher education institutions. We recommend that the Commission for Employment and Skills undertake a review of the effects of the withdrawal of institutional funding on ELQ students and the institutions which principally educate them.

18. The representations we received about the Leitch Review saw ELQ support as integral to Leitch's objectives of encouraging lifelong learning, acquiring new skills and professional development. We recommend that the Government make explicit its policy to assist people looking to re-skill and obtain professional or technical development and that this must be done in time to contribute to the major review of fees policy and other higher education strategies which Government intends to undertake in 2009.

20,000 FIRST-TIME STUDENTS

19. The Government's main justification for its policy to switch £100 million from institutional support for ELQ students was that the resources will fund 20,000 extra first-time students.[28] This is part of the 50,000 additional students announced in the Comprehensive Spending Review.[29] The Secretary of State has set as a priority increasing the number of students in higher education.[30] The Minister explained that the status quo would not deliver the Government's policy to expand the numbers qualified to level 4;[31] a policy in line with Leitch and which has broad acceptance.[32] The Minister argued that the provision of financial support for ELQ students excluded first-time students.[33]

20. The Government's approach would be substantiated if demand for level 4 qualifications from potential first-time students could be demonstrated. But the higher education sector doubted that there was the potential demand. Professor Latchman from Birkbeck College considered that there "is no evidence of huge demand" for extra places from first-time students.[34] Ms Tumelty, National President, NUS, saw no evidence that people who did not have degrees were being pushed out by people who did or that demand was unmet.[35] Professor Gourley from the OU added:

The Open University does an enormous amount of marketing, […] it has all sorts of outreach programmes to get students in, it is one of our core missions getting people into higher education that would not have seen themselves as higher education candidates. At the moment we have no unmet demand at all; we are taking all the students who apply to us.[36]

21. The Minister pointed to the 100,000 students who applied to universities last year and did not gain places as proof of unmet demand.[37] We asked him to indicate whether, and how many of, those who were suitably qualified for the courses for which they applied did not go to university.[38] In response, in a subsequent memorandum the Minister said:

The issue of the "missing 100,000" has been raised with Government and other stakeholders as a matter of concern by UCAS[39]. Their report "Missed Opportunities? Non-Placed Applicants (NPAs) in the UCAS Data" was published in December. It notes that there are a number of reasons why applicants are not accepted onto courses. We cannot quite answer the exact question you posed. However, the proportion of applicants with fewer than 80 tariff points, often seen as the minimum needed to enter HE is relatively small across all categories of Non-Placed Applicants—10% or less. But we do not have more detailed data on the levels of qualifications within this group, adjusting for subject, institution etc. to get below this level of analysis. We are currently considering with UCAS what further research we can do to understand the group better and building on that what we can do to decrease the propensity of applicants not to follow through.[40]

22. The Government's case was also that increasing supply in itself stimulated demand. The Minister pointed out that there were 300,000 more students in higher education today than ten years ago. This had been achieved in the face of criticism that the higher education system had reached its capacity and doubts about the demand for places. The Minister said that "at every stage the system, responding to the funding steers from government, has actually managed to significantly expand the higher-education system".[41]

23. In our view the Government has not shown convincing evidence that the withdrawal of funding for ELQ students and the phased re-allocation of the resources will meet its policy objective to encourage more suitably qualified individuals to start higher education for the first-time. In the absence of research on, or any analysis of, the groups to whom the redirected resources are targeted, we cannot see how the Government is certain that the funds taken from ELQ fees will meet their intended purpose efficiently or effectively. While we recognise that the expansion of the higher education sector has occurred in the teeth of substantial scepticism about the demand for, and value of, extra university places, we could find no convincing evidence that ELQ students were preventing access for first-time undergraduates or that there was a significant unmet demand from first-time undergraduates, though we accept that such evidence is not easy to collate.

24. We conclude that the Government should have carried out a full analysis of unmet demand, including the annual 100,000 individuals who apply but do not enter higher education and of their reasons for not starting higher education, before it switched resources away from ELQ students.

25. On 25 January 2008, after we had taken oral evidence, HEFCE announced funding for higher education institutions in 2008-09. It noted that existing commitments for growth in student numbers in the 2008-09 academic year amounted to approximately 26,000 full-time equivalent students (FTEs).[42] In a supplementary memorandum Professor Latchman from Birkbeck College pointed out that HEFCE announcement showed no additional new places available for 2008-09 in the aftermath of the ELQ decision.[43] In addition, the ELQ places which would be lost in 2008-09 and the consequent £20 million saving in the first year of the ELQ scheme, to which the Minister referred to in his evidence,[44] were not being used to produce additional numbers for 2008-09. Instead, the money was being used to fulfil existing commitments or possibly to make a saving.[45] In their response to this report, we ask DIUS to explain what has happened to the £20 million the Minister said would be redistributed in 2008-09. We question the Government's case that switching funding from ELQ students would increase opportunities for first-time graduates, in the apparent absence of newly funded extra places for first-time undergraduates in the first year of the scheme. We ask the Government to explain the rationale linking funding and places.

"PERPETUAL STUDENTS"

26. We considered whether the decision to withdraw ELQ funding should be construed as directed at students who took one course after another rather than starting employment—so-called "perpetual students". While accepting that there might have been "perpetual students" when education was free to students and grants were widely available, the NUS pointed out that this situation has changed now that students had to pay top-up fees and repay loans.[46] The OU added that, before the September 2007 announcement, ELQ students already did not get funded in the same manner as first-time students and that a survey of its ELQ students showed that 75% were studying for vocational reasons and only 8% for personal enrichment.[47] We found no convincing evidence that "perpetual students" were absorbing public resources or impeding the access of other students to higher education.

Timing of the change

27. There are questions too over the timing of the change in policy and the speed of implementation. There will be an independent review in 2009, working with the Office for Fair Access, to report to Parliament on all aspects of the new variable fees and student funding arrangements based on the first three years operation of the policy.[48] The NUS and UCU argued that:

It seems […] putting the cart before the horse to unilaterally withdraw funding from one particular group of students as we run up into that review. […] if we are going to have this question around whether we should fund second degree or second chance learners at all, it should be deferred to the 2009 review when we can look at how the whole sector is funded, and what support we give to individual groups of students.[49]

28. The Minister confirmed the scope of the 2009 Commission but was concerned that it was unlikely to report until the middle or end of 2009.[50] He argued that, if the change were delayed until then, "that would effectively mean that we have agreed here and now that we are going to make none of these changes during the whole of this [Comprehensive Spending Review] period [ending in 2010/11]. Given the Leitch skills imperative, I believe that would be the wrong thing to do."[51] We welcome the Government's focus on the improvement of skills impelled by the Leitch Review, although, as we discuss above, the Leitch Review does not offer clear support for the Government's policy. The Minister's reference to the Comprehensive Spending Review may be more telling. We note that the DIUS 2007 CSR settlement provides 2.2 per cent annual average real growth in expenditure over the CSR07 period, from £18 billion in 2007-08 to £20.8 billion in 2010-11. Amongst other matters

this will ensure that […] by 2010-11 reprioritising about £100 million a year of HE funding to increase and widen participation, by focusing public funding mainly on students participating in the system for the first time.[52]

The Minister confirmed that the withdrawal of ELQ funding was the direct product of the Comprehensive Spending Review.[53]

29. The long-planned independent review of the operation of variable fees in 2009 will provide a suitable opportunity for a comprehensive and coherent review of all tuition fees and their impact on students and on higher education institutions. The Government's decision to start the withdrawal of funding for ELQ students' fees in 2008-09 ahead of the 2009 review can only be justified if there is a pressing reason for urgency in the matter. We see no evidence that there is a pressing reason to make the changes to ELQ funding in 2008-09 and believe that the Government should have waited for the 2009 review of fees, which would have been able to weigh funding of ELQs against other priorities.

Consultation on policy

30. Our final concern on the decision process is over consultation. We note that following the Secretary of State's letter of 7 September 2007, HEFCE published a consultation document, Withdrawal of funding for equivalent or lower qualifications (ELQs),[54] which included details of exemptions and transitional arrangements. In November, HEFCE held consultation events in Manchester, Birmingham and London to discuss the proposals. In the "admin message" issued in January 2008 following the consultation, the Board of HEFCE noted that, while significant concern had been raised about the ELQ policy, the majority of respondents to the consultation agreed with HEFCE's proposals for implementation. It therefore endorsed the proposals for implementing the ELQ policy as described in the consultation document, subject to some changes to the exemptions and transitional arrangements.[55]

31. In contrast, there has been no consultation at all on the policy decision itself. Prior to its instruction to HEFCE, the Government carried out no public consultation with higher education institutions or with representatives of students, employers or professional bodies. We asked the Minister why he did not consult on the principles before embarking on the ELQ changes. He replied:

Let me turn that round. Where was the consultation that the interests of eight million graduates should be put ahead of the 20 million people in the workforce who do not have degree-level qualifications? In terms of the priorities that we set out within the HEFCE grant letter, that has always been a matter for the Government and ministers to give those steers. What we have done, however, additionally to that is, rightly, consulted on the detailed implementation.[56]

32. Commenting on the consultation, Professor Latchman from Birkbeck College said:

We have not had consultation about what other possible sources of this hundred million pounds there are, we have not had clear evidence of student demand, and most importantly […] we have not had proper resourcing of the part time sector and the students who want to study part time in terms of grants so that we can achieve these hard to reach students.[57]

Many other concerns were raised in submissions to this inquiry which went far beyond the relatively limited adjustments the Government was prepared to make to the implementation arrangements. The Government can, of course, announce its priorities for funding without consultation but, where it does, it runs the risk of failing to test its proposals with debate, of unforeseen consequences and of alienating those who have to implement its changed priorities. Consultation would have allowed the assumptions underpinning the switch of funding and the full consequences of the policy to have been examined and the adequacy of the transitional arrangements and exemptions to have been tested. The Committee accepts that the consultation on the implementation was open and that as a result DIUS and HEFCE have made some changes to the original package. We conclude, however, that DIUS should have carried out public consultation about the principle, merits and consequences of the policy rather than exclusively on the implementation of the package.

13 Education (Student Support) Regulations 2007 (SI 2007/176) and the Student Fees (Qualifying Courses and Persons) (England) Regulations 2007 (SI 2007/778). See also below, para 64. Back

14 Qq 21-22 Back

15 That is bachelor's degree, graduate certificate and diploma. Back

16 HM Treasury, Leitch Review of Skills: Prosperity for all in the global economy - world class skills, December 2006 Back

17 HC Deb, 10 December 2007, col 67W; Q 78 Back

18 That is bachelor's degree, graduate certificate and diploma. Back

19 Q 66 Back

The costs of raised ambitions must be shared between government, employers and individuals. Government investment in skills should be focused on ensuring everyone has the opportunity to build a basic platform of skills, tackling market failures and targeting help where it is needed most. There are key market failures at all skill levels, but these impact most at the bottom end. The Review recommends a much clearer financial balance of responsibility, based on clear principles of Government funding to be targeted at market failure and responsibility shared according to economic benefit. To meet additional investment this means:

the Government should provide the bulk of funding for basic skills and the platform of skills for employability, with employers cooperating to ensure employees are able to achieve these skills;

for higher intermediate skills (Level 3) employers and individuals should make a much higher contribution, in the order of at least 50%; and

at Level 4 and above, individuals and employers should pay the bulk of the additional costs as they will benefit most. Back

21 See Ev 23, para 1(b), Ev 37-38, paras 22-27, Ev 41 [Birkbeck College], paras 10 and 18, Ev 43 [UCU], para 32. Back