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Lord Tope moved Amendment No. 50:

Before Clause 20, insert the following new clause--

Use of fees by institutions

(" . In exercising his powers under section 16 the Secretary of State shall--
(a) ensure that all income derived from fees is used by institutions for the provision of courses of higher education and for connected purposes;
(b) disregard such income for the purposes of calculating the grant to be made available to the funding councils under section 68 of the Further and Higher Education Act 1992; and
(c) require, as a term and condition of grant under paragraph (b) above, that the funding councils do not diminish the grants made to the relevant institutions in respect of any income derived from fees.").

The noble Lord said: My Lords, noble Lords have discussed Amendment No. 50 and similar amendments on a number of previous occasions and I believe that the points have been well and fully aired. I do not intend to

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take time tonight repeating them. Paragraph (a) recognises that the Government have said repeatedly that the income from fees will be retained by the colleges and universities. That is really not the issue at the moment. I believe that paragraph (b) is the real issue. It is meaningless if there is no financial benefit to the universities because later the Government simply take money from their HEFC grant. Were that to happen the students would pay the £1,000 instead of the taxpayer. Occasionally I have run into difficulty when I have referred to this as a tax but I cannot see what else it is unless the fee that is paid is directed to and wholly benefits higher education. That is the purpose of paragraph (b).

The noble Lord, Lord Whitty, has twice refused to commit the Government to the principle that this new tuition fee money represents in the long run a real increase in the funding of higher education. On 2nd March he said that public expenditure decisions were taken year by year; in other words, there is no guarantee that the Government will not find good reasons to take away the money in due course. The noble Lord's response to paragraph (c) of the amendment was that it removed the funding councils' flexibility in awarding grants to particular institutions. All we ask is that the funding councils do not diminish the grants. We propose the amendment because we fear that a back-door mechanism may be found by which the councils reduce the universities' grants rather than the Government.

This is an important amendment and I believe it is one that gives much needed reassurance to the universities. The noble Baroness, Lady Blatch, was kind enough to say at Report stage that the amendment was more watertight than the one in her name. I was grateful then to hear her view on that. I hope that, having convinced the Conservative Opposition, we have now also convinced the Government and that at the closing stages of the Bill they will graciously accept the amendment.

Baroness Blatch: My Lords, I support the amendment moved by the noble Lord, Lord Tope. The rationale adopted throughout the Bill, and even before the Bill was laid before the House, was to put more money into higher education. Every argument that we have put at each stage of the Bill to get the Government to agree that this is additional money and that it will be disregarded for the purposes of the funding of higher education has been rejected. Either this is additional money or it is not; either additionality works or it does not. Whatever be the wording--this wording is the best that I have seen to date--the intention is to ensure that the money that is taken from students in fee income is regarded as additional money to the system both to alleviate present tensions and to fund expanding numbers, because the Government intend to lift the lid off numbers.

We have received guarantees that the £1,000 per student, whether it is paid in part or in whole by the student and/or the local authority, will follow the student into each university and college throughout the land. We are grateful for that. However, that is only part of the equation. If that is disregarded for the purposes of funding higher education one can genuinely say that it

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is additional money. However, if the higher education funding council simply tells a university that it has £500,000 from tuition fees and therefore the council will pay only whatever is the top-up amount to meet the average cost of course fees throughout the land then students will be asked to share the cost, and that will not be providing additional money for the universities from which universities and students will benefit.

Much has been made of the £165 million which is to go into higher education in 1998-99. That will be very welcome to the universities. However, it has been achieved by the re-jigging of payments which allows some expenditure to be moved into the next financial year. It is a fortuitous one-off saving which will go to universities this year. Unless that level of expenditure is maintained year on year the universities will start the following year down by £165 million. They will have two choices. If they spend the money on capital projects that is fine because that is one-off spending. However, if it is revenue spending the universities will find themselves in very real trouble the year after.

I am aware that £165 million is greater than the £120 million or £130 million--whatever the yield from tuition fees is--so the Government are saying that that is subsumed. But I have not heard the Government, at any stage of the Bill, say that they will receive £165 million, plus any income from fees, but when that £165 million has gone as expenditure for the coming year, we want to be certain that money raised from tuition fees from students is, first, spent exclusively in higher education, and not elsewhere, otherwise it becomes a tax; and, secondly, that it is genuinely seen as additional money going into higher education, which can be done only if it is disregarded for the purposes of the normal funding of higher education.

Lord Wallace of Saltaire: My Lords, I, too, hope that the Government will find it possible to accept the amendment. We are all concerned about the immense financial crisis that universities face. We are all, I hope, including the Government, greatly concerned about maintaining and improving the quality of British higher and further education. The Government have made it clear since Dearing that they cannot and will not provide additional revenue to universities through taxation. The additional revenue must therefore come from fees. The amendment states that what comes from fees will, in effect, be used as additional revenue. On that basis, I hope that the Government will willingly and happily accept the amendment.

Baroness Blackstone: My Lords, I admire the persistence of the noble Lord, Lord Tope. This is the third time that we have debated an amendment along these lines. But, for all the debates we have had, this amendment remains inappropriate. I am sorry that I shall have to disappoint him. I shall try to explain why.

The amendment seeks, first, to ensure that all fee income is spent by universities and colleges on providing courses of higher education. Just as universities charge fees, so they receive fee income. That has always been the case, and it will remain so.

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Students who have to find all or part of the fee themselves in future will pay that fee directly to their university or college. Where students receive financial assistance with all or part of their fees from public funds, that assistance will be paid directly to the university or college. As the noble Lord and the noble Baroness understand, the university or college will keep all that fee income, whatever its source. Universities will not surrender any of their fee income, either to the Government or to the higher education funding council.

It will of course be for universities themselves to decide on how to use fee income from higher education fees. But there can be little doubt that it will essentially be spent on providing courses of higher education and for connected purposes. However, Clause 16 deals with not only higher education but also further education. And it would seem strange to require all fees charged by institutions to be used for higher education even though FE colleges exist primarily to provide further education courses. The first part of the amendment poses some problems, therefore.

Baroness Blatch: My Lords, is the Minister suggesting that, if the amendment were correct and referred to money taken from students and their families in higher education, the amendment would be acceptable, or is she using the argument that we are cross-fertilising further education as well?

Baroness Blackstone: My Lords, for reasons that I shall explain, even if the wording of the amendment were improved it still would not be acceptable.

The second part of the amendment is to require the Secretary of State to disregard fee income for the purposes of calculating grant for the higher education funding councils. I shall deal in a moment with the wider issue of the extra funding that the Government will be making available to universities and colleges as a result of the savings achieved through means-testing support for students' fees. But, before that, I should make clear how public funds for higher education are channelled to universities and colleges.

Some £3 billion of public funds for teaching higher education students will go through the funding councils in 1998-99. But, in addition to that, about £1 billion of public funds will continue to flow through support for tuition fees next year. Even when the new funding arrangements reach steady state, we estimate that just over half of universities' fee income will continue to be paid out of support from public funds for tuition fees. We clearly cannot leave such a large sum of taxpayers' money out of account when calculating the public funds for higher education that flow through the other channel of public support; that is, through grant to the HEFC. Nor can the funding council leave out of its calculations the fee income that is received by institutions, as the third part of the amendment would require. That is primarily because the funding council needs to ensure fairness in funding.

The HEFCE is aiming to fund similar activities at similar rates and to offer a standard price for each full-time equivalent student place. At present, tuition

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fees are paid on behalf of home full-time undergraduates up to maxima at three different levels to reflect the broad subject area studied. Next year, support will be available up to just one maximum level of fee, whatever subject the student is studying. As a result, it will be necessary for the funding council to make adjustments to the grant it provides to ensure that some institutions which concentrate on providing costly subjects do not lose out in consequence and that others which concentrate on cheaper subjects do not gain unfairly.

All that said, I should emphasise that the aim is that universities and colleges should receive similar support in grant and fees to fund similar activities. Institutions may receive more funding to educate a student in one subject than another because of the extra costs involved, but all institutions should receive broadly similar amounts to teach the same subjects.

In short, therefore, the amendment is unnecessarily restrictive in the requirements that it seeks to place on both the Secretary of State and the funding councils. But there should be no question that universities and colleges will benefit financially as a result of income raised from students' payment of tuition fees.

We have already announced a package of measures which will allow an extra £165 million to be spent on higher education in 1998-99. Universities and colleges will thus receive directly some £130 million in extra funding in 1998-99. As the noble Baroness said, by allowing an extra £130 million for universities and colleges, we are ensuring that they will benefit fully from the money derived from students' contributions to tuition fees.

I was asked whether I could give an assurance that universities would continue to benefit from the income received from tuition fees. Yes, I will give such an assurance. I repeat the assurance that the Government gave in their initial response to the Dearing Report, in an oral Statement made in both Houses of Parliament on 23rd July last year:

    "These proposals will mean more money for universities. The Government will ensure that savings are used to improve quality, standards and opportunities for all in further and higher education".--[Official Report, 23/7/97; col. 1447.]

We recognise that, when they are making a direct contribution to the costs of their tuition, students are likely to be more demanding of institutions. They will rightly expect high quality and standards. That is in line without our own intentions. I agree with what the noble Lord, Lord Wallace of Saltaire, said about the importance of that. It is evidenced by the funding package we have made available for 1998-99. Of course we are committed to maintaining and enhancing quality and standards in higher education and of course we shall do our utmost to ensure, as we have said, on a number of occasions, that the savings from the new funding arrangements are used for that purpose as well as for increasing and widening participation.

Of course we are not in a position to give cast-iron undertakings in relation to future years. We are in the middle of a comprehensive spending review, and it would be unrealistic for noble Lords to expect me to pre-empt decisions on public expenditure for future years or to put undertakings related to future public

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expenditure decisions on the face of the Bill. As the noble Earl, Lord Russell, said so eloquently on Report, no Parliament can bind its successors. We cannot now bind a future Chancellor of the Exchequer to put a certain sum of money into the budget for higher education. The amendment, however, would commit the Government to a spending decision years in advance.

Noble Lords on the Conservative Benches opposite, who have had more recent experience of government than the Liberal Democrats, would realise that no government can do this. While we can express intentions in general terms--and we have been happy to do that--it is simply unrealistic to expect more, as no one can foresee what circumstances may arise in future.

However, let me confirm that, on the present accounting basis, we estimate that the proposed means-testing of financial support for fees will bring in some £450 million to £500 million by the year 2015-16. And the words I have quoted from the Government's Statement of 23rd July last year make our intentions absolutely clear--as clear, I would maintain, as any Member of this House could reasonably expect, given the way in which government decisions on public expenditure have necessarily to be taken. The funding package which allows an extra £165 million to be spent on higher education next year demonstrates our determination to put our words into action and to live up to our commitments.

With that assurance, I return to the specific amendment before us. I repeat that it would be wrong, for the reasons I gave earlier, to leave out of the reckoning fee income for the purposes of calculating grant for the higher education funding councils. All public funds must be taken into account when assessing higher education's needs. Nor would it be right to place on the funding council restrictions which would in themselves lead to unfairness in the allocation of grant. Given the assurances that I have just made, and given that all fees paid by or on behalf of higher education students will remain with higher education institutions, I hope that the noble Lord will withdraw his amendment. If not, I ask your Lordships' House to reject it. While I accept that future spending commitments may be an entirely legitimate target for probing amendments, I wonder whether it is appropriate for your Lordships' House to divide on financial provisions of this kind.

8.30 p.m.

Lord Tope: My Lords, I am grateful to the Minister for her reply. She began by expressing sorrow at once again having to disappoint me. To be disappointed means that one first had expectations. Therefore, she will understand if I say that I am not disappointed. However, I was looking forward to being pleased and I am not.

We have debated the issue on many occasions and I am grateful to the Minister for the assurances that she has sought to give. I am not sure that we have gained anything further. When I moved the amendment, I said that I believed the issue to be important. I am grateful to the Minister for phrasing the reply a little differently and suggesting what is undeniable--that we on these Benches have less recent experience of government than the

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Conservative Opposition. However, this is an important amendment and therefore I wish to seek the opinion of the House.

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