Oral Evidence

Taken before the Business, Innovation & Skills Committee

on Tuesday 29 March 2011

Members present:

Mr Adrian Bailey (Chair)

Paul Blomfield

Katy Clark

Rebecca Harris

Dan Jarvis

Simon Kirby

Mr David Ward

Nadhim Zahawi


Examination of Witnesses

Witnesses: Professor Ruth Farwell, Chair, GuildHE, Professor Les Ebdon CBE, Chair, million+, Professor Colin Riordan, Universities UK, Professor Michael Arthur, Chair, The Russell Group, Professor Simon Gaskell, The 1994 Group, and Libby Aston, Director, University Alliance, gave evidence.

Q90 Chair: Good morning. I know feelings are running high in the student community, but I trust that the bag outside is purely innocent. Can I welcome you all and thank you for agreeing to address the Committee ? In a moment I will ask you to give you r names and titles for voice level and transcription purposes. W e do not normally interview six people at a time, and I am conscious - please do not take it the wrong way - that interviewing six people from the academic community can take an awful ly long time . I f we ask a question that is not organisation and person- specific, or if somebody has said what you would say , you do not need to repeat it . Obviously , we want to keep contributions as pointed and informative but as brief as possible in order to get through the enormous range of questions that I know members of the Committee want to ask you. So could we start from Professor Farwell ? I f you could introduce yourself and your title and run through the panel .

Professor Farwell : I am Ruth Farwell, Vice Chancellor of Buckinghamshire New University and Chair of the representative body GuildHE.

Professor Ebdon: Les Ebdon, Vice Chancellor of the University of Bedfordshire and Chair of the University think-tank million+.

Professor Riordan: I am Colin Riordan, Vice Chancellor of the University of Essex, and I am here representing Universities UK.

Professor Arthur: I am Michael Arthur; I am Vice Chancellor of the University of Leeds and Chair of the Russell Group.

Professor Gaskell: I am Simon Gaskell; I am Principal of Queen Mary, University of London, representing the 1994 Group this morning.

Libby Aston: My name is Libby Aston, I am a director of the University Alliance and a Senior Research Fellow on Higher Educational Policy at the University of Lincoln.

Q91 Chair: Thanks very much. We will start with a slightly philosophical question, but hopefully tease out the issues around whether education is good for its own sake or whether it should be focused on the defined needs of the economy and the community. What do you think a degree is for? Who would like to open that?

Professor Gaskell: Shall I begin? I think it is true to say that the benefit of a university education should be viewed in terms of benefit both to the community and to the individual, and the balance of that benefit of course varies with circumstance. I think both for the individual and for the community, there are clearly economic benefits, and those tend to be focused on in such discussions. So we might take those as read, but I think we also need to recognise that there are benefits to society and to the individual that go beyond the economic. So, for example, when I am talking to students at Queen Mary, I will certainly refer to the fact that their degree will improve their employability and their earning power, but I will indicate that it should also improve their emotional and intellectual development so their broader contributions to society will be greater after they graduate.

Chair: Does anybody wish to add to that?

Professor Farwell : I would like to add that we talk quite a bit about the contribution to the economy, and often think about that in the context of the national economy, but it is important also to think about the local economy in the sub-region in the vicinity of many higher education institutions. I think a contribution of degree-level education is also about increasing growth locally, in terms of the capacity of the communities but also in terms of the local sectoral employers within that area.

Chair: Thank you. Libby Aston, you indicated, but my next question is specifically directed at you, so I will leave you for now and see if anybody else wishes to comment on that.

Professor Arthur: If you go slightly beyond the question, which I think we already have, there is also an international element to the importance of higher education, which is related to this country’s standing in the world; the soft diplomacy, if you like, of our international excellence in higher education is of significant value.

Q92 Chair: Thanks. Libby, representing University Alliance, you said in your written evidence, "The question of appropriate balance between public and private funding should not be driven only by economic pressure on the Government but on a coherent argument about the desirable extent of public support for higher education." This is obviously the issue we are trying to tease out. What do you think that argument should say?

Libby Aston: Our point is that you are absolutely right to identify a need for protected academic space and for the ability to enjoy learning for the sake of learning. All of those arguments are absolutely right. But we have this particular English approach of downplaying the role of universities and of our graduates in the economy.

I will not go into it all, but all of the research shows that growth in our economy is going to be around hightech and innovationbased growth. In the kind of economy that we are moving towards, in that way driving economic growth, the primary driver of that is the quality of your human capital. We are in a world where Sarkozy, Obama, all of these other major countries, our competitors, fully recognise the central role of universities, higher education and research in driving economic growth. For whatever reasons, we shy away from that; we do not recognise that as well in this country. We are trying to make that point and to emphasise that the balance of public and private investment needs to come from that perspective, and from the understanding that higher education is no longer an addition, a badge or an extra of the education system. It is absolutely at the heart of economic policy, of growth policy.

Q93 Chair: Do you agree that money spent on higher education should be regarded as an investment and should be termed as such?

Libby Aston: I could not agree with that more strongly, Chair.

Chair: Could I just ask-it is probably a nobrainer-do the other witnesses agree?

Professor Ebdon: Chair, absolutely I agree with that. I think it was a great mistake to refer to the investment that the Government makes in higher education as a subsidy to it. According to figures from the Royal Society of Chemistry and London Economics, the Exchequer makes £81,875 additional income through extra taxation because of graduates earning more. Yes, there is a benefit to a graduate of over £117,000, but clearly it is an investment in terms of the return to HMRC and to the Government from increased taxes. It is a return to the country in terms of the higher skills that we need to have a competitive economy in a knowledge-based world, where we will succeed or fail based on the high level skills of our people, and in terms of citizenship and culturally, as we have been discussing, it is a major investment in our country. It is a great mistake not to regard higher education as other than a very significant investment with a very good rate of return for this country. In fact, universities generate £59 billion of output in this country, and as the Committee well knows, in excess of £5 billion of export earnings every year.

Q94 Chair: Thank you, and I think you have made the case fairly powerfully that the education industry is absolutely crucial to the country and also to individuals. What do you think the Government should do to maximise universities’ ability to contribute to economic growth?

Professor Riordan: Can I make a point on that? I think one of the key things we have to watch out for is the temptation, due to political pressures, to regulate universities excessively. I was at a meeting in the United States last year at which one of the presidents said, "When they stop sending you money, they send you regulations instead." There is something in that, because if there is a feeling that resources are tight, you need to make sure you are getting as much value as possible from them, and you have to show that by regulating. I would imagine that my colleagues tend to agree in this area: you have to be very careful not to strangle the golden goose.

Professor Arthur: I would agree that autonomy is critical and it should be maintained. There is quite a lot of evidence that the more autonomous your higher education system is-and the more it also has to compete for funding-the more productive the higher education system is. I would have that pretty high on the list. I think we need sufficient funding to remain internationally competitive in what we do-that would be another prerequisite for successfully driving the economy forwards-and alongside that therefore, appropriate levels of investment in research and science are also critical if we are going to keep the economy buoyant.

Q95 Chair: I think you have partly answered my supplementary. I will come back to you in one moment. What do you think is the biggest threat? I gather you would assume that regulation is, and possibly finance. Is that correct, and would you wish to add to that?

Professor Riordan: I agree with Professor Arthur that autonomy is the key to this, and it is something that is very difficult for people to recognise because it is as though we want to have our cake and eat it. We want to have funding, but we also want to be able to do what we like. That really is not the point. There is evidence that the more autonomous an institution is, the more likely it is to succeed, and just anecdotally, if you think of what you regard as the most successful universities in the world, you will find that they are relatively free from state interference, and do have control over their own finances, staff and buildings, and have autonomy to make their own decisions, clearly within sensible parameters.

Chair: Professor Farwell indicated that she wished to speak, and then Simon Kirby wants to come in with a supplementary.

Professor Farwell : Yes, Chair, thank you. I would like to add that one of the important things about the sector that needs to be preserved is its diversity. No doubt we will return to this later, perhaps around student choice and also around funding, but in terms of the different sectors that are served by different types of institutions, I think that diversity is fundamentally important to maintain the breadth.

Q96 Simon Kirby: You mentioned autonomy and how universities perform best when they are autonomous. Should the Government then have listened to Lord Browne and not imposed a ceiling on tuition fees?

Professor Riordan: That is clearly a matter for the Government, but the Browne review was very well thought through. It is kind of like a clockwork mechanism: it is difficult to change one bit of it and not affect everything else. The way that Browne worked was saying, "Yes, there is no cap on fees, but there is a levy that will discourage"-not force; universities can make choices about how they set their fees, but if they do so they will be making a powerful, quite substantial financial contribution back into the system to finance widening access and participation. In that sense, the Browne Review had considered the fairness of no cap on fees and found a way of counteracting that. At the moment we do not have that; we have a cap on fees, but no way of recycling back in.

Chair: That seems to have generated a fair bit of interest.

Professor Ebdon: There were two fundamental flaws with the Browne review. One was the introduction of the concept of subsidy to higher education as opposed to the investment that we all argued for. Of course, that paved the way for a massive 80% cut in teaching grants, a massive swing from funding by the Government to funding by the graduates of universities, and I think there will be significant consequential impacts of that on widening participation, on social cohesion, on opportunity for young people from poorer homes. I am sure we will discuss that later.

The second flaw was suggesting that there should be no ceiling on the fees. Of course, that effect would be exacerbated; fees in excess of £10,000 would have completely put young people from poorer homes off going to university; it would put it completely out of their reach. I think I have gone on record as saying that if you have been paying high school fees then maybe high university fees do not seem to be quite so offputting, but for the vast majority of people in this country fees in excessive of £10,000 look quite unreasonable, and we have seen that would have been charged. I think the Government were right to say that there should be a ceiling; I think they were wrong to take away 80% of the teaching funding, which meant that the ceiling had to be at £9,000, and I think it will impact on participation.

Q97 Simon Kirby: Can I just explore the logic of that particular point? What you say is very true if the fees were required up front. I do not understand your logic if they are paid in arrears only when the graduate is in a position to repay them. It is illogical; I do not accept your point.

Professor Ebdon: It is the perception of debt, and of course the research that the Browne review did suggested that even £5,000 fees would be significantly offputting for people from poorer homes going to university, so I think we have to take the evidence such as it is. Obviously, I very much hope it will not, and as you say, it is something that people will only repay later. The Deputy Prime Minister suggests that 60% to 70% of graduates will never repay their debt. In one way, I hope he is right. I guess the Treasury hope he is wrong.

Professor Riordan: Just on that point about the perception of debt, before the last time fees were tripled, in 2004, the evidence appeared to show, and a debate certainly took place about the notion, that students would stop coming to university because they would be put off by fees of £3,000 or more. That clearly did not happen; there was a dip and then there was a continued increase until now we have so much demand we cannot meet it.

Obviously, there has to be a tipping point, where fees would become too much of a burden, but whatever the perception, the reality is that it is more like a tax. Whether the fee is £5,000, £4,000, £6,000 or £9,000, you pay the same per month related to your ability to pay, and it is a question of how long that happens. It may go the full 30 years, or maybe you get a better job and earn more and pay it off more quickly. That is what it is about.

Professor Arthur: I state a very clear preference for no cap-in other words, following what Browne originally suggested-but on the condition that there is no upfront payment-that it is an income-contingent loan system. That is crucially important, otherwise you will see a negative effect on social mobility. Another condition has to be that there will need to be a lot of work, even with the system that the Government is currently running with, in terms of informing prospective students and their families about what the arrangements actually are, because there is a lot of misinformation and there has been a lot of scaremongering, which I think will ultimately be incredibly unhelpful. Alongside that, the levy: I personally think the levy as it was constructed was a little bit heavy, and perhaps if it had been more related to the RAB charge-that is the eventual cost to Government-that would seem more logical to me. But I do think the principle of having no cap was a good one.

Professor Gaskell: I think the question of perception is important, and wherever the fee is finally set for a particular institution, the perception of that fee by potential students is important. I find the situation very frustrating, because we got this wrong once, when fees were first introduced. We did not get the terminology right. To talk about a loan system is probably ill advised; it is a contingent tax liability that has been introduced, effectively, and that would be far more useful terminology. But even regardless of that, I think the Government and universities have a real obligation now to inform potential students and their families about what the real system is. We had some school kids through one of our outreach programmes a couple of weeks ago. I talked to one of their teachers and asked, "How are students perceiving the new system?" and he said-

Chair: We are going to deal with the question of access, which in part is covered by this, in a moment.

Professor Gaskell: It was just on the question of perception; the perception is that the students and their families will have to pay up front.

Chair: Perception will affect access as well.

Q98 Mr Ward: Can I just say how much I welcome your comments, which are confirmed by Lord Browne, because there are many groups and organisations that are frightening people and then saying that people will not go because they are frightened. I welcome your comments. These are possibly the comments you made tied up with the autonomy, but you mentioned regulation. Would you add to that stability and sustainability, or lack of sustainability and constant change?

Professor Ebdon: I certainly would say that universities have three or four-year product life cycle typically, and therefore stability is important for us. Changes of funding during the time a student is with you are very destabilising. We have benefited over a number of years from a very stable situation, and one of the concerns about the proposals for 2012 is that they may create an unstable situation. We are already being told by the Minister that, if we do not average out at fees of £7,500, the Treasury will be forced to step in and take further savage action and claw back money after we have already committed to students. I think one of the things he will be worried about is the evidence from the Office for Budget Responsibility, and I think this relates to one of the reasons why the Government would not have followed Browne. Already the Government will be cumulatively adding £13 billion of extra debt to the public sector by 2015/16 to fund this new system of funding universities, and if Lord Browne’s no cap had been followed, that figure of £13 billion extra borrowing would have gone up even higher.

Q99 Paul Blomfield: I just wanted to take the opportunity to clarify the language, because, whilst I understand the attraction of describing the Government’s proposals as effectively a tax, it is fair to say that a tax is something based on earnings, irrespective of what is effectively, in this case, an income-contingent loan, isn’t it? We are asking students to pay back the money they need to borrow to go to university, not make a contribution based on their earnings irrespective of that, which would be a tax.

Professor Ebdon: Quite right. million+ was of course the only group to suggest that a graduate tax should be seriously considered by the Browne review, and I am very sorry that Browne did not consider that seriously. There was a little aside that I have said that, if I was marking that as a student attempt, then I would have failed it, or if it had been a modular A Level, I would have sent it away to be done again. A graduate tax of, say, 2% on graduate earnings over £21,000 would raise £3.5 billion a year of income. That is compared with the 9% that will be required under the proposals that are presently there. It would take us back to 1997, when universities received all of their money from Government, from taxation, and there was no suggestion that we did not have autonomy. It is a system that is much more likely to promote participation, because people realise that you cannot avoid death and you cannot avoid taxation, and people accept taxation. An income-contingent loan, something which your mortgage company might look at when you go to buy a house and all of those things, is very disconcerting to people, particularly if you have a couple who have both got an income-contingent loan to pay back.

Q100 Chair: We will be covering this area a little later, so I would like to make a little bit of progress now, because inevitably we are straying into areas that we will be asking more detailed questions on in a moment. I would like to conclude by asking: Browne does seem to envisage more private involvement in educational provision. How do you think the private sector can add value to education in this country? Anybody want to take that up?

Professor Riordan: The private sector could obviously add more choice and diversity of opportunities for students, but I think the crucial thing for us is that, if that is to be the case, then it needs to be on the basis of a level playing field, so that any private sector providers that get degree-awarding powers-that has already happened, in fact-are subject to exactly the same regulations on quality assurance, and absolutely now, consumer protection, as universities would be.

Q101 Mr Jarvis: I would like to ask you about the Browne review; indeed, Lord Browne gave evidence to the Select Committee a week ago. The review was presented as a package, and I would like to ask what you think the risks are if it is not implemented in full.

Libby Aston: You are absolutely right to say it is a package. It was a very tight idea that in and of itself worked well. The logic of it was very convincing. The difficulty of what we have now as a result of implementing parts of it is that the system; that logic, does not hold. What was underpinning that was that Browne achieved this critical separation of public investment and private investment through graduate contribution, and that allowed the UK Government to be putting in-if it chose to-stable public funding, core funding for teaching, and also for the university sector to increase its income from private graduate contributions over time.

The compromise situation we have, however, is this locking of the two systems together. Because compromises were made around the repayment system of the graduate contributions, it is not self-funding. Under Browne, the only thing the Government had to put in was the upfront cost to cover that part of the system, and that could have been done through accessing private markets. There are all sorts of ways of doing that. Under the system that the Government are implementing, there is a 30% subsidy on every single student that is going through the system, which means that you have locked public contribution and private contribution in together. This makes it incredibly complicated, and incredibly hard for us as a sector to see how we can-well, we cannot-increase the total pot of investment coming in to our higher education sector, which was critical and exactly the problem that Browne was trying to solve. The compromise has meant that that is a really complicated thing to do: we cannot, because of that tie-in between the cost to Treasury and the system that is now being run.

Q102 Mr Jarvis: My next question is for you, Professor Ebdon; it is about your organisation million+. You took quite a different view on the Browne Review to the other mission groups. You have spoken about this already to a degree, but perhaps you could tell us a bit more about your view on the report and why you disagreed with the other mission groups.

Professor Ebdon: As I say, the basic flaw in the Browne review was to disregard the importance of public investment in higher education. I think we have heard others on this panel eloquently saying why indeed that is important. As a consequence, we get into this language that the Government contributions towards higher education are some kind of a subsidy to individuals, and it is solely about individual advancement. As a consequence, we have seen this massive cut to teaching funding. In my own university it will amount to about 97% of our teaching funding, going on present estimates; on an average across the country it is 80%. I know that in some universities it is better than in mine, but it is a massive cut in the contribution from the Exchequer. We have ended up with a system that is actually more expensive to the Exchequer, as the Office of Budget Responsibility has shown, than the present system, with graduates carrying a very heavy burden of debt-which many of them, admittedly, will never pay off-but we have ended up with that system. We have also ended up with the possibility that we may damage the UK system in global terms by reducing the amount of access and opportunity, and therefore damaging UK plc by not having an appropriate supply of highly skilled people in the future.

Q103 Mr Jarvis: Thank you. My next question comes in two parts. I would like to ask you what the impact of another Government review of university funding in the next few years would have on the sector, and I am also interested in your view on the comments made by Sir Alan Langlands, who said, "The reductions in public funding for university teaching activities have been the consequence of the financial crisis and the budget deficit, and the postBrowne review settlement should not be viewed as permanent."

Professor Ebdon: I would like to support Alan Langlands very strongly in that the misfortune of the Browne review was to report at a time when we were seeing such large cuts in public sector borrowing, and here was a marvellous opportunity to take a large chunk out of that particular column, namely the HEFCE teaching funding. Sir Alan is Chief Executive of HEFCE. I think he is absolutely right in saying that we should regard this as a temporary solution. We need a long-term, stable solution. We will of course see what the impact of these fees are before we get to that, but I really fear there could be a significant impact on students from lower income groups.

Q104 Chair: On this, could we have any alternative viewpoints?

Professor Arthur: To answer the question, I think a further review at this point would be pretty devastating. We have been through a period of considerable uncertainty. When you are planning for the finances of an organisation that, in my case, turns over half a billion pounds a year and has 8,000 staff, then the last thing you need is this level of uncertainty, and having gone through that and come out the far end with at least some of those uncertainties landed-albeit not necessarily the way you would like-we now need a period of stability to get on with our job, which is educating students and doing research with impact for society.

I guess I take a slightly different view from Les, because Les is implying that this level of funding was cut because of what Browne said. It is my assertion that this level of funding would have been cut no matter what Browne said-at least it looks that way-and I would go further than that. If you followed the IFS figures, what the previous Government were going to have to cut from higher education, if they stuck to what they said they were going to do, would also have been in the order of £2.5 billion. For whatever reason-and we of course found this incredibly difficult to understand in comparison with what was going on internationally-higher education has been targeted for really significant funding cuts for quite a long while. We have known about that for the best part of two years, and it has created a very low morale and great difficulty.

The way in which the funding has now been cut was a surprise to all of us. None of us expected 80% funding cuts in teaching, and therefore maybe the review shaped the nature of the cuts in a strange way. I do agree with Alan Langlands; if we are going to go forward in future, I personally think that the balance between graduate contributions and state is the critical issue. I think graduate contributions are the best way forward. I agree with the Blair Government; it was a brave thing to do, it was the right thing to do, and the balance at that stage was about right. What has happened now is that the balance is heavily towards the graduate contribution, and over time, as the country’s finances improve, there is of course the opportunity to rebalance the state side.

What has been particularly unpopular in our institutions has been the way in which this has fallen on arts, humanities and social sciences predominantly, although one understands the arguments about money being channelled through a different route, but it does not feel like that to individual members of academic staff. It feels as though their subjects have been rather targeted, and that has caused a lot of unrest and difficulty.

Professor Farwell : I want to add a point in support of what Michael has said about the destabilising effect of the review; however, I fear that there could be a certain inevitability about some change being needed relatively quickly in terms of the new system unfolding. I think there are two big risks and two big questions about what is going to happen: one is whether demand will hold up, and if it does, what would the impact be on the student loan book. So perhaps change, which could incorporate some of Alan Langlands’ points about the level of public funding and reviewing that in the future, could take place or will have to take place because of what unfolds, but it would not necessarily have to be on the scale of the massive review that has taken place with Browne.

Q105 Mr Jarvis: I would now like to turn to the Government’s response. What you would most like to see in the Government White Paper and what you would not want to see in it?

Professor Riordan: This follows on from the previous question, because the fact is that the present system is not yet finalised. We do not yet know what the present system is, we do not know what student number controls are going to look like, and there is a huge wealth of detail there. So before we start thinking about another review, we really need to conclude this one. Just to pick up on the previous point about the balance between funding, you would not need any kind of a review; it would be a relatively straightforward matter to increase the amount of money that goes into the T-grant by feeding that through from BIS to HEFCE. You could do that without any kind of review in the future, and inflation would take care of fee levels if you wanted to hold those down.

So far as the White Paper is concerned, I think the key priorities for us will be to have a way of controlling overall student numbers that nevertheless allows some student choice, because if we do not allow students to choose between institutions under the system we now have, there will be no incentive for universities to introduce differential fees. Do not forget that the fees that are being set now are for one year. If there was a possibility of students choosing which university they went to on the basis of what they perceived to be the value for money-if the assumption that they would take account of the fee level is correct-then there needs to be a methodology for achieving that, at least at the margin. There needs to be some marginal opportunity for students to say that they can move between universities as they choose, rather than as allocated in terms of the numbers, which is obviously the present system. There is only a small amount of latitude at the moment. That will be a key thing.

Another key thing would be an absolute commitment to university autonomy and an undertaking to keep regulation to as reasonable a minimum as we could possibly have. A third priority would be to ensure that as new providers come into higher education, they are subject to the same sets of regulation and provisions that pertain to the universities and the traditionally publicly funded providers.

Professor Arthur: Not surprisingly, I would agree on the points about autonomy. A risk-based approach to regulation might be something to think quite carefully about in the White Paper. There are many other things-like a magic wand-that I am not sure the White Paper could include, but educational attainment in people coming to us, visas, Freedom of Information Act, initial teacher training, NHS; there are so many things that are influencing our future that probably will not be part of the White Paper at all, and I think it is very important for the Select Committee to understand those other pressures that are outside the immediate issue of students and their fees.

Chair : I do appreciate that we could have a seminar on this subject alone, so I appreciate your brevity on that.

Professor Gaskell: I will try and match it. I think the issue of autonomy is critical, but it needs to be defined. Almost everyone signs up to their notion of autonomy and almost everyone means something different by it, so it has to be made very clear what autonomy means. The second point, in terms of primary providers, is that there needs to be, as Michael has said, a very clear establishment of a level playing field-I think Colin said that. But we also need to recognise that private providers are not interested in matching the breadth of provision that is made by universities at present. Carl Lygo, who runs BPP, is very clear: he is interested in law, accountancy and other such courses. That is where money is to be made-not in teaching Latin, Greek and modern languages. So we have to have a recognition that any private provision first of all must work to the same rules, but is also not simply going to provide the other side of the coin and cover the same breadth that universities cover at present.

Professor Farwell : I would like to see the narrative in the White Paper shifting and broadening out from perhaps, say, some of the language that has been used in Browne and in the Government’s response, which has a rather one-dimensional view of a student in higher education. The complete range of people who participate in higher education is an important factor, and along with that it is shifting away from simply access, and access of particular kinds of students to particular kinds of institutions, to broadening participation generally within higher education.

I think that then takes me into a point-following on from Professor Riordan-about the increase and meeting demand in student numbers and also student choice, and it is not just about marginal effect. I think it is also about enabling numbers to grow, or perhaps even reducing pressure on the loan book in terms of those students who are not taking out loans and are off the loan book, in effect.

Professor Ebdon: I would like to see the White Paper to take the Government’s stated commitment to widening participation and social mobility into real action. In particular, I would like some assurance that the current widening participation funding that HEFCE gives institutions that participate in this expensive activity is going to be continued. That is unclear at the moment, and that is very unsettling. I would like to see a clear commitment to strengthening and sustaining the research base in this country. I think selectivity-a situation where 75% of research funding goes to just 24 institutions-means that we are beginning to destroy the seed beds in which we grow new researchers and, indeed, new subjects and new areas of research, and that will look very foolish in a rapidly changing world.

Of course, it is important that we preserve the UK concept of a university, with research-informed teaching underpinning our high-quality universities, which are recognised around the world. As to the suggestion in the White Paper that nonteaching organisations should get degree-awarding powers, I know that the Archbishop of Canterbury has them at the moment, but virtually everybody else is a teaching organisation, and to get honours degree-awarding powers you need to have a research-informed teaching background. I would certainly like to see that preserved, so that our international competitors cannot denigrate the UK university system.

Chair: Thank you. Can I just come back to Dan Jarvis on the issue of sustainability? We have partly touched on that.

Q106 Mr Jarvis: We have, Chair. Just finally from me, in terms of the specifics of the Government’s reformed funding system, will it work in the short and medium term? What problems and opportunities do you foresee with it?

Libby Aston: It is a really big question, and it comes back to the White Paper, because what we need is for the Government to be taking a longer term view of how to set up the system. The fear is that they will focus on this very immediate concern, this very short-term issue, of how to make sure there is not overspend, how they control total student numbers and all those things. The irony of this is that the Government are very committed to creating more of a market, more competition, more openness. The sector would absolutely welcome that, on a like-for-like basis, on a level playing field. Universities are innovative, entrepreneurial organisations. The worst-case scenario is that in the short-term fix the Government become obsessed with finding levers, regulatory mechanisms, controls on the system that in the medium and longer term are just going to restrict the quality and growth of this sector.

Professor Gaskell: I think the short answer is, yes, it will work, because universities are very inventive organisations and will make it work. The question is, at what cost? For an institution like mine there are two costs, both of which we alluded to previously. The first is stability: are we going to be providing a diminished education, are we going to achieve less in research because of the instability associated with the introduction of the new system? The second challenge-particularly for an organisation like mine-is whether we can maintain our commitment to widening participation. I know that we are going to get on to that, but that is a real issue. My university is unusual, perhaps unique, in having a very high level of research attainment, within the top dozen or so within the UK, but also a very high proportion of ethnic minority students. It is a very unusual combination, and there is a real question whether under the new system we will be able to maintain that status.

Professor Arthur: I am also an optimist. I believe we can make it work. I also think there are significant challenges in there, not least of which is making sure that prospective students understand the new system.

Q107 Paul Blomfield: Following on from that point, in terms of how the system will work, but also how the terrain will look different: how do you see higher education changing outwardly as a result of these changes-to students, to employers, to other stakeholders?

Professor Ebdon: Ruth has already referred to the diversity of the sector. Million+ universities teach 21% of the students in the sector, but 33.7% of the non-white students. We know that ethnic minority students are not equally distributed in our universities and tend to predominantly go to universities in the million+ grouping. The system that therefore disadvantages those universities disadvantages ethnic minority students, and I think there will be a number of unintended consequences that have not been thought through in terms of equal opportunity, which I worry about substantially.

The other thing that worries me a lot is the actual level of debt that students will leave with and, when that becomes clearer, the impact that will have. London Economics have done some figures for us that suggest that, if the fees are £9,000, the student with a maximum maintenance loan will leave university with debts of £53,439, if the proposed introduction of the interest rate while you are studying is implemented. That is substantially higher, I think, than people are expecting. That means, as I say, that if a couple are both graduates we could be looking at debts of £106,000 at the time they leave university, which is going to have a significant impact on the structure and the types of people who think they can go to university.

Professor Riordan: The point I want to make is I suppose a slight repeat of what I said before. I am sure-as Michael said, we are very inventive-that we will make it work, whatever it is, but we still do not know what it is. We do know the parameters clearly of the fees and of the recovery system, and how that is meant to be funding. But there are two really big questions: one is whether the cap on numbers for individual universities will be lifted so that those numbers can go up and down; and the other one is, if the costs of the new system are higher than anticipated, how will that be clawed back? Presumably it will have to be, and that will affect things. There is also the whole NHS funding issue. There are a lot of variables in there that make it very difficult to see exactly how it is going to work. We really need the White Paper and the detailed proposals to be able to have a sensible view on that.

Professor Arthur: I think it will contribute to improving quality. What I have been saying internally in the University of Leeds is that this is not just an increase in the fee. This is a really significant change in the way in which the whole of higher education is funded, and therefore your continued success as an institution or as a school within an institution relates to your ability to attract students at whatever fee we choose to charge in due course. Therefore, people are going to be looking very heavily at the quality of what you do and making choices about whether or not they wish to pay that for that quality. It powers up and puts money behind the importance of learning and teaching in a way that has not been quite so evident in previous funding regimes.

I have made a comparison with the way in which the importance of research was powered up by the funding that came through the research assessment exercise, and that became a very prominent set of issues during my academic career. This now rebalances that equation quite significantly. There is also going to be a high expectation of good levels of information about the courses and programmes that are on offer. I am a little bit worried about that, because I think that is a space where it will be awfully easy to have a lot of data and not too much information. I think it will potentially be very confusing to people when they first look at it. But nevertheless, I think that, plus the social media, means that one’s reputation and the quality of courses will be out there and very evident to people. I do not think that is a bad thing: I think that is a positive out of all of this.

Q108 Paul Blomfield: Could I pursue that point in terms of driving quality, because it is part of the conversation we had with Lord Browne last week. What evidence do you think there is, say, in looking at the system in the States, that a more marketised system with higher fees at the top end drives quality at all levels of the system? I can see how it would drive quality, and there is no doubting the strength of Ivy League institutions, with which I guess the Russell Group can most closely compare itself. But where is the evidence that that system drives quality at every level?

Professor Arthur: I could not quote you specific evidence; I am really talking about the reaction of an organisation to charging a significant fee, much higher than before. The biggest difference, of course, is that we previously used to receive a pretty gold-plated grant from HEFCE each year that would vary at the margins but would turn up each year. That is no longer there, to any significant degree, across all subjects, and in some subjects, as we were saying earlier, is not there at all. You can imagine that being an enormous driver to make sure that what you are doing with those students when they come is something that they are going to value. I am not in the consumer category myself, I think this is a partnership between us and the students, but it has to be very high quality, it has to feel very high quality to them, in order for them to report it back positively to their families, to their friends, to future prospective students. There are various surveys, as you know, the national student survey being one of them, from which it will be very evident if things are not right. Of course this may lead to a lack of recruitment, and a lack of recruitment puts the future of a part of a university, inevitably, under significant threat. It is very difficult to make any higher educational entity pay for itself without the background of undergraduate education and its funding as part of the package.

Professor Riordan: I think we will be equal to this challenge, because like many universities, in our case at Essex 46.5% of students are on unregulated fees now, so they are either international or postgraduate; many of them are self funded, and some of them have families putting in considerable amounts of their own hardearned cash up front into fees. This is not something that we are not used to, and that will be the case for many of the universities represented at this table and around the sector. I think it is a challenge that we will be able to meet; it is something we are familiar with, but it will clearly extend to pretty much the full extent of our activities.

Professor Ebdon: I think the honourable Member’s question is a very good one, because if you look at the United States you see a much more stratified system of universities, with exceptionally well-funded and high-achieving universities at the top, but a much wider spread. In this country, of course, we have always had a system in which we expect the same standards to apply throughout our university system. In the States they do not have that. In the States they have very distinctive universities. You can go to a university that is just one colour; you can go to all black or all white universities-largely the surrogate for class in the United States. I think we should look with some anxiety at the fact that we might end up with a system like the US. Yes, there will be winners from this system, but there will be a large number of losers, and those losers will be in particular social classes, and I think MPs would be right to be worried about that.

Q109 Nadhim Zahawi: Professor Ebdon, can I just pick up a point? You quite rightly say that there is a difference between our system and the US system, and then you went on to say that in our system the difference is that we expect all universities to be of similar quality.

Professor Ebdon: No, I said standard.

Nadhim Zahawi: Same standard? And the word was "expect". Do you think we have achieved that in our university system?

Professor Ebdon: Yes. To be absolutely clear, the difference between quality and standard always comes up as a difficulty when I am in this House, because we use these words in technical ways in universities. The standard is the level of achievement of students, and we have for some time had a system in this country designed to make sure that there is a broad equivalence between a first obtained in any one of our universities, and that is very important internationally. It is actually not so difficult within one’s subject area to say, "Have we got equivalent standards?" because the external examiner system enables one to do that. The challenge comes between different subjects. But it is something for which we strive very hard, and we have a quality assurance system in this country-a framework to help us to assure that. Of course, very few countries use the external examiner system. It is a great strength of the UK system.

Q110 Nadhim Zahawi: I hear you. Do you think we have delivered that in reality on the ground?

Professor Ebdon: Yes I do. I think it is remarkable that we have managed to widen participation in our universities in this country, reach out to a much broader percentage of the population and sustain that. That is one of the remarkable achievements of UK universities.

Q111 Nadhim Zahawi: Does the rest of the panel concur with that view-that we have achieved that on the ground rather than its being an aspiration?

Professor Gaskell: I would tend to argue that what has been extremely successful is the achievement of appropriate minimum standards, which does not necessarily mean that a degree means the same thing for all universities, but it is of key importance that there is not a broad scale. There is a minimum level of achievement that international companies and organisations can have confidence in. I think it is perhaps a little misleading to suggest that the average employer would consider a first-class degree to be the same, regardless of which institution it was derived from. But the minimum standard is important. That is a different issue.

Chair: I am conscious that we have a lot of questions and Paul has been waiting patiently to pursue his line. Paul, can you come back?

Q112 Paul Blomfield: Yes, I certainly will, thanks Chair. I wanted to explore another area of a more marketised system, and I appreciate that we are looking day by day at a system that looks less marketised than the Government’s ambition. Do you feel that any subject areas might be a casualty of a more marketised system-areas that would not sustain demand in the face of higher fees?

Professor Riordan: The obvious answer is that arts and humanities might suffer, but if you look at what happens elsewhere in the world, where there is a marketised system, in the United States, people do not stop studying those subjects, and I genuinely do not believe that students go to university purely with an economic motive in mind. Certainly many of the students I talk to do not have that as the primary focus; clearly they are aware of it. Who knows, is the answer, I suppose, but I have enormous confidence that students will continue to want to study those subjects at universities that really do offer a great education-something that we can be proud of and students can be inspired by. They will recognise that yes, there is going to be a headline fee, but what they pay back will be related to their subsequent success in life. So if they do become a struggling novelist, for example, they perhaps will not pay at all or they will end up paying a lot less for their education than those who go on to become the multi-million, airport novelisttype bestseller. It seems to me that there are as many reasons to say that those subjects will thrive because they will be better funded, and there may be better morale among the staff if that happens, as there are to say no, students are going to make an absolutely economic decision, "I am only going to study accountancy or business or law," because of a level of fee.

Professor Gaskell: I think there is perhaps another twist on that, and I think Colin is exactly right. These subjects will survive-partly because universities will ensure that they do, but in terms of the student body I do worry that, to be blunt, some subjects will become white middle-class student subjects, and that, I think, is a real risk. I think we will have our work cut out to ensure that the demographic that is represented across the university is reasonably well represented across the subject mix as well. That will be a real challenge.

Q113 Chair: Just on this, do you think it was wise for the Government to set the fees regime eight or nine months before they actually publish the White Paper?

Professor Riordan: I think the reason why they did that was that they recognised that universities could not continue living with uncertainty. As Professor Arthur mentioned earlier on, we had years of this under the previous Government-awaiting a review and then awaiting the Browne review. I think what they were trying to do was to get some certainty in the system as soon as possible, but of course the best-laid plans and so on, and I think the intention was to get the White Paper out very soon after the fees vote, but it became a much more complex matter than was anticipated.

Q114 Chair: On the basis of what you said in answer to previous questions, it looks as though the uncertainty is still there.

Professor Riordan: Yes, it is.

Professor Ebdon: I think it has been a very unfortunate circumstance. Universities have always made it quite clear to Government that we had to set our fees around about this time, because students who are thinking of applying need to know what fee they are going to be charged. But it has come at a time of very particular uncertainty. We have had the uncertainty about when the White Paper is going to be published and the important things within that. We have had the uncertainty about the visa situation-a consultation on Tier 4 that looked at one time as if it would cause massive damage to the number of students and therefore the income to universities. We have had a Government White Paper that says that the Government want to shift teacher education from universities into schools. That is a major income line for my university and many like mine. There is the uncertainty about nursing and midwifery and professions allied to health, because they are funded and commissioned at the moment by the strategic health authorities, and about the only thing we know is that they are being abolished. We have had this great uncertainty about virtually every income line coming into the university, and in that context we have had to set fees, so it is no surprise that people have erred towards the top end, rather than the bottom end.

Professor Farwell : I will not repeat what Les has said because I would support what he said, but I would add another point about the uncertainty. We understand why the announcement around fees has come early, but there are many details about how, for example, part-time students are going to be included or not included and they add to the uncertainty that has already been articulated by Les.

Libby Aston: I have heard somebody describe it as like driving at 100 miles an hour towards a system and we are not quite sure what it is going to look like when we get there, why we are driving there, and about many of the parameters of the journey along the way. There is this fundamental issue that once it was announced, this tectonic shift in how the money was going to flow through the system and this limit on fees-it is such a big change, and we are moving towards it so quickly, and the difficulty of this is doing things almost the wrong way round-we needed serious discussion of the White Paper first, and then to start to put these things in place. You can understand the circumstances of this and why these conditions have had to come about in the order they have, and the Government were doing their best to provide stability and funding for universities, but it is a very unfortunate set of circumstances, which means that we are doing things in a really funny order.

Professor Arthur: The first prospective students who will be paying the new fee will be at an open day at the University of Leeds in about 60 days’ time, so it is all to do with relative timing. The timing was initiated by the announcements in the first Budget of the new Government and the comprehensive spending review. If we had not been able to put the new regime in place for 2012, we would have had a year of extraordinarily difficult times, with a lot of money removed and absolutely nothing to replace it, which I think would have been a real problem for the sector. I can understand the timings. I do not understand why the White Paper has now subsequently been delayed-that is Parliamentary business. It could have been closer, but I think the fees decision had to go at that pace because of all the other decisions.

Q115 Paul Blomfield: Incidentally, I am not sure that the White Paper has been delayed because of parliamentary business, but to follow up on an earlier point from Professor Riordan, you were, I think, alluding to the potential withdrawal of funding from other areas of university activity as a result of the Government having got their calculations wrong on where the fee levels were going to settle. If that is the case, and there is additional constraint on teaching and research, what areas do you think are most vulnerable? What are universities going to have to stop doing?

Professor Riordan: I really do not think that should happen. I think it would be a wrong move to say, "Let’s take money out of Quality Researching funding, or money out of the remaining teaching grant." It seems to me that a better way of recovering that money will be to have a modified form of the Browne levy, so you effectively reduce the number of student places available across the piece. If that is not available, you reduce the number that are automatically allocated, and leave, say, year by year 3%, amounting to 10% over three years, of student places that are available, but you have to bid for, and you could bid for those on the basis of the level of fee you have set. Those who have set a low fee would perhaps get them either for nothing or for a very low price, and those who charged a high fee would have to pay more to secure those places. That would allow more money to flow back into the system and would allow universities choice over whether they engaged in that or not, or preferred to restrict their numbers, and maybe others would be able to take up the slack and recruit more than the 10% difference.

QR would be a disaster. There is only one way of funding blue skies research; it has to be public funding, and economic prosperity into the future absolutely depends on the amount of money that goes into it. You can show that. That really must not happen, and it will be quite wrong to take money from the teaching grant when it would simply reduce the quality and reduce the unit of resource on an even basis across the piece, when people have set slightly differential fees at least. So something related to our own decisions and some sense in which the universities can then decide which route they want to go in that new landscape will be more beneficial.

Professor Ebdon: I know that Oscar Wilde said, "The only thing we learn from history is that we do not learn from history," but there is some history on this concept of taking away 10% of funding and then bidding for it. The Polytechnics and Colleges Funding Council did that-sadly, I am old enough to remember that-and exactly what it did was drive down the unit of resource very rapidly indeed, because you had to bid to get your money back. You were either looking at a 10% reduction in your funding, or you had to take significantly more students. That drove class sizes up, contact time down-the very things that students say they most value and the very things that the Minister says he most wants to see improved under the new regime. They will be the first casualties, and then of course we begin to look at the least economic courses in our provision and say, "We can no longer afford to crosssubsidise this particular subject area because there are not enough people taking that programme." I am sure that is what we will see again; that is what we saw before, and that is what we will see again if that path is followed.

Q116 Nadhim Zahawi: What barriers are there to further efficiency within the sector?

Professor Ebdon: There is one very important barrier: we would all like to engage in more shared services. We do remarkably similar things; we would like to do them together. If we engage in shared services, those shared services are subject to VAT. A change in the arrangement so there was not 20% VAT on shared services would be a very significant help and stimulation to further efficiency in the sector.

Q117 Nadhim Zahawi: I hear you on that, but what are the other risks around and compromises that you have to make when you, for example, share services?

Professor Colin Riordan: You will not get any value out of it unless you have the same business processes. Say Bedfordshire and Essex shared an HR department or service: unless we unified our promotions system, you would have to have two promotion systems, for example, and if the Council of the University of Essex wanted to say that research was a key element and Bedford wanted to say knowledge exchange was a key element, or vice versa, and they did not map on to each other, it would then be difficult to share that service and get any value out of it. I suppose on things like payroll presumably you would be able to have the same business processes, but that requires organisational and cultural change, which is not insurmountable. It can be done, but it has to be recognised that unless you can map the business processes onto each other it is not going to work.

Professor Gaskell: I think one important point to consider is that there is some scope for further reductions, but one barrier is the recognition that what you are cutting is the quality of the student experience. We tend to assume that the quality of the student experience is solely related to expenditure on academic staff. Library staff, IT staff, estate staff and so on: all of these individuals and organisations within the universities contribute to the quality of the student experience. It is foolish to imagine that we can simply keep on squeezing what is sometimes simply called the administration without recognising that that would directly impact on the student experience.

Nadhim Zahawi: So the risk is that those people also interact with the student, and therefore -

Professor Gaskell: Very directly, yes.

Q118 Nadhim Zahawi: What other revenue sources are you considering, other than shared services?

Professor Arthur: Of course a major effort in alumni and development, and fundraising from those who would support a university in the city and region, and alumni internationally. Many of us are following an American style of developing the alumni function of our universities. I have been at that over the last seven years at Leeds. We have launched our first campaign, and I guess if you look back at the history of higher education, particularly between the two wars, philanthropy was absolutely commonplace. Of course, it fell away with state funding, and I think we largely lost the culture of asking, with one or two notable, ancient exceptions. We are rebuilding that, and lots of universities are doing that and it is becoming quite successful. That is one area.

Interactions with industry, of course, are another potential source of funding. For both research and education and greater relationships with small- and medium-sized enterprises in the city and region, I think most universities are ploughing that furrow very significantly. Then I guess also we should mention international students: the international student market was growing at 7% to 8% per annum internationally, and I think most universities in this country were expanding at that rate, roughly. I am a bit worried about the visa changes, particularly the post-study work change to Tier 2.

Chair: We will be asking a question about visas later, so take that as read.

Professor Arthur: International student growth in my turnover is now £50 million, and in my current projections it is set to grow to £70 million. I have scaled that back a wee bit in light of recent decisions.

Professor Gaskell: It is also important to recognise that there are two aspects of international student education. The first is clearly directly impacted by visa regulations: the education we provide to overseas students in the UK. There is another very important aspect-particularly in my university-and that is the provision of our education to students outside the UK. We have 2,000 students in Beijing, which is educationally first rate. It is very good from a number of standpoints, including building up further international relations, but it also operates at a surplus.

Libby Aston: I think this question of alternative sources of funding is a really critical one. Universities are private institutions in receipt of public income. They are not lazy public institutions sitting there with their receipt of full public income. Alliance universities-this is the case across the sector, but I can only speak for the 23 I represent-receive less than 50% of their funding from core public funding sources. That is not an unusual picture for a university.

Yes, it is absolutely critical, but there are two things to bear in mind. Firstly, one thing universities are very successful at is this idea of a gearing ratio: that you give us a small amount of public funding-for example, for working with industry-and we will bring back a lot more on the back of it. For example, it is recorded that we bring about £7 back for every pound invested in public funding. That is a fantastic gearing ratio, but when you are reducing the number of pounds going in-the amount of public investment up front-obviously our ability to bring in private investment on the back of it is reduced.

The second point is that-people have described it as a perfect storm; that is perhaps a little bit overdramatic-all of the possible sources of alternative funding are under threat for different reasons. They are all unstable and they are all under threat. You are absolutely right to identify it, and it is a critical issue for our universities. We are historically very good at finding alternative sources of funding, and we will continue to be, but it is a very difficult area.

Q119 Nadhim Zahawi: Let me just push back for a second on that, because we heard from Professor Arthur that part of the cause of the failure to attract alumni contributions has been the dependency on public funding. I hear you when you say that universities are private organisations, but even private organisations can always do better. There is a disconnect here, i.e. that too much public funding makes you behave differently. There is some research-very little research, but some research-from the countries that do have fees, Australia, Canada, America, that people begin to behave differently when they are able to go out and market themselves and reap the rewards for that.

Libby Aston: I absolutely agree with you. I just do not think that our sector has been lacking in drivers to be innovative and entrepreneurial in seeking alternative sources of funding. You are right to say that there will be increasing and additional pressures to do that. As Professor Arthur said right at the beginning, a competition for funding and an autonomy and freedom to be innovative and entrepreneurial are exactly the things that will drive us to be a better and more efficient, more successful sector.

Chair: I am conscious of the fact that Rebecca Harris, I believe, has to leave early, and I would like to bring her in to ask some questions on fee setting before she goes.

Q120 Rebecca Harris: Thank you Chair. I want to talk about how you think the new charging fees regime is going to look in practice, because I think about 10 institutions have already said what their intentions are in terms of fees, and about seven of those have already said they intend to charge the upper limit. What impression do you have of the number of institutions that are likely to wish to charge the full upper limit?

Professor Riordan: I suppose the answer to that is we will soon see. It is not something that vice chancellors have discussed among themselves because of competition-that would be quite wrong and we certainly have not done it. But I think we are all aware that, when you look at the drivers, the question that you ask yourself is, "What would be the reason for not charging the fee that will allow us to give the best possible education to our students? Why should one not do that?" That is a difficult question to answer. If you believe that you are offering extremely high-quality education, you have a great library, the best staff, sports facilities, etc, and you intend to invest in all those facilities and improve them, enhance them and make them fit for the future rather than just for the present or the past, then that tells you that you need to charge the maximum fee that you are allowed to, and you believe that you are offering real value to your students.

Professor Gaskell: It is important to recognise that there are different approaches one could take to setting fees. One could take a purely market-driven approach, and indeed there are pressures from Government to do that. Then, of course, you would simply look at your respective university’s position in the marketplace and decide what fees might be justified. The approach that we have taken has been quite different. One approach is to say, "What do we need to charge to replace the income we are losing, having built in some quite significant efficiency savings? Building in all these factors, what do we need to charge?" The other approach that we have taken is to say, "Let’s use the best methodology we have for determining how much it costs to provide that education, again building in some quite challenging efficiency savings." Those two approaches have essentially given us the same answer. This in fact has not been a market-driven approach. We have essentially taken the approach: "What is the lowest fee we could charge?" We have not yet announced it, but we will not be out of line with the rest of the sector.

Q121 Rebecca Harris: Shall we just try to guesstimate then, the proportion of institutions that are going to be at the upper limit, because the logic of what you have said is pointing in that direction?

Professor Gaskell: I guess the question you are asking is whether there is any reason to suppose that those who have announced their fees so far are unrepresentative of the sector. My guess would be no.

Q122 Rebecca Harris: The Government have said that only in exceptional circumstances would institutions be expected and understood to go for the upper limit. What do you take the Government to mean by "exceptional circumstances" ?

Professor Arthur: There are only three people who can answer that question: the three people who used the words. We are taking a very similar cost base and "what have we lost"-type approach, and also absolutely critical in that is quality. For example, I could provide an arts degree at a lower cost, but at a student/staff ratio that is not internationally competitive. I am running student/staff ratios in the high 20s in some of my arts and humanities subjects; my competitors internationally are running student/staff ratios of 10. That is the real issue: do we want to provide at the very highest international quality, and do we think that is important to the country’s future? Where there is a margin-and I can tell you that the margins are not very great-that would immediately be reinvested into that quality issue, and that is how we arrive at the fee structure. You also have to think about those subjects and what we charge our international students. The bottom line is that the figures you are seeing, the £9,000, are about the real cost of providing a higher-quality arts and humanities degree. The margins get smaller the further you go up the banding structure. That is the bottom line: that is what it costs to provide a really high-quality education. That is one definition of "exceptional", I guess.

Q123 Rebecca Harris: I gather that some universities, such as Goldsmiths, have said that they might be looking at a variable fee option, perhaps for less popular courses. How realistic do you think that is? How likely is it that we will see different fees for less popular courses?

Libby Aston: I think there are two sides to variability by discipline. We all know that students choose on the basis of their subject, their discipline, and therefore there is a lot more differentiation in the market in terms of accepted hierarchies, who are the elite, etc. There is a lot more movement and differentiation across different subjects and disciplines. In introducing more of a market into the system, it is a very healthy thing to do to have differentiation of graduate contribution levels by subject or discipline, and we are all aware of the fact that the returns are different, the value is different, in the marketplace, so it makes sense. The difficulty we are facing is that, as has been eloquently described, the cap that is currently in place, when you strip out public funding for teaching, is not far off the cost of most courses. We are not in a position where it is possible to differentiate in a way that would more accurately reflect the market. I think you will see some differentiation in price, subject to discipline; I do not think you will see as much as is an accurate reflection of the market and how much differentiation there is in the market.

Q124 Rebecca Harris: Maybe the differentiation is perhaps to prop up certain courses, rather than the market value. There will be a suspicion that universities will look at charging on the basis of being reassuringly expensive, and there is the risk that a course that is not coming up to full cost will be suspected of being of less value. Do you think there is any possibility that universities will factor that into their charging regime?

Professor Riordan: There are two things on this. One is that you just have to look at what we presently do on overseas fees. Those are unregulated fees, and the normal practice is-certainly in my university, I am sure it is in others-that you do not charge more for an undergraduate business studies degree-maybe some do, we certainly do not-than you do philosophy just because business studies is a lot more popular so you can get more money out of the students. We do not do that: we set fees in bands. Clearly it is more for engineering, but it would be anyway because we would have Government funding for engineering.

The other thing is that universities are not there to make money on courses. We do not make profits; we do not have shareholders. We are there to provide education. It is very important to me that the University of Essex continues to be able to educate in art history and philosophy and literature, as well as in business studies and accountancy. Almost any of us at this table could make our universities far more financially efficient by becoming essentially an enormous business school with one or two bits of other things attached. But we do not do that, because the way that universities finance work is that you have money from a very large number of sources-which we have already discussed-and they all come in and you allocate them out in order to achieve your objectives, which is essentially to extend and deepen the fund of human knowledge, not to create profit margins.

Professor Farwell : I think an important principle in all of this is that we are not taking advantage of our prospective students in terms of where our fees levels end up. That is therefore linked-we have talked about this before-to having very clear information for prospective students about what they will be experiencing on their different courses, so that they have an understanding of the kind of course they are embarking on.

Professor Ebdon: I think there is a danger that we have created a system in which signalling is important. We are dealing with a generation that buys designer goods, and therefore is influenced by the reassuringly expensive tag. I am sure that, as Colin says, universities would reinvest that money in the student experience, so it becomes a real challenge if you do not charge the maximum not to seem to give an inferior student experience. But again, it is worth looking at the United States, where of course there is a freeforall in the market. If you go round American universities, you see wonderful sports stadia, you see marvellous dorms, you see nonprofit making charities reinvesting that money back into the student experience in a lavish way, but of course now many of those universities are facing a real crisis because of the economic recession in the United States. They have fees that are uneconomic; it is not a sustainable model. That is another reason why I think it is important to have a cap on fees.

Q125 Rebecca Harris: How will a student determine whether a given degree course is good value for money in future?

Professor Riordan: They will have to make a judgment on the information that is provided, which could include their potential future earning power. They could certainly look at that information, and that will be provided. They could look-now, I am not saying that everyone is going to be in a position to do this-at the quality of the staff: are there world-leading academics at this university and will they actually teach me? They could look at the contact hours; they would have to understand that contact hours are not the be all and end all, and in fact it is the totality of the interaction that really matters. What they do look at is facilities: they come and look at the sports centre; they come and look at the accommodation; they are interested in the social facilities. They will make a judgment based on all of those things. One of the most important matters is nearly always word of mouth; other people telling them they had a great time at that university does seem to affect things. Clearly they can have a look at the educational attainment and the levels of achievement of students who go there, and they will make a judgment in the normal way, as anybody would making a decision about which way to go when you know that you are going to incur a liability.

Professor Arthur: I would add to that graduate destination- not necessarily the amount of money you are paid, but the type of job that you do and whether or not it is a fulfilling job. I think there is perhaps a bit too much emphasis on the pure graduate premium, but coming to university is a life-changing event, and generally speaking you will end up with a type of job that will be fulfilling for the rest of your life. That is crucially important.

Q126 Chair: Just a couple of quick questions. First of all a practical one: if a student signs up for a course at the fee level of, for example, £7,000, will that £7,000 remain constant over the three-year period of study? I see nods; is that unanimous?

Professor Arthur: That has been the system under the previous fees regime, so when the fee goes up each year, it just goes up for those in the first year and follows through the three years.1

Chair: So you know the level of your commitment, and that is not altered. That is important. Sorry, did I-

Professor Ebdon: It doesn’t. The Government announce the maximum fee level every year, the £3,000 uprated by inflation, and then all students pay that fee, so in a sense they will pay the original fee uprated by inflation, so you do not have different fee levels for your different years of students, Michael.

Libby Aston: In real terms it stays the same.

Q127 Chair: That is an interesting qualification. So in effect, if there is built into the system a price increase in line with the CPI or whatever, then students will have to pay more than originally anticipated in cash terms?

Professor Ebdon: Yes, I think the tradition now is that if you are paying it to the Government then it goes up by RPI. If they are paying you, it goes up by CPI.

Chair: That is interesting.

Professor Farwell : I believe that in the fees that are being set in 2012, if we imagine that there might be a purely inflationary increase over and above that, then that would have to be specified currently.

Q128 Chair: HEFCE calculates a block grant according to certain bands, depending on the cost of the courses, and it varies from £17,800 at the top for medicine and dentistry to £6,000 for the, if you like, cheapest courses to deliver. Do you think fee structures will tend to reflect that? Obviously, institutions cannot charge £17,800, but do you think there will be a reduction for the cheaper courses?

Professor Ebdon: I think it is worth qualifying that: we actually get a block grant from the funding council. After we have received the block grant and we know the numbers of students we have recruited in those particular bands, a calculation is done to see whether the unit of resource per student is within plus or minus 5% of that. Although those are indicative figures, it is not a voucher system, like the new system will be. At the moment, we have a block grant and we have considerable crosssubsidy between courses, because those bands are very broad bands, covering quite a large activity. So within band C, for example, are all of my computing students, who are a good deal more expensive than some of the other students in band C, so there is broad variation.

The question is-I think it has come up before-whether we are expecting to see variation in the fee levels charged. I suspect we will not; we do not at the moment, but it is possible under the present system. If you do the open day talk, as I frequently do on a Saturday at my university, you get questions that show there is not a great level of understanding about the fee system as it is now or in future. We frequently still get the question about having to pay £3,000 up front. People do not understand the very complex fee system that we have at the moment, and they will not understand an even more complex one. I do not think they will understand that there are different fees for different courses. It is altogether too complicated, and I suspect that most universities will go for a common fee across their programmes.

Chair: Professor Riordan; I want to move on if you can just confirm whether you agree.

Professor Riordan: Just as a point of information, London Metropolitan University has announced that it will charge differential fees within its own institution.

Q129 Chair: That is interesting. Professor Ebdon thinks it will be a standard fee. We have had an announcement that one university will not. What do you think is the situation?

Professor Riordan: I think some may go for that. London Met has said that that is what it is going to do, but it will be up to each university to decide. We certainly considered it: we set our fee a couple of weeks ago. We had considered, at one point, setting a differential fee, but having thought it all through, in the way that I explained to Rebecca Harris, we decided that in the end it was clearer, simpler, less confusing for students and fairer to set a single fee, which is the Essex fee.

Q130 Chair: But would it be fair to say that it is not dependent on the bands that HEFCE worked?

Professor Riordan: No, it is up to us now.

Q131 Nadhim Zahawi: I think we touched on the factors that influence choice for students if these are essentially equal. I think, Libby, you talked about course being the influencer, and friends and family and experience. How much of an influence do you think price will be when the variable fees-I know I am asking you to stick your finger in the air, because until it is there you will not know-how much of an influence do you think price will be when you do have variable fees?

Professor Riordan: Our estimation has been that price is going to be less of an influence than people felt, because it is capped at a point at which in a sense the band is not big enough. That is one reason; the other reason is that-Professor Ebdon may well not agree with this-I nevertheless see this as really quite a socially progressive system. It allows anybody to go to university at no cost, the Government will provide the money. It will go from BIS, to the student loan company, to the university, and a grant will as well for anyone earning less than £25,000, and a further loan on the same basis, so that you do not need to spend all the hours God sends working in Tesco to get through your studies. Anybody from any background can go to university, and they will not, as in the United States, a month after they graduate, start having graduate debt repayments whether they are employed or not employed. They will not have that.

It will essentially be rather like an income tax. So if you are on the basic rate of tax, instead of paying 20%, you pay 25%. When I graduated I think the basic rate of tax was 30%, and when I got my first job it was 25%, and of course you carry on paying that for ever, whereas with this, you have a chance, at least, of paying it off, although perhaps not until the 30 years have elapsed. So it seems to me that the Government have built in a huge amount of safeguarding of social mobility, but it is absolutely true, as we heard earlier on, that perception is a key issue. We really do have to communicate this to people: that the Government are going to fund your fees for you, and you will be expected, later on, to repay as and when you can afford it.

Professor Farwell : I would not disagree with what Professor Riordan has said, if you take a particular view of what individuals want from higher education. If you take the view that what you have is a group of young people who are typically going away from home, then I believe that what he said is correct. I think if you take a broader view, then some groups may be more price sensitive. For example, one in six of my full-time undergraduate students choose not to take out a loan, because they do not want to do so for various reasons- personal reasons-and I imagine that some of those students, who are often local, will be quite sensitive to what kind of fees are levied.

Also, I know for sure that some of our mature students who are studying alongside work, who already have particular personal responsibilities-they may already have mortgages and so on-may well be more sensitive to price because of the amount of loan that they will have to take out over and above what they already have.

Q132 Mr Ward: If I was a potential applicant from a low-income family, and there were two courses, wouldn’t I be foolish to go for the lower price?

Professor Riordan: I suppose it depends what the course is and what you want out of it, what kind of a university––

Mr Ward: Two equal courses, one is at £6,000, one is at £9,000. I would be stupid to go for the £6,000, when actually I am going to pay exactly the same for both.

Professor Ebdon: I think this is one of the features of the system that I imagine the middle classes will cotton on to quite quickly. I liken it to when I took my first mortgage out. I was not so much worried about the total sum or the number of years I would be paying it off. What I was worried about was whether I could afford the monthly repayments. The feature of the system is that the monthly repayments will be the same no matter how large the total is. I have some optimism that one can explain this system to the middle classes. I think it is more difficult if people come from backgrounds where mortgages and mortgage calculations are not so common. We are going to have to work a lot harder there.

Of course, the advantage of the £9,000 course is that you would expect to see significantly more investment in that course. You would expect an improved student experience. If the course was at £6,000, the experience would have to be a poorer experience than you are presently getting, because £6,000 is less than the amount of money that we have per student at the moment.

Professor Arthur: I was going to say that the big unknown in this is how much debt aversion will come in to play, and how much people will be advised to go for the lower cost course by their advisers. I would come back to something I have said all along: I do not think anywhere near enough work has been done yet on publicising and making clear the way in which the new system will work. There is a slight aversion to marketing in the current Government, and expenditure on marketing, but I do think publicising and marketing this new system is fundamentally important. We did not get it right when we put fees up to £3,000 in 2006. We should learn that lesson, and there needs to be a massive concerted effort from Government, from secondary, from further, from higher education, all joined together to really explain this new system to people.

Chair: We are just moving into this area of questioning.

Q133 Simon Kirby: Yes, very briefly picking up on Professor Ebdon’s point, I think in a way it is quite patronising to say it is a more difficult thing to sell to poorer students, or potential students, because presumably for all of the universities, people who are applying will need a number of A-levels to attend. It is quite a clear system, and one of the benefits is that it is clear that anyone can go to any university if they want to and they are academically able and have been offered a place. They pay no money up front. It is not a complicated thing to explain, and the same applies to people from-to use your expression-middle-class backgrounds as poor backgrounds. It is not complicated, and I think you do people a disservice using that kind of explanation.

Professor Ebdon: Perhaps I can respond to that. Obviously, I am in daily contact with potential students coming from that background, and they find the system much more difficult to understand. I myself came from a background where nobody had previously been to university, and I remember every time I had a setback, the common response from people in my peer group back home to me was, "University is not for the likes of us." I think it is very easy for people without that tradition of going to university, without that tradition of investing in themselves, to be put off. We live in a society of debt, most of us. The difference is whether it is manageable debt or unmanageable debt, so I think it is reasonable to say that there are different responses to debt in different groups in this country.

Professor Farwell : I make the point again that not all students can necessarily go to all universities, because some are constrained in terms of their locality and their mobility.

Simon Kirby: That is a fair point.

Professor Arthur: It is not complicated, but it is not a very easy soundbite, whereas £27,000 debt, and debt with an inflection in the voice, is a very easy soundbite. That is the problem we are up against, and our media tend to work in 20 second soundbites. You try getting the whole explanation of the new system out in 20 seconds; it is actually very difficult. That is the problem we are up against, and we need to start using language that other people can understand. When you are earning £25,000, it will cost you £30 a month, or the price of two pints of beer a week-brackets, in the north of England, close brackets.

Q134 Chair: We have a whole range of questions on access and participation. Some have been anticipated in the responses that you have given, so I would ask you not to duplicate them. Just before I bring Nadhim back in on that, I think Professor Arthur made the point that we did not market the initial tuition fees level properly. I accept there were a lot of presentational difficulties about it, but at the end of the day, if my memory serves me right, the number of lower-income students who went to university did marginally increase. I think that fell off in the last year or 18 months, but certainly there was no obvious impact in terms of demand.

Professor Arthur: You are absolutely right. In fact, the participation of students from low-income families in Russell group universities went up. Of course, the biggest difference was removing the upfront payment of £1,100 or whatever it was at the time, and replacing it with no upfront payment but £3,000. It did work, but the publication and the publicity about it was relatively late in the day. I think it could have been better.

Professor Ebdon: Can I add that the reintroduction of the grant was also significant for those students? You can see those figures in the improvement of participation by lower income groups. I think the grant re-introduction was very important.

Q135 Nadhim Zahawi: Before we get on to access, do you think we will see less popular courses put on special offer to attract more students and retain the staff?

Professor Riordan: You might see grants, bursaries and scholarships. We do that now. Do not forget that none of this is new. This is merely an extension of activity that already happens, whether it is in overseas or postgraduate fees, or indeed some present undergraduate programmes.

Q136 Nadhim Zahawi: What courses do you think would be at risk of that?

Professor Riordan: Languages; my own subject has been in difficulties for many years now.

Q137 Nadhim Zahawi: Just on access, what is the difference between talking about access and participation, and does it really matter?

Professor Riordan: Fair access is whether what you might call elite universities are really open to all. Does everybody have a fair chance of getting into one of what are commonly regarded as the elite universities? Widening participation is the activity generally in the sector of reaching out to students who just have not gone to higher education. So there is one thing: can you go to higher education at all? Do people go to higher education from certain areas or socio-economic groups? That is widening participation. Fair access is, that being the case, can they go to the universities that take, say, a higher proportion of students from private schools? Is there a level playing field in terms of access to those universities?

Professor Gaskell: I just want to develop that point and recognise that much of what universities do at present-certainly in my university there are plans to extend this-is concerned with widening participation in higher education. For example, we have a couple of partnerships with local schools, where our objective is to help them build up their sixth form, their years 11 and 12, and a measure of our success, in part, will be the proportion of those students who go to university-not to my university, but to university. One of the points that I hope the White Paper will acknowledge and get right is that the contribution that universities make has to be taken across that broad canvas. To simply measure the success of universities’ commitment to widening participation in terms of the make-up of their own student body is under-representing all the work that is done by universities.

Q138 Chair: Can I just come on to-we have touched on this-how you sell the new package to particularly lower-income and historically lower-aspiration students. I suppose you would say that there is a role for Government and universities, and indeed Parliament as well. In that context, in my experience of representing a constituency of West Bromwich West, where there has been relatively low participation in higher education, the role of Aimhigher was extremely constructive. That is going. How do you think universities and Government can replace it?

Professor Arthur: Most of us would be working with a series of schools, quite often in the region and in the city, and increasingly extending out from that. I think we would envisage that part of our effort would include a redoubling of those efforts and greater investment in those efforts and those schools, and possibly extending out geographically into other parts of the country, and I think also collaborating with other institutions around the country to make sure that there is reasonable coverage. A big effort from us ourselves and our own outreach activities is critically important.

Just to put some numbers on this, we would be working with 200 schools, and we would have about 40,000 contacts. We would also, by the way, have some very specialised schemes, which I am happy to describe, which are really targeted at individuals from low-income families or care families, first-timers to higher education, individuals from schools with very low GCSE attainment, those types of criteria. We used to use educational maintenance allowance as a criterion to identify a potential student we would like to work with. So we have some very special schemes for really targeting and working extensively with those individuals to persuade them to come to higher education. One is called Access to Leeds, the other one is called Reach for Excellence. Both of those have had significant philanthropic support.

Professor Ebdon: I pay tribute, obviously, to the work that Leeds does in widening access. It is very much treating the vanilla student there. MPs should be aware that more students go from colleges into higher education than go from schools-43% of my students are over the age of 24 before they join us. Getting into schools and getting the message out there is in some senses the easy bit. There is a plethora of colleges it is important to get to, and more important, obviously, are the people who are perhaps no longer in the formal education system. There are people who maybe missed their first chance to go to university, or they did not have a first chance and now we need to reach out to them and tell them there is still the possibility: they have not lost out for ever just because fees have tripled. We need to reach out to them.

I think that the role of social media is absolutely crucial with this younger age group that Michael is talking about, and that need not necessarily be terribly costly. It is such a disappointment that there has been a delay in reaching out to that group. Reaching out to the mature student market is more challenging. We knew that it was more challenging when the £3,000 fee came in. There is, of course, a built in reason why it is more challenging, and that is that they have less time to recoup the benefit from the investment they are making, because the older you are then the less your working time. So we need to put particular effort into that mature student market.

Professor Riordan: I would not want the Committee to lose sight of the fact that the key intervention is at age eight or nine. That is where the evidence shows you can make the biggest difference. I am absolutely sure we all do this: you need to go into primary schools and you need to get the families involved. The parents need to come on campus, and so we have programmes for children of that age, and they go through a programme for a month or so and then have a graduation ceremony with little robes and Professor Fluffy gives them their degrees, and this really matters. It takes away the fear and ignorance, as it were, or lack of awareness about what higher education really is.

Q139 Chair: I certainly agree with you about the engagement with primary schools. However, there has been some interesting work by the Institute of Fiscal Studies that shows that at the age of 16, something like 53% of lower-income students aspire to go to university, but at 18 only 13% do. If you take the figures for higher-income groups, it is hugely higher. What is not being done between 16 and 18 to ensure that that cohort of students realise their aspirations?

Professor Arthur: I think that one of the quickest wins in this field is the quality and accuracy of the independent advice and guidance that is given to 14 to 16-year-olds, and as far as one can gather it is a pretty variable feast. We certainly, in the Russell Group, frequently come across the attitude that you should not apply to Russell Group Universities because it is not for you. That is being expressed to those individuals, and that is a great shame.

We have held events for secondary school teachers about the sort of things that you need to be doing to get people to come to the Russell Group institutions, and it is pretty unusual to get significant attendance from the state sector. I am afraid I do have to say this: the number one issue about all of this is educational attainment in secondary schools, and the type of courses that people are studying at A-level. That set of issues must be made clear at an early age. That is one of the reasons why the Russell Group produced that publication recently called Informed Choices, which was some 18 months in gestation. It was in some ways a little bit controversial, but it did state very clearly the sort of facilitating subjects that you need to have at least two of when you apply to a leading, research-intensive university. I do not think it is unique to the Russell Group, by the way, that set of issues.

So if you ignore that, this is a whole-system problem, basically. You have to work on the educational attainment, the independent advice and guidance, the funding systems-EMA or its replacement of yesterday-and admissions to university. If you only ever work on one part of it, then you will not succeed, and we will be having the same conversation in another 15 years’ time. The whole system has to be addressed.

Libby Aston: Chair, if I may I would like to go back to your question about how we communicate this new system so that finance is not a barrier. Firstly, we need to understand in what way finance can be a barrier. Two points on that: all of the research evidence shows that, first, it can be a barrier in terms of upfront cost, and secondly it can be a barrier in terms of debt adversity, or perception of debt. Those are the two things that we need to tackle; that we need to communicate clearly to potential applicants.

Then in terms of how we communicate this, again two points. Firstly, language matters. I know this has been said already, but if you tracked back or looked at your public records of our conversations this morning, how many times have we used the word "fees"? It is not rocket science as to why, when we talk about fees, tuition fees, topup fees, £9,000 fees, that people new to this system, encountering it for the first time, will think there is a fee to pay when they arrive. It is not rocket science, but we all still keep using the language, and we need to get past that and move on. This is Professor Arthur’s point again about the soundbite. We need a name for this programme, whether it is Graduate Contribution Scheme; whether we steal the Australian title and call it HECS-the Higher Education Contribution Scheme; whether we call it Study First, Contribute Later. Whatever we call it, we need to start using a different language, a different dialogue that explains quickly and clearly that this is about a graduate contribution; there is nothing to pay up front.

In terms of the debt adversity issue, the message that we really clearly need to get across is that this is not a credit card debt, it is not a mortgage-style debt, and Paul Blomfield is quite right to identify that it is not a pure graduate tax, but it is like paying tax. It is capped, it stops at some point, but it will feel like paying income tax, and Professor Barr very eloquently describes the fact that no parent or potential student loses sleep about the future tax contribution they are going to be making. We need to get this system into that kind of mindset, into that kind of understanding by potential applicants and parents. They are not going to be afraid or put off by a system in which they will be paying a little bit more graduate tax after £21,000.

Chair: Thank you. Paul, you have been mentioned in dispatches, so would you like to come back in?

Q140 Paul Blomfield: Just very specifically on that point, surely the Government are seeking to develop a narrative in which prospective students are encouraged to think about the different levels of fees, and therefore the different levels of debt?

Libby Aston: Graduate contribution? Yes, you are to think about the different level of graduate contribution, and that will only affect how long you pay for. It will not affect your weekly contribution, and it will not affect your upfront cost. There is no upfront cost, and your weekly contribution is dependent only on your income.

I take your point that this is more accurately described as an income-contingent loan; it is accurate and precise to describe it as such. Who understands what an income-contingent loan is? We are used to loans in which the amount you borrow and your interest rate determine your repayments. It is quite a big step to try to get public understanding of an income-contingent loan. Much better to describe it as something that is well understood already, say that it is like income tax, which is exactly how this system is going to operate, in effect, for that person paying it back on a month-by-month basis.

Q141 Chair: Could I just move on to the issue of aptitude, potential and contextual information? First of all, how you define aptitude and potential? Would anybody volunteer a definition of that?

Professor Gaskell: I am not sure I can come up with a definition, but I think it relates to a point that we were addressing a few moments ago, of identifying students who might benefit from the courses we offer, and without wishing to be too anecdotal there is in the area of medicine, for example, a real problem in that there is a glut of very highly qualified students, and there is a great deal of work to be done to recognise among school students the aptitude and the ability, and then coach them in the final years of schooling so that they are prepared in the way that matches the preparation they might be given, for example, in the private school sector.

Q142 Chair: Does using contextual information mean that qualified applicants whose parents sent them to private school could lose out to applicants with lower grades but who went to a disadvantaged state school? How do you strike that balance, and do you think it could undermine, if you like, the quality of courses and results? Professor Gaskell, are you volunteering to answer that one?

Professor Gaskell: I can do; I think in a sense universities very commonly use contextual information, in that if we are deciding between students who have equivalent qualifications and derive from different backgrounds, then we are likely to take that into account in assessing their potential to benefit from our courses. That is rather different from saying that the requirement in terms of A-level tariff, for example, is lower for someone from one background compared with another. That is a move that, at least so far, we have resisted.

Q143 Chair: Anybody would differ from that?

Professor Arthur: This is anecdotal to Leeds, but I think it makes an important point. It is very clear that there are individuals who, through their life chances, have not had the opportunity to develop themselves as well during their secondary education as others. You can identify them using various criteria, and it is also clear that you can assess that potential, The scheme that I described called Access to Leeds is a 10-credit module conducted inside the university. It is, of course, quite expensive to run, but nevertheless, if people obtain a satisfactory grade through that course when given the chance, and we offer up to two A-levels lower for admission to the university, we have been able to show that those individuals do end up with the same level of attainment at degree level. I think we have had four, possibly five, cohorts of graduates from that scheme; it has been running for seven or eight years. So if you put the work in, you can assess that potential, and it can substitute for A-level performance in terms of later performance in university life. I think that is really good, hard evidence that contextual information can be relevant. We like to combine it with assessing potential. That makes us feel comfortable that we are doing the right thing.

Q144 Chair: Do you think it is fair-if indeed you think this-that the cost of widening participation is basically being paid for by the universities?

Professor Riordan: That is how long is a piece of string, isn’t it? We absolutely have a responsibility in this area. I do not think we should be shrugging this off and saying, "It is something that schools should be doing." We clearly have a responsibility, and I know that many of us will be recycling up to 25% of any increased fee income above £6,000 back into that. That is going to be a matter of judgment as to how much it should really be. I think that universities have taken this responsibility extremely seriously and will continue to do so, and we have put an enormous amount of work into this. Everyone is committed to it. It is very rare to come across anyone who says in universities, "We should not be doing this." There is generally throughout the staff and students of universities a commitment to this agenda, and we do fulfil our responsibility. Some of it needs to be in schools-of course it does.

Q145 Chair: I was going to say: what role do you think the Government have?

Professor Ebdon: I think there is a perverse incentive here that we have to deal with, because taking students from a widening background is more expensive. They require a larger input from the university both in terms of recruitment, as Professor Arthur has pointed out, but equally in terms of teaching while they are with you. They are more likely to drop out, not necessarily for academic reasons but often for financial and social reasons. They come from much more challenging situations. They are often single parents with much bigger commitments than other people, and therefore they are more likely to drop out, and that of course is a substantial loss of income to a university under the present system, and will be so under the new system of funding. You can prove that such people are more expensive to teach, but they are not evenly distributed in our universities: 70% of my students in the University of Bedfordshire qualify for the full grant; 1,000 of them are assessed as having zero income when they join us. So that is a significant contribution that we make to widening participation.

Now, the easiest thing in the world would be for my board of governors to say to me, "Stop doing all this widening participation work. Stop reaching out to those communities. Go and get some of these easier students to teach with three As at A-level, and save us all a bit of money." I think it is important, if the Government’s belief is behind their rhetoric in the area of social mobility and widening participation, that they recognise these increased costs and that it is important for Government money to be there to support them.

Q146 Chair: Do you not think that there is a danger of a hotchpotch of schemes designed to get lower-income students into university, and that there could be considerable duplication of effort and waste of money?

Professor Ebdon: I think the biggest problem that we face is an inconsistency with those systems. We have had a number of initiatives. Every time we get a new Secretary of State we seem to get a new initiative, and we have just seen the abolition of two very effective initiatives, the EMA-I worry a lot about the abolition of the EMA and its impact on a university like mine-and the Aimhigher initiative, both demonstrably successful at engaging young people and raising their aspirations and indeed their achievements. They are being stopped and now replacements are being drummed up to take their place.

In the case of Aimhigher, which obviously as a university vice-chancellor I know better, there will be a year’s gap between the end of the Aimhigher funding and any additional money from additional fees coming to my university. It is important that in a very tough year I find some money to support the good people we have doing that Aimhigher work or otherwise we will never attract high-quality people into that kind of outreach activity, because they are going to say, "Well, after two or three years the Government will abolish that initiative and start another one." I would ask for some consistency from Governments in those initiatives. They are long-term activities. As Colin said, the work you do with eight- and nine-year-olds is important, and you have to continue that work, continue to reinforce the messages you have given, and they are not there for short-term initiatives.

Chair: I like the phrase a "whole system" that was used by one of the witnesses earlier, and certainly I think that is the approach to take. Can I move on and bring in Katy Clark on student numbers?

Q147 Katy Clark: Thank you very much. My first question is to Professor Ebdon. University Alliance and the 1994 Group are in favour of removing controls on student numbers, and I understand that the Russell Group says that it would rather concentrate on high quality but fewer students. Where does million+ stand on this?

Professor Ebdon: We would be very keen to see the end of the student number cap, which has denied opportunity to study to large numbers of students-probably in excess of 100,000. It does seem to me to be rather extraordinary for people to talk about establishing a market when you have capped the volume. It is another one of the strange features of introducing so-called differential pricing if the option is not there in terms of volume. We would be very keen to see the abolition of the student number cap.

Q148 Katy Clark: My follow-up is really to the whole panel. If funding was not an object, what proportion of the population do you think ought to study at degree level?

Libby Aston: Can I give you an interesting statistic? From 2000 to 2008-slightly old stats now-OECD data shows that we were third as a country for the proportion of graduates coming out of our population. We are now 15th. Now, 2000 to 2008 was a time when we were investing quite heavily in higher education, and rapidly increasing the number of students and graduates. Turn that around: what that shows is that our competitors are investing increasingly and at even faster rates than we are. Now we are in a situation where we are potentially capping numbers, and we have gone from third to 15th. Where do we want to be? I have talked already about the fact that human capital is now the primary driver of economic growth, if economic growth is about high-tech and innovation-based economy. We have to get our human capital there and in place, the high-quality graduates. We do not want to be 15th; we want to be back to third again. How can we do that if we are putting these caps on student numbers?

Professor Arthur: I do not think there is any evidence that accurately answers your question. There are international comparisons and trends, and I agree with Libby that the trend of us sinking down that league table is rather alarming in a global environment where we are going to survive by our wits and our knowledge economy and staying ahead intellectually through innovation. But what that translates to in terms of a precise number I think is really difficult, and of course you do get accused of snatching a number out of the air without the evidence to back it up. The other piece of evidence, which I think is quite interesting, is that the wealthier a country, the higher the level of participation in higher education. We would of course love to say that the country becomes wealthy because it invested in higher education, but it looks as though it is the other way round. It looks as though countries that are wealthy protect their future by investing in higher education. That is very evident internationally, particularly if you look at Scandinavian countries, for example. I am worried by the trends and would like to see higher education grow, and the reason why the Russell Group is being cautious about this is that we did not want to see it grow without funding, and the unit of resource drop away so that we could not do the job properly. That was really our key point.

Professor Riordan: I think what we have seen, though, is that if people are given the opportunity and the aspiration is promoted and we go out and say yes, this is a good thing to do, then they will take that opportunity. We seem to have reached a limit, although a limit has now been imposed. Had there not been a student number cap imposed a couple of years ago we would have gone straight through that 43%, up towards the fabled 50% that was the original aim. It is correct that 50% is a number plucked out of the air, to be honest.

Professor Ebdon: I often hear that, and the reality is that when it was introduced a lot of people, including the CBI, supported it. The Leitch Report is probably the best piece of evidence we have as to the numbers of graduates we might need in this country, as it says that by 2020 50% of the jobs in this country will need higher-level skills. Because so many of the 2020 work force are actually working, and we have done poorly at the number of graduates in the work force compared with OECD countries, that suggests we should have a participation of 70% in our higher education. Now, the objection to 70% is that we cannot afford it, and we have had to cut back on student numbers in this country, and that is in the Government policy. I sometimes wake up and think Lewis Carroll has taken the world over, because I am told that the Government have to make savings on higher education, and then I read from the Office for Budget Responsibility that the new system will cumulatively add £13 billion of additional borrowing to the public sector by 2015/16, so I just wonder what happened while I was asleep.

Professor Gaskell: It is very important to recognise that the labelling can be a little bit arbitrary here. I think most of us would agree that a very high proportion of the school-leaving population need to acquire higher-level skills. We need to give, I think, more attention to what should precisely be the form of delivery. It may not be higher education as we currently understand it. That should not deny the entitlement to gaining higher-level skills from an increased proportion of the population.

Chair: I want to move on to postgraduate funding and visas, so if we can just complete this, Ruth Farwell, what is your view, very quickly?

Professor Farwell : I do not need to add anything.

Chair: Fine, no, that is good. Can I bring in David Ward on postgraduate studies?

Q149 Mr Ward: Thank you. First of all, postgraduate taught programmes. In the Smith review, this was the area in which we-I was at Leeds Met for 25 years-had some flexibility when we had capped numbers for undergrads. The flexibility was in external income generation, research and postgrads, international students and so on. It is not covered, of course, by the new scheme. What is going to be the impact, do you feel, on postgraduates? The taught programmes to begin with.

Professor Arthur: I think it is a really significant issue: it throws us into a quandary. Some HEFCE funding has been removed, and in essence those programmes were often not cost-effective even with the HEFCE funding, and obviously without replacing it, it will be difficult. However, it is a relatively price-sensitive market. Quite often individuals are having to pay out of their own pocket or take real bank loans to fund their postgraduate taught activity, so we need to think it through carefully before changing the fee structure. Obviously the risk, with the increased cost of undergraduate study, is that fewer people will want to take up postgraduate study. It is a big social mobility problem, because quite often these courses can be pathways into the professions. To ignore this problem would be a long-term mistake for the country. The thing that is needed most is a pathway to funding that is affordable. I have one or two personal ideas of how that might be achieved. One is of course rather worried that there is no state funding left for this, as we currently look at the complexities of funding of higher education today.

Professor Gaskell: I think there is a real concern-I think I share the concerns that Michael has-that we might in fact see a transfer of the widening participation problem from undergraduate level to postgraduate level. That is a real concern with the levels of debt that undergraduates will leave university with. They will be much more averse to further study rather than beginning to earn money. The other key point, of course, about postgraduate taught programmes in particular is that at present they are very heavily populated by overseas students. For example, at my university more than half of our taught postgraduate students are from outside the EU. This is a mechanism that is already propped up by overseas students.

Professor Ebdon: Just to echo, I think universities are seriously concerned about this. There will be a clear deterrent effect to taking on a postgraduate programme if you have £53,000 of debt, or, as Libby would term it, a graduate income-contingent contribution. Postgraduates still pay their fee up front, and therefore you would be looking to find between £6,000 and £9,000, depending on what people think the cost of a programme is as an upfront fee, and no maintenance. I think it is not going to be a possibility for many students.

I think employers are going to have to pick up the tab here. I expect to see a lot more programmes that my university runs together with employers. They will obviously fit more closely to what employers want, but local employers tell me they understand the problem and they will step up to the mark in terms of funding that. The words are often good; the realities can be somewhat different, given the economic circumstances.

But there is a significant problem for our international recruitment as universities, because those international students, who increasingly come to do postgraduate taught programmes-and we have a big commercial advantage in this country in terms of our one-year masters programme, which is widely regarded around the world-are hoping to study alongside UK students, and increasingly those programmes are going to become exclusively taken by international students.

Professor Riordan: This is a genuine problem: at the moment the M-level fees tend to be less than the level that many universities are now going to be setting for undergraduates, and that is because Research Council UK guidelines push us in that direction. Something we absolutely need from the White Paper is a genuine attempt to address this issue. I gather that Adrian Smith is returning to his postgraduate review to look at it again in the light of these changes, and the White Paper does need to take this quite seriously. It is fine, and I think we agree it is a good thing-at least we do-to have a large cohort in the country with undergraduate degrees, but that then makes the requirement to have a postgraduate degree possibly greater in order to distinguish oneself, and there will be people who will want that. We need to find ways, as a country, of enabling that to happen.

Q150 Chair: We are going to have to close slightly earlier than I anticipated because I have just discovered that another Committee is supposed to be coming here for five past one. We did want to ask about graduate employment skills, and I think we might table questions to you separately for that for written responses. Quickly, can I just ask: last week, the announcement on student visas, how far does that really meet the problems that have been identified by the HE sector in terms of recruiting students?

Professor Arthur: I am happy to go first on this. I do think that there is really good evidence that the Government listened to higher education and made a lot of positive changes, and have left us with a workable system. One area that I have subsequently picked up on where there is continuing concern is the change from post-study work being almost guaranteed, as it were, over to applying for a Tier 2, albeit uncapped. The practicalities of the timings seems to be a bit of an issue. You literally have to get that all done in a very short space of time, and yet get the graduate-level employment opportunity together within three months of your visa coming to an end.2 That will be quite a tall order for a lot of graduates. The problem with it is that of course prospective students will compare that with the post-study work systems that are still available in Australia, Canada and so on. Although it looked good at first, when it comes to the practicalities of making it work, I have already heard that my international office, for example, have some concerns about that.

Chair: I see nods across; is there anything that anybody wants to add to that?

Professor Farwell : We have talked a lot about perceptions today, and I think whilst a workable solution might have been found, damage has already been done, in terms of respective recruitment areas overseas, about how hospitable or not we are as a country.

Chair: We will take those points and reflect them in our recommendations. I am sorry that we have had to conclude slightly more hurriedly than I had intended. I would repeat what I have said to other witnesses, that, if on reflection you wish to add to any of the evidence that you have given, please send it in to us in written form. We will be pleased to receive it. Secondly, of course, there are a few questions that unfortunately we were unable to fit in, but we will do so, and would be grateful for your response on them. I thank you for your attendance and the very full way in which you have responded to a very comprehensive list of questions. Thanks very much.

[1] Footnote by witness : [correction of fact - the fee has previously increased each year by inflation.

[2] Footnote by witness : [correction of fact – a letter from BIS last week indicated that the timescale was f our months]

Prepared 8th November 2011