Examination of Witnesses (Questions 20-39)
DEPARTMENT FOR
INNOVATION, UNIVERSITIES
AND SKILLS
& HIGHER EDUCATION
FUNDING COUNCIL
FOR ENGLAND
29 OCTOBER 2007
Q20 Mr Bacon: To start with, I declare
that I interviewed Ruth Thompson 15 years ago, when she was a
Treasury official and I was a financial markets journalist. I
must say that she was very helpful at that time, and hopefully
she will be as helpful this afternoon. Furthermore, I have met
Professor Eastwood on a number of occasions, because he used to
be the Vice-Chancellor of the University of East Anglia, which
had its official residency in my constituency.
With that, may I ask the National Audit Office
a question about figure 29 on page 40 of the Report? I see that
the University of Chester and the University of Bolton had the
lowest continuation rates in 2004-05. Angela Hands, which was
the third lowest?
Angela Hands: Rather.
Q21 Mr Bacon: Right, I shall ask
you a different question. St. George's Hospital medical school
and the University of Oxford are the two highest, but which was
the third highest?
Angela Hands: I am sorry, but
I do not have that information to hand.
Q22 Mr Bacon: I am vexed to see that
King's College London, which we like to call "Strand Poly",
is slightly ahead of the London School of Economics—I am
sure that Sir John is just as vexed as I am—and that the
University of Nottingham is ahead of both of those. My point is
that you cannot tell that just by glancing at the chart. I am
sure that it would be just a question of a quick shuffle of the
spreadsheet, but is it possible that we could have it sent to
us ranked by continuation rates in 2004-05?
Angela Hands: So you want it as
a league table target chart?[2]
Q23 Mr Bacon: You used the phrase
"league table"; I did not. I said ranked by continuation
rates in 2004-05, so that we can see the top and bottom of what
you chose to call a league table. What is the methodology used
for the benchmarks? That is discussed in paragraph 1.19, but I
am reminded of the report that the NAO did on student achievement,
which had a chart at the back that seemed to say: "If Pakistani,
add minus two, if Bangladeshi, add 0.03 and divide by the number
that you first thought of"—I am not kidding. It is
plain that there will be a lot of different factors that contribute
to continuation rates. You list them in paragraph 1.20 as: "recruit
more students from neighbourhoods with higher rates of participation
in higher education; ... admit students with higher pre-entry
qualifications; ... have a smaller proportion of their intake
aged 21 or over; ... and offer particular subjects"—such
as medicine and dentistry, which have high rates. I am suspicious
of being able to reduce all of those things to one number that
is always going to be meaningful. Will you briefly explain how
you get to your benchmark number, which has the effect of making
this chart nearly impossible to read?
Angela Hands: The benchmarks are
indicators; they are not absolute, precise numbers. They are based
on historical data and so will change from year to year as those
data are updated. In this particular case, they are the Higher
Education Funding Council benchmarks and not ours.
Q24 Mr Bacon: It would be very helpful
if you could send us a note on it. Plainly, work has been done.
It is similar to the value-added work.
Angela Hands: It is basically
from a value-added perspective.[3]
Q25 Mr Bacon: Absolutely. I do not
necessarily decry that value-added work. A lot of people have
a lot of time for it. But it is helpful to see the raw data because
they give you actual facts about which is the highest continuation
rate institution and which is the lowest. If you could send us
this reshuffled, and if HEFCE could perhaps send us a note, that
would be marvellous.
Professor Eastwood, could I ask you about
paragraphs 2.7 and 2.10? Paragraph 2.7 states, "an institution's
under-performance against its continuation benchmark may be indicative
of a lower than expected rate of students completing their year
of study, which may itself lead to a funding adjustment ... The
Funding Council withheld some funding from five of these institutions
on at least one occasion during the period 2003-04 to 2005-06."
When I read that, I thought "terrific". You go through
the figures and if they are not doing what you think they should
do, you adjust their funding.
Yet over the page, there is funding going
in the other direction, namely the £345 million which was
reallocated on the basis of the widening participation element
to compensate for their difficulties—for whatever reason
they have difficulties. Which is it? Are you punishing institutions
when they fail to achieve the expected rates, or are you helping
them because you know that they are institutions in difficulties?
Professor Eastwood: What we are
doing in the procedure outlined in paragraph 2.7 is that, in cases
in which an institution has poor continuation or completion rates
and it undershoots its target numbers, then we will, under certain
circumstances, claw that back. That is why there is a strong incentive
on institutions to promote a progression and completion within
our funding model.
What we are trying to do with the widening
participation and continuation funding identified in paragraph
2.10 is to provide institutions that have more challenging students
cohorts in terms of retention with the kind of resource that they
need to invest in some of the things that the Chairman referred
to.
Q26 Mr Bacon: So what paragraph 2.7
says is that, notwithstanding whatever cohort they have, their
benchmark continuation rate would lead you to suppose that they
could have done better than they have done, and therefore you
snaffle some money off them.
Professor Eastwood: The consequence
of progression and continuation rates has been such that they
have undershot their agreed numbers target.
Q27 Mr Bacon: Presumably, the agreed
numbers target is all to do with this benchmark and the calculation
and the methodology used?
Professor Eastwood: No, it is
to do with what we call the funded numbers that the institution
has.
Mr Bacon: Oh, okay.
Professor Eastwood: In other words,
it is part of its contract.
Q28 Mr Bacon: Part of its contract,
did you say?
Professor Eastwood: Part of its
numbers contract with the Funding Council.
Q29 Mr Bacon: In paragraph 2.12 it
says: "The Funding Council does not require institutions
to keep records on the use or impact of their widening participation
grant because it is part of the teaching grant." If I were
to ask you, "Why do you not require institutions to keep
records on the use or impact of their widening participation grant,"
please do not answer, "because it is part of the teaching
grant." I do not understand why you do not require them to,
especially when it is quite obvious from figure 19 that Aston
University is more than able to do it to a quite high level of
detail.
Professor Eastwood: Can I respond
in two parts?
Q30 Mr Bacon: All right, I will ask
my supplementary now, at the same time. If you do not monitor
the impact of it, how on earth do you know whether it is working
or not?
Professor Eastwood: The reason
that we do not require reporting for the £345 million is
because we are working under an injunction to reduce the burden
of regulation, audit and reporting on the sector. We have made
substantial progress in doing that. We operate a risk-based approach.
When we think that there is a risk or a high priority, we require
reporting; when we think that aggregate data will enable us to
see whether or not money is being appropriately spent, we do not.
That was the first comment that I was going to make.
Secondly, at the moment we are reviewing
the way in which we use our widening participation premium, and,
in that context, how it will be invested and what kind of reporting
on that investment we might require are live issues as we speak.
Q31 Mr Bacon: Why does Scotland appear
to be noticeably worse than the other home nations? The table
on page 16 shows the percentage of students in the home nations
continuing to a second year of study, and the percentage expected
to complete their courses. In the second column, which shows those
who are expected to complete, England is in the lead and there
is little difference between England at 78.1%, Northern Ireland
at 77.9% and Wales at 77.1%. However, Scotland is five percentage
points below the others. Why?
Professor Eastwood: I think that
it is beyond my remit for me to comment on issues in Scotland.
Q32 Mr Bacon: But it is a significant
difference, is it not?
Professor Eastwood: I would make
two points. First, participation rates in Scotland over the past
few years have been higher than those in England, and that might
have an impact. Secondly, the mix of institutions in Scotland
is somewhat different from the mix of institutions in England.
Formally, the answer to that question should come from my counterpart
in Scotland.
Q33 Mr Bacon: Right. I want to ask
you about the economic benefits of a degree. The Report says in
note 2—I forget which page it was on—that a still
unpublished PricewaterhouseCoopers study said that the economic
benefit was £100,000. Is that correct? I remember the Government
vociferously repeating a number of £400,000 at the time of
the student funding debate. That was the standard number that
was used to justify the move towards more charging for student
courses, because they were £400,000 better off over a lifetime—I
remember thinking that that meant that they pay £160,000
more tax over a lifetime. What is the difference? Perhaps the
NAO should answer: why is the only information apparently an unpublished
study that shows such a big drop?
Angela Hands: I am not aware of
the figure of £400,000.
Q34 Chairman: You do not remember
it at all from that time? Do you remember it, Professor Eastwood?
Professor Eastwood: I do. There
have been a number of attempts to calculate a lifetime's earning
benefit to a graduate. The figure given at the time of the Higher
Education Bill was a gross figure rather than a net figure. The
figure that I gave when I was last asked by a Select Committee
about the lifetime's earning premium was £160,000. That,
broadly, is where we in the Funding Council think that it is safe
to place the estimate at the moment. The Department has commissioned
some work of its own.
Ruth Thompson: May I add to that?
The £400,000, as Professor Eastwood says, was a gross figure.
It was also not discounted to present values. The subsequent work
that we have done to compare graduate earnings with those of somebody
with the entry qualifications to go into higher education—somebody
with A-level equivalent qualifications—has led us to refine
and improve that figure, to take out the gross and to do the discounting.
We have come up what we tend to say is a premium of "comfortably
above" £100,000 over a lifetime.
Q35 Mr Bacon: I will ask one more
question. It is about paragraph 1.5. Professor Eastwood, you mentioned
the difference for part-time students, and that their reasons
for study were often very different from those of full-time students.
The paragraph says that an indicator to measure part-time students:
"would be developed from this work if appropriate."
That is in light of the particular difficulties with such data.
I have personal experience of this, because I was a student at
the free University of Berlin, but to say that I ever had any
intention of matriculating there would be to put it rather strongly.
Most of the authorities had no idea that I was there; you could
just drift in and out. I got what I wanted from it, but I would
not have helped any statistics. Do you think that it is likely
that you will be able to develop a useful indicator for part-time
students?
Professor Eastwood: If we are,
it would be different from the full-time student benchmark, for
the reasons that you give. Following Sandy Leitch's Report, we
are also trying to develop more flexible approaches to part-time
learning in the workplace. Therefore, any benchmark that we develop
would have to capture that range of study as well as that range
of study intentions. However, I do not want the Committee to conclude
that, because we do not currently have a benchmark for part-time
study, we are indifferent to either the progression of part-time
students or to the value for money associated with public investment
in them. We are alive to those issues.
Q36 Mr Touhig: Retention is around
91%, which is not bad by any measure. However, it has been like
that for the past five years and has not improved. Why is that?
Professor Eastwood: As paragraph
1.14 of the Report shows, some institutions have shown significant
improvements above the benchmark, some have drifted away and the
majority are about where they were. That is the challenge that
we now face.
Q37 Mr Touhig: But you have been
challenged for the past five years and the situation has not improved.
How much money have you spent on universities in the past five
years to help them retain their students?
Professor Eastwood: Because the
bulk of our teaching investment is made in the form of block grants,
the specific investments that we have made are those identified
in the Report, such as the continuation premium as part of the
widening participation premium.
Q38 Mr Touhig: Give me a ballpark
figure. What have you spent in the past five years that has directly
helped universities to retain their students?
Professor Eastwood: Over the past
five years, if one were to aggregate everything, we have probably
spent something in the order of £600 million.
Q39 Mr Touhig: That is £600
million for no improvement. Paragraph 2.1 of the Report states:
"From 2003-04, the Funding Council substantially increased
this recurrent funding by introducing another element with the
aim of improving retention, particularly among the types of students
who are more difficult to retain. This new element was financed
by a reduction in the rest of the teaching grant." You robbed
Peter to pay Paul.
Professor Eastwood: It is perfectly
true that we made an adjustment in the teaching grant.
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