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3.09 pm

Baroness Morris of Yardley: My Lords, I first declare an interest in terms of my employment at the Institute of Effective Education at the University of York, and as a member of the council at Goldsmiths College. I also welcome the debate. It is a timely opportunity to discuss a serious issue, which worries not only those working in universities but everyone who has a child who wishes to go to university, or has skills that they need to upgrade. I am not taking away from the dire situation that many institutions in both higher and further education will be in. I do not think the Minister will say that the cuts that will come will make no difference. To cope with that, we will certainly have to be far more radical in our thought than we have been over the last 10, 20 or 30 years.

I could also make a speech about the achievements of this Labour Government in their ideas and investment in further and higher education during their time in office. I know that the Minister will make that speech, so I will not use my far fewer minutes in doing so. However, the Government have a good record, and one to be proud of. That does not take away from the difficulty facing the sector now. There is no doubt that if there were no cuts, or more money could be invested in the sector, they would make good use of that.

Fundamentally, my point is that it is easy to have a debate and say that this round of cuts will damage our further and higher education sectors. Indeed, it might. However, the truth is that those sectors do not have an adequate way of financing themselves, even before this round of cuts. Unless we face up to that fundamental issue, we will just be talking about something that is the end of a long line of challenges that the sectors have faced. The main message of my contribution is that the Government's agenda for higher education is right and should not change. However, the structure that is needed to deliver that agenda is not yet on the table, is not well worked out and is not one that faces us today. There has been a need radically to review the structure and financing of higher education. Maybe, from what is bad news in this round of cuts, we could get some good things if we put our minds together.

If you look elsewhere in the education system, be it at early years, schools or parts of further education, they have all had fundamentally to change how they do their jobs and how they get their money to meet the demands of the modern economy. I do not believe that universities have been through that process. They have not modernised and asked tough questions in the same way that many other parts of the education system have. I am not saying that change has not been made, but now the financing means that it is still a better deal for those students of traditional subjects on three-year courses straight from schools at research-intensive universities. Those universities that come out

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of it best are still those that are research-intensive and offer traditional subjects-not those that have excelled at the access agenda.

If we are to have radical thought, we must challenge some of the assumptions that we have veered away from. I very much agree with the previous speaker, who talked about mission drift. Let us have the mission drift that we have seen since the end of the polytechnics put at the top of the agenda. I also question the need for three-year courses. I welcome the announcement by the Secretary of State that we should be looking at two-year degrees. I question why we always assume that degrees follow A-levels and why they must take place at institutions called universities. I am not convinced that all lecturers need to carry out research, nor that all university departments should carry out research. I worry that teaching can be given over to postgraduate students, whereas top-line research would not be treated in that way. I do not know why we still run three 10-week terms and say that it is the format in which higher education should be delivered. I am also not sure why further education is seen as a separate sector, when more than 20 per cent of degree-level work is now offered at such institutions.

What we have going for us is progress over previous years, whereby people now accept that citizens have an entitlement to funding for their education beyond school; that they have a responsibility to contribute to that funding; that it is desirable for employers to play a part, too; that there is a willingness by alumni and entrepreneurs to give money and resources; and that universities have a growing ability to earn income. Somehow, within that combination of players in the field, we have a chance to create a new structure. Let us take this crisis as an opportunity to do that.

3.14 pm

Baroness Greenfield: I congratulate the noble Lord, Lord Baker, on this extremely timely debate. As a neuroscientist at Oxford University and chancellor of Heriot-Watt University, I declare an interest, and share the concern of many colleagues involved in higher education and research. If, like everyone and everything else, we need to become as cost-effective as possible, let us focus on our product. One suggestion was the ring-fencing of some 25 per cent of funds for the type of scientific research that is closest to market, but science itself does not automatically nor immediately generate a product.

One example of a seemingly exotic and utterly impractical intellectual indulgence could be quantum theory, pioneered by the physicists Heisenberg and Schrödinger in the 1920s. Quantum theory challenges an apparently impregnable assumption that waves and particles are distinct, and suggests instead that they are inseparable. Abstract and baffling as this may sound, this highly academic research gave enormous insights into the basics of matter and energy. In turn, these insights were to have astounding implications for the more down-to-earth branches of science and, ultimately, technology and eventually everyday life. Advanced materials such as lasers and transistors, and thus finally computers, rely on the principles of quantum

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theory. Likewise in biology, the current emerging feats of the molecular biologist in genetic engineering have their provenance in the ability to manipulate atoms, in turn reliant on an understanding of molecular bonds and the technique of X-ray crystallography, all of which hark back to quantum theory. What kind of lives might we all now be living, I wonder, if Heisenberg and Schrödinger had been made redundant?

This question begs a still more fundamental one. What, after all, is the real product of a university? Is it truly marketable goods and services, or is it thoughtful individuals who can make the most effective possible contribution to an ever changing society? Whatever one's answer, we should be mindful not just of the products but the by-products of the imminent loss of perhaps some 15,000 highly and expensively trained specialists. What provision is being made for this expertise to be channelled elsewhere, in either the public or the private sectors? What of the 200,000 new students whose aspirations and dreams may now be thwarted for ever through no fault of their own? What do they do now? How many will be absorbed by the job market? Will the cuts in funding be used simply to pay the increase needed in social security provision?

It would at least be helpful-even responsible-for the Government to implement in parallel some constructive ways in which the effects of dwindling income could be offset. For example, more practical help could be offered to universities to supplement income via philanthropy. Given the imminent introduction of a 50 per cent rate of tax for top earners, it is important that it should remain possible to claim gift aid in full on all donations. Why not allow the financial institutions, whose behaviour triggered the current crisis, to hand over those controversial bonuses, untaxed, to the universities their employees attended?

A second option could be to raise, or even remove, the current fee cap so that universities might be free to charge students the true cost of their tuition. Of course, the large government subsidy on the interest costs of student loans currently makes this strategy expensive for the Government. Perhaps the answer is to cap subsidised loans at their present level and to concentrate financial aid on the students who genuinely need it most.

A failure to adopt such policies could well hasten the rise of the private university, rather along the lines of the American Ivy League. The smaller the sum the best universities receive from government, the less they have to lose by rebelling and by setting their own tuition fees. If we were to adopt the Ivy League model, at the very least a socially sensitive fee structure might be a means of maximising the number of able but poorer students. Inevitably, however, such a delicate balancing act could never be without pain, be it in bureaucratic time taken, parental savings spent, or talent wasted.

The whole point is that universities are all about far-reaching activities, be it in innovative research or in teaching someone the intellectual skills that will enable them to adapt throughout their whole lives to a fast-paced and complex society. Imposing criteria of short-term demands must inevitably be in conflict with institutions whose entire leitmotiv is unambiguously long term.

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Electioneering phrases such as "tightening one's belt" and "fair share" may have a certain immediate appeal to some-that the unworldly pointy-heads have finally been given a taste of the real world-but surely that same electorate should be aware of the implications of what that world will be like if long-term needs are trumped by short-term expediency. I am not suggesting that we academics should be insulated-even if it were possible-from the real financial problems we face, but the answer cannot be in targeting higher education in such a drastic and unimaginative cutback. Let us think of longer-term solutions-solutions that could play to the real strengths of universities. After all, it was the closure of the School of Athens in 529 by the Emperor Justinian which played a major role in the shift of Greek learning to the east, while here in the West it arguably ushered in the Dark Ages.

3.19 pm

Baroness Perry of Southwark: My Lords, I, too, am grateful to the noble Lord, Lord Baker, for bringing this issue to the attention of the House. It is right that the House should draw attention to the distress caused by the Government's proposed cuts to our excellent university system.

There is real anger in the academic world. Universities recognise the need to reduce spending in the public services. They are, however, dismayed that the cuts proposed go far beyond the public services' average in this year's Budget, and that they were picked out as the first victims of the Government's attempt to reduce the deficit which the Government's own policies have created.

Why do the Government not take a much more strategic stance towards deficit reduction? Why do they not cut in areas where, for the past decade: spending has been wasteful and non-productive; initiatives have petered out or produced nothing but more bureaucracy; consultants have been brought in at huge cost to tell government what well trained civil servants could have told them; there has been advertising to promote government policies, engaging celebrities with fat fees; and armies of well paid professional regulators have become present in every aspect of our national life, most of whom know nothing of the world they are regulating? While cutting in these areas, the strategy should preserve or increase spending where there is a bridge to national growth and prosperity.

Universities should be expanding to provide the engines of growth both in highly qualified people and in world-class research which generates innovation and invention. We will need both to weather the economic storms of the next decades.

We have a record number of 18 year-olds in the population. It is a matter for rejoicing that so many of them have stayed in education to the age of 18 and want to continue into higher education, but it is a matter of shame that hundreds of thousands of them will be denied their chance at higher education. How can any civilised country, not to mention a Government who claimed that education was their main priority, let down a generation of young people in such an arbitrary way? Of all the effects of the university cuts, this for me is the most shameful, and I find it

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hard to believe that many on the Benches opposite-although there are not many there today-do not share this view.

Furthermore, there is little doubt that the cut in funding for teaching constitutes a threat to the standard of student academic experience. The Secretary of State's astonishing observation that universities could reduce the time taken to reach graduate level to two years or even one literally takes my breath away. It shows an astonishing lack of understanding of what is involved in reaching first-degree level. A degree is not just about stuffing students with a range of facts and skills; it is a process of intellectual and practical maturity, a state of confidence and competence which will go through life with the graduate, empowering them not only to work but to continue learning and contributing to the quality of their own and the nation's life-and this takes time.

The Prime Minister told us that cutting too early would damage the economy, and said that he would not impose early cuts. Yet from this year, as we have heard, there is to be a swingeing cut of more than £400 million. That is an average of around £4 million for each university. But then adding to this in the Pre-Budget Report of last December, we were told there was to be another £600 million cut, starting in 2011-12. What is unforgivable is that the Government have not indicated where this huge cut will fall. Even Sir Alan Langlands, the chief executive of the Higher Education Funding Council for England, has not been told. He told a conference earlier this week:

"I spent a whole day trying to find out what it"-

the £600 million-

This is no way for a responsible Government to relate to the university system.

British universities do not face these savage cuts with a cash cushion to help them. As others have pointed out, even with the addition of fee income, the unit of funding per student in real money terms remains substantially less than in 1989. The huge expansion of student numbers in the late 1980s and early 1990s was done with greatly increased funding overall, but with decreased funding per student. There was, arguably, some fat in the system when that expansion started, but there is no room for any further reduction without a real diminution of the quality of student experience. On top of that, this Government are proposing a fine of £3,500 per student on any university which recruits above its government-imposed quota.

The concerns of further education in the light of these higher education cuts must not be forgotten. Many establishments provide a valuable contribution to higher education through foundation degrees and other collaborative arrangements. History records that universities tend to find that it is too expensive to continue these external partnerships in hard financial times, so this crucial ladder of opportunity for older, local students may be lost. Other unforeseen consequences will no doubt emerge over the coming years if this Government are still in power. In the mean time, I ask only for a strategic approach, which sadly seems to be lacking in these unwelcome proposals.

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3.25 pm

Lord Butler of Brockwell: My Lords, uncharacteristically, I am going to make a controversial speech, and I hope that this will not be regarded as ingratitude to the noble Lord, Lord Baker, who has given us the opportunity for this debate. I shall say the most controversial thing first. I agree with much of what the noble Lord, Lord Mandelson, has recently been saying. Writing in the Education Guardian, he said that,

As the noble Lord, Lord Krebs, has said, the sector is diverse. The noble Lord, Lord Mandelson, and the noble Baroness, Lady Morris, are surely right in saying that not all degree courses have to follow the same pattern. Some universities have already shown the way by offering degrees in traditional subjects which can be obtained in two years with, so far as I know, no degradation in quality.

As with the degrees that our universities offer, so it is with their funding. The universities differ hugely in their costs, their endowments, the value of their brands and their needs. Yet at present the fees regime treats them as though all were the same. I have long argued that our present arrangements offer perverse incentives to our universities. British universities can receive only little more than £3,000 a year from British and EU first-degree students, whereas they can receive from non-EU first-degree students and all postgraduate students the multiple of that figure which their tuition costs. If universities responded to these incentives, they would try to admit as few UK first-degree students as possible and replace them with those from outside the EU. It is a wonderful thing that British higher education has such an international appeal, but do we really want to encourage discrimination against our own nationals?

Secondly, it is absurd that universities should have to subsidise UK/EU undergraduates whose families do not need help in meeting the cost of their courses, when those resources could be used for students who need financial help. If it is necessary to save public expenditure-as it undoubtedly is-that is the place to start. To illustrate this absurdity, if someone were to suggest that the fees of private secondary schools-public schools-should be capped at one-sixth of their present level and five-sixths should be met by the taxpayer or from funds which could be used to subsidise poorer students, we would think that they were mad. Yet that is what our present system for higher education does.

What I hope that the review of the student fee regime by noble Lord, Lord Browne of Madingley, will recommend is the deregulation of fees, on condition that all universities will put in place bursary schemes whereby no able student will be prevented from entering higher education by lack of resource. The Government's teaching grant should be frozen at its present level and the money which would have been used for future increases should be directed to those universities without sufficient endowment to afford such bursaries. I realise that in saying that I may not altogether please my old university-Oxford-but I am recommending not that the teaching grant should be removed, only that it should be frozen at its present level. The Russell group universities have a strong enough brand and endowment

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to support that; indeed, to a large extent, they are already doing so. This would be a far better way of saving public expenditure than reducing expenditure on research, which so many speakers in this debate have said would destroy the lifeblood of one of our greatest national assets.

3.30 pm

Lord McNally: My Lords, I congratulate the noble Lord, Lord Baker, on securing this debate and on the galaxy of talent that he has attracted. I always approach education debates in your Lordships' House with some temerity. In the past, I said that they should be divided in two: one half for oiks like me and the other for the vice-chancellors, chancellors and heads of colleges to make their speeches.

I was moved to enter the list today because I have never believed that more means worse. I have supported higher and further education expansion since the Robbins report in the 1960s. Until I see middle-class parents content to see their children leave school at 14 or 16, I will continue to believe in expansion. Secondly, ever since I have been involved in politics, I have heard successive Governments argue that Britain is undertrained and underskilled, and that to prosper we need a high-skill workforce.

I intervene today to make a plea for the further education sector, to which the noble Lord, Lord Baker, referred in his opening remarks. I have close links with two FE colleges: Oaklands College in St Albans, where I now live, and Blackpool and the Fylde College, located where I grew up and where many of my family still live. Both colleges are superbly led by principals with vision and dynamism: Mark Dawe at Oakland and Pauline Waterhouse at Blackpool and the Fylde. Both have established good and imaginative partnerships-to which the noble Baroness, Lady Perry, referred-with their local universities: Oaklands with the University of Hertfordshire, Blackpool and the Fylde with Lancaster. Both have seen their vision and dynamism kicked in the teeth by the mismanagement of the college capital programme by the Learning and Skills Council. My noble friend Lord Shutt told me a similar story about Calderdale College near Halifax.

I have seen with my own eyes the crucial work done by these two colleges. They are but two excellent examples in a sector that, as the noble Lord, Lord Baker, said, educates and trains 3 million people every year, of whom 750,000 are aged 16 to 18. The colleges provide 39 per cent of entrants to higher education. Often, these are the students whom the school system failed to motivate, but who were given a second chance by FE.

The cuts to funding will have serious consequences for the ability of colleges to respond to local demand, to offer high-quality courses and to contribute to the economic recovery. One suggestion made to me was that colleges should be given the ability to transfer funding within 19-plus funding streams, and from 16 to 19 funding pots, which would mitigate some of the effect of the cuts. However, unlike the university funding cuts currently under debate, which are prospective, these changes are happening now and will affect students trying to enrol this year.

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Mine are the observations of a concerned outsider. Mark Dawe said:

"The underlying message from this is we are concerned that future Ministers ... will focus the next round of cuts, which will inevitably come from the public sector, disproportionately on Colleges of Further Education".

Pauline Waterhouse says that her college attracts,

Those are voices from the front line of the battle to ensure that we emerge from this recession with a workforce that has the skills and training to underpin the high-skill, high-value-added, high-productivity, knowledge-based and innovative economy necessary for Britain to prosper in the 21st century. I look forward to the Minister's reply.

3.34 pm

Lord Bew: My Lords, like other noble Lords, I thank the noble Lord, Lord Baker of Dorking, for securing this debate and for the powerful speech with which he introduced it. I need to declare an interest both as a working professor in a Russell group university and as an honorary fellow of Pembroke College, Cambridge.

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