Appendix: Government response |
The ELQ policy is not about saving money: it is a
re-distribution not a withdrawal. Our ELQ policy is part of our
agenda to unlock talent.
The ELQ policy is a lever to incentivise institutions
to do more to recruit more of those without a higher education
qualification, whatever their age. At the moment, the number of
graduates of all ages and backgrounds we are producing is just
not good enough to meet the challenges of the 21st Century. An
extra 5.5 million people will need to go through university by
2020 if we are to be even on the edge of the premier league for
world-class skills, with at least 40% of the workforce with a
first HE qualification. Countries like the USA and Japan have
already reached that level and they are not going to stop. The
ELQ policy will enable us to support more adults than would otherwise
It is also an intrinsically fairer way to spend the
resources available to Government to fund the costs of teaching
students. We will fund everyone with the ability to benefit from
higher education once, but will only fund those studying for an
equivalent or lower level qualification to one they already hold
when we judge that it is in the national interest to do so. Our
ELQ policy is therefore a balanced one with additional protection
for subjects which are economically and socially important, and
with opportunities for those who wish to retrain through foundation
degrees and employer co-funded provision. Over two thirds of the
current level of grant for ELQ students will continue to be invested
in supporting them in 2010-11. We consulted on questions about
its implementation, and made measured changes to our plans as
As we have said in Parliament, we reject the Committee's
main recommendation that it would have been better to defer implementation
of this decision. Given the scale of the Government's ambitions
and the social and economic background, we need to be bold and
to take managed risks. Over 20,000 first time students would not
be supported without the redistribution of ELQ funding.
We turn now to the report's recommendations.
The Select Committee's recommendations are in bold
The Government's response is in plain text.
In a few cases, some of the recommendations and responses
have been grouped.
1. There can be little doubt that the withdrawal
of HEFCE funding support for the tuition fees charged to ELQ students
will increase substantially the fees such students will have to
pay, if the full cost is passed on to them.
The Government believes that the costs of developing
and expanding higher education need to be shared equitably and
efficiently between Government, students, employers and other
funders. We believe that our proposals for ELQs are right because
they direct Government funding, as it increases significantly
over the CSR period, to students who represent a higher priority
in terms of public policy objectives. Lord Leitch was clear about
the priorities for funding: in broad terms, the higher the qualification,
the greater the level of individual or employer contribution.
However, fees for ELQ students are already unregulated
and therefore subject to market forces. Any institution will need
to think hard about whether to increase fees substantially taking
account both of student demand and the pricing policies of other
competing providers. Some institutions, including the Open University
and Birkbeck College which the Committee specifically mentioned
in its report, have already decided not to increase fees substantially
next year and the extent to which they will be able to do so in
future will depend on what students are prepared to pay.
2. We consider it unacceptable for there to
be no memorandum provided from the Government. We expect government
departments fully to comply with all reasonable requests for written
submissions before they appear before us in future.
We apologise that we did not provide a separate Memorandum,
and we will do so in future.
3. 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.
We welcome the Committee's view that it is for ministers
to decide on funding priorities, and that it could be reasonable
to give priority to students who have not studied for a first
degree. We would go further. We believe that, given that all governments
have to prioritise one way or another it is right in principle
that we prioritise "first time" students over those
who already have higher level qualifications. That is first and
foremost an issue of principle not analysis, although it also
follows from the Government's response to the analysis in Lord
The Funding Council's consultation exercise provided
an opportunity to consider how the Government's core decision
about priorities should be implemented, including identifying
unintended consequences. As a result of this consultation significant
changes to the draft proposals were made: notably a 50% increase
in the additional support that had been proposed for part-time
provision, and the creation of a mechanism to review the position
of subjects that might be affected by the change.
The Government's policy is a balanced one which generally
gives priority for public funding to those studying for a first
degree in the light of the well-documented evidence of the social
and economic benefits of obtaining a higher level qualification.
But we also prepared to give targeted support for graduates to
re-train and re-skill through foundation degrees and employer
co-funded provision, and to protect strategically important subjects
where we judge that it is in the national interest to do so. We
stress again that one way or another, any government has to prioritise
public funding and make a judgement on distributing funds between
4. 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.
7. 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.
8. 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.
We disagree with the test that the Committee seems
to be proposing here and we are surprised by the apparent implication
that there is no-one of working age who would benefit from a university
education who is not currently getting one. If that was the case,
there would be no need for the entire widening participation programme
or the funding we provide for universities for outreach work.
In the Government's view, it is not a matter of "demonstrating"
that unmet demand exists. Rather, the argument is that there is
an overwhelming economic imperative dramatically to increase the
number of adults with a higher level qualification. The Government
is confident that there is unmet demand for the reasons set out
below and we note that the Committee appears in recommendation
20 below to share that confidence.
We are also encouraged by the response we have already
seen, from local communities, to our "new university challenge"
proposals to establish new "university centres" in areas
of the country which are at present poorly served by accessibly
higher education provision. This suggests that many local areas
believe there is unmet demand within their communities, and the
success of new provision such as the Combined Universities in
Cornwall would seem to bear that out.
We are confident that there is unmet demand from
students and employers for 20,000 additional places for the following
of the adult workforce (some twenty million people) do not have
a first degree, of whom six million have A levels or equivalent;
the earnings premium for getting a first
degree is among the highest in the world. The laws of supply and
demand suggest that, other things being equal, that should not
happen if we were already producing enough graduates for our economic
More and more of the jobs to be created
by 2020 will require graduate level skills.
While the number of adults of working
age with a first HE qualification has increased by over 1.5 million
over the last 5 years, only about 30% of adults have them.
In the USA and Japan the proportion is
already at 40% and our international competitors are all bent
on increasing the number of graduates they produce.
The number of older students studying
part-time has increased by 75,000 since we took office
We have foreseen the consequences of our policy and,
in our view, they are wholly acceptable. By contrast, doing nothing
and failing to strengthen the incentives to produce more adults
with higher level skills is more likely over the longer term to
produce unacceptable consequences.
The actual funding outcome is that about £100
million a year in 2010-11 will be redistributed to support over
20,000 full-time equivalent new students whom we could not otherwise
have afforded to support without reducing other budgets either
for institutions or for students. At the same time, over £225
million will continue to be available to support ELQ students
5. 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. 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.
We agree with the Committee that the Leitch Review
of Skills does not address the question of ELQ students directly.
However, its central message and the top priority for the Government
is to increase the number of people progressing from lower to
higher level skills throughout the system.
The redistribution of ELQ funding towards more first
time students does go with the grain of the Leitch Review of Skills
because Leitch recommended that, at level four and above, individuals
and employers should pay the bulk of the additional costs. His
justification was that this was fair, given the benefits for individuals
and employers who gain higher level skills.
Against that background, we cannot accept the Committee's
recommendation as regards the Commission for Employment and Skills,
at least as it stands. It is already the responsibility of HEFCE
to have regard to the financial circumstances of institutions
- although not to shield them from change. HEFCE is carrying out
this role in respect of ELQs through transitional protection for
As a result of the partial redistribution of ELQ
funding, over 20,000 adults who would not otherwise have had an
opportunity will be able to obtain higher level qualifications
and contribute to Lord Leitch's overall objective of progressing
upwards from lower to higher level skills throughout the system.
6. 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
We have consistently made our policy explicit in
our letters to HEFCE about priorities for public funding, our
response to Lord Leitch's report, and most recently our Higher
Level Skills Strategy "Higher Education at Work".
Our policy is balanced. Of the £325 million
or so currently allocated to support ELQ students only about £100
million will be redistributed by 2010. There will still be many
opportunities for people with a first HE qualification who want
to re-skill which will attract public funding such as foundation
degrees, re-training in subjects of strategic importance such
as STEM subjects, progression to higher level postgraduate qualifications
and especially employer co-funded provision. That is the way forward.
We set our ambitions for a step change in employer
co-funded provision in our Higher Education at Work document.
We will encourage employer demand by empowering Sector Skills
Councils. We will ensure there is an effective brokerage service
for higher level skills and that SMEs have access to the management
and leadership support they need. We will encourage employees
by providing the information, advice and guidance on offer through
the new adult advancement and careers service. And we will ensure
relevant and flexible learning is available. HEFCE will test regional
and sectoral approaches to employer co-funding, including a co-purchasing
role for Sector Skills Councils in the expansion of employer co-funded
9. 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.
HEFCE announced that £24 million would be used
to increase and widen participation in 2008/09. That is enough
to fund over 5,000 new "first-time" students in full-time
equivalent terms which could not otherwise be afforded without
making reductions in other HEFCE budgets or reducing in real terms
the overall level of grant per planned student. That needs to
be set in the context of the overall settlement which will allow
HEFCE to allocate a total of over 20,000 additional students.
10. We found no convincing evidence that "perpetual
students" were absorbing public resources or impeding the
access of other students to higher education.
The Government agrees that there is no evidence that
perpetual students are absorbing resources. We have never made
such a claim.
11. 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
We strongly disagree with the Committee on this point.
To delay any decision until the independent review
of the first three years of the new fees arrangements for full
time undergraduates has reported would mean that no change could
be made during the current CSR period, up to and including 2010-11.
Because of the priority we want to give to funding for those without
an existing HE qualification and the huge reservoir of talent
that is not being properly tapped under the current system, we
do not think it could have been right to build in such delay.
Accepting this recommendation would have meant denying over 20,000
first time students the opportunity to benefit from higher education
and putting back by three years our strategy for responding to
the challenges set by Lord Leitch.
12. 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.
We take a strongly consultative approach to policy
making - recently, for example, in our launching of a debate on
the future of HE, our Innovation Nation publication, and
our Higher Level Skills Strategy "Higher Education at
However, it is for government ministers to set the
direction of travel, and strategic priorities. And no consultation
took place about the policy priority before our ELQ discussion
which placed the needs of those doing ELQs ahead of new entrants
13. We saw no convincing evidence that part-time
students would gain from the redistribution of funds away from
ELQ students. We welcome and endorse the priority, and funding,
that the Government has given to part-time students to improve
their skills and we recognise that the Government has made improvements
in support for part-time students. However, overall support for
part-time students remains precarious and we conclude that these
proposals are in danger of undermining improvements and current
The Government welcomes the Committee's acknowledgement
of the support we have provided for part-time students. We have
introduced personal financial support for part-time students in
higher education for the first time, and repeatedly increased
the grant provided to HEIs to support part-time provision.
Our ELQ policy is not about giving priority to part-time
students or full-time students. It is about giving priority to
first-time students, especially the six million adults who do
not currently progress from level 3 qualifications to higher education.
Most of this group are likely to be mature learners from non-traditional
backgrounds who want to study part-time. And, as we say above,
this is part of an overall drive to increase dramatically take
up of higher education by adults in the workplace.
14. The result of the policy may be that, with
an increased reliance on co-funding, employers will have greater
influence over the choice of courses part-time students take.
Those who are self-employed or who work for small or medium sized
businesses will have reduced opportunity of co-funding. We have
therefore concerns that the withdrawal of ELQ funding will remove
the flexibility in the system that allows individuals without
employers' support to acquire new skills to be able to change
employment and meet the needs of a changing economy.
In addition to employer co-funded courses, those
with a first HE qualification will be able to re-train through
foundation degrees, which are employment focussed and developed
with employers or other short cycle courses supported by career
Those who already have a first degree are in general
a better position to help finance their courses than those with
just A levels, because they earn on average well over £100,000
more during a working lifetime than that group. The evidence we
have given the Committee from the labour market shows that there
are two million self-employed workers without a first HE qualification
including 600,000 with A levels or equivalent. They are the priority
group for public funding, and the redistribution of ELQ funding
sharpens the incentives for HE providers to meet their needs.
15. We conclude that the Government needs to publish
its policy as an employer on funding its employees' fees when
they become ELQ students.
We made clear in our response the Leitch report that
in general public as well as private sector employers should contribute
to the cost of higher level qualifications. That includes local
authorities, the police and NHS employers to name but three.
However, we have proposed some limited exceptions
relating to the training of teachers and doctors and a few other
subjects of strategic importance where the Government has a role
as employer. Those apply only to the initial training needed for
such occupations. For continuing professional development at the
level of higher skills, there is a much stronger presumption that
employers should co-fund the costs.
16. We are disappointed that HEFCE appears not
to have pressed the Government to allow it to carry out a full
impact assessment study. We recommend that in future before embarking
on major changes such as the withdrawal of ELQ funding, the Government
ensure that a full sector assessment of the impact of the proposals
is carried out and the results published with consultation exercises.
17. We recommend that HEFCE publish the sector
assessment of the impact of the policy of withdrawing funding
for ELQ fees as soon as possible, in order to facilitate further
analysis where necessary.
We attach an impact statement which brings together
the data which we have already given to the Committee from the
Labour Force Survey on the characteristics in terms of gender,
race, disability and age of those who have not yet acquired a
first higher education qualification as well as those who have.
The latter data shows, among other things, that there are over
twenty million people who do not have a first HE qualification,
half of whom are women, a quarter of whom are over fifty, and
a quarter of whom have a disability. Over two million are from
ethnic minority backgrounds.
We also attach the sector impact assessment which
HEFCE has published.
The concerns that have raised about our ELQ policy,
that it will have undesirable impact on levels of participation
among certain groups, will be allayed by these figures.
That said, it should also be noted that some of these
concerns have missed the point of what we are seeking to achieve.
They have assumed there is an equal value to Government funding
someone for a second or subsequent time in HE compared to funding
them for the first time. We reject this view, which takes no account
of the intrinsically greater fairness of the new funding arrangement.
18. We recommend that HEFCE institute a speedy
appeals system that will allow higher education institutions to
challenge the data about ELQ students on which grant, including
the safety net, is calculated.
We agree with the Committee's recommendation. HEFCE's
approach is set out in its grant letter to institutions which
issued in March. The Council's approach was that in considering
requests for changes, there were two things it needed to consider:
1. Whether the appeal is well-founded/the original
data was wrong.
2. Notwithstanding the above, whether overall the
adjustments that it had calculated for the institution were appropriate.
HEFCE informed institutions that they could make
changes to the data underlying the ELQ adjustment. But the Council
has also said that any such data changes would not automatically
result in a change to the ELQ funding adjustments. Where institutions
wished to see a change in how any individual area of their provision
was treated for the purposes of determining ELQ funding changes,
HEFCE reserved the right to review all the individualised data
submitted by the institution, not just the areas where they wished
to see a change. That could include looking at linked student
or learner records to identify where there was evidence of recent
HE experience for individual students, notwithstanding the entry
qualifications reported by institutions on their HESA student
record. That would enable HEFCE to make a judgment about whether
overall the adjustments for an institution appeared appropriate.
The Government agrees with this approach.
19. The Government needs to explain in detail
how the safety net will work so that institutions can adequately
plan their finances for the period of the transitional arrangements.
In particular, the Government must clarify the points raised by
We have said that no institution will lose grant
for teaching in cash terms between now and 2010 simply as a result
of the ELQ policy, and even in 2010 the redistribution of about
£100 million will represent about 0.5% of the total income
English generate. Within the overall system for distributing HEFCE
grant, the current "tolerance" band means that higher
education providers can plan ahead on the basis of a stable, predictable
system. That said, we will of course address any specific queries
which have been raised.
20. In our view three years is an adequate period
for transitional arrangements and the higher education sector
as a whole could not reasonably expect a longer period. It should
give most higher education institutions enough time to make adjustments
to their courses and to attract first-time students to fill gaps
left by withdrawal of ELQ funding. We recommend that this be the
subject of a short, sharp, interim review by HEFCE, with whatever
recommendations to Government prove necessary.
21. We recognise that additional measures may
be needed to assist those higher education institutions particularly
badly hit by the withdrawal of funding for ELQ students and recommend
that the Government provide for such additional measures.
The Government greatly welcomes and shares the Committee's
confidence that over three years most higher education institutions
will attract first time students to fill gaps left by the redistribution
of funding for ELQ students.
However, as we have already told the Committee, all
we have asked HEFCE to do is to find savings of about £100
million a year by 2010-11. Anything beyond that has to be speculation,
but no-one is going to fall off the edge of a funding cliff either
now or in three years' time. Indeed, the reality is that no strategic
decision has been taken about reallocating further funding after
22. We welcome the immediate review of support
for those studying theology as an ELQ and recommend that the Government
exempt those studying theology as an ELQ from the withdrawal of
In finalising our proposals on ELQs the Committee
will be aware that theology was the only subject where we asked
HEFCE for further advice. That is a mark of the importance the
Government places on the benefits that faith-based leadership
can bring to communities.
We are pleased to inform the Committee that there
has been some constructive discussion with HEFCE about the best
way forward for students training for the ministry who already
have a first higher education qualification and we greatly welcome
the willingness of the Churches to embrace the challenges of our
employer engagement agenda. On that basis, we are, exceptionally,
prepared to look favourably at the possibility of a one year postponement
as regards the withdrawal of funding for ELQ students studying
theology to train for the ministry. No other subject will be treated
in this way.
23. We conclude that the exemptions proposed by
the Government are inconsistent and unsuitable for determining
state support for the fees of ELQ students. We conclude that the
Government ought to have asked HEFCE to design exemptions from
the withdrawal of funding for ELQ students that aligned with the
Leitch review to focus on students and courses likely to provide
the greatest benefit to the economy or to meet skills shortages.
Of the alternatives offered, by Birkbeck College for example,
we conclude that the best case could be made for part-time students
following courses that lead to re-training and hence value to
the economy. Given the proposed policy of the Government, there
is, however, no feasible alternative to the subject-specific basis
The list of exempt and protected subjects flows naturally
from those subjects which the Government has designated as either
eligible for student support, even when studied as a second degree
or as strategically important but vulnerable. They form the natural
We considered carefully whether to make any changes
to the list but decided against doing so because the subjects
which were put forward as candidates for exemption/protection
are relatively popular as first HE qualifications.
More generally, we have already said that it would
be wrong for us to rush into making special arrangements for any
subjects, other than those which had already been identified,
before any changes to ELQs, as requiring support in the public
interest (such as medicine, initial teacher training teaching,
science, technology, engineering and maths subjects, area-based
studies, and modern foreign languages). But we do take the concerns
seriously, and indeed even if the change to ELQ funding rules
were not being made we would want to keep a close eye on how demand
to study key subjects evolves over time.
24. We recommend that the Government in responding
to this Report clarify the effect that the widening of the exemptions
and the provision of additional resources for part-time students
will have on £100 million ear-marked for first-time students
and whether resources will be taken from other parts of the higher
The increase to £30 million in the additional
resources for part-time students is offset by a reduction in the
need for transitional protection and still enables us to redistribute
about £100 million a year by 2010 and so fund 20,000 more
full-time equivalent students than would otherwise be possible
Any further exemptions or even more generous treatment of part-timers
would either have to come from within existing Higher Education
budgets either for providers or for students or mean that we have
to support fewer new entrants to HE.
25. We recommend that the Government bring forward
from December to the summer the first annual review of the exemptions
for the withdrawal of funding for ELQ students, widen the terms
of the review and carry out a full consultation as part of the
review. We further recommend that the Government set out the financial
consequences if the proposed reviews extend any exemptions; in
particular, will there be offsetting withdrawal of exemptions
for other ELQ students?
We cannot accept this recommendation.
We have said that the first such review should take
place starting in December 2008, in the light of entry data for
2008.There would be no data available to underpin any up-to-date
analysis before then, so we have no plans for any earlier reviews
but the December review will be consultative and wide-ranging.
When we conduct the review, we will ask HEFCE to
look at levels of demand for key subjects, and in cases where
there is evidence of a fall in demand to consider:
- the extent to which the subject
has economic or social significance
- the scope to increase demand for that subject
from those without an equivalent or higher level qualification
- whether there is adequate provision of Foundation
Degreesas the hallmark vocational qualificationin
- the scope for labour market demand for graduates
in that discipline to translate into increased employer funding
to support students in that discipline; and only then
- whether there is a case for exempting entrants
to the subject who have an ELQ from the general ELQ funding rule.
In such cases, the Council should also advise on the scope for
removing exempted subjects from the list.
Therefore we could not rule out the option of an
offsetting withdrawal of exemptions for other ELQ students.
26. We recommend that the Government produce as
a matter of urgency comprehensive and clear guidance for higher
education institutions and students to ensure that they understand
and follow the funding rules on fees for ELQ students. The guidance
needs to clarify the responsibilities of higher education institutions,
whether they have a duty of due diligence and who should bear
the financial consequences for an ineligible ELQ student who either
unwittingly or by deception obtains government support for his
or her fees.
We accept the points made by the Committee. HEFCE
wrote to institutions on 15 April with further guidance on this
27. The announcement of the decision in September
2007 to withdraw institutional funding for those studying for
equivalent or lower qualifications has the appearance of a decision
taken in some haste, the full effects of which and consequences
for other policies such as the need for re-skilling have not been
fully examined. The matter would have been better left until the
independent review of variable fees due in 2009. The transitional
arrangements and exemptions, while welcome, are inconsistent and
may well prove inadequate. As the Government has decided to proceed
with the changes to ELQ funding, the first annual review of the
exemptions provides an opportunity for a full review of the scope
and operation of the exemptions. We support the Government's aim
of encouraging more first-time students to enter higher education;
but without due analysis and evidence of the likely effectiveness
and impact of the change, we cannot support the decision to cut
funding to ELQ students in this way.
As we have already said in Parliament, the Government
disagrees with the Committee's judgement on this occasion.
Governments must take difficult decisions, not delay
them. We have done what Governments always have to do either implicitly
or explicitly: prioritised. Our principle is that first-time entrants
should come first.
If we had remitted this to any future review, we
would have abrogated our responsibility to take decisions on public
priorities and to lead the system. It would have meant that we
would either have to deny public support to over 20,000 fewer
new entrants to HE or make cuts in other HE budgets whether they
are for higher education providers or for student support. That
would not be in the best interests of either the country or of
those with the talent to benefit from participating in higher
education but who do not do so.
And unlocking talent is the cornerstone of our policies.