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Baroness Blackstone: Perhaps I may remind members of the Committee again that the new funding arrangements that we are seeking to put in place will, in 1998-99, yield an estimated £130 million in students' own contributions to fees in England alone, after allowance has been made for costs of some 5 per cent. for collection and default. Our £165 million package of measures for higher education in 1998-99 will mean that universities and colleges will receive directly around £130 million in extra funding in 1998-99. They will benefit fully from the money derived from students' contributions to tuition fees.

We have thus honoured our pledge that our proposals would mean more money for universities. Levels of funding for future years will necessarily have to be considered in the context of the Government's comprehensive spending review, but we fully intend that higher education should benefit from the new arrangements. Perhaps I may reiterate that savings from the introduction of tuition fees will be used to improve quality, standards and opportunity for all in further and higher education.

The Dearing Inquiry identified as its first priority the need for additional funds to enable the reduction in the unit of funding to be limited to 1 per cent. Our funding package provides for that and, in addition, will allow for more investment in infrastructure and a start on growth in student places. There should be no need for universities and colleges now to consider introducing top-up fees. Our provisions do not, as some have suggested, threaten the university system. Instead, they provide the means of improvement and expansion.

However, in seeking to address the financial crisis that has been facing universities and colleges over recent years, we should not forget the interests of the students. Indeed, many members of the Committee mentioned students during our debates today. Clause 18 is not about altering the fundamental nature of the relationship between the Government and universities, as the noble Earl, Lord Russell, has claimed. It is simply about protecting the interests of students, and particularly those who come from families that are financially less well off, at a time when some of them are being asked to contribute to the costs of their education.

We need to have a reserve power to control top-up fees, if necessary, in order to be able to reassure home and EU full-time undergraduate and PGCE students that tuition will continue to be free for those from lower income families and affordable for those from slightly better off backgrounds. And we need to assure their parents that they will be expected to contribute no more than under present arrangements. We also believe that students should choose higher education institutions and courses on the basis of what will be most appropriate for their needs rather than on the costs of tuition. Top-up fees would undermine that principle.

I know that some universities or colleges might be willing to introduce bursary or scholarship schemes alongside top-up fees. But I do not believe that anyone

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can guarantee that all would do so. We cannot be certain that such schemes would ensure that all students from lower income families received bursaries equivalent to the top-up fees while fees for students from slightly better off families would be kept to affordable levels. That is why we are seeking a reserve power to control top-up fees, if necessary.

But all we are seeking is a reserve power to limit the amount that universities may charge home and EU full-time undergraduates and PGCE students in return for the £3.5 billion of public funding they already receive through grant and the further £1 billion they will receive through tuition fees. The Bill does not give the Secretary of State power to set university fees. Nor is it, as I said, our purpose to control fee levels generally for part-time students, postgraduate students or overseas students for whom we make no direct financial support available. I trust that the amendments that we have brought forward today have made this amply clear.

We have also said that we hope we never have to use this power. But I do understand universities' concerns about the possible use, or misuse, of powers that are on the statute book. Clause 18 is not, however, an attack on academic freedom, nor is it an attempt to prevent universities improving their financial position. Universities retain all their essential freedoms to decide which students to admit, which staff to appoint, what courses to provide and what to teach on those courses. They will also remain responsible for their overall income and expenditure, and will be free to maintain and develop funding from other sources.

In drafting Clause 18 it has been necessary to make sure that there could be no legal conflict between certain provisions in the Further and Higher Education Act 1992. But I should like to emphasise again that the safeguards for academic freedom in that Act will still stand.

I also wish to stress that we are prepared to look again at particular elements of the drafting of Clause 18 and to continue working with the CVCP to clarify as far as possible any remaining uncertainties. If Members of the Committee agree that Clause 18 should now stand part, we would, for instance, be willing, as I said, to see whether an appropriate amendment could be drafted to ensure as far as possible that conditions on grant to control top-up fees could not be framed by reference to courses in particular subjects.

With those assurances, I hope that noble Lords will accept the importance of Clause 18 in the new funding arrangements that we are proposing for students, and particularly in giving reassurance to full-time undergraduates and PGCE students as we ask them to contribute to the costs of their tuition. I commend Clause 18 to the Committee.

11.45 p.m.

Baroness Blatch: I wish to ask a technical question. It is pertinent not only to the clause but also to one or two future amendments.One hundred per cent. of tuition costs for each student are met by the state. From the beginning of the next academic year students will be required to meet approximately 25 per cent. of that

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through the first £1,000 of fees. Am I right in assuming that the state will continue to provide the equivalent of the 100 per cent., and that the income generated by the 25 per cent. will be additional money; or will the Government adjust their grant to the higher education sector and include the 25 per cent. that is being met by students to make up the 100 per cent?

Baroness Blackstone: As I have already explained several times, both at Second Reading and earlier today, universities are able to keep the fees that they are charging to students under the new arrangements. We have already said that during 1998-99 universities will have an extra £130 million to deal with making sure that the efficiency gain is no more than 1 per cent. and to deal with some of the problems of their infrastructure. The amount raised from fees will be £125 million, so the universities will receive more next year than is raised by the fee. As I have said on countless occasions, it is our intention to ensure that the new arrangements will lead to more money for the universities. Because of our comprehensive spending review, I cannot anticipate the precise arrangements after 1998-99. I can only repeat what I said: for 1998-99 the universities will retain the additional funds that derive from charging students fees.

Baroness Blatch: I am sorry to come back on the point, but does that then mean that the university sector as a whole will receive the equivalent of 125 per cent. of the cost of tuition? In other words, universities already receive 100 per cent. from the state and they will receive a further 25 per cent. from students, which tops up to 125 per cent.; or will the government adjust the amount and pay 75 per cent. in future with 25 per cent. coming from the students? In that case there is no extra money. As I understand the noble Baroness's remarks, the Government will continue to pay the equivalent of 100 per cent. tuition fees and the student will add to that a further 25 per cent., which will be kept within the universities.

Baroness Blackstone: It is very late, and I have tried to explain the position. Next year, the amount of money that is raised from tuition fees, which will be charged and collected by the universities, will be kept by the universities. I cannot--

Lord Pilkington of Oxenford: What my noble friend is asking is this. At present the state pays all tuition fees. The state is now to charge for 25 per cent. of tuition fees. I realise that we are all tired, but it is a very simple matter. Universities receive the 100 per cent. paid by the state, but they are to receive the 25 per cent. extra that the student pays--in other words, as my noble friend says, 125 per cent. The amount will not be the same as it is now. The student's contribution will be extra to the 100 per cent. presently paid by the state.

Baroness Blackstone: The existing arrangements in relation to fees will not continue. So the answer to that has to be no. There will not be a fee in the same respect so far as the state is concerned. All the arrangements will change. What is important is whether the

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universities will benefit, and the answer is that they will. They will be collecting the fee. For next year they will have the total amount of the fee that is collected. What I cannot do, because of the comprehensive spending review, to which we were committed prior to the election, is say what will happen in subsequent years.

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