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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 885-viii

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

BUSINESS, INNOVATION AND SKILLS COMMITTEE

THE FUTURE OF HIGHER EDUCATION

MONDAY 18 JULY 2011

RT HON SIMON HUGHES MP

RT HON DAVID WILLETTS MP

Evidence heard in Public

Questions 610 - 736

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the Business, Innovation and Skills

on Monday 18 July 2011

Members present:

Mr Adrian Bailey (Chair)

Mr Brian Binley

Paul Blomfield

Katy Clark

Rebecca Harris

Margot James

Simon Kirby

Ian Murray

Mr David Ward

Nadhim Zahawi

Examination of Witness

Witness: Rt Hon Simon Hughes, MP, Advocate for Access to Higher Education, gave evidence.

Q610 Chair: Good afternoon. Thank you for agreeing to attend, Simon. Obviously you need no introduction to the Committee, but for voice transcription purposes could you please introduce yourself?

Simon Hughes: Chair, thank you very much, and for the invitation. This is Simon Hughes. I have been, since the beginning of the year, the Government’s access advocate for education.

Q611 Chair: Thank you very much. We understand that you submitted your report as Advocate for Access to Education to Mr Cameron and Mr Clegg. When can we expect to see it?

Simon Hughes: I hope it will be published this month. It is now not in my hands. It has gone out of my hands to the PM and the DPM in response to their request, but my expectation is that it could be published as early as the end of this week. I am keen that it should be this week because the school terms will still be on in England and Wales, and there will therefore be the opportunity for teachers to go away with some of the ideas in their minds-students too. I certainly expect it to be published this month.

Q612 Chair: From your discussions with prospective students, what do you think the impact of the higher education reforms will be on participation?

Simon Hughes: I think you know that my concern was that the increase in fees would put people off by its reputation-not so much the facts but the perception of what the increase would do. So, I have used the six months to ask about that, but also to test people’s knowledge and go through the new system with them, explaining it and seeing what the result of that was. I have to say that it is obviously still an issue, because fees, loans and debts are generally frightening things, but if you talk about costs and benefits those are very different things and they are not so frightening. I have carried with me for the past six months in my top pocket the payback amount, and have explained very simply to people wherever I have been that you need to look at this in terms of what it will cost you. If you earn up to £21,000 it will cost you nothing.

Q613 Chair: We are aware of that and I understand the issues, but what do you actually think will be the impact? How do you think it is being perceived?

Simon Hughes: The answer is that the message is getting through and therefore the impact is likely to be less problematical than originally thought. My judgment is that we will not be able to tell that until next January because the crucial six months are the six months coming now, as people come back after the school holidays and think about applying to university. Therefore, I have recommended to the Government that a huge effort be put in during the next six months, to make sure that there isn’t a single student, family, teacher, peer group or adviser who does not have the right information. We really will not know until January. There will be fewer people going to university. The number of 18-year-olds is dropping, and so people must not be misled next year by the overall numbers; we must go behind them.

I have considerably more confidence than I did when I started that we are now beginning to get the message out. I pay tribute to the fact that there are now independent people. I recommended that it should not be the Government and Ministers who tried to sell the scheme, but independent people, and there is now an independent student finance task force, led by Martin Lewis, the money expert, supported by a former president of the NUS. I think they are far better placed to get the messages out. The other people who are really good are people who have just been to university and who go back to their schools and say, "This is my experience." I’m talking about people who either were just there or have just come out the other end. They’re the most influential people to say, "This is worth doing and the cost is worth it."

Q614 Chair: In terms of influence and the perception of prospective students, do you think their concentration on fee waivers and bursaries is likely to have more influence, or outreach activities?

Simon Hughes: I’d like to give an example in answer to your question. My test has always been a youngster living in a council flat on the Old Kent Road. What would be likely to get through to them if they were from a family who had never been to university? I think they are hugely influenced by outreach. There has been a brilliant scheme in London that has got all the universities working together. I think that’s needed in every region for all the schools in the region-not just some, but every single school, sixth-form college and FE college.

I also know that if you’re offering scholarships, they need to be big enough to appeal to a youngster for whom 30 quid or 300 quid won’t make a difference in their life choice when they’re 18. That’s why I believe that £3,000 is the right sort of amount to have in the frame, and I’m very clear that it should be offered in order for the student to offset their living costs, not their fees. I’ve made it very clear to Government that it’s inconsistent to say, "Don’t worry about fees. They’re not payable up front. But here’s a scholarship to help you with your fees." It seems to me that what youngsters worry about is the debt that can’t be put off, as it were, because it’s on a credit card or whatever. In the end, your living costs are your living costs, and your overdraft at the bank is your overdraft at the bank, and nobody is going to say, "Don’t worry about it. You don’t have to pay until you have £24,000 a year." So, significant scholarships are needed.

If I may say so, the only thing that will ensure that every school understands the system is every school in England having a scholarship offered to it. I’m clear that what has happened is that some schools have been really good at providing a ladder to university, whereas from some schools, almost nobody has gone to university, or nobody at all.

Q615 Chair: On the basis of what you’ve said, it sounds as though fee waivers might be irrelevant and what is needed is scholarships, provided that they cover maintenance costs. How well do you think the national scholarship programme will address that?

Simon Hughes: I agree with your interpretation of what I said. I think that it’s not fee waivers that will matter to the student, with very few exceptions. I think people should have the right to say, "I would rather the money was put to a fee waiver than a bursary for my costs," if that is what they want. There are some cultures and groups that see things that way, so people must have the choice. But the offer will be more persuasive if it is to pay living costs. I think that if it’s significant enough and well publicised enough, it will be influential.

The scholarship scheme is a good one. I’ve been working with the group that is working out how it will work, but it hasn’t yet said that it will reach every school. At the moment, it’s a scheme available to people with lower incomes. I don’t think that will be good enough unless it reaches every school-unless every school in your constituency and mine knows that from the age of 15, scholarships will be available to youngsters from families on lower incomes if their grades are good enough. Obviously, you have to get a place, but if you know it at 15, even if there are only a few from the school, that can influence the whole of the class and suddenly provide an ambition and an aspiration. I think that’s what we need.

Q616 Chair: I think it’s fair to summarise by saying that a huge amount of evidence that we’ve had from witnesses says that in effect, outreach programmes are more effective than scholarships.

Simon Hughes: Yes, on balance, because there’s more of it, bluntly, but scholarships have never been available in every school to every student, starting at 15. That has never been there; it has not been a concept. I’m very clear that so far, all the scholarships offered by every university are not influential at all in terms of who goes there, because you apply and get the place and then you may discover there’s a scholarship, a bursary or a prize. Unless universities want to hide what they’re offering, they need to put that on the front page of every prospectus. The national scholarship scheme-

Q617 Chair: But wouldn’t it be better not to bother with the scholarships and just put more into outreach, then?

Simon Hughes: No. I think there are some youngsters for whom the scholarships will be helpful, but you’re right-outreach is the key. It starts in years 9 and 10, with people coming into schools from the slightly older generation. It starts with really competent careers advice. I’ve spoken to DFE Ministers about the fact I’m troubled that, having gone around the country, I have seen that two things have not been working in relation to secondary school years 8 and 9 upwards. One is careers advice, which generally youngsters think has been poor, and the second is work experience, which generally has been poor. If those can be good, that changes the culture and aspiration. We really need to concentrate on that.

Chair: Okay. Can I bring in Paul Blomfield with a supplementary before I bring in Nadhim Zahawi?

Q618 Paul Blomfield: If you thought that the overall impact of the changes was so benign, why did you refuse to support the Government when the proposals were on the Floor of the House? I am guessing it was about more than presentation.

Simon Hughes: I never said they were so benign. As you know, Paul, I was worried that they would be off-putting because of the perception of what the fees would do, particularly to youngsters who had never thought of going to university. Big sums-described as a big debt-would be off-putting for families struggling to cope with finance on a day-to-day basis. I was very clear about that. The sort of constituency I represent has mainly people from those sorts of homes, not any other sort of homes. I agreed to do this job because, given the decision Parliament took-as you know, I did not vote for that-I wanted to make sure that we did not suffer the adverse consequences that would affect your constituents and mine. You can change information, you can change attitude and you can change response, but you have to get the message out really clearly. I repeat: the words "fees," "debts" and "loans" are unhelpful; "costs" and "benefits" are much more helpful.

Q619 Nadhim Zahawi: The responses you have just given are very insightful. Did you have any budget to do any research on this, because it sounds like you’ve really honed down what needs to be done?

Simon Hughes: Thank you; that’s kind. I was given a small staff to work with me. They mainly concentrated on arranging my visits to see people and on bringing people in to see me. I drew my evidence base from the people who came to speak to me and who gave me their work. I didn’t commission new research. There was plenty of research. You know that well, as a Committee, because you have been considering this very thoroughly.

I wanted to do something that was slightly different. I wanted to spend at least half my time talking to the young people-not to the academics, to the people at UCAS or to people from the head teachers’ and teachers’ unions. I went specifically to schools, sixth-form colleges and universities and talked to the students about their perceptions and understanding. I choose three parts of the country, so I wasn’t skewed in my view. Apart from my part of the world, I chose Cornwall, as it is the most remote part of England from here; Merseyside, as it is one of the most deprived urban areas; and a band in the midlands and middle England. I have specifically gone back to those youngsters at the end of my work and asked them some key questions to see whether I have judged the mood right, and I have. There were so many reports produced both before I started and during my inquiries. The Library here and other places had done work, and I didn’t think I needed to do more academic research.

Chair: Ian Murray and Katy Clark have supplementary questions.

Q620 Ian Murray: A quick supplementary. When you started this particular six months of research and the report, was it your perspective that the only problem with the system was perception, because many of the people who have spoken to me about it have said that it isn’t perception. They are saying clearly that leaving university with tens of thousands of pounds of additional debt will stop them from going. That’s not a perception; that’s a fact, isn’t it?

Simon Hughes: Well, I’ve got into the debate-as you may have done-about what it is you leave university with. Is it a debt in the conventional sense or is it something else? You know as well as I do that the consensus around the debate last year was that everybody-all three main political parties in England, the NUS and others-had pretty well accepted that we were going to have to move to a graduate tax and contribution-type system.

The question is: can you change it from being a debt that is frightening to being a graduate tax and a contribution that you pay according to income? I report just as I found. Every time I spent an hour with a group of youngsters going through the new system and asked, hands up at the beginning and hands up at the end, the number of people dissuaded from going to university once they understood the system was always reduced. I am not going to pretend that there was no one in the room with their hand up saying, "It still worries me." That would not be true. But when they understood the system-whether they were in the most deprived bits of Merseyside or in south-west London-the numbers significantly improved. That persuaded me that the message, the facts and the terminology were as important as anything else.

There are still other issues-if your mate goes off to work at 16, are you going to do the same? If your parents put pressure on you and say, "We need money coming in", are you going to do other things? The answer to that-I have heard you argue this case, Mr Bailey-is to remind people that they do not have to make a choice only at 18. They can go to an FE college and take up apprenticeships and then come back to university later. The best way to help the sort of kids that you would be worried about is to tell them about further education colleges. The college in the community, which is easy and accessible and looks like a place you can cope with, is, for many people, the only way they will get to university. If FE colleges do their job properly, they will promote them the best locally.

Chair: Okay. Simon Kirby.

Q621 Simon Kirby: Thank you. You have mentioned about perception and you have told us that we now require a huge effort over the next six months. In hindsight, was six months an appropriate period in which to produce the report or should you have done it quicker?

Simon Hughes: That wasn’t my decision if I may say so. To be fair, I think that it was reasonable. It gave me long enough to collect the information. I was also clear that it needed to be completed in time to influence the coming academic year, so that from September we can be doing what I hope are the right things. I hope that the Government will respond positively, but the work is not done. I am not bidding for another job, but I am clear that it is no good someone being asked to do a bit of work, producing a report and then everyone backing off. There is a huge task to do, starting in September, and I am very clear in the recommendations to Government that it needs every school, careers system and university to work hard, and the Government information machine must do that. The more people like Martin Lewis on the moneysavingexpert.com website who can say, "These are the figures, work it out," the more likely we are to have youngsters who will say, "Okay, this is working out for me." May I add a PS? There is still one category that I worry about and it is those for whom the degree will have to be more than three years-such as medicine, dentistry, architecture or veterinary science. If you come from the Old Kent road council flat, being able to manage four, five or even six years is a very different kettle of fish. There are real issues about widening participation for those sorts of courses. I am keen that the Government, the universities and OFFA should have a system that specifically looks at schemes to have access courses and preliminary years and marks them and adjudicates them. OFFA should look at them separately to see whether they are working. Otherwise-to put it bluntly-you have the children of doctors, architects and vets going off to be the next generation.

Q622 Mr Binley: Simon, I was really interested in your point about outreach. Governments across the piece are not good at outreaching. I link your argument that there should be outreach with the fact that it has to start from September. You have talked to Ministers. Have you had any indication that they are prepared to put that sort of resource behind a need of that kind?

Simon Hughes: The answer is some, but so far not enough. Your help with that would be welcome.

Chair: We cannot anticipate the outcome of our report. In spirit at least, the Members will be there.

Simon Hughes: No, but this discussion gives me the opportunity to say this. May I be very specific about two things? There is obviously a willingness. There is a communications budget and there are things in train. The difficulty in England is that schools are, to a large extent, free to arrange their own affairs and Government, rightfully, do not want to tell every head teacher or principal exactly what to do. I have no doubt that good schools will do all the right things. My worry is that not every school will do the right thing, so I have been strong in saying that we need to ensure that messages are going to every school and that there is a system for checking that they are going to every school. We cannot rely on just happenstance for that to happen. That is my area of remaining concern.

Q623 Nadhim Zahawi: I think that you have pretty much addressed my question. To take you back to schools, we have heard a consistent message from all those we have taken evidence from that the problem is at schools. It is there that the gap begins to appear. I do not know whether you want to add anything else, Mr Hughes. What more can Government do? You have mentioned being consistent and making sure that every school has an outreach programme, but is there anything else specifically to do?

Simon Hughes: Universities have quite often said, "Don’t blame us; you must look further down the food chain, at schools." I think that there is an equal responsibility between schools, colleges and universities. Of course it starts at schools. They have to make up for parents where there isn’t parental aspiration and give parents information. You can start at the top end of primary school by bringing people in to share their work experience in primary schools. The best do that already. Some of them take youngsters to do work experience when they are in year 6.

Secondary schools are vital, but universities cannot let themselves off the hook. Particularly those that have done least well in the last 10 years, and often the most elite universities, have to do more. For example-you may have seen some comments that I made in the press-you have to have the best possible and fairest admissions procedures, so that you do not skew your intake on the basis of the admissions process. Universities have to look at potential to get a good degree, as much as the grades you got when you did your A-levels. It is much easier to get good A-levels if you are in a family where everybody else has been to university, you have a room at home to study privately and you get sent off to holiday courses than it is if you are sharing a bedroom with two other siblings.

Chair: I think everybody understands that.

Q624 Simon Kirby: Were you involved in designing or contributing to the various public awareness campaigns that we have seen? I am thinking of the web-based ones in particular.

Simon Hughes: The answer is only marginally. The Government had, obviously, started their own process of an information campaign. I had a session with the people who had given them advice and done the research, but then they went off and made their own decision, quite properly. It was not for me to be part of that process; it was partly influenced by budget.

My worry was that it talked too much about fees, loans and debts and not enough about costs and benefits. One or two of the examples I would not have written. In the same way, my local paper, The South London Press, ran the adverts at the end of May: "Future students-paying for university in 2012". Well, nobody will pay for university in 2012. That is the whole point of the argument. You don’t pay up front. You don’t pay until you come out. That is probably not the best title.

The answer is that I gave advice that it would be better not to use certain words and so on, but it wasn’t my campaign; it was very much the Government’s campaign. I gave an interim report on communication issues at about the same time for the coming year, and I have come back to that in my final report, which I have just submitted.

Q625 Simon Kirby: Okay. That is very useful. You mentioned meeting lots of young people, which is, at the end of the day, what this is all about, isn’t it? You said that you went back with the key questions that had arisen. Before those key questions formed, what were the main messages coming from the young people that you met?

Simon Hughes: The main messages were, first, that careers advice was generally poor, much poorer than I had assumed it would be. I am talking about 80% or 90% of young people who said that they had had poor careers advice. Work experience was particularly valuable, especially for those who came from an area where work was more difficult to find-for example, in the north-west-but often, it was poor too. People were being placed for work experience in a place where they did not want to go.

There may be a difference between what Professor Wolf argued for and what I found. I think you can start work experience from 14 upwards. I don’t think you have to wait till 16. If somebody really wants to be a vet, for example, why can’t they do a week’s work experience when they are 14 to see if that is what they really want to do, or if somebody wants to be a chemist, a scientist or a computer technician? Those were the strongest things.

Thirdly, the language issues were very clear from young people. Fourthly, they were clear that any scholarships should be to pay off things other than fees and not be fee waivers. There were other responses, too, of course.

Q626 Ian Murray: I want to ask you two quick questions, if I may. You are right to talk about costs and benefits-that is a valid point to look at-but did any of your analysis look at whether mortgage companies or high street lenders would see a student coming out of university with significant fees to pay back, regardless of the structure that is put in place, as having a significant debt?

Simon Hughes: Absolutely. That is an obvious question. Interestingly, at the very first session I had when I went to one of my local secondary schools, one of the very first questions was, "How will this affect my mortgage?" That was from a youngster in an area where most people are not owner-occupiers. So I did look at the issue. I discussed two things with the Government and the banks: how we can get the best help from the Council of Mortgage Lenders and the best help from the banks. The Government are on the case. I do not think they have yet secured as positive a commitment from the building societies or the banks as I would like. Of course, the banks cannot say, "We’re not going to take your obligations into account at all," but they should be able publicly to say, and I hope they will say, "This won’t affect your ability to have an account with us. It won’t affect our assessment of your credit worthiness or other things." Mortgage lenders, I hope, should be able to say-I would encourage them to do this-"We will not regard an obligation to pay off your student fees as something that would prevent you from having a mortgage with our company."

Q627 Ian Murray: Is there potentially a danger that mortgage lenders looking for an opportunity to say no to a mortgage could use this issue?

Simon Hughes: I think one thing that will lock the system into a much safer place would be if the banks and mortgage lenders could be helpful and could give as generous a commitment as possible not to disadvantage people. If you think about it, it would be illogical for them to do so, because the average earnings of someone who has been to university or further education college are much higher than those of somebody who has no qualifications.

Q628 Ian Murray: If a student’s future mortgage is based on undertakings from the bank, I would really worry, Mr Hughes. However, my second question is that if the Prime Minister and the Deputy Prime Minister implement all the recommendations in the report you have given them, and there was a vote on this issue again tomorrow, would you vote yes?

Simon Hughes: That is a question I had not anticipated. If all my recommendations were implemented, I would have to vote yes, I guess.

Q629 Mr Ward: Just a quick question, Simon. Do you regret the demise of the Aimhigher programme?

Simon Hughes: I do, and it was very well regarded around the country, not just by the people who worked in it. That is why one of the things I have urged should happen-I took evidence from people in Aimhigher, not only in London, but in other regions-is that Aimhigher is, effectively, replicated through a requirement from OFFA. I would like OFFA to say, "We won’t allow you to charge more than £6,000, unless there is a collaborative scheme in your region for all universities reaching out to every school and college." That is the best way I can see of taking the Aimhigher benefit into the new system.

Q630 Chair: So, if I can clarify, you are saying that universities or higher education institutions charging more than £6,000 should collectively organise a funding process to enable a successor organisation to Aimhigher to function in their area?

Simon Hughes: I am, and I would have it as a precondition for crossing the £6,000 threshold. If those involved do not do this, they are not doing one of the basic things they should be spending their extra access money on. They have plenty of money to do it; they should do that.

Chair: That is very interesting.

Q631 Katy Clark: I have two points. The first is on the education maintenance allowance. You will be aware that the scheme that existed has been scrapped, and the Government have come up with a new scheme, which is less well funded. Did you explore what impact that will have on people, particularly those from disadvantaged backgrounds, going into higher education? Also, do you accept that even if everything that you have suggested happens, it will be difficult to get people from disadvantaged backgrounds to go into higher education, because of the £9,000 a year? I know that you represent a constituency that has many of the groups that we are trying to get into higher education and that you know how difficult it is to do that. Even if many of your proposals are implemented-I hope that they are implemented, if this goes ahead-do you not accept that the fees will still be a disincentive?

Simon Hughes: Okay. On the first question, I was very preoccupied about EMA. Immediately after being asked if I would do the job, I asked if it could specifically include allowing me to give advice on the replacement for EMA. I remember Mr Ward and other people saying, "Actually, we need to concentrate as much on people who are never going to go to university and who are only going to do apprenticeship, training and college as we do on those who go to university." In fact, the majority of our youngsters will not go to university; they will do other things. So for me they were as important a group, if not more important, than those who will go to university.

Therefore I gave a report in February-an interim report that I produced immediately. I recommended that there should be a continuation of EMA for those who had begun with it in year one, so that they did not suddenly discover that they were left high and dry. The Government accepted that; it was provided at a slightly lower financial level, but they accepted that.

I hope that I am at liberty to say this, but I recommended that there should be a travel entitlement, because in non-urban and rural areas travel was the most important issue and the cost could be variable. In the end, the Government did not give that travel entitlement, but they gave a sum that was increased from £175 million to £180 million and there was no limit on how the college could spend it, so they can spend it on travel support. So I guess that I was able to contribute to the fund increasing significantly. It needs to be monitored, it may need to be varied and it may need more finance, but obviously it is working within tight constraints.

You are right to say that, for many people, going to college and feeling that they can afford to go to college is the only way they will ever think of going on to university. If they go to college, they can find the opportunity.

Q632 Chair: Can I just pick up on a comment that you made before I bring in Paul Blomfield?

Simon Hughes: I am conscious that I have not answered the second question from Katy Clark at all.

Chair: I am sorry. Answer that first, please.

Q633 Katy Clark: Even with the first question, I was asking you something specific. Given that there are these changes and that we have a system that is less well funded, even taking into account the improvements that you were able to get-I very much welcome the work that you did to get those improvements-do you not accept that it is still likely that the fees will still have a deterrent effect?

Simon Hughes: I will make three points. First, clearly there were some abuses of the old system. I am not saying that those cases were in the majority, but there were some, particularly where households were apart and the income of one part of the household was not taken into account. So there were abuses. Some youngsters told me, "Look, so-and-so is getting EMA and actually they don’t need it at all." Clearly, there were some flaws in the system. Secondly, however, I am very clear that you need a system that can get the message across that if you go to college and you are from a poor family, you will be assisted. That is really important. Thirdly, we need to ensure that we see what the effect is this autumn. The best test will be this autumn and if we see a significant downturn in the numbers of youngsters-not only youngsters, but particularly youngsters-going into FE, the Government have said they will review the system and that it is up for annual review. All of us have an obligation to see how the system works.

So I am still concerned about the system. For me, it is the largest gateway to get people to do further study when they leave school. Therefore, if you are put off at that point, it may be that you will never get back again. There are ways of dealing with that issue, which I deal with in my report; giving someone an account that they keep open after they leave school, where they can perpetually be reminded of apprenticeships, FE courses or part-time study opportunities that are on offer. But it is crucial.

Lastly, will it put people off? I say to colleagues in what I hope is the most respectful way possible that all of us, including myself in my political position, now have an obligation to send out the messages that do not put young people off. We have had the political fight and we have had the decision; some people agreed with it and some people did not. But because everybody-the three major parties and the NUS-wanted a graduate contribution system, I hope that we can all stop talking about fees and debts and loans in the next few months, and that we can encourage youngsters by talking about the costs and the benefits, because if we do that we will all help to get kids from the sort of constituencies that we have discussed.

Q634 Chair: Can I just pick up on one point? Earlier you said that the majority of our youngsters will not go into higher education. Doesn’t that imply that built into the system is an assumption that, in effect, the majority of people will still not enjoy this, despite the fact that they may be potentially good enough, the opportunities may be there or whatever? Would you like to clarify that point?

Simon Hughes: I will. I am working on the basis of other people’s assessments rather than just giving my own subjective view. All the analyses I’ve seen suggest that we are likely in the foreseeable future to have under 50% of our school leavers going on to higher education. They will go on to other things. What I think is as important is to get the message across that school leaving isn’t a choice between higher education and nothing. There is a range of options. We must big-up apprenticeships, training, NVQs, diplomas, and all the technical and non-academic courses as much as academic courses.

People will want different skills. They may go to university later, and they may get a degree later, but everybody’s working on the basis that ideally we need everybody to be skilled, but not everybody to be skilled by going to university. It’s a great experience, but many people want to get an apprenticeship and to go to work, or to go to FE college to obtain skills. I am working on the basis of other people’s analysis that we won’t be having more than 50% going to university. I haven’t seen anything to suggest that such a figure is likely in the near future.

Q635 Chair: You’re not working on the basis that those countries that seem to generate the highest economic growth have the highest number of graduates?

Simon Hughes: Of course it’s true that other people have hugely increased their graduate numbers, and in theory we could do that, but I don’t sense that that’s what everybody wants. I think they want other opportunities to get their qualifications, and that they needn’t do them at universities, but can do them elsewhere. Apprenticeships are the most significant thing we need to add back, and that’s why I think the Government have been good to prioritise apprenticeships. We need many, many more, and the cry round the country, particularly in the less advantaged places, is "Please, we need more chances to have apprenticeships and link them into work."

May I say as a PS that the more courses that universities have-I know that Mr Zahawi has been talking about this-that link to work afterwards so that you tie in people who might want to be engineers, chemists and so on into the local industry and economy, the better. You have made the case often in your part of the world, Chairman. We must make sure that FE, apprenticeships and HE link people to the opportunities of the work that goes with it, as well as learning for its own sake.

Q636 Chair: It’s perhaps a bigger issue, but of course that link is, unfortunately, quite weak at the moment.

Simon Hughes: It is weak.

Q637 Paul Blomfield: Given the concern that you’ve shared with us about the abolition of Aimhigher and EMA, and your concern on the record about the tripling of tuition fees, and given the impact of all those decisions on access, do you think it would have been better to commission your report before the decisions were made?

Simon Hughes: I was surprised that the decision on EMA was made without a better public assessment of its implications. The decision was made and the analysis came later, which was the wrong way round. Of course, on higher education funding, the Browne report, to be fair, was a thorough piece of work, and came to conclusions that the Government didn’t entirely accept. I think the assessment of the impact on FE wasn’t adequately prepared for, and I think the decisions on FE had had plenty of preparation, so the Government were well equipped to make the decision. Some of the advice that the Government were given wasn’t of the best in terms of likely fee levels and so on, but I know you have been asking other people about that, and you have the Minister coming to see you soon.

Q638 Chair: Yes, he is outside at the moment, so I will terminate our proceedings now, but thank you for your contribution, which was very helpful. I am sure it will be embodied in our recommendations. Thank you very much.

Simon Hughes: Thank you for all your important work.

Examination of Witness

Witness: Rt Hon David Willetts MP, Minister for Universities and Science, Department for Business, Innovation and Skills, gave evidence.

Q639 Chair: Welcome, Minister. I am sorry for the slight delay but, as you can imagine, there were an awful lot of questions to ask the previous speaker. Thank you for agreeing to speak to us; it is a reflection of the quality of this Committee that you chose a member of it as your PPS. Obviously, you need no introduction to the Committee, but for transcription purposes, perhaps you could introduce yourself.

Mr Willetts: Yes. David Willetts; Member of Parliament for Havant and the Minister for Universities and Science.

Q640 Chair: Thank you. I will start the questions. You originally proposed a White Paper in winter 2010. Why was it six months late?

Mr Willetts: We had a wide range of discussions with stakeholder groups that we needed to consult, and meanwhile, of course, we were putting out the operation information that universities needed. We can still move ahead under the timetable that we had originally envisaged, which was that there should be further reaction to the White Paper, and then we very much hope to secure parliamentary time for legislation in the second Session, beginning next spring.

Q641 Chair: What assessment have you made of the impact of the delay on higher education institutions?

Mr Willetts: I hope that the main consequence of the delay has been that the White Paper is better informed and has been able to draw on a wider range of views in the higher education sector. I think that universities got the information that they needed when they needed it.

Q642 Chair: But all the discussions that I have had with representatives of higher education institutions, including would-be students and their families, suggest that the delay and, if you like, the piecemeal introduction of some of the measures in the White Paper has caused confusion, doubt and, in some cases, dismay.

Mr Willetts: I am surprised by that. I recognise that in a perfect world we might have published the White Paper and then made the specific decision on fees. The reality, however, was that the priority for the incoming coalition was to sort out the public finances. That meant that we had to agree a budget for higher education as part of our public expenditure settlement that was announced last year. We therefore thought that universities needed to know the implications of the public spending settlement as soon as possible, and that we needed to get on with the specific vote in the Commons and then the Lords on fees. After that, we produced in the White Paper our wider proposals for a new, more liberal regime for higher education, and a new regulatory regime for higher education, which will require legislation. We are in good time for that because the legislation was only ever going to be possible in the second Session at the earliest. The financial decisions came first because of the national priority of sorting out the public finances. The wider changes will be in the second Session, provided that we secure agreement for that. The White Paper provides time for people to respond to the thoughts in it, and then for us to draft the legislation.

Q643 Chair: Can I give an example of the difficulties? Whether they are perceived difficulties or not-you may have a view on that-it was put to me that universities already had a level of financial commitment according to the university population that they had at the time. As a result of the reduction in the teaching funding, and the uncertainty about the level of tuition fee funding that will substitute for that in the long run, universities did not know how the proposals were going to impact on their finances. What have the Government done to get round that and provide that reassurance?

Mr Willetts: Both the Secretary of State and I have tried to make it clear at every stage that the increase in fees and the extension of loans would enable universities to replace the money that they lost as the teaching grant was cut back. Part of the Government’s aim as we went through this process, even when we were having to take very tough decisions to bring down public spending, was that we still wanted our universities to be properly resourced. Resources come in a rather different way, through fees and loans, but I think universities could always have been confident that there was going to be this alternative source of finance for them, and that is indeed what the Commons and Lords vote secured for them last year.

Q644 Chair: Yes, I understand that, but the crucial issue is the timing of it-the cuts in teaching grant before the implementation of the tuition fees. How has that problem been overcome?

Mr Willetts: When we announced in the public expenditure settlement what we were doing on grant, at the same time we made it clear what we were doing on fees and loans. We did indeed inherit some reductions in teaching grant, which, if I may say so, actually began in the fine days of the previous Government, and we then moved to replace the reduction in teaching grant with fees and loans as quickly as we could. That is actually one of the reasons why we have ended up with this timetable. We wanted the higher fees and loans to be available to universities as quickly as possible, and that drove the requirement for the early vote in order to give them time to plan through for the autumn 2012 new regime; but we have got a bit more time for the wider changes in the HE sector, because those will require primary legislation. That primary legislation could only be in the second Session at the earliest.

Q645 Chair: The problem is, of course, that as tuition fees have not yet been introduced, there is, if you like, a rush to get to university this year, which has actually aggravated this particular problem.

Mr Willetts: Well, there is some of that. It looks actually as if the 2011 applications are not running now that much ahead of 2010, although they are a bit ahead. It is true; there probably have been at the margin some people who are not taking a gap year, who are applying for 2011, but universities have always known the regime for 2011, as I said, and we tried to set out the key features of the financial framework for 2012 as early as possible. That meant that universities had the information they needed. It also meant that we had the time to consult properly and prepare a proper White Paper that is in turn a prelude to legislation, which we hope to bring forward in the spring of next year.

Q646 Chair: Can you guarantee that no university will run into financial problems arising from these changes this year?

Mr Willetts: Well, no Government have ever been able to guarantee universities’ continuing right to carry on in the way that you imply. All I can say is that HEFCE keeps a very close eye on the finances of universities, and it believes that the changes that we are putting through are changes that do not jeopardise universities’ finances. Indeed, we estimate in the White Paper that by the end of this process, when the full fees and loans system is in place-although these things are always a bit unsure-if anything, there could be more cash going into universities than there is now. One of the things that we have been able to do is save money for the Exchequer by lowering the expenditure on teaching grant but, because it is replaced by the fees and loans system, ensure that at least as much cash continues to go into universities. There are also other changes, which we think will improve the focus on the teaching experience. So we think that this is, overall, in aggregate, a very effective set of reforms.

Q647 Chair: When I asked you that question on a previous occasion, you were not prepared to commit yourself. Have things improved that much, that you feel that you now can?

Mr Willetts: All I can say is that HEFCE has not drawn to my attention a serious financial crisis affecting specific institutions in England.

Q648 Chair: Okay. Can we just go on to a different issue? BIS has seen one of the largest reductions in headcount in Whitehall, arising from the cuts. What proportion of officials involved in developing higher education funding policy and the White Paper have been in the same post since November 2010?

Mr Willetts: I am afraid I could not give you the figures. I do know that overall, indeed, it is true that within BIS we have already made a reduction in our headcount of over 10%, and there has therefore been a reduction in officials in the Department, in the headquarters in Victoria street. I would have to send you and the Committee a note about what exactly that means for HE officials.

Q649 Nadhim Zahawi: Thank you for coming today. Why did the Government modify Lord Browne’s proposals? Did you disagree with them?

Mr Willetts: I thought Lord Browne’s report was an excellent report. The review had, of course, been set up on a cross-party basis and had taken evidence for a year. Many of the ideas, and their thrust, we have accepted, but we have not accepted everything.

If the Committee wishes, I am happy to go through a bit more detail. We did not agree with Lord Browne’s suggestion of combining the four different bodies involved in HE into a single body. We did not agree with his proposal that there should be no upper limit on fees, and quite an aggressive levy to offset the effect. So there were specific proposals that we did not agree with, but overall I thought it was an excellent report. We have drawn on it in the central proposal to shift funding for universities away from grants and more towards fees and loans.

Q650 Nadhim Zahawi: Did you not agree about the uncapped fees because of your fear of what would happen in the court of public opinion?

Mr Willetts: There was quite widespread opposition to the idea of the levy. We could not simply have had no cap on fees, because the Government are lending students the money to pay the fees and, therefore, if we had no cap on fees, we would have had no cap on that public expenditure-cash, however defined. Lord Browne, who is a very astute man, recognised that issue and therefore proposed this very steep levy.

I got quite a bit of lobbying from universities, which said that they thought the levy was unfair on them-I cannot remember the exact formulations, and I do not have the report with me, but by the time we were on fees of £9,000 or £10,000, it was running at about 75% or 80%, I think, of the extra £1,000 of fees paid in the levy. The universities’ complaint was that this was grossly disproportionate to the Exchequer risk of those loans not being repaid. So there was quite a lot of feeling that the levy was a rather aggressive device, but we needed the levy if we were not going to have a fees cap of some sort. We therefore thought that the alternative model of simply setting the fees cap at £9,000 was a better way forward.

Q651 Nadhim Zahawi: We heard from Lord Browne that his proposals were like a very fine Swiss watch, and that any modifications would mean serious danger of malfunction. Did you check the effects of the modification against the Browne or even IFS models before announcing the package of measures in December?

Mr Willetts: Oh yes, we were able to do quite a lot of modelling, not only internally within BIS-I am sure we placed the basis of our internal ready reckoner in the Library of the House of Commons on the day of our response to Browne-but of course also in the IFS, with which we were doing cross-checks. The IFS system was rather different from the other, which is a good thing, and meant that we had two rather different models that were not perfectly aligned. The IFS was also able to assess what we were doing. So the combination of our internal work and the IFS work meant that we were able to be quite detailed.

Q652 Nadhim Zahawi: Do you think that you could have done with a bit more time, since this is such a sweeping reform, rather than doing it in two years?

Mr Willetts: In an ideal world, people always want more time at every stage, but the fact is that-provided we keep to the timetable, and I am optimistic that we can-what we will just be able to do is deliver the entire reform in the life of a Parliament, which I think was a reasonable objective to set. Remember, we needed the decisions before Christmas, because this would affect students going to university in 2012-it was already too late for 2011-and then, of course, it is three years for the new regime to feed through. My view is that taking a process that began before the last election-there was cross-party agreement to set up Lord Browne-to full implementation in the final year before the next election is a reasonable timetable for change.

Q653 Nadhim Zahawi: Speaking on BBC’s "Newsnight", on 28 June I think, you described the White Paper as a long-term strategy. Does it really represent a stable picture of the shape of things to come, or can we expect you to make further changes in the future, perhaps when the economy is doing better?

Mr Willetts: We are shifting to a more open system, which will not be completely micro-managed from Whitehall-and a good thing too. What we have done is put our universities on a secure long-term financial footing with, as I have said, if anything, more cash going into the end of the period than at the beginning. That ensures that they have good finances. At the same time, we are trying to improve the incentives for them to focus on the teaching experience, and there is a transformation in the amount of information available to prospective students. I think that all those will be permanent features of the higher education landscape.

Nadhim Zahawi: Thank you.

Q654 Margot James: Given that the changes to student finance were agreed by Parliament last November, what was the reason for the delay in the communications programme for them and the promotion of better information?

Mr Willetts: We started from the very beginning with some basic information. We got this leaflet out very early on and, for example, every MP who wrote to me with questions about the regime got it. We tried some other communication, but the focus of our communication was always going to be the people, particularly young people, applying to university and starting university in autumn 2012. For them, the crucial decision periods are immediately after they finish their AS’s before the summer break in May and June of this year, and then after they-we hope-visit some universities on open days over the summer vac, come back to school to start the second year of their A-levels and, in September, October and November, put in their UCAS application forms. In terms of the communication message to the crucial audience, those were the two periods that really mattered and we have used our communication budget to focus on communicating with that age group in those crucial months.

Q655 Margot James: Do you not fear that the volume of misinformation that appeared in the media at the end of the year and in the new year has embedded perceptions to such an extent that it is now very difficult to overhaul them?

Mr Willetts: It has been very frustrating. I tried in every interview and every letter to make it clear that nobody pays up front, for example, and that monthly repayments are actually lower than under the current system, because we have put up the threshold from £15,000 to £21,000. I hope that the sustained effort focusing particularly on the young people taking these decisions and the media effort will help. Also, assisted by the Department for Education, we e-mailed head teachers and principals of colleges that had people who would be applying for university, giving them the basics of the scheme and links to the websites that had reliable information. We really have tried to get through to the core group and I very much hope that they understand the truth of the scheme.

Q656 Chair: Can I just pick that up? Coming back to my opening question, do you not think that the piecemeal way in which the different announcements were made, rather than publishing everything together in a White Paper that could have demonstrated the bigger picture, is part of the reason why there is now a prevailing perception that this is a huge amount of debt that calls into question potential benefits and that it, in effect, skewed the debate from the start?

Mr Willetts: The reality was that the Government’s incoming priority was a radical set of proposals for sorting out the public finances. That involved, obviously, a significant contribution to the savings from BIS and, within that, from HE. We simply did not have the capacity or the time to produce a White Paper at the same time as we were releasing the figures on the public expenditure settlement. Had we tried to rush that White Paper, I simply do not think that we would have had the departmental capacity to do it. Even if we had done it, it would have involved doing it within weeks of the Browne report being available and there would have been a serious danger that we would not have been able to consult the sector properly. So the financial decisions had to come first-that was just the reality of the situation. Then, as I said, because we have legislation coming up in the second Session, we hope, that gives us time for a more reflective process, drawing on consultation, for the wider changes in the regime. I do not know if these historical parallels give you any comfort, Mr Bailey, but oddly enough the Robbins report, which is seen as the great-

Chair: I am old enough to remember it.

Mr Willetts: Right, well, the Robbins report actually came a year or two after changes in the financing of universities proposed by Anderson. The Robbins report was a follow-up to a previous set of financial changes, so this is not the first time that the financial decision has been followed by a wider consideration of the implications for the sector.

Q657 Chair: It would be fascinating to follow that particular red herring, but I am not going to do so. I accept the need to make budgetary announcements, but the original timetable for the White Paper was January. Now that would have at least closed down the amount of time that has subsequently been available for this different media agenda to be promoted. Do you not agree that, had you managed to stick to your original timetable, some of the problems that we have now would not have arisen?

Mr Willetts: But the financial decisions were already clear and the communication had already begun. We were able to produce this leaflet within weeks of the decisions.

Q658 Chair: With great respect, I have no doubt that that is a very good leaflet, but it is nothing to massive media and newspaper coverage.

Mr Willetts: I accept that. The point I was trying to make though was that the key messages that had to be communicated about finance-such as, you do not pay up front, your monthly repayments are lower-were those that we were trying to get across. They did not depend on publishing the White Paper. Those were just the core financial decisions that had been taken and voted on by both Houses of Parliament by Christmas. So that communication, that key information that was necessary for communication, did not depend on the White Paper. The White Paper is much more about the wider consequences for the regulatory regime, for example, which will require legislation. The White Paper is a prelude to legislation and we wanted to consult as we prepared it, and we have the time because the legislation is likely to be brought before the House in spring or summer next year.

Chair: I could pursue this more, but I want to bring in-[Interruption.] I am sorry, Margot, you wanted to come back in. Margot, and then Paul.

Q659 Margot James: Two more questions. Are you monitoring the effectiveness of the communications and information campaign?

Mr Willetts: Yes, it is being monitored. The aim, of course, is to reach that target audience effectively. I know that the advertising agency has a very strong sense of what percentage of the audits are reached by the different media we are using.

Q660 Margot James: Do you agree that the communication and the information should go beyond talk about the costs and the no up-front increase in fees to embrace other benefits, such as the fact that the Government anticipate overall education funding increasing by up to 10% by 2014? There is likely to be a lot more competition between universities on quality, choice of courses, students in the driving seat and so forth. There are all these other benefits. Are you sure that your campaign is getting everything across, as well as the essentials, about the loan system?

Mr Willetts: I have to say that, just from talking to vice-chancellors, students and people at universities, I think that the central message that the academic experience of the student matters, and that universities are going to be judged-not just by the Government, but more importantly by prospective students-on the quality of that experience is getting across. Even the, admittedly anecdotal, evidence from open days is that there are a lot more requests for hard-edged information: how many seminars will I get to? What work experience programmes are there? How crowded will the lectures be? When will I get my academic work back? What level of academic input will there be? All those are key aspects of the teaching experience. They had sometimes been lost from sight because there were such strong incentives for research, and relatively weak incentives focused on the quality of teaching. I think that message is getting through to universities loud and clear.

Q661 Paul Blomfield: I wonder whether the Government have added to the confusion. On the one hand, when you have been trying to offset students’ very understandable concerns about the high level of fees, you have said, "Don’t look at the fees, look at the repayments", but on the other hand, when you have been trying to extol the virtues of a market system to drive change, you have said to students, "You should look very carefully at the fees you’ll be paying", and they have.

Mr Willetts: You could argue that the only thing that matters is the repayment terms. Especially as we are trying to get more of the money to go with the choice of the student, which is the logic of our shift to more contestable places, they can also ask about what they are getting for their money-to put it very crudely. Even there, competition is at least as much about quality as it is about price. Students are of course entitled to ask how much it will cost down the track, but they are also clearly asking a lot about things such as employment outcomes. Over the next 12 months or more, we will ensure that there is far more information available to prospective students about such outcomes-

Chair: We will cover this in a minute.

Q662 Paul Blomfield: As the Chair says, we are clearly going to explore that further. On the very specific issue of price, particularly in the lead-up to the vote in December, but also subsequently, the Government made a great deal of the fact that it was your firm expectation that fees of £9,000 would be-it was quoted many times by many different Ministers-the exception. Clearly, that was spectacularly wrong. On what evidence did you base that expectation?

Mr Willetts: More universities than we expected went for a headline figure of £9,000, but if you look behind the headline at the fee waivers and go even further behind to look at bursaries and other forms of financial support, you see that the average fee is, I think, about £8,180 and the majority of students will not pay £9,000. Again, talking about frustrations and sometimes misunderstandings of what we are proposing, I read in the press about a fee of £9,000 being set by a university, but now that the OFFA access agreements are out, it is perfectly clear that that might have been £9,000 for some students doing some courses, but behind that headline there is quite a wide diversity. The average fee is significantly less.

Q663 Paul Blomfield: I can recall one debate in the House in which the expectation that £9,000 would be exceptional was complemented by a comment from the Secretary of State that most fees would be closer to £6,000. Clearly, that is not the case. If I can push you further, what was the evidence on which you based the statement that you thought £9,000 would be exceptional?

Mr Willetts: Well, we had a belief that £9,000 would be exceptional and what turned out was that, indeed, universities were- You had to look behind the headline fee, and my view is that when you look at what has actually happened-namely, the majority of students not paying £9,000, an average fee after waivers of about £8,180 and fees of below £8,000 once you allow for bursaries and other financial support-you can see that the outcome is very different from the scares we had about everybody having to pay £9,000. I accept that what has happened is that the diversity of fees is more by individual and less by institution than we expected. In other words, behind that headline of £9,000 there are special arrangements between courses or between students depending on their families’ financial circumstances. We have ended up with quite a lot of diversity, but the diversity is by individual and not so much by institution.

To be honest, this is a big change in the system. It is a very large reform, and as I said, we will not be able to micro-manage it or predict every step of the way in detail. That is clearly how it has played out. In the end, I think it has worked out so that students from low-income backgrounds have actually got-what is it?-£600 million of access to reach out to them; there are bursaries and fee waivers, even before you include the Government’s contribution to the national scholarship programme. It is quite a lot.

Chair: Again, we will go into those in a moment.

Q664 Paul Blomfield: To clarify one point, Minister, there have been a lot of figures floating around, as you have said-the mean average in excess of £8,700. You mentioned £8,100. Is that what you anticipate the modal average to be?

Mr Willetts: The mean is £8,161, and including waivers and bursaries, that falls to £7,793. Those figures are themselves imperfect, because they were calculated before the 20,000 places under the core and margin policy-with figures at under £7,500-and I believe they also assume that all institutions that are coming in at below £6,000 are at £6,000. There will be further iterations yet. We are dealing with a changing situation. As I say, we know that the majority of students will be paying less than £9,000. It will only really be in the autumn of 2012-when actual students are at actual courses, and the fees for a course, the fee waivers and bursaries are in place-that we will know exactly what the outcome will be. This is still a fluid situation, but I have to say that I think that OFFA has done a good job in securing a very good deal on access.

Q665 Mr Ward: We spoke earlier about perceptions and reality, but if we were to do a proof-of-the-pudding test on this using your top three indicators of success or failure, what would they be and when would we be able to judge you on it?

Mr Willetts: This process will take the lifetime of this Parliament. What I want to see at the end are strong universities-we can be proud of our universities, because they are fantastic institutions that change people’s lives for the better-that are well financed.

Secondly, I want to see students’ academic experience centre stage-so, a sense that the quality of the teaching experience is rising. We have to be careful, because that may mean that students become more demanding and will not put up with and are dissatisfied with things that they were satisfied with in the past. However, I want more demanding students, who get a higher quality academic experience.

Thirdly, on access-there is that deterioration of access to our research-intensive universities, where the gap between kids from the less advantaged backgrounds and those from more advantaged backgrounds actually widened from six-fold to seven-fold, as we know from Martin Harris’s report last year. I want to see improvements in access, especially to our research-intensive universities for people from a wider range of backgrounds. So, strong universities, a high quality student experience and improvements in access would be my three indicators.

Q666 Mr Ward: We could achieve all those with a much smaller HE sector, could we not?

Mr Willetts: There is a great debate about how many people should go to university. In a way, I would love to move away from a system in which Ministers had to fix a total-I think it should emerge from the decisions of young people. I have to say, however, that when you look around the world, there is a pretty strong trend in advanced countries for more people to go to university. Of course, if they go, they should get a good deal from it. It should be good for them and probably also good for their job prospects.

Q667 Chair: And good for the country.

Mr Willetts: Quite right, Mr Chairman-good for the country. I am not one of those who thinks that we have a problem that too many people are going to university. There may be some people going to university who, on better advice and with more information, might instead choose an apprenticeship, for example. We have had a fantastic success already, with 100,000 extra apprenticeships. Those other options have to be available to them. In Britain decades ahead, we will probably see an underlying trend of more people going to university.

Q668 Ian Murray: I want to unpack some of the financial aspects that Mr Blomfield mentioned. At the start of an answer to a question about the pace of this, you mentioned that part of the financial drivers was the deficit reduction plan. If that plan is to be completely concluded by 2015, and students would be paying this back only in 2015-16 as a minimum, what effect will the policy have on the deficit? If the average, or modal or mean average, of the fees is higher than the Treasury had assumed, there would seem to be a black hole somewhere in the funding. Who would pick up that particular tab?

Mr Willetts: As we reduce the teaching grant-that will not completely go-by 2015-16, there will be a saving in teaching and related grant expenditure of approaching £3 billion. That is a public expenditure saving, which is part of the coalition’s wider objectives on saving public expenditure. We replaced the grant-a system we inherited from the previous Government-with fees and loans, which are accounted for differently. Quite rightly, if you are lending people money, you are going to get quite a bit of it back. That is a different type of transaction than just an unconditional grant.

I know that there has been anxiety about the black hole. Let me share with the Committee the mental arithmetic, which I think I even risked in the Chamber the other week. No one can be certain. This is a set of big changes. I am not claiming that we can be absolutely certain, but the estimate is that in 2012, 350,000 students will be eligible for loans, of whom 90% would take one out. That is a slight increase on the current number; no one is obliged to take out a loan. They would take out an average loan of £7,500, which is not the same as saying that the fee would be £7,500, because the loan need not be the same as the fee, though it often is. We stand by that as a broad ballpark estimate. It adds up to about £2.4 billion of loans. The RAB charge, which is the amount that you think you will not get back, at a rate of 30%, is about £720 million. We think that we are broadly there. But again, we will know for sure only when those students have arrived at university next autumn and have decided how much they want to borrow and on what terms. I cannot give a 100% guarantee, but we still think that that is a reasonable estimate.

Q669 Chair: Before we develop this slightly, can I ask this? Earlier, in response to a question on average tuition fees from, I think, Paul Blomfield, you gave us the mean average. Could you give us the modal average? If not, could you write to us with it?

Mr Willetts: Yes. I will happily write to the Committee with whatever information we have. We may have to obtain it from OFFA.

Q670 Margot James: Going back to the economic model that you were outlining earlier, what sort of tolerances are there within that? How much leeway do you have in the fee levels, repayment rates and interest rates before you have to go back to the drawing board?

Mr Willetts: I will happily write to the Committee if this incorrect. A rough rule of thumb is that a £500 change in loans either way-if the average loan were £8,000 or £7,000-ends up as a change in the RAB charge, which is the amount of money you lend that you are not going to get back, of about £50 million. We have a budget of billions-£10 billion or more. Although there are uncertainties, we believe that they are manageable, especially as we have already taken a deliberate decision on the 20,000 core and margin policy. There are other arguments in favour of it as well. The 20,000 core and margin policy, looking at high-value places at less than £7,500, was introduced partly in response to this. Of course, it arrived after the access agreements for OFFA, so the estimates that I gave to the Committee precede the impact of the 20,000 core and margin. We think that we are broadly on track.

Q671 Katy Clark: The White Paper speaks of monitoring fees and the size of loans. It says that, if necessary, you will take action to ensure that the system remains sustainable in the long term. What would trigger changes to what you are putting in place, and what form might such changes take?

Mr Willetts: As I said, the 20,000 core and margin policy was a kind of response to this issue, but it has other arguments for it as well. It is another attempt to free up the system, but the fact that we are nudging it, freeing it up for places with a high value that are well regarded but under £7,500, was a response to this. We will take stock after the first year of our two main measures to improve contestability-the 65,000 AAB places and the 20,000 core and margin coming in at under £7,500-to see how they are working. Obviously, we have to look at overall spending and the pattern of students’ choices.

The direction for the coalition as a whole is that we want to reduce the significance of quotas and open up more places in this way. As I say, it is a right kind of start that one in four-85,000-will be contestable. We do not want to inflict unnecessary uncertainty on institutions, but we want to push that further in subsequent years.

Q672 Rebecca Harris: Coming back to practicalities, I am sure that many of us in this room have constituents who have had trouble with their student loans. The Public Accounts Committee strongly criticised their delivery in 2010. How confident are you that the company will be up to the challenge of this change in time for 2011, so that we do not let down students or institutions?

Mr Willetts: All of us, with our constituency case load, will remember the crisis of 2009. One of the first decisions that I took-it was a tough one-was to ask the then chairman of the Student Loans Company and, through him, the chief executive of the company to stand down. I took that decision in the first weeks of the new Government, as I was not confident that the company would be able to deliver the quality of service that students were entitled to expect.

The whole Department, including me, recognises that we need to monitor this closely. I have regular meetings with the Student Loans Company. Officials have even more frequent meetings with it. I always ask, "Can you deliver this? Is there anything more you need by way of staff or IT support, to deliver these changes?" Indeed, we put more resource into the Student Loans Company and, so far, its performance is improving. However, there are still levels of dissatisfaction. For example, too many people who start off by trying to deal with it on the website, but at some point become exasperated or cannot resolve an issue on the website and phone up. That problem needs to be tackled, but the company assures us that it can handle these changes, although I know it is operating under pressure.

Q673 Rebecca Harris: It is learning from its mistakes?

Mr Willetts: We all know that there was a very unhappy episode in 2009-10, and the organisation has raised its game enormously since then under transformed leadership.

Q674 Rebecca Harris: I want some clarity about how the changes will affect the current ability of universities to take the HEFCE grant and cross-subsidise that money between courses and whether we will still have that flexibility under the new regime.

Mr Willetts: Universities will still have that flexibility-there is not an instruction from Government or HEFCE. However, students will be entitled to ask, "What am I getting for the fee?" If they are told, "What you are getting is a generous cross-subsidy out of your discipline to a completely different discipline," they may have questions about that. On the other hand, when they are paying back as graduates, they are partly paying for a total university experience. If they are told, "This helps to secure us a really good library, wi-fi across the entire campus or investment in better sports facilities"-or whatever-they may be happy with that. Universities accountable to students is the moral.

Q675 Rebecca Harris: Right. You do not foresee any operating problems for universities-not being quite sure what the student numbers for a certain course will be or how many fee waivers they will have right until the eleventh hour.

Mr Willetts: I recognise that we are asking universities to go through a big set of changes with big uncertainties. I fully understand that. I am always trying to balance on the one side the fact that we have to deliver savings and reforms-there will be a better system at the end of the day-against the amount of uncertainty that universities can reasonably be expected to take. That was why, with the Secretary of State, the PM and the DPM, we took a view that having one in four places contestable in 2012 was about right. Some people would have argued that we should have gone even further, but I thought that then universities would just be handling too much uncertainty; with less, it would not have been a big reform. One is endlessly trying to get that balance right, and I hope that we have got it about right, but it will be very valuable to have the Committee’s assessment.

Q676 Rebecca Harris: My final question is about the appropriateness or not of the Government specifying to universities that they may use the teaching grant money they receive only for STEM subjects, and whether that is interference with the academic autonomy of universities.

Mr Willetts: The surviving teaching grant for bands A and B is intended to reflect the objectively higher costs of those disciplines. Of course, HEFCE will carry out a consultation about the teaching grant in 2013-14 and beyond, and that is something that it could look at as part of that consultation.

Q677 Chair: Picking up that theme, do you not think there is a danger that some university courses are subsidised and are subsequently almost demonised, particularly in the red-top media, as not justifying that subsidy from other courses to the detriment of both the range of courses and possibly the student experience for some people?

Mr Willetts: I agree. It is a great pity that courses sometimes get demonised in the way you suggest, Mr Bailey. I rather agree with you on that.

Q678 Chair: To be consistent, it is not only the red tops; I have heard that done by politicians as well.

Mr Willetts: We are straying into rather different scrutiny that may be taking place in a different Select Committee. The best solution to all this is information and transparency. Let us go straight for the caricature subject: media studies. There is quite a wide variety in outcomes from media studies. I believe that 55 of the people working on "Avatar", a fantastic and technically very accomplished movie, did media studies at the university of Bournemouth, because the university of Bournemouth has a fantastic reputation in that discipline. There may be other media studies courses that do not necessarily perform quite so well. Instead of going for a kind of caricature picture of media studies-media is a very successful British industry-prospective students should be able to see what the outcomes are from such a course at such a university. That should be much more micro and grounded than it has ever been before.

I have also said to the industry-this applies to the media industry as well as to others-that it should kitemark courses. People should know whether a course is rated. NESTA has done a fascinating study of computer games. Some universities have a really good course in computer games, and if you do it well, you basically walk into a well-paid job, again in a very successful British industry. Other courses have perhaps come along more recently and have not got the quality. The solution is information and kitemarking by employers, so that people know whether a particular course at a particular university is worth while. It is much more specific than general demonisation of a certain course across all universities.

Q679 Katy Clark: What you have just said might relate quite well to this. Lord Browne’s report said that we found no work that gave us any comfort that you could actually measure quality in advance of taking a degree. Do you think that there is any evidence that prospective or current students are in a position at the moment, no matter how much information is available to them, to judge the value for money offered by a course at any particular institution?

Mr Willetts: There is always going to be something intangible about quality, but the crucial point of your question is "at the moment." I do not think that at the moment they have the kind of information they need, but I hope that over the next 12 months or so there will be far more information available. The key information set, for example, has assessments of student satisfaction, some objective measures of employment outcomes and some input measures on the kinds of teaching engagement with the students. If you put all that together, I think you will have the basis for an assessment, and I very much hope that as the raw data come out, we will have lots of websites and social enterprises, such as bestcourse4me.com, or organisations such as the Student Room and, of course, Which?-it has told us that it now really wants to get engaged with the HE sector-running their assessments.

The assessments will include everything from anecdotal evidence from individual students through to the kind of data that we want to publish much more on employment outcomes. Of course the information will be imperfect, but I hope that we will then be a lot further towards what you want. We will probably never get to the ideal, but I think we can make a lot of progress.

Q680 Margot James: On the early repayment of loans, I think that an adviser, Martin Lewis of moneysavingexpert.com, made the point that a few years ago commercial lenders were banned from levying redemption penalties because they kept people locked into loans. Are you at all concerned that this proposal might be at odds with the law in that sense, or certainly with the spirit of it?

Mr Willetts: Our student loans are not, of course, commercial loans. In fact, this goes right back to your question, Mr Chairman, at the beginning. Our loans are in many ways far more flexible and forgiving than the usual commercial loans. We are now consulting on the early repayment issue. There are people who are strong advocates for penalties for early repayment, and there are others, such as Martin Lewis, who do not believe that there should be penalties. The coalition wants an open consultation on this, and we will see the reactions that we get and then reach a judgment. This is absolutely something on which we will welcome feedback, including from, if it has a view, this Committee.

Q681 Margot James: As the Government estimate that about 30% of the total loan will not be repaid, do you not think it irresponsible to turn down someone who is willing to pay early? You never know; in the fullness of time, they might go downhill with their earnings, and you might end up not getting the payment at all.

Mr Willetts: You are right. You are absolutely getting to a crucial point here. I hear these confident assertions about who gains and who loses, but you will only know at the end of the day. One of the flexibilities of these things is that people do not know how their circumstances are going to play out, but they know the rules of the loan. That is an argument that will be put, I am sure, as part of the consultation, and there will be arguments on the other side as well. As I say, we are waiting now. We made a commitment to consult, we are now consulting, and we will assess the reactions that we get.

Q682 Margot James: If a system of penalties was brought in, would that apply to employers who chose to clear loans as an incentive for obtaining graduates?

Mr Willetts: That is another consideration that we would have to look at very carefully. If there were repayment penalties, we would need to consider whether they extended to employers in those circumstances. Again, we will see how the consultation goes, and then consider the outcome from the consultation.

Q683 Chair: Earlier, we touched on the issue of information to students. I want to ask a couple of questions to develop that. I understand you are going to have a website called "Key Information Set", with the beautiful acronym KIS. What progress is being made on providing the information? We have less than a year before students start applying for courses that charge fees of £9,000. Do you think there is sufficient information for them to start making these judgments now?

Mr Willetts: It is getting better all the time. Already this year, we are seeing on websites much better information than in the past. I have already asked HEFCE, for example, to ask universities to put information about employability on their websites. They are already expected to do that. You will have noticed only this week the attention paid to it-for example, to the HESA statistics on employment outcomes after six months. So we are making progress and there will be more information in the months ahead, but I do not claim that we will have got as far as I would have liked in year 1. We have to make further progress beyond that, but we are already moving. It is already shifting, and I know that organisations such as bestcourse4me are already very keen to analyse the type of data that we are making available to them.

Q684 Chair: In general, I would have said the information is welcome, but do you not think there is a very real problem with putting details of graduate earnings on there? Do you not think that you are potentially creating a perverse incentive for universities to push their graduates towards high-paying jobs, so as to encourage recruitment to their university? I can give an example of this; I can assure you it is a real-life example. I was at Rolls-Royce recently, where I met a female graduate from Oxbridge working in engineering. She said that she was the only one of her cohort who went into engineering; the rest went into the City because of the higher earnings. Do you not think that you are potentially going to reinforce that particular problem?

Mr Willetts: Ultimately, individuals have to take those decisions. I think the incentives are going to be the other way. More than half of the people who go to university are going in order to get some kind of qualification that they think will help them with their job. There is more to university than that; I always have to make that clear. It is a fundamentally worthwhile experience in its own right, but when you are at levels of participation of 40% or more, a lot of people are going to get a qualification that they hope will help them into work, and they are entitled to know what the prospects are from individual courses at individual universities.

I still think of a constituency case brought to me by a Member of this House; I cannot remember who it was. The case concerned someone who had done biological sciences at a university, hoping to work in public health, only to discover at the end of her course that her biological sciences course at that university was not recognised by the public health profession as a step towards public health. The NHS did not accept it as a basis for working in public health; she needed to get further qualifications. That really is to let people down, and I think people are entitled to know far more clearly what routes into employment they can expect as a result of doing a particular course at a particular university. I know there is more to life than that; there is more to university than that, but as a minimum, the information has to be available.

Chair: Can I come to off-quota, or core and margin, places? David Ward?

Q685 Mr Ward: We touched on this a little earlier, but I want to ask specifically about the 20,000 contestable places. For these places, you propose that institutions will offer good-quality courses for less than £7,500. Is a lower cap level, in effect, being set for these places?

Mr Willetts: We had to pick some kind of sum, and £7,500 was the one we picked. There is no right answer, but it seemed a reasonable way forward. The thinking was this. There is an alternative model of delivering higher education, which could cost significantly less than the classic go-away-from-home, three-year campus experience. If you like, it is a more transactional type of higher education. It may not be what every person wants, but it is part of the repertoire and a legitimate part of higher education. It may be more for mature students than for younger people. It may be more for people who are staying at home. It could be HE delivered in further education colleges. It could be vocational courses delivered by new providers coming in and saying, "We’re going to get you the qualification you need to work as an accountant or a lawyer." They may well be able to come in lower even than £6,000, but we thought under £7,500 gave an opportunity for rather more.

We will see what becomes available. I know, for example, that the Open university is keen to link up with more FE colleges and to deliver HE in them, with an OU degree at the end. There will also be further education colleges, and perhaps some alternative providers as well. However, I am pretty sure that all those providers will be trying to do things differently; there may be more use of IT and distance learning. That is not the full story, and it will never be anything like the full story, but it is important that people have that option available. This is an attempt to nudge things that way and to encourage a bit of expansion.

Q686 Mr Ward: Would you expect this to be the exception?

Mr Willetts: After the first year, we will have to take stock of how both our steps towards contestability-the 65,000 AAB places and the 20,000 core-margin places-work. Then, we will have to take stock, and we will have to be careful about how things go, but I very much hope we will be able to go further. We will have to take a judgment on the balance between going further on the tariff, so that you go from AAB to ABB or something, and going further on core-margin, so that you go beyond 20,000; or you could have some combination of the two. However, that is not a decision we need to take now. We will take that decision in the light of our experience over the next 12 months.

Q687 Mr Ward: The argument made against the £9,000 was that it would become the figure that people would specify, and we discussed that earlier. We seem to have done the same thing with the £7,500. You say it is to encourage flexibility in provision; people are being asked to come forward with a flexible alternative provision offer at a figure lower than £9,000.

Mr Willetts: That is a fair point. If everyone congregates at £7,400, that would be rather frustrating, but HEFCE will have to take a decision about value, which will be partly about cost-effectiveness and partly about patterns of student demand. There is already some evidence that there may, for example, be further education colleges that can deliver higher education at less than £6,000, so I hope we will get a range, but it will ultimately be HEFCE’s decision as to what it thinks is in the best interests of students, and what is best value.

Q688 Mr Ward: Would you expect this £7,500 to move with inflation at RPI?

Mr Willetts: Yes, I do not think we have, as yet, specified on that, but I can see the logic of what you are saying. That was a slightly guarded answer; I did not want to make up policy on the hoof, but I can see the logic of what you are suggesting.

Q689 Mr Ward: It was a question, not a suggestion. You have touched on college places. There will be many offers below £9,000 from colleges. I understand that they are to have 160,000 HEFCE-funded students on HE courses. Do you expect the 20,000 low-cost places to be additional to those existing HE offers?

Mr Willetts: They are additional. I think that there is scope there. We will see how it plays out. We think that there is scope for rather more HE provision in different ways, as I have said, but FE colleges are certainly part of that.

Q690 Chair: Before I bring in Paul Blomfield, may I ask a question? If the number of places at fees below £7,500 is set to increase each year, does that mean more and more people will be pushed towards, if you like, a low-cost-base education?

Mr Willetts: As I have said, we will take stock about the balance between advancing in these two forms of greater choice and openness. A lot will depend on what alternative provision develops and what level of demand for it there is. If we find that there are some FE colleges and new providers that can deliver cost-effectively a significant amount of provision that people are choosing and that comes in at under £7,500-perhaps even at under £6,000-and that gets them the vocational qualifications that they want in an efficient, brisk way, with a high-quality teaching experience, and if people are happy to choose it, then, yes, we would want to see that expand. However, we will take a view when we have seen how we do on the cost-effectiveness and what patterns of student demand emerge.

I want to stress, as I have stressed at several points already, that this is a big change in the system; it is a big reform. It is quite important that we have the flexibility year on year to take further decisions in the light of how the system is developing.

Q691 Chair: Do you not agree that if you have a limit on the total numbers, but you expand year by year the numbers on the sub-£7,500 level, you are effectively pushing people in that direction?

Mr Willetts: To some extent, you are talking arithmetic. The issue, though, is whether "pushing" is the right way to describe it. One of the key factors will be what people are choosing. Clearly, if people are finding that there are courses that they want to do-

Q692 Chair: Yes, but if there are only courses available at sub-£7,500, it is not much of a choice.

Mr Willetts: There will be a wide range of courses. As we know, for individuals there will be a wide range of fees, with fee waivers and bursaries as well.

Q693 Chair: If you have a set number, and there is an increase in proportion of the sub-£7,500 courses, the choice will become more limited at one level and greater at another. Now, whether you call that "pushing" or whatever, that is the reality of the situation. In effect, the total choice is limited, or more limited.

Mr Willetts: That is something that we will look at in the light of the experience of the first year, as we decide how to develop both of the initiatives that we have put in the White Paper.

Chair: I will bring in Katy Clark.

Q694 Katy Clark: What do you say to those who say that this kind of model has not been tried anywhere in the world and that it could have a destabilising effect on the sector? You know that people are saying that-what is your response?

Mr Willetts: Our system of quotas is a pretty unusual model. What we are trying to do is to break free from a system in which we literally state for each university, "You can recruit 1,797 students, and we will fine you if you recruit 1,798," which is also quite an unusual way of delivering higher education. What we are trying to do is to move away from that and to bring a bit more flexibility into the system.

Remember that the main feature–the 65,000 places at AAB-was a proposal in Lord Browne’s report. I was asked at the beginning about our view of Lord Browne and whether we have properly drawn on his report. He proposed this tariff-type model. This is not something that we have plucked out of thin air. It is something that the review, which was set up on a cross-party basis, itself proposed.

Q695 Paul Blomfield: Can I focus specifically on the question of employer and charity sponsors of quota places? The White Paper has said that the places must be genuinely additional. Can you explain exactly what you mean by that? I have got it in mind that universities gear up to cater for a number of students with resources such as IT and library facilities, which are part of the key information set on which people have been making their decision. If, then, there are large numbers of additional students, surely they are not really genuinely additional.

Mr Willetts: My answer to this is similar to my answer to Katy Clark. Much though I would love to tear up the quota system and be free, we cannot do that because of the public expenditure implications, so there are going to be controls on student numbers, even with our new, more flexible system. "Additional" means outside those controls. The paradox is that one thing that we will be able to do as a result of the controls is be clear that these are additional and will be extra to whatever the allocation of places is.

Universities will have to take their decision about what resource they have got to deliver, and of course there will be lots of other crucial tests. I appreciated the opportunity of being summoned before the House the other week to make it clear what some of those criteria would have to be. You can’t have just rich kids buying themselves into university. It would be extra on top of the publicly financed places that were allocated through the conventional quotas, core margin or tariff system.

Q696 Paul Blomfield: What did you have in mind when you chose the words "genuinely additional"? There was clearly a thought somewhere that there might be an attempt to create places which were not genuinely additional.

Mr Willetts: Yes, I suppose you could get into a model where universities tried to reduce their publicly financed offering. We will have to see where this goes, but I think that would be unwelcome.

Q697 Paul Blomfield: On the same point, the White Paper also talks about equity in terms of access through this route. Who is going to decide who could be admitted through one of these sponsored places?

Mr Willetts: We are going to have to do a lot more work on this. Clearly, we are envisaging the employer or charity identifying people, but the university must not sacrifice its academic standards for entry. It is early days, but I am very aware of the sensitivities around this subject, so it is very important that anything that does happen meets all the criteria that I put before the House the other week. As I have said, there cannot be a sacrifice of academic standards by universities, and it cannot be a matter of people simply buying themselves in. We think that those criteria for employers and charities will help to ensure that that happens.

Q698 Paul Blomfield: So within those broad criteria, an employer would have full control over an employer-sponsored place in terms of admissions?

Mr Willetts: Well, the university would have to agree that these people had the capacity to benefit from that course and met the academic standards on the course, but that is the kind of thing that we’re talking about-as you know, this is available at the moment in theory. There are currently about 6,000 closed places, as they’re called, sponsored by employers, of which only about 1,500 are full-time and about 4,500 are part-time.

In the past month or two, KPMG has got together with Durham university and said that instead of simply recruiting graduates, KPMG wants to recruit at 18 and then sponsor those recruits to do a course in business finance at Durham. KPMG will pay, so those people will not be a claim on the Exchequer. We are keen to encourage such initiatives. That goes back to the earlier line of questioning on my view on the appetite to go to university. We are keen to encourage such initiatives. We are in tough times, and the number of publicly financed places, certainly for the next few years, will be broadly flat. There is an underlying aspiration for more people to go to university, and people being sponsored by willing employers and charities is another way of bridging that gap. That is one way of getting genuine extra opportunities in HE.

Q699 Paul Blomfield: How will you ensure that the financial support package for students going through that route is at least as good as that for mainstream places? We need to ensure that there is a means-blind admissions process.

Mr Willetts: That is something for the employer or the charity to agree. I want to avoid mirroring all features of the current publicly financed places and saying that we can only support something that looks identical to the package already available from the Exchequer. Clearly it is very important-I made this clear to the House the other week, and I have always made it clear privately and in other discussions-that admissions have to be means blind. It cannot be rich people buying places at university for their kids.

Q700 Paul Blomfield: I accept that that may be your intent, but if you engage in a light-touch way, as you are implying, how will you ensure that it actually happens?

Mr Willetts: These are very early days. At the moment, the issue is one of trying to encourage employers to do more. As I have said, none of the examples that have come across our desks so far have presented such problems. I am aware that people have such concerns, but when you move from the theory to the practice, you see that, by and large, these are ways of improving access to university.

These are people who did not go to university at 18. They have taken a different route, but their employer now wishes to sponsor them through university. That seems to me to be a good thing. The obvious way that many of those people will be financially supported is as an employee in receipt of the minimum wage, but with their employer paying their fees. That looks like a reasonable package.

Q701 Paul Blomfield: So it will be for people who are already in employment with a particular employer, rather than, say, a graduate training scheme? Are you ruling that out? Is it not what you envisage for such places?

Mr Willetts: You say "graduate training scheme", but in the White Paper we made it clear that it has to be an employer or charity sponsor.

Q702 Paul Blomfield: "Graduate training scheme" was not a good choice of words. I am thinking of employers that recruit at 18, linked to a job offer, and sponsor students through this route. Are you implying that you would rule that out?

Mr Willetts: No. Provided that they meet the criteria of means-blind admissions, and so on, what you are describing is, as I understand it, the KPMG-Durham scheme. So I certainly would not want to rule that out.

Q703 Ian Murray: The impact assessment that was published alongside the White Paper is unclear on participation in and access to higher education. What is the Government’s intention on access and widening participation?

Mr Willetts: We want to make more progress on that. Under the previous Government, although there was progress on participation, which is people from a range of social backgrounds going to university, there was not so much progress on access. Access tends to mean people getting through to the research-intensive universities, which, for example, tend to staff the professions, although not exclusively. We attach a lot of importance to access to the research-intensive universities, which is what the access agreements are about.

Even those universities that do well on participation tend to have an alternative problem; they tend to suffer from quite high drop-out rates. Again, for them-this has been a flexibility in the access agreements, and this is where there has been good news in the access agreements-even if they are doing well at recruiting from a wide range of social backgrounds, we want them to put more resource into retention and making sure that people do not drop out. That is another sort of progress that we would like to see.

Q704 Ian Murray: If universities demonstrate improvements in both participation and access, but-I have scribbled down here that you just mentioned this in response to Mr Blomfield’s question-numbers are broadly flat, particularly over the next few years given the funding constraints, does it not automatically follow that there may be places for students at universities, on the basis of that being broadly flat, at the expense of people who would be considered less disadvantaged?

Mr Willetts: I hope that it is not that kind of zero-sum game; you can improve the total number of people graduating by a reduction in drop-out rates. Individual universities will have to decide whether they wish to expand or not and how they expand and recruit more people. The AAB option, and the flexibility there, makes it easier for these more research-intensive universities, which tend to recruit the AABs, to expand. It need not be a zero-sum game for access to those universities.

Q705 Chair: If I can just interrupt you for a second, Ian, before you go on with your questions; in the context of this, Minister, will you require universities to give you figures on drop-out rates with a view to working with them to introduce policies that might reduce those rates?

Mr Willetts: Data on drop-out rates are already collected. In the letter that the Secretary of State and I wrote to OFFA at the beginning of the year giving guidance on how to conduct this exercise, we particularly drew attention to drop-out rates as one of the things that could be a feature of access agreements. A significant number of the access agreements have got initiatives in that area.

Q706 Mr Ward: Are you comfortable with the decision to bring Aimhigher to an end?

Mr Willetts: Aimhigher was mixed, although there were some excellent initiatives in it. What I hope is that the extra resource that is now going into access via the OFFA exercise-it is up from £400 million to £600 million, even before you include some of the public spending on the national scholarship programme-will enable universities to draw on the best features of Aimhigher as they design their access programmes. We have not been privy to this; it has quite rightly been between OFFA and universities. We are still analysing the access agreements, and we will be happy when we have done this analysis to share it with the Committee if that would help. It looks, however, as though there will be summer schools and outreach programmes as well as bursaries and initiatives to support retention. Some of the best features of Aimhigher will carry on in this new form.

Q707 Mr Ward: The head of our local Aimhigher project, which is one of the most successful ones I have come across, is taking this opportunity to retire. It is perhaps an indication of how others feel. At a time when we are dealing with this perception/reality issue, would it not have been wise to review Aimhigher and maybe in a year or two look at alternatives-in other words, to help us through this really difficult period with something where there is proven success?

Mr Willetts: The evaluations of Aimhigher were mixed, but I accept that some of them were better than others. The aim was that we would put a clear responsibility on universities to do that sort of work and to pay for it. I think that is where responsibility lies. As I say, extra resources will go into it through the access agreements. This year we have tried to communicate effectively with national and regional advertising, as well as information to individual schools and colleges sent via DFE.

Q708Ian Murray: I should like to move on to the national careers service. I believe that it won’t be up and running fully until April 2012. Have the Government put any transitional arrangements in place for the cohort of students who will require the service before that date?

Mr Willetts: In the current Education Bill, there is a clear obligation on schools to provide access to independent information, advice and guidance. I believe that will be effective in ensuring that young people get the assistance they need. I accept, and we get the message loud and clear, that information, advice and guidance are crucial. The starting point has to be information. We are moving as fast as we can to get the raw data and the information out there so that it can be used in lots of innovative ways.

Q709 Ian Murray: The national careers service will be provided through a website and telephone support initially, but what about provisions for the hardest to reach? Essentially the best advice will be about getting the hardest to reach into further or higher education. Will schools provide that service directly or will there be another way for people to access it? It is a very proactive thing, isn’t it, a telephone and a website for careers service?

Mr Willetts: Obviously my Department does not have responsibility for the under-18s. My understanding of the proposal in the Education Bill-here I am speaking on behalf of the Ministers in the DFE-is that schools will be required to get independent advice and guidance. There is separately the all-age careers service, post 18, where we are working very closely with the DWP and hope that, not least through jobcentres, hard-to-reach groups, such as people who are on benefits, will have access to that type of information, advice and guidance, as well as its being available on websites.

Q710 Ian Murray: One of the key pieces of information at the moment is that access to the internet is becoming more difficult for the hardest-to-reach groups, particularly through public services, library provision and so on. There has to be a key strategy from the Government to ensure that the hardest-to-reach groups, and this is all about access and participation, can be reached.

Mr Willetts: That is a fair challenge. We recognise-and this comes across loud and clear-that making sure there is proper access to information, advice and guidance, including for hard-to-reach groups, is important. Martha Lane Fox is leading for the Government on trying to secure wider access to web-based information. I cannot immediately update the Committee on how she is doing, but she and her group are intent on tackling the problem that you rightly identify.

Q711 Chair: Before we move off this, may I pick up a couple of points from the previous witness, Simon Hughes? First, he told us that the most significant way of changing prospective students’ attitude towards higher education was through the outreach service, including Aimhigher. Given that students will have to make decisions fairly soon at the start of the new term, will you ensure that adequate resources are put in place so that there is a level of outreach service that makes sure that students from disadvantaged backgrounds try to access higher education next year?

Mr Willetts: The anecdotal evidence we get is that interest at open days and summer schools is, if anything, as great as ever, and the questions are in some ways more penetrating than in the past. We did write, via the DFE, to all schools and colleges with people in the crucial age group, drawing the head teachers’ and principals’ attention to all the resource that was available online.

The new legal obligation is being put into one of the first items of legislation of the coalition Government. We are trying to move as rapidly as possible. I hope that young people get access to the information that they need. When I look at the level of activity on the web and the excellent independent initiatives, such as Martin Lewis’s, I think we are beginning to get the message through about the basics of financing and of the kind of opportunities that open up for you if you go to university.

Q712 Chair: To pursue that, one recommendation that Simon Hughes made is that OFFA, as a condition of accepting fees above £6,000, should stipulate that universities within a region provide a collective fund for an outreach programme-effectively a successor to Aimhigher-for the schools within their region. What is your view of that proposal?

Mr Willetts: We will look at it carefully. Obviously, I have been in touch with Simon a lot over the past six months, and have really appreciated his contribution, which has been very helpful. He is now going to bring forward his final report. We will consider that and respond properly to his proposals. If we analyse the access agreements, via OFFA or the Department-we would be happy to share any analysis-many of them are about this type of outreach activity. A lot of universities are setting themselves targets for outreach to schools that are not sending many people to higher education, with descriptions of the kind of activities they are going to engage in. It is happening already, and we are hoping more will happen as a result of the access agreements.

Q713 Chair: Do you not agree that, without some sort of collective initiative, there is a real danger of having a hotch-potch of unco-ordinated outreach activity, based on individual universities, which may well be to the detriment of making the sort of impact that is necessary, and could be done on a more collective basis?

Mr Willetts: Universities have put to me the following point, which I very much understand. They say that they are going to try to reach the schools and colleges in a 25-mile or 50-mile radius of the university. Then the University of Sheffield says, "If as a result of our engagement, we really raise the level of HE participation by a school or college in Yorkshire that we have been visiting, what do they do? More of them apply to go to the University of Birmingham. Will you recognise that we, the University of Sheffield, have made an effort, rather than our having to get in touch with comprehensive schools in Cornwall", and rather than Birmingham having to go to Sheffield. We understand that. That is why some of the measures of performance are inputs not just outputs. They are perfectly entitled to focus on their geographical area. That is the best way to excite a 15, 16 or 17-year-old.

Q714 Chair: That is incorporated in Simon’s proposal, I think.

Mr Willetts: We will look carefully at what he is proposing. We will look at all his proposals with great respect. I cannot give an immediate response to the Committee. It may be a problem that is rather greater in theory than in practice. We will look at it and if there is more that needs to be done to co-ordinate, I will not rule that out.

Q715 Chair: That sounds a bit like "Yes, Minister".

Mr Willetts: Oh, does it? I am sorry about that. I am trying to be respectful to Simon, whose report is due in its final form on our desks only in the next few days. Then we will have to look at it properly.

Q716 Mr Ward: What is your gut feeling? Do you think that increased tuition fees will deter people from applying to university?

Mr Willetts: I hope not, once people recognise that nobody has to pay up front. It should not do. Of course, we are very aware that if you look at the experience of the introduction of the fees and loans system in 2006 there was that dip, and then the recovery; but I hope people are not put off. We are absolutely putting all our efforts into communicating as effectively as we can, so that people are not put off.

Q717 Mr Ward: Are you not in a Catch-22, whereby the more you talk up the measures taken to help people from deprived backgrounds-the national scholarship programme is a good example-the more you are in fact admitting that they are necessary, because people will be deterred?

Mr Willetts: I fully recognise that there is a kind of purist position that says, "All that matters is the monthly repayments", and that once people recognise that their monthly repayments are lower, because the threshold has increased from £15,000 to £21,000, that is the most important single feature of these reforms for someone worried about the cost of going to university. There is that sort of purist argument; but in the real world, I have to accept that there are people for whom the level of that fee will be an issue, and the connection would be how long they have to make the repayments for. So the use of the national scholarship scheme and bursaries to help with the up-front fee in a world where people have multiple concerns-having that as well-does, I think, help strengthen the case.

Q718 Mr Ward: We had a debate before on the relative merits of funding NSP, as opposed to additional funding for the widening participation agenda, so maybe we should comment on that, for the record, as well. The other issue is to do with the NSP and the fact that it is for the institutions themselves to look at the criteria for that. If that is the case, there is a lack of transparency and consistency in the adoption of that across the sector.

Mr Willetts: Well, we have got several trade-offs here. One is, of course, between the clarity of a nationwide scheme on the one hand, and on the other hand the belief that institutions should be able to innovate and do what is best for their prospective students. Of course, we inherited a system where there was just a requirement to put 10% of the money into bursaries, and the evaluation, which Martin Harris produced last year, showed that that was not particularly effective. That is why we have deliberately decentralised, or localised-one of the things that we believe in, in the coalition-to give a little bit more discretion to universities on that.

There are different ways in which you can help people. You can help them with fee waivers and bursaries; and we, of course, are helping them with a general increase in maintenance support. For many students there will be an increase in their total maintenance package. One can be purist, but it is to some extent horses for courses, and I think especially when we are making such a big shift to a new system it is right to have a bit of flexibility and different ways of helping; then, over the years, we will be able to see which ones are most effective.

Q719 Mr Ward: Do you think it is right for admissions tutors to take into account contextual data when looking at applications?

Mr Willetts: Provided that it is done on a transparent evidence basis, yes, I think that universities are entitled to reach that decision. We are not instructing them, but I do believe, as a meritocrat, that you want universities to fish in as deep and wide a pool of talent as possible, and they may wish to use contextual data if they think that helps them do so.

Q720 Mr Ward: And is that compatible with ending contextual value added tables?

Mr Willetts: The data on backgrounds, performance indicators and benchmarks will still be collected, so that universities will still be able to see how they are doing, given the background of their students. As I say-I know that this is a sensitive issue-we are trying to do our best for social mobility and meritocracy without dictating to universities how they should run their individual admissions. From the previous Government we inherited a clear legal framework, in which Ministers do not determine individual universities’ admissions decisions. We respect that and do not wish to change it.

Q721 Mr Ward: Is it not a problem, in terms of the wider participation agenda, that the total focus on attainment as opposed to achievement will disadvantage those who made more progress during their secondary education?

Mr Willetts: I do think that if you solely focus on attainment, and simply say that going to university is a reward for good A-level grades, you would be in danger of missing out the talented people who have been let down by the school system, or, for whatever reason, had A-level grades that did not reflect their underlying abilities. That is why most higher education systems in the world try somehow to look at potential. It must not be about sacrificing standards; it should be about the recognition that there is more to standards than what A-level grades people have. How universities do that is for them. If they do it, it has to be rigorous and it has to be evidence-based. We are not insisting that they do it, but if they wish to do it and have clear criteria for doing it, it is one thing they can do.

Q722 Mr Ward: The A-level result measures a level of performance at a particular point in time, but if the race had been 100 yards longer, the horse may have won the race. That is the difficulty in focusing entirely on attainment.

Mr Willetts: I am going to use that image in future. That is a very good way of putting it. I accept that.

Q723 Chair: Just before we go on, may I clarify something? It has been put to me that some universities already have a high proportion of students from disadvantaged backgrounds. What guarantees are there that they will not be discriminated against in the allocation of the national scholarship programme? It will be rather more difficult for them to demonstrate improvement on procedures that they already have.

Mr Willetts: That is why we have a range of measures. There is retention as well for precisely that reason-you are quite right. We did not want to put an unfair burden on the universities that are doing best. It is also why we have been a bit flexible in year one, because we did not want to impose too heavy a burden on universities in those circumstances. The criteria are a bit more flexible in year one as well, I believe.

Chair: Right. We will monitor that. A question from Ian Murray.

Ian Murray: You asked the question I was about to.

Chair: Right. We will come on to alternative providers.

Q724 Katy Clark: You will be aware of the concerns about alternative providers, particularly from the for-profit sector. We understand that the new regulatory framework for institutions receiving public money, including requirements for information, provision and quality, will not be in place until 2013. If so, why are you none the less increasing the student loans available to students studying at designated institutions from 2012? Why is there the difference?

Mr Willetts: I fully realise that in 2012-13 there will be an interim regime. In an ideal world, we would have the whole regulatory regime in place for 2012, but that is simply not practical given the parliamentary timetable. The decision was on what we should do in 2012. Of course, we inherited a system from the previous Government where a student can have access to student loans at an independent provider, without having to comply with the full regulatory requirements. That is what currently happens. We will have to wait until 2012-13, parliamentary business permitting, before we can have a single regulatory regime. We are getting on with it as best we can.

Q725 Katy Clark: A number of witnesses who have given evidence to us have described the Government as "withdrawing" from higher education by reducing the teaching grant. Without financial control over institutions, how do you propose to incentivise the higher education section to deliver against national strategic priorities?

Mr Willetts: I would like to challenge this picture of us delivering a kind of Americanisation of English higher education. First, there is a continuing Exchequer commitment through the Exchequer subsidy in the loan scheme, which is quite right. If people have low-income jobs or they are out of the job market for a time for whatever reason, we do not expect them to repay the loans. That is the 30% RAB charge-it is about 30% of the loans that we do not get paid back.

There will continue to be some teaching grant for the more expensive-to-teach subjects in bands A and B and, we hope, for strategically important and vulnerable subjects. Unlike in the US, there will also be a proper system of regulation-the QAA. As I said, we are going to extend the QAA regime to private providers that are currently within it. We have to make it more flexible, but we are going to extend it.

I fully realise that the national interest-the public interest-is closely involved with HE. We are not trying to disengage. I am a realist; I am trying to deliver more cash to universities even when public money is tight and reform the system so that the student is empowered. But we are not disengaging; there will still be a range of legitimate public policy objectives that you should rightly hold Ministers and any Government of whatever political colour accountable for.

Q726 Katy Clark: So what are you going to do if institutions or individuals do not react in the way that you hope? For example, what about if individuals decide not to choose to study the strategically important subjects?

Mr Willetts: In the long run, we in Britain do not have direction of labour. Ultimately, we cannot say to someone, "Well, you might wish to study psychology, but we are going to tell you that you have to study physics." That is not our way of doing things-and a good thing too.

However, we can provide information about employment outcomes and reflect the higher costs-the continuing provision-for bands A and B. But I don’t think our problem is that large numbers of people are uninterested in studying STEM subjects; it is that they do not always get the information and advice that they need about the A-levels they should study to get in to do the STEM subjects. No one necessarily sits them down and says, "All right, if you want to be an engineer, you really need to do maths at A-level." There is a real challenge to get that information out, which is why, for the first time, we are saying to universities, "We expect you to release publicly the information about the actual A-levels people have done on a specific course." So there is an information problem.

When we talk to employers, they have a problem about the type of education people get on a STEM subject course. Sometimes they say, "Well, they’ve spent all their time sitting in seminars; they haven’t had enough time in the lab-they’re not lab-ready." Again, that is where we think kitemarking and employers signalling is important. In the life sciences industry, the biological sciences courses that employers values are ones that enable students to be ready to come and work. They might say, "You’re ready to come and work for GSK if you have done this course, but not necessarily if you’ve done it at a different university." Those are the types of problems, rather than a general aversion to STEM, which, fortunately, I do not think is a problem in our country.

Q727 Katy Clark: That did not quite answer the question.

Chair: I will come back to you, Katy.

Q728 Ian Murray: I want to go back to the Government withdrawing from the sector question. Is it not the case that the level of fees set was determined by the deficit reduction programme, in terms of money going to universities from the state, rather than what was best for the students and for the sector?

Mr Willetts: I must not be disingenuous. Of course, saving money was part of it, but it was only part of it. We are saving public expenditure-perfectly legitimately. That is a clear aim of the coalition. But we are also ending up with a system that actually gets more cash to universities and puts more power in the hands of students, so there is also a genuine reform.

The other point that I would make is that many of the key features of this were put forward by Lord Browne and commissioned by the previous Labour Government-in consultation with us, of course, when I was the Opposition spokesman-so this is something that has deep roots back into a decision by the previous Government. This is a reform programme, but part of it is to save public expenditure, and it delivers that.

Q729 Paul Blomfield: Still on the issue of the role of the for-profit sector within higher education, when Carl Ligo met the Committee, he told us that BPP university college expected to serve ABC1s-high-quality students who are going on to high-quality jobs. Professor Kealey, who you all know, from the university of Buckingham said it would take 50 years before they could offer needs-blind admissions. Could you give us an absolute assurance that for-profit higher education institutions receiving public money will be open to all students with the ability to benefit, regardless of background, wealth or employment aspirations?

Mr Willetts: It is very important that they should be, and if-

Q730 Paul Blomfield: It is important that they should be, so can you give us that guarantee?

Mr Willetts: I can, because the structure of access agreements will apply to them in the same way that it does to all other universities. The position that we have inherited is one in which they are exempt from any such requirements. They are not participating in the QAA. They do not have to participate in the OFFA process. I want the QAA to be more flexible, but, in future, we envisage, through legislation, achieving a single system where as soon you as wish your students to be in receipt of Exchequer loans, with the subsidy that is implicit in that, then you have to accept, as your side of the bargain, that you participate in the access regime and the QAA regime.

Q731 Paul Blomfield: So BPP will have to revisit their business model.

Mr Willetts: They will have a decision to make-I fully respect their decision-whether they wish to participate in the system or not. It is up to them.

Q732 Paul Blomfield: Okay. Can I ask one more question? In the context of the various things that have been happening with News International over the past week, I wonder whether you thought that, when awarding degree-awarding powers and university titles to for-profit companies, there ought to be an additional fit-and-proper-person test.

Mr Willetts: We are entitled to look at the track record of the institution, and that can include whether there is any relevant experience abroad. British higher education is valued around the world. If you are to pass the QAA requirements or to have the title of university, you do have to be rather a special institution. So exactly how we measure that and whether you have to go through an individual being fit and proper I am not sure, but the institution certainly must have a credible track record or other evidence that it is going to give a high-quality university experience. I do not wish the international reputation of British higher education to be diminished. All that I want to do is to see that we have another generation of innovative new entrants. The history of the growth of higher education in our country has been successive waves of new entrants coming in, and some of them were treated rather suspiciously at first.

Q733 Chair: May I just finish off by saying that, as was said earlier, the White Paper was six months delayed, but in response to several questions you have replied along the lines of there still being areas where more work needs to be done? That seems surprising given the fact that the White Paper was six months delayed, and you would reasonably expect any problem areas to be resolved during that six-month period. Could you summarise the areas where there is still more work that needs to be done?

Mr Willetts: The next stage of the White Paper is to get responses to it and draft the legislation. We hope that the legislation will appear, with the consent of colleagues and everyone, in the next parliamentary Session. At the end of the White Paper on page 76, we set out very clearly the areas where we have specific consultations on early repayment, on the regulatory framework, on the teaching grant in 2012-13, which is particularly time sensitive, and more widely for ’13, ’14 and beyond. I hope-I do not claim to have got this absolutely right-that, by in large, the areas where I have indicated there is more work to be done are areas where we have shown in the White Paper that there will be further specific consultations. We welcome, more generally, reactions to the White Paper, which takes us a significant step beyond the financial decisions that were taken last year, and it is a significant step toward the legislation that will be brought forward next year.

Q734 Chair: Given the widespread opposition to at least some elements of the White Paper, particularly the higher than expected levels of tuition fees and the areas of uncertainty that I suspect reflect a certain intractability of the problem, would you consider delaying any of the proposals if there is no satisfactory resolution of them or if, on the basis of what we see over the next few months, there are very real problems with the implementation of some aspects of the White Paper?

Mr Willetts: I would be very reluctant to do that, Mr Chairman, not least for the reason that you hinted at earlier. Universities need to know where they stand. At each stage of the process, we have tried to give them the information that they needed. I realise that it is asking a lot of them. These are big changes in the system. The White Paper sets out the Government’s proposals. It is the direction in which the coalition wants to travel. We do identify some specific areas where we are consulting and, more widely, there will be reactions to the White Paper, but the timetable and the direction of travel is pretty well set.

Q735Chair: So, you will continue to go forward with them, even though evidence shows that there are still huge problems in their implementation?

Mr Willetts: We have drawn on the evidence in our economics paper, in our research paper on arrangements in other countries, and in the excellent report from John Browne that the previous Government commissioned. We tried to set out evidence in the White Paper. Of course you cannot satisfy everyone all the time. There are trade-offs, and there will always be legitimate disagreements about them, but I think that we will achieve a properly funded university system with more power and information in the hands of students, and a real impetus for further improvements on access. That is the coalition’s view. Of course we will listen to any points that are made in response to the White Paper, but the direction is set out. I very much hope that it will be possible to bring forward legislation next year .

Q736 Chair: But there are a whole number of unknowns, as you have acknowledged yourself, that could present very real problems, and you are saying that you won’t-shall we say?-deviate from your course .

Mr Willetts: The big strategic decisions have been taken. Of course, we will monitor closely what happens-on access, for example-and we will consult on the specifics that we set out, as well as more generally encouraging reaction to the White Paper. However, if you follow the timetable, which begins with the establishing of the Browne committee in 2009, through to the changes here, which are only being fully enforced in 2015-16, that is a pretty generous time scale. At each stage of the way, we have been trying to respond to the evidence that comes in.

Chair: Thank you, Minister. We will be doing our report in due course, as you are aware. Obviously, if you feel any further information might be appropriate, we would be happy to receive it.

Mr Willetts: Right.

Chair: Thank you very much.

Prepared 20th July 2011