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Now we need to ensure that our universities drive economic growth. The excellent 1993 White Paper

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from the noble Lord, Lord Waldegrave, entitled Realising our Potential, linked science, engineering and technology with national wealth creation and quality of life. The problem was that there was very little investment to go with the vision. Today, funding has increased, but the words “engineering” and “technology” seem to have disappeared from our official vocabulary. I hope that we do not also lose the words “wealth creation” because to reach the 2.5 per cent GDP target, we need to attract R&D funding from the private sector to universities.

I remember asking the research councils to provide funding for postgraduate training on the basis of how much investment could be levered from industry for high-quality courses. The Engineering and Physical Sciences Research Council took my advice, and its system now provides incentives for academics and increased engagement with industry, and is hugely successful. That would not have happened if we had not understood the priorities of industry. Attracting private R&D funding can also create enormous wealth. I go to Boston quite often, where the number of businesses and spin-offs on Route 128 near Harvard, MIT and other universities is simply staggering.

Here in the UK our research and teaching is of excellent quality and extremely good value for money but, sadly, our business creation performance—other than in a few universities—is very patchy, even though venture capitalists are desperate to fund new ideas in engineering research and with private sector partnerships. I remember the late Lord Butterworth, when I started at Warwick and there were huge cuts in the university sector, giving me a chair and saying, “Get on with it”. I was lucky enough to find a vice-chancellor who gave me the freedom to do that. He said, “I will not interfere—get on with it. If it fails, it’s your fault, and if you succeed it’s our success”. I did not mind because I cherished the freedom he gave me. Because of that freedom, we have attracted hundreds of millions of pounds in private funding and produced highly rated research and excellent teaching. All my equipment came from the private sector and I suspect that in my area it is the best in the world.

I fear that the freedom I found at Warwick is still a rarity. Universities also have to deal with too much external bureaucracy when seeking state funding. The blunt truth is that universities are prepared to put up with months of revising bid forms in order to gain state funding but commercial partners are not. Speed of reaction and delivery is paramount when dealing with the private sector. We have to take risks. At Warwick, we recently decided that cyber-security will be vital to the nation. Because of our flexibility we have already been able to invest in e-security as part of our plan to build a new £50 million digital laboratory. We were able to move very fast, recruiting the best people and starting the programme within eight weeks. If we had been slower, we would have lost our edge to institutions overseas.

I understand that if the Government are to invest in innovation, they must have some way of knowing that the funding is actually going to related projects.

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We should lighten bureaucracy by trusting those institutions that deliver on priorities. The principle should be that if you deliver, you receive funding, which would have the benefit of giving academic entrepreneurs the incentive to innovate and make a difference.

Over the past 10 years the Government have delivered on the mantra of “education, education, education”, at least with regard to higher education. I am sure that the Chancellor, in whatever role he takes on next, will continue to invest in such a vital part of the nation’s economy.

2.45 pm

Baroness Bottomley of Nettlestone: My Lords, I, too, give great credit to the noble Baroness, Lady Warwick, for initiating this debate in which there is such competition to speak. Like the noble Lord, Lord Giddens, I declare a cluster of interests. My great-grandfather was one of the original applicants to the Department of Trade for the incorporation of the LSE in 1901. For 25 years I was a Member of Parliament in the constituency including the University of Surrey and I was a governor at London University of the Arts for a long time. Above all, I am privileged to be the chancellor of the University of Hull—and I dare say a great number of speakers in today’s debate will be able to claim a link with the Hull mafia.

The 2003 White Paper said:

I believe that today’s debate is a most remarkable example of the degree to which universities in the United Kingdom understand their role, fundamentally as centres of learning, teaching and research—and any of my comments should not in any sense be seen as diminishing that role. But universities also have the opportunity to act as a catalyst for their local economy. What distinguishes the University of Hull from those other institutions from which I have been associated is the contribution of the university within our region as a particularly important economic catalyst.

Richard Lambert’s 2004 Review of Business-University Collaboration said that businesses should look to collaborate with universities for research and development programmes. Universities must identify their areas of research strength and actively push for links with business. Lambert pointed out that in almost every case a business working with a university improves its performance, develops its products better, works smarter and sees an improvement in staff skills. We at the University of Hull take that message to heart, and I should like to demonstrate how Hull could almost be regarded as a case study of this strategy.

A successful and thriving city needs a successful and thriving university—and vice versa. That is why the university plays an active role in regional regeneration. Its reported interaction with the region’s business and community was worth more than £14 million last year, which includes a substantial contribution to the cultural life and community through music, drama, university art collections and

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lectures on top of the core research and teaching activity that you would expect from an established university with such an excellent national and international reputation, which the noble Lord, Lord Norton, has already spelt out. It is said that the mere presence of a university in Hull is worth more than £200 million to the local economy.

More fundamentally, the university has been involved in helping to shape the regional economic development strategy, ensuring that the strength of its academic expertise is brought to bear, especially in identified areas of economic importance which are appropriate to the region. Those include added value manufacturing and logistics, biomedical healthcare and renewable energies. Money from the European regional development fund, not something that was available in the county of Surrey, and the regional development agency and the university itself secured an investment of £9 million in a dedicated logistics institute, one of only five of its type in the world which, through high-level educational programmes and consultancy, can have a major impact on business supply chains. A further £9 million investment established state-of-the-art facilities for Hull’s growing business school and a new enterprise and innovation centre, hosting pre-incubation facilities for student and graduate businesses, will open next year. It will also provide a high profile base for the university’s business and community knowledge exchange, which was established specifically to ensure that the wealth of university expertise has an economic impact on the region it serves. One splendid example is Bankside Patterson. This small manufacturing company providing chassis for the caravan industry wanted a lighter but stronger design to provide a flexible product for a sophisticated market. The university’s knowledge transfer partnerships programme came up with a solution that dramatically increased its turnover, profit and staffing. The university very much hopes that the Foreign Secretary will open its new facilities.

The message of the higher education strategy and of the Lambert review has given us all a sense of optimism, pragmatism and principle, which we see very well demonstrated at Hull.

2.50 pm

Lord Hannay of Chiswick: My Lords, one of the most striking manifestations of globalisation so far has been the emergence of a global market among higher education institutions. Of course, students and professors travelled outside their geographical or national boundaries from the Middle Ages onwards, but they did so in small numbers and those attending higher education institutions remained for many centuries a limited elite. In recent decades we have seen a massive worldwide expansion in the numbers of those benefiting from tertiary education and a smaller, but proportionately just as large, expansion in those continuing into postgraduate studies. This expansion in higher education has come when the ease and speed of travel have encouraged many to look abroad for their higher education, and when the spread of English as the world’s main working language has put those with higher education

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institutions which teach in that language at a major comparative advantage. These developments are having a significant and potentially highly beneficial economic impact in this country so it is right that, thanks to the initiative of the noble Baroness, Lady Warwick of Undercliffe, we should be considering them.

In the eight years I spent, up to last summer, as part of the governance of one of Britain’s large universities, I was struck by the fecklessness with which Governments of both main parties piled burdens on to the backs of the universities without providing them with the resources to carry those burdens. Year after year numbers increased and more efficiency savings were demanded, so investment was skimped, maintenance went by the board and quality was put at risk. Academic salaries lagged far behind those of other parts of the economy and even further behind those of some of our main overseas competitors. These trends could not have continued much longer without inflicting the serious damage that we have seen occur in a large number of continental European universities. Luckily, the lifting of the cap on tuition fees and an increase in government spending has provided a breathing space, but no more than that. It is time we looked ahead and considered how this vital sector of our future knowledge-based economy is to compete successfully in the global marketplace for higher education. Here are one or two suggestions.

First, we surely need to find some way to remove from the realm of party politics the provision of more financial resources for the higher education sector. At the previous general election, two of the three main parties campaigned on policies which would have inflicted serious damage on Britain’s universities if they had ever been implemented. The hard fact is that the universities will not be able to look to the sort of increases in public spending they have received in the past few years, so the £3,000 ceiling will have to be looked at. Why not seek an impartial analysis of the options by an independent commission, thus removing the issue from becoming a political football at the next general election?

Secondly, we surely need to make further progress in encouraging philanthropic giving and business investment in the university sector. At the moment this remains pathetically small. Partly this is a task for universities, but the Government too should be looking at imaginative ways of making such giving and investment more tax effective. Further steps in matching financing will need to follow the first modest one just announced.

Thirdly, the whole issue of the international dimension of Britain’s higher education needs more careful and systematic treatment than it has received hitherto. Universities need to be helped to devise and implement international strategies which maximise their chances of competing in the global marketplace. International students and researchers must be treated not just as cash cows to compensate for the shortfall in funding from domestic and EU students, but as an integral part of the university with their own specific needs and sensitivities. Government

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should be looking for ways of waiving visa fees and lightening entry procedures, not increasing them.

Fourthly, we should be giving a lead in Europe on this sector where we have real comparative advantages. We need to boost the research budget, and strengthen the activities of the European Research Council while avoiding costly white elephants like the proposed European Institute of Technology. We should be increasing academic and student exchanges.

This debate demonstrates beyond reasonable doubt the greatly enhanced place of higher education institutions in the economic life of this country. In purely material and utilitarian terms universities represent national assets which we need to develop and strengthen, but they are much more than that. They are centres of intellectual excellence and independent thought which are an essential part of our national life. The challenge for us is to maximise the beneficial economic impacts of the sector while not jeopardising the intangible intellectual values which the whole concept of higher education exists to propagate. That should not be beyond our reach.

2.55 pm

Baroness Blackstone: My Lords, I too declare an interest, as the vice-chancellor of the University of Greenwich. Some speakers have emphasised the vital role of universities in research, knowledge transfer, spin-out companies and innovation, all of which are spurs to economic growth in a knowledge economy, and I endorse that. But I want to draw attention to two other important economic roles of UK universities: regeneration and international economic development.

If our economy and our society are to flourish, it is vital that some areas are not left behind with low growth, unemployment, poverty and social disadvantage. The creation of the RDAs is a recognition by the Government that regeneration in our regions is of great importance. Many universities are located in the poorer areas of our big cities. This is especially true of the former polytechnics. Those post-1992 universities are most likely to recruit students who live in those areas, giving them life chances that their parents’ generation did not have.

Some universities, such as my own, have developed new campuses in areas needing regeneration. These are not just situated in our inner cities in the north. The Medway towns went into serious decline once the Navy left. They are now being regenerated by the development of a big, multi-university campus, a partnership between Greenwich and Kent Universities and Canterbury Christ Church University. Two-thirds of our students who come from the Medway area stay in it when they graduate and therefore provide this run-down area with the advanced skills that it needs. For every job on such a campus, another is created in this regeneration area.

The presence of universities in these run-down communities also leads to better public services, which are essential to create the conditions for private sector investment. For example, in the University of Greenwich 56 per cent of nursing students come from

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the Thames Gateway and 66 per cent go on to work in the area. Forty-nine per cent of teacher training students come from the Thames Gateway and 45 per cent of teaching graduates go on to work there. University research expertise will also attract more business into regeneration areas.

I want to explore universities’ international role. We have heard about the enormous contribution that universities are making to our own economy through the export of higher education all over the world. We are competing successfully in a tough global market. Many students are coming here from countries such as India and China but we must not forget Africa in any discussion about the international and economic roles of universities. It needs economic growth and development too. Without it, it will suffer from poverty, war and the ensuing famine and high levels of mortality. That in turn will lead to long-term dependence on development aid. Universities in the United Kingdom are contributing to economic growth in Africa in various ways. I give just two examples from my own university. Our Natural Resources Institute provides programmes for graduate students from developing countries and does research and consultancy working with African institutions to improve agricultural productivity, crop development, and food marketing to create the agricultural surpluses which allow African countries to acquire the goods and services that they need to compete in the global market.

The second project is an EU-funded project with some UK government support that is being undertaken by my university with Coventry. We are working with universities in South Africa and Ghana to support new small and medium-sized enterprises in poor townships. This is another form of regeneration in an international context. I hope that the Minister will agree that we need to continue to fund universities to regenerate our poorer areas and to support their activities in helping the economies of developing countries, especially in Africa.

3 pm

Lord Geddes: My Lords, I join other noble Lords in congratulating the noble Baroness, Lady Warwick, on her success in the ballot for this debate. I hope that I may be allowed to concentrate on the narrower focus of the specialist arts institutions. I declare an interest as a non-remunerated director of Trinity Laban, a conjunction of Trinity College of Music and the Laban Dance Centre. It is with pride that I say that over 90 per cent of recent alumni from Trinity Laban are in employment.

It may be obvious that the idea of a distinction between a knowledge economy and a culture economy is not yet common currency, but I believe strongly that that lies at the heart of the case for the specialist arts institutions in higher education. At our leading universities, the value of higher education is, dare I say it, obvious; what is often neglected is the value of the smaller, specialist higher education institutions. The overwhelming majority of the United Kingdom’s orchestral players, opera, theatre and dance company members and successful

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freelance practitioners are conservatoire trained. Any erosion of the sector’s funding base would lead to a sharp decline in the number of British performers in our orchestras and performing arts companies, as well as a break in the supply chain of artists to support the wider cultural infrastructure, including arts education and particularly participation for schools and communities.

The cultural sector also produces significant and growing economic benefit in areas such as tourism and neighbourhood regeneration, as pointed out by the noble Baroness, Lady Blackstone. Any assessment of tourism income will feature our cultural life. This country is the capital of live theatre, much of it music theatre, which generates huge net contributions to the United Kingdom economy. The public investment in performing arts conservatoires is extremely modest, at less than 1 per cent of the total HEFCE recurrent funding for higher education institutions in 2007-08, but it delivers huge returns. If the standards of cultural performance were to drop, there is no doubt that a significant part of the £75 billion income generated by tourism and the 2.1 million jobs that go with it would drop also.

We all know of the continuing high street battle between the supermarket and the bespoke retailer. Is it stretching credibility too far to equate our excellent universities with the supermarkets and the specialist arts institutions with the bespoke retailers? Just as in the high street, we need them both. We also need to encourage and continue with the Arts and Humanities Research Council. With the proven economic advantages to the country of the arts, a developmental base is vital. We cannot afford to sit on our artistic haunches; we must keep our edge.

The conservatoire sector is not an expensive luxury but a gem in the higher education firmament, which needs to be encouraged as a leader of the culture economy, now over 7 per cent of the national economy and growing fast, in which Europe and the United Kingdom have a natural advantage. The very small investment that we make in specialist higher education institutions is more than justified by the income that it generates, and it must be sustained or increased in the face of any economic pressure to restrict it.

3.04 pm

Lord Carey of Clifton: My Lords, I join other noble Lords in thanking the noble Baroness, Lady Warwick, for introducing this debate. We have heard from her of the outstanding contribution that universities and colleges make to the economy of our country, to say nothing of their major influence on shaping knowledge, art and culture. Britain has much to celebrate in the success of our places of higher education. Although in numerical terms a small nation, we punch above our weight and have an enviable reputation for producing scholars and scientists of extraordinary stature.

However, we cannot be complacent, as we have heard. To stay ahead in a world where knowledge rules demands investment at every level. I declare an interest as chancellor of the University of

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Gloucestershire, one of the youngest of the universities created since 1992, although with roots that go back to the 1830s. I am proud of what our university is achieving under the effective leadership of Professor Patricia Broadfoot. As with other newer universities, our regional links are extensive and we make a substantial contribution to the regional economy. Our university was among the first to recognise the importance of learning, living and leading in areas pertaining to environment and ecology. There is much more that I could say about our university in the West Country; we have a dedicated and able teaching staff and well motivated students. We are confident, although not complacent, about our future.


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