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We also welcome the Government's commitment to improve the links between businesses and universities. At every level, education is and should be about so much more than the financial benefit in career terms. But too often the whole debate about higher education has downplayed, or even excluded, the role that businesses can play, and increasingly want to play. Strengthening the links between business and higher education offers benefits to students, companies and the wider economy.

It is regrettable that more progress has not been made over the past decade and that the issue is only now receiving the Government's attention-now that companies are struggling to cope with the effects of the recession. Nevertheless, the most innovative universities have made steady progress and are already showing the benefits that accrue from stronger links with business. So even if progress is overdue, we welcome that new commitment also.

Today's document is not primarily about the student finance review, but while that is still to come this document is likely to be closely studied for clues about that whole area. We have been calling for more than two years for the review to start. However, now that it will soon begin, we do not think that it is in anyone's interests to rush to judgment. It cannot be, as some people would like, a 10-minute review in which a small group of vice-chancellors agrees simply to raise fees. No decisions should be taken until we know more about the educational impact of the last increase in fees, or about the public spending consequences of a further increase. We are also clear that the review must be broad.

Sometimes, this Government have tended to think of students as exclusively young, full-time undergraduates. But the student body is so much more diverse, with mature learners, part-time learners and second-chance learners. We would like to encourage further diversity in years to come, as the number of young people falls and as we rebalance the economy. So when the student finance review finally starts, it must look at higher education in the round. If that happens, we will do what we can to co-operate on a cross-party basis.

While we welcome the Secretary of State's focus on the student experience and improving links between business and universities, and while we look forward to co-operating with the review, we have some real concerns about the Government's approach to higher education. Not all the key indicators have been moving in the way we were promised. A decade ago, the Government adopted a suspiciously round target of having 50 per cent of all young people at university by 2010. Today, despite numerous changes to the way the data are measured, the proportion of young people at university is still way below that level.

Despite the shortage of other opportunities during the recession, and record increases in applications, Ministers are now threatening to fine universities which have over-recruited students this autumn. Universities must sometimes feel as though they are in an absurdist play in which one hand of Government urges them to take on more students while another seeks to punish them for working to achieve that. Ministers used to speak a great deal about widening access to university-we

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heard more talk of that today-but the key figures show that progress has been regrettably slow. The number of students from socioeconomic groups four to seven has inched up from 28.2 per cent to 29.4 per cent since 2003-04. We also deprecate the slow progress that has been made in helping part-time students, who are on a funding regime that is clearly indefensible, and on older learners, many of whom have been put off from going back to university by the Government's penal changes to the equivalent and lower qualifications rules.

I finish by posing four specific questions to the Secretary of State on the back of today's Statement. First, will the student finance review team be free to consider questions about part-time funding, about the links between higher education and further education and about postgraduate funding; or will it be asked to look simply at the level of the fee cap and to rubber stamp the direction outlined in today's strategy document?

Secondly, the noble Lord mentioned the appointment of Sir Martin Harris to consult vice-chancellors on improving access to the most selective universities. Can he say whether and, if so, how, that exercise will tie into the funding review? Thirdly, given the mixed record of Aim Higher and other initiatives, how can he reassure the House that future efforts to widen participation will be more successful? Lastly, can he reassure the House that the current crisis in the Student Loans Company, which is hurting vulnerable students hardest of all, will not be forgotten as the longer term questions about higher education take centre stage?

3.31 pm

Baroness Sharp of Guildford: My Lords, I thank the First Secretary of State for his Statement and say how very welcome it is. We share with him the celebration of what has been achieved by our universities during the past two decades in widening access and exploiting their research opportunities, so that we are challenging the United States in spin-offs per capita and the quality of education provided.

Equally, a number of problems are posed to our universities today. Whether one can, as the noble Lord did in his Statement, cite the fact that there has been a doubling of first-class degrees as an indication of the quality of performance of our universities, I am not sure. The Select Committee in the other place raised some real questions about that issue, but also about the quality of teaching being provided generally. We have seen difficulties in the trade-off between money to be spent on research and money to be spent on teaching in our universities, with the emphasis on research coming from the research assessment exercise such that, on occasion, money for teaching has been squeezed in favour of research.

I have a number of specific questions for the Minister, some of which reflect concerns expressed by the official Opposition. First, he talks about widening the range of routes into university and of the widening of study opportunities, which is welcome. Precisely how are the Government considering the inequity between part-time and full-time funding for students? At the moment, all the incentives are to be a full-time student, not a part-time student. It is unfair that a full-time student

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who does 20 hours work a week can claim a full-time grant, whereas those who are honest about it and try to learn and earn at the same time are penalised for doing so. It would be interesting to hear how the Government propose to address that inequity.

Secondly, the noble Lord talks about careers opportunities and how vital they are. In the Apprenticeships, Skills, Children and Learning Bill, currently before the House, we have been considering the importance of careers teaching for young people and how apprenticeships, in particular, should be widened. However, there is a crisis in the Connexions service. There are not enough qualified people to provide the service in schools. What does the Secretary of State propose to do about revamping the Connexions service and providing a proper careers service in schools?

The Statement refers to prioritising STEM subjects and to a contestable fund for HEFCE. Will it be limited to science, engineering and maths subjects or will it be extended to other subjects where there is a strategic shortage of teachers, such as languages, and even to some of the creative arts subjects where employment opportunities are expanding fast but we have to look overseas to meet them?

The Statement also refers to concentrating research resources. Is there evidence to support this? I was involved in research by the Science Policy Research Unit in the 1990s. We looked at the productivity of research groups and found that, except in exceptional circumstances, such as in astrophysics, research concentration did not increase productivity in publication or patenting terms. What was needed was a group of half a dozen like-minded people who could bounce ideas off each other. In the early 1990s, that was within their own little group, but the internet makes collaboration that much easier. The Secretary of State is quite right to emphasise collaboration. The degree to which there is evidence to support concentrating research funding rather than encouraging diversity, because from diversity comes creativity, is vital.

Finally, I return to fees. We recognise that the Statement does not address them. A review will be announced next week. We on these Benches are rather sad that the two main parties have connived to make sure that the review reports after the general election. Fees are a highly contentious issue, so it is obviously very convenient to have the report after the general election rather than before it. We have two questions. First, in considering how far fees should increase, how far is it right that our young people should be burdened with even greater debts than at the moment and should have to start out life with these huge debts? Is this a good way of funding their contribution? Secondly, are the Government looking at some of the more creative ways of funding the student contribution that, for example, the National Union of Students is now exploring? I echo the points made by the noble Lord, Lord De Mauley, about the Student Loans Company. Student loans are now worth £30 billion as part of the national debt and are increasing by £7 billion to £8 billion a year. At the moment, the Student Loans Company-the public exchequer-is having to meet increased fees. Is that really sensible?

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3.38 pm

Lord Mandelson: My Lords, I am very grateful for the relevance and precision of all the questions put to me. I shall respond first to the noble Baroness. As I said in my original Statement, it is important that we reduce the inequity-as she calls it-between full-time and part-time students. In the next 10 years, we will face a falling number of teenagers, and we will therefore want to attract older people into higher education. In doing so, we must vary patterns, lifestyles and backgrounds-those in work and not-to maximise our recruitment to higher education. Therefore we will look at how those who want, or are available for, part-time as opposed to full-time study may be attracted into higher education, and how we can make that more possible.

I have been in this House on occasions during debates on the Bill. Indeed, I have heard the noble Baroness, Lady Sharp of Guildford, speak about careers teaching in our schools. I am very glad that the Secretary of State for Children, Schools and Families has recently proposed to make available much better information, advice and guidance, and we will work closely with his department to promote that.

The noble Baroness asked about the priority given to STEM subjects. My view of this and whether we should extend the finance available from contestable funding is that it depends on the relevance of other subjects, some of which she mentioned, to the economy's skills needs. She mentioned languages. Employers do look to languages-they are an increasingly important skill need, despite the preponderance of English speaking in the world-so when we consult HEFCE and others on how contestable funding will operate, we will certainly take her observation into account.

I see the noble Baroness's point about research groups and research concentration. None the less, there are now many examples across the country of where concentrating funds on a greater critical mass of researchers has given dividends. This year, the Engineering and Physical Sciences Research Council has established 45 multidisciplinary centres for doctoral training that are building links between different teams and universities and with industry on the basis of previous experience and a track record. We need to experiment with models of that sort to see whether research concentration will give us even greater benefits and dividends in the future.

The noble Baroness also talked about the fees review. If she does not mind, I would prefer to describe that review and its remit and terms of reference when I have consulted on them, when they have been agreed and when I am ready to announce them to this House. That will be before too long.

The noble Lord, Lord De Mauley, asked about the Student Loans Company. I am very sorry, as I have said before, that the company's service has fallen well short of the expectations of students and their families. More students than ever before have applied to universities, so the workload has been huge. None the less, there is no excuse for the service which the company has provided. We are inquiring into what went wrong to ensure that it does not happen again.

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The noble Lord asked whether the fees review will include the financing of part-time students. I think that I have answered that. It will. Similarly, Sir Martin Harris looked at access to the more selective universities. Where they are relevant, there will be plenty of time for his findings, which I expect next spring, to be fed into the work of the fees review, which we expect in the next nine to 12 months.

The noble Lord asked about wider participation and hoped that there would be more success with that in the future. We are at 43 per cent and rising, which is not a bad record given our target of 50 per cent. It just shows that we have more to do in, among other ways, the approaches that I have described in the Statement.

Overall, I have to thank the noble Lord for what he has said. It must have something to do with the clarity, relevance and coherence of our proposals that I do not think that he has been able to find a thing I have said this afternoon with which to disagree, which I welcome. In following our approach, I hope that the noble Lord will check his homework and his figures with his colleague the shadow Chancellor, from whom it seems that education is not very high on his priority list. I can only take at face value what Mr Osborne says. When we hear from Conservative Party spokesmen, we just have to bear in mind their record when they were in government. It is very serious.

I am slightly torn, but I feel that I have to quote the chancellor of Oxford University, Chris Patten, the former Conservative Party chairman, in this context. Last year, the noble Lord, Lord Patten of Barnes, said:

"What is true is we"-

talking about the Tories in the 1990s-

That, he said, is,

We do not have to look into the crystal ball to know what might be offered by the Conservatives. We just have to look at what happened last time.

3.47 pm

Lord Baker of Dorking: My Lords, I will try to resist the temptation to engage in such base politics, because I was going to welcome much of what the Secretary of State said. Perhaps he might recognise the fact that the greatest expansion of university education took place when I was Secretary of State, but that is ancient history. I welcome in particular two aspects of what he said. The first is that he will ensure that, as the cost of education is borne more and more heavily by students, universities give good value for money, which is absolutely essential. Secondly, I welcome the fact that he is going to make more higher education studies and faculties available in further education colleges. We must bring the further education and the higher education sectors together. If we are to produce a skill-based economy, it must be a seamless robe.

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The Secretary of State used a very engaging phase in the Statement in saying that he wanted no cap on talent. Perhaps I may ask him about the numbers going to university. This year there has been a record application and it looks as though next year will exceed that by a substantial figure, because those who did not get in this year are applying again and there has been a surge in overseas student applications. In his discussions with the Chancellor in the next few weeks, will he do everything that he can to ensure that, next year, all those British students who want to go to university and who are qualified to do so will be able to? There should be no cap on talent.

Lord Mandelson: I welcome what the noble Lord has said and take this opportunity to wish him a happy birthday. It is very important to stress this point: if we are going to ask students to make greater individual payments and to take out loans, which they pay back subsequently, they have to be treated like quality paying customers of these institutions. Therefore, they have to know which institutions, universities and courses they are choosing between and among. They need more information to choose from. That information must include the quality of teaching, the number of teaching hours and the amount of face-to-face contact between themselves and university teachers. The QAA has a particular responsibility to make a great and proactive effort to elicit, categorise and tabularise that information and make it available to students. I can assure the noble Lord that, in the discussions that I will have with the Chancellor, I will emphasise the great need, for the vitality of our society and for our economic strength and growth, to continue to invest in universities and higher education programmes as much in the future as we have in the past 10 years.

Lord Morgan: My Lords, I must declare great enthusiasm for what my noble friend said. Some of us tried to run universities under the previous regime and this is a pleasant improvement. It is worth pointing out that some of the Government's other policies have also assisted higher education. I am thinking particularly of devolution and our higher links with Europe, bearing in mind what my noble friend said about the need for promoting regional development and extending higher research collaboration with other universities.

There is a possible mismatch between two of the excellent objectives that my noble friend mentioned-namely, the existence of high-level institutions and clusters of people working at that level and the need for developing professional skills. Our best institutions and departments seem to me to be concerned with something else: developing the intellectual resources of students. For example, you train students in the principles of jurisprudence, not how to be lawyers. It is important that the work of universities is not diminished or cheapened in that respect.

The point about part-time students is extremely important, given the Government's commitment to lifelong learning. I should like to hear from my noble friend a further affirmation of the need to resource that, bearing in mind the trouble that we had earlier with ELQs and their diminishing effect on, for example, the Open University. One hopes that that will be overridden.

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Perhaps I may make a final plea as one who was once a vice-chancellor. Universities would get on very much better if they had to grapple with less bureaucracy, which has been a managerial constraint. Mankind is in paper chains in our universities, but it would be nice to be free.

Lord Mandelson: I certainly agree with my noble friend that as much form-filling and box-ticking as we can persuade others to reduce is welcome, but perhaps I may emphasise one of my noble friend's other points. Universities are not factories for producing workers; they are educational institutions that exist not only to generate, transfer and inculcate knowledge but also to enable those who benefit from higher education to use that knowledge. When I talk of skills, I refer to a range of attributes of a graduate that together make up an individual's employability. As employers constantly stress to me, they look as much for generic and soft skills as for specific and hard skills, if I can use those expressions.

Lord Broers: My Lords, would the Minister say a little more about the concentration of research, particularly in the science, engineering and technology fields? I agree entirely with the noble Baroness, Lady Sharp, about collaboration, which can take place in these subjects as well. However, in certain subjects it is difficult to supply the equipment necessary to more than one institution. This does not mean that the institution has the right to use all the equipment itself. A very good model can be found in the United States at the National Science Foundation, where centre status is allocated to given universities on the basis of the strength of their case that they will collaborate with anyone in the country by making the facilities available to them. This is essential in many subjects, but especially in my own, that of microelectronics. We have lost our competitiveness in this country because we failed to do that. The money was spread over about five institutions, none of which had adequate resources to sustain international competitiveness.

There are some areas where we have concentrated extremely well. Here I declare my interest as chairman of Diamond Light Source Ltd, which is the UK's largest science project. It has been extremely successful, but I have written to the First Secretary to say that, unfortunately, because of funding difficulties in the Science and Technology Facilities Council, the future even of that resource is in jeopardy. Can the Minister reassure us that the facilities that we have established will not be put at risk in the future and that we are prepared to concentrate resources within individual institutions on the basis that they share their equipment with everybody?

Lord Mandelson: Yes, my Lords, I think that I can give the noble Lord that reassurance. In what he says he seems to be endorsing the approach that I have set out this afternoon. First, I would like to stress that, when I talk about research concentration depending on the volume and critical mass of the research being undertaken, that is not related to the size or status of a particular institution. It is very important to stress that. Secondly, the noble Lord is right to point out that, if we were to spread our resources thinly across

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too many institutions or research centres, it might result in each of them having insufficient resources. That is at the core of what I have described today; it is precisely what we want to overcome with what I hope is a smarter, more intelligent approach to the allocation of research funds. Incidentally, those funds have doubled over the past 12 years of the present Government. We have invested in particular in our first-rate, first-class science base and we intend to continue to protect that science base.

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