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Earl Russell: My Lords, does the noble Baroness agree that the fact that students need to depend on a couple of thousand pounds a year in support from their parents is a bigger obstacle to expanding access than any created by any university?

Baroness Blatch: My Lords, there is a debate to be had about the plight of students and the deterrent effect of fees but I am afraid that we do not have time to address that at the moment. I hope that the noble Earl will forgive me if I move on speedily.

The passage in the White Paper on pay is not only short but also troubling. It appears to suggest more meddling by government-appointed monitors making judgments about performance pay. Perhaps we should add Saturday to the five-day week of events described by the noble Lord, Lord Sutherland. The noble Lord, Lord Morgan, referred to London weighting allowance. I believe—I stand to be corrected—that the London weighting allowance for university teachers and lecturers is lower than that of teachers, policemen and others who receive London weighting.

Amazingly, and despite the Government's best efforts, we are so blessed that there are still those who are prepared to dedicate their professional expertise, time and energy to teaching and research in Britain's universities. Despite everything we still have excellent university teachers, but I cannot help but fear that that will not continue. Professional satisfaction through academic freedom and fair remuneration should be the aim. Good staff will not wait for ever but will run out of patience and choose instead to move abroad, where they can enjoy a dramatically improved quality of life, or work in the private sector where the value of their skills is recognised and rewarded.

Fortunately, that trend can be reversed. The Government should abandon their 50 per cent target and concentrate on creating more high quality vocational options in further education. Standards of entry should not be compromised. Prejudice against

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selection on the grounds of academic ability to enable pupils from poor homes to make greater progress should be abandoned, and the Government should stop meddling with access arrangements. They should also reduce the army of bureaucrats to be engaged under the new proposals to monitor and second guess our institutions.

University staff are not seeking salaries comparable with the top of the private sector. If they were, they would have left academia by now. They seek fairness and recognition of their worth. Unthinking expansion of student numbers risks putting an undue burden on our academic staff, and over time will adversely affect standards. Whatever the outcome of the debate, a way must be found to attract the most talented staff and to retain them if the bleak scenario described by my noble friend Lord Lamont and others is to be avoided.

8.41 p.m.

Lord Davies of Oldham: My Lords, we are all grateful to the noble Lord, Lord Lamont, for introducing the topic at what is, as he rightly said, a timely moment. I appreciate that what he described as a penitential moment was in fact a scene-setter to give the background to the position that we face on the resources for support for students in universities. The problem with regard to academic pay goes back over two decades.

The noble Lord will also recognise that it is with the very issue on which the noble Baroness, Lady Blatch, was critical of the Government—our approach to student finance and support—that we are exactly addressing the problem of how on earth to ensure that universities are adequately funded. University pay has been accurately identified on all sides as a problem, and we must seek appropriate resources to put into universities in the long term.

In the short term, the Government have acted in advance of the White Paper and the long-term proposals on student finance. We have planned investment in higher education to ensure that public spending on it will have reached almost 10 billion, an average increase of more than 6 per cent above inflation in each of the next three years. In that period, spending per student will rise by 7 per cent over and above inflation compared to the figure for 2003, and universities will have received a 34 per cent increase in funding over and above inflation compared with the total for 1997–98.

I do not pretend that that commitment solves every problem of the salaries and incentives required for every area of staff in every university in the United Kingdom. It is not the Government's job to do that. As has been identified by several noble Lords, it is absolutely right that the issue of distribution of pay is part of the negotiating machinery between the higher

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education institutions and their staff. However, the Government are under an obligation to provide adequate resources to make that possible.

Baroness Sharp of Guildford: My Lords, could the Minister clarify precisely what the 34 per cent increase that he mentioned covers?

Lord Davies of Oldham: My Lords, that covers the increase in expenditure—34 per cent over the figure for 1997—that we will have achieved by 2006. That indicates that, for the first three years of the Labour Government, we carried on with spending patterns established by our predecessors. As I suggested through the figures that I gave a few moments ago, we are proceeding towards ensuring that higher education gets the resources that are necessary in the short term.

I pay tribute to the achievements in higher education. We should recognise that despite our difficulties, the United Kingdom's higher education system has one of the highest completion rates in the world. According to the OECD, only three other countries have a higher rate. Our higher education system performs better than that of many of our significant competitors. The earnings premium for UK graduates relative to upper secondary education is among the highest in the OECD. Employer demand for graduates is strong and has remained strong throughout a period of rapid expansion and against a background of a rapidly changing labour market. Graduate earnings are higher, and their unemployment rates lower than those of non-graduates. That forms the background to our longer-term proposals for funding and the student contribution.

I recognise that it will be difficult for us to return to aspects of the halcyon days of the late 1950s and early 1960s. I, too, recall the Robbins report and the esteem with which higher education was held at that time. We recognise that there are now many other competitors for esteem in the nation. My noble friend Lord Morgan will recognise that we are set on a strategy to recover ground lost over two decades, and the Government's intent is represented in the figures for the next three years and in the long-term strategy for improving resources for universities.

Baroness Sharp of Guildford: My Lords, I am sorry to interrupt the Minister again but does he agree that, given the increased numbers going to university now and the importance of university education in relation to globalisation and competitiveness, it is somewhat strange that we are spending a lower proportion of GDP on universities than we did in the late 1970s?

Lord Davies of Oldham: My Lords, that is indeed the case; I cannot pretend that we can turn the figures around overnight. The noble Baroness will recognise the Government's intent and the inevitable result of our proposals. I cannot forecast the spending round for 2008 from the Dispatch Box this evening but what the Government are doing is clear. Over the next three years, we will show a percentage increase and we are

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ensuring, at considerable pain, that resources will be available to enable us to increase the percentage of resources devoted to higher education. In that process, the Opposition will present all sorts of challenges to our strategy for increasing such funds for the future. The noble Baroness will recognise the intent for education as a whole and for primary and secondary education.

None of us doubts that that investment must clearly relate to the question of university pay, because universities are their people, especially their academic staff. However, I bear in mind the important point made by my noble friend Lady Warwick that we should recognise that staff other than teachers contribute to the essential welfare and success of university teaching. This evening's debate is predominantly about academic staff. If we fail to recruit and retain the high-quality staff we need, a gradual if barely perceptible decline into mediocrity will follow. That was rightly identified by several noble Lords.

I recognise the point made by the noble Lord, Lord Watson: we must consider the question of additional resources. It is recognised in this country that we have been less successful than other countries at tapping into other available resources. None of us expects to adopt overnight the alumnus culture of the United States. He rightly said that we must consider developments in the corporate world. We will inevitably operate in the economic environment that obtains at the time. I hear his words of warning. I assure him that the committee or taskforce that will address this issue will shortly be set up, and it will take his points into account.

The noble Lord, Lord Quinton, made a valuable contribution to the debate by reminding us that universities recruit not only in a national but, increasingly, in a global labour market. Of course, they are struggling to employ the best academics and, to do so, they need to be able to pay competitively.

As reflected in the debate, there is evidence of continuing and worsening difficulties in recruitment in certain disciplines. In other areas, the issues are not so pronounced. But we all recognise that if we are not able to produce sufficient numbers of undergraduates in accountancy, law, business studies, IT, certain branches of engineering and the professions allied to medicine, then the country will be much the poorer in every respect. It is important that we have the necessary teachers to provide a service for such students.

I heard the lament that the salaries of university staff cannot be compared to the higher earnings of people who enter the City and that economists who teach in universities earn only one-fifth of the pay of people in the City. I believe that that is bound to be the lot of a number of university staff. They pass on knowledge, inspiration, opportunity and experience, which guarantees that students who enter other occupations will earn more than they do. What has been successfully advocated this evening is not that we can expect university salaries to match the lavish heights of

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those of their students but that a decent standard of living is required which will guarantee adequate recruitment.

I agree with noble Lords that university staff have not done well in winning pay increases in recent years. In his introduction, the noble Lord, Lord Lamont, identified graphically the shortfall in comparison with other increases in earnings over the past two decades and the fact that academic staff had failed to match those.

We acknowledge that the recruitment and retention of staff is an issue. That is why we put in the extra resources. HEFCE has distributed money to institutions in return for human resource strategies which address issues of recruitment and retention, staff and management development, equal opportunities, rewarding good performance and tackling poor performance.

I hear noble Lords say that there can be an excess of bureaucracy and that HEFCE attaches too many strings to the money distributed. But surely we are also right to say that we hope to see a narrowing of the gap between the pay levels obtained by women lecturers and men in higher education. We cannot pretend that that is not an important national priority; nor can we stand idly by and pretend that universities should not ensure that they make progress in that area. In case anyone in the House is under the illusion that higher education has a splendid record in terms of equality of provision between men and women, that is not the case. I give way to the noble Earl.

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