To move that this House takes note of the financial pressures on Higher Education and the impact on (1) local communities, (2) the United Kingdom’s science and innovation exports, and (3) the impact on delivering the Turing Scheme.
My Lords, it is a pleasure to open this debate. The Minister is taking her seat, and she knows that I am a bit of a schools policy obsessive, so I come to this area of education somewhat afresh—and I am pretty alarmed by what I have found.
I must start by underscoring that higher education is critical to Britain. For individual learners hoping to prosper in the future labour market, we know that, as technology and the greening of the economy deskills and demands new skills, future prospects will require higher levels of learning for more people. Employers are desperate for talent with strong cognitive and collaborative ability, and are relying on a thriving higher education sector to deliver that. For university towns and cities, the sector creates and sustains-high quality jobs. Many are anchor institutions for the local economy. They bring large numbers of students to pay rent and spend money in that economy. Universities are major property owners and developers, and their research translates into spin-outs, start-ups and consultancies. Nationally, we have a persistent problem in the economy of low productivity that needs more of these highly educated individuals who can work well with both technology and each other. Britain also needs to continue to be at the forefront of applying academic research to maintain any competitive advantage we have left post Brexit. In export terms, international students alone generated £19.5 billion in export earnings in 2020.
According to Universities UK, the sector contributes £95 billion to the economy and supports 815,000 jobs. We are the third most popular destination for international students globally and we have the highest degree completion rates in the OECD. Then last week, I woke up to the news that Cambridge University, my alma mater, alone contributes £30 billion a year to the UK economy. I have also just been reading about the impact of the Graphene Engineering Innovation Centre in Manchester and the potential of the venture science doctorate being developed by Deep Science Ventures.
A healthy, vibrant higher education sector is essential as this country seeks to grow and thrive. That is why I was so alarmed to see news from places such as Norwich and Wolverhampton, and then to read last year’s National Audit Office report and the response from the Public Accounts Committee. This paints a picture of serious financial stress in the sector. The report found that the number of higher education providers with in-year deficits has risen from 1% to 15% in the last five years and that 20 have been in deficit for at least three years. In 2020-21, 43 out of 254 higher education institutions were reporting deficits and the net operating cashflow of the sector had halved. These problems cover the full range of types of higher education institution, suggesting a set of systemic issues that cannot be written off as a hangover from Covid. So what is going on?
My Lords, I congratulate the noble Lord, Lord Knight of Weymouth, on introducing this very timely debate. I will briefly mention three aspects: international co-operation between universities; the extent to which reciprocal university programmes can also be supported by their cities, regions, industries and communities; and the relevance of public/private partnerships in funding, both here and abroad, studies and learning, including in higher education.
International co-operation between higher education institutions is able to reduce financial costs by sharing human resources, while achieving improved education and research results, thus preparing students better for their future professional challenges in a globalised world. There are two immediate facilitators. First, EU Horizon grant funding for research is still available, for a short while, for United Kingdom institutions in their own right. Secondly, Horizon funding of partnerships will continue to apply to an institution in the United Kingdom, provided its partner is within the EU. One example is the proposed partnership between the Scottish University of the Highlands and Islands and the University of Zadar in Croatia. In helping to put this together, I declare an interest as recent chairman of the Council of Europe’s Education and Culture Committee and as current chairman of the All-Party Parliamentary Group on Croatia.
The second point relates to the ways in which corresponding cities and regions also gain from reciprocal university programmes. Of course, the more advantages accrue not just to the universities but to their regions and communities as well, the more university costs themselves can decrease as a result. UHI and Zadar University each happen to be researching new technologies for greener energy in any case, on the Cromarty Firth and the Adriatic coast respectively. Equally, they are each researching into improved conditions and opportunities for people living in their similar locations of remote areas and islands. However, joint efforts will assist those universities and their localities to a greater extent, while also expediting, earlier than otherwise, constructive outcomes from research. Here, then, are obvious examples of how, at reduced costs, universities and communities alike stand to benefit considerably from international partnerships and their focused designs.
My Lords, as a former teacher, I am glad to have the opportunity to speak on this issue. As noted in the register, I am the chair of trustees of the Council for Dance, Drama and Musical Theatre.
I do not need to tell noble Lords taking part in this debate about the strengths of the UK’s higher education sector. Whether it is our fantastic HE colleges or our world-famous universities, the teaching and research they give us should be a source of immense pride. That is why it is so important that the Government are alive to the risks the sector faces, and that they take a proactive approach to supporting providers and their students to weather them. I am grateful to my noble friend Lord Knight for bringing these matters to the attention of the House through this debate. Indeed, universities and higher education institutions face a perfect storm of rising costs, with EU structural funds ending and an increasingly combative Government raising fears about capping international students.
In June last year, the House of Commons Public Accounts Committee published a concerning report into the financial sustainability of England’s HE sector. The number of institutions with an in-year deficit has risen more than sixfold, from 5% in 2015-16 to 32% in 2019-20. It would not be fair to draw attention to any particular provider, but we know that when organisations look to balance their books, they often have to cut staff and subjects. This can be devastating for students and regional economies alike.
I am sure that noble Lords across the House will speak in more detail than I intend to on the second and third aspects of the debate, and I am certain they will do a sterling job. I wish to focus on the threats to local communities, and particularly the key role the Office for Students must play in supporting providers, considering the central contribution they often make within their surrounding economies. There is value in probing the regulatory role of the OfS, particularly how well it monitors the financial sustainability of the sector, and its role in protecting students from fallout when things go wrong. As my noble friend highlighted in the blog he published last week prior to this debate, the university sector brings much-needed skills to local communities: 73% of UK university students study locally, or go back to the region they grew up in to work. However, when the sector struggles, the impact on the local community is widely felt.
My Lords, I thank the noble Lord, Lord Knight, for this debate. I am very pleased to speak on this very important subject which is close to my heart.
The UK’s universities and colleges are world-regarded, as the noble Lord has already set out. However, like much of the country at the moment, they are under extreme financial pressure to do all that they need and would like to do, but are deprived of the resources to do it. I thank all those who have sent us briefings—Universities UK, MillionPlus, Horizon, London Higher and others I shall mention later. I will concentrate my remarks on a couple of issues: the Turing Scheme and part-time education, which of course impacts local communities.
First, I turn to the Turing Scheme. It is a poor replacement for the wonderful Erasmus, which the Conservative Government assured us would be kept after Brexit—another broken promise. We have heard from the British Council and the University Council of Modern Languages of their concerns. Modern languages are more important than ever since Brexit. Our European neighbours no longer need to speak English as we are no longer in the club, but British ability to speak French, German, Spanish, Italian and other languages has been seriously depleted since a GCSE in a modern language is no longer regarded as important. It was good to hear the King speaking in German on his visit to Germany, and I gather that, had he been allowed into France, he would have spoken French too—a great example. But what about Mandarin and Arabic, arguably the languages of the future? How can we communicate, trade and understand each other without other languages, and how will this impact on international relations?
As we know, unlike Erasmus+, inward mobility is not supported by the Turing Scheme, nor does it provide funding for staff placements. Significantly, the scheme does not cover tuition fees, and these are expected to be waived by host universities—how is that working, I wonder? Erasmus+ helped to enhance language skills and ensured that UK-based students and staff could work across different cultures and within a diverse workforce, as well as establish critical international partnerships. Following the loss of this Erasmus+ opportunity for UK study, and the introduction of a student route points-based immigration system, students from the EU, EEA and EFTA face increased costs due to the change in the home fee status and eligibility for tuition fee loans. Before the transition period ended these students were able to study in the UK without a visa, which will now cost them money that they may well not have.
My Lords, I thank my noble friend Lord Knight for initiating this debate and for his comprehensive introduction. I worked as a university administrator for 33 years, and I have a pension from the USS. There were not the commercial incentives in universities when I worked there, although there would have been limits to the possibilities anyway. The Institute of Education, where I worked, was entirely postgraduate, and although heavily involved in research, there is not much money in teacher training and education. As the noble Baroness, Lady Garden, has already said, institutions with a significant proportion of part-time students—such as the institute or Birkbeck or the Open University—were always Cinderella services when it came to funding.
Universities have always had a hierarchy in funding and research grants, so I am not going to claim that some golden period of access, standards, student support systems or value for money ever existed. However, what we have now is the worst of all worlds, with tuition fees falling in value by 15%, student loans reduced by at least £1,000 since 2020-21, overreliance on overseas student fees, commercialisation threatening standards, and damaging limits on the number of training places for doctors, nurses and teachers.
Until last month, I was a member of the Industry and Regulators Committee, which has launched an inquiry into the role of the Office for Students. So, as a mark of respect to that excellent committee, I will refrain from making rude remarks about the Office for Students, tempting though it is.
My first question for the Minister is: what plans do the Government have for funding more university places for doctors, nurses and teachers? It is not a great money-spinner for universities, but it would help. It would also meet a desperate need for more homegrown doctors, nurses and teachers and reduce the need for overseas talent.
Although we know that 44% of student loans are subsidised by government and some say the system is broken, I will leave it to others to elaborate on that. However, do the Government have any plans to unfreeze tuition fees before the next general election, as this represents a substantial cut in university income, or will it have to wait until after? Do the Government propose to place a cap on the number of overseas students and compensate universities for any lost income?
My Lords, I join other noble Lords in thanking my noble friend Lord Knight of Weymouth for securing this important debate and in paying tribute to his powerful introduction to it. I strongly endorse his analysis of the intense financial challenges faced by the higher education sector and add my voice to the questions he asked the Minister. I declare my interest as vice-chair and trustee of the drama school LAMDA and as a co-opted member of the investment committee of Worcester College, University of Oxford—a rich university with a poor college within it.
I am also privileged to have taken the place of my noble friend Lady Donaghy as a member of the Industry and Regulators Committee of your Lordships’ House. I am therefore currently involved in the inquiry into the Office for Students. I would be as unpopular pre-empting the conclusions of the committee as I would be giving a plot spoiler to the current series of “Succession”—which stars, in Brian Cox, a distinguished alumnus of LAMDA—but some of the points that I will make this afternoon have been formed by the evidence about the HE sector that has already been heard by the committee.
Academic politics is
“the most vicious and bitter form of politics, because the stakes are so low”,
wrote Professor Wallace Sayre in the 1950s. He may have been reflecting the views of President Woodrow Wilson, and subsequently Henry Kissinger has characteristically claimed the analysis for his own. Senior common-room debate can be impassioned on a wide range of subjects, and the intellectual self-confidence of members of the academic community undoubtedly makes the governance of universities and HE institutions challenging.
Professor Sayre’s dictum may accurately represent one aspect of academic life, but it would be completely wrong to interpret it more broadly as implying that the stakes in higher education generally are low. They could not, in fact, be more important. That importance is based on the education and training provided to UK citizens of every age, but particularly as young adults; the research and innovation undertaken of national and global scope; the economic benefits of a vibrant HE sector nationally; and, as my noble friend Lord Knight and others have highlighted, the benefits for local communities. It also includes the contribution to the UK’s international standing and relationships through the foreign students who are drawn to the excellence of our institutions. Where these are all interconnected, students benefit from being taught by academics at the forefront of research and from their interaction with overseas students, for instance.
My Lords, central to this debate is the failure to invest enough in our higher education system. Consequently, we have to restrict the number of domestic students relative to the number of those from abroad, because universities lose money on domestic students. In other words, UK universities are supporting the nation’s science and further education ambitions through the income that they receive from international fees. This is inherently an unpredictable and risky platform on which to provide a higher education system.
There are more particular problems. The noble Baroness, Lady Garden, referred to the uncertainties surrounding the Turing scheme. This particularly affects students from disadvantaged backgrounds, who are particularly vulnerable to this uncertainty. Universities face myriad funding pressures in pursuing their mission and sustaining academic excellence, but having fees frozen at £9,250—which, as my noble friend has already explained, in real terms is now equivalent to only £6,500—means that they simply do not have the money to cover the cost of courses, in particular the cost of STEM subjects. The fact that student fees have been stuck at this level for some years, for the reasons that we understand, coupled with inflation, mission creep—additional responsibilities being placed on institutions—the pressure from industrial action, and so on, means that universities are experiencing a damaging squeeze on their finances. Coupled with the cost of living crisis, the lack of resources means that that there is inevitable damage to the important objectives of increasing social mobility and local community engagement. This is despite universities’ regulatory requirements to spend part of their tuition fee income on widening participation.
There is a growing risk to social mobility if, for pragmatic reasons, universities have to make hard decisions to recruit fewer domestic students relative to international students or have to spread their limited bursary and hardship funds over a thinner entry. The ability of universities to collaborate with local government and third-sector partners is also being strained, in large part by the budgetary pressures on would-be partners, particularly in deprived communities with lower social resilience capacity, during this cost of living crisis.
My Lords, I intend to talk about the internal consequences for universities of their financial crises. The number of universities running financial deficits has increased in recent years. The proportion of providers with a yearly deficit has increased from 5% in 2015-16 to 32% in 2019-20; the figures for the subsequent academic years will undoubtedly be far worse. The deficits can be attributed to the declining values in real terms of the fee income received from students and of the grants from central government. The finances of universities have been sustained by the fees paid by overseas students, as we have heard. It had been feared that in consequence of the Covid pandemic there would be a major loss of the income from this source but, remarkably, it has been maintained.
However, it is by no means assured that the numbers of overseas students will be maintained. The recent increases have been attributable mainly to students from China and India, but our relations with the Governments of these countries are deteriorating and their students might be encouraged to go elsewhere. The number of students from the European Union has plummeted: there was a decline of 40% in applications for undergraduate study in the UK from EU countries in 2021-22, and the decline has continued.
A natural advantage of British universities, their use of the English language, is being eroded rapidly. It should be recognised that the majority of postgraduate courses in European universities are now taught in English. The fees demanded by those universities are much lower than British fees. Therefore, European universities are liable to be more attractive at the postgraduate level, at least to overseas students, than British universities, which also face competition from universities in other English-speaking countries.
The financial outlook is extremely worrying. A further factor in the financial difficulties of our universities has been a consequence of the Government’s decision, or desire, to make them compete among themselves in the recruitment of students. Instead of competing via the level of fees, universities have chosen to complete via the amenities they offer students. This has led them to capital expenditures that few can afford.
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Put simply, it appears that the university business model is teetering. Universities rely on four sources of income: government funding, tuition fees, research grants and other income such as property investments, IP exploitation, conferences and endowments. These are just the kinds of things that allow the rich, such as Oxford and Cambridge, to get richer while the rest struggle. The balance between tuition fee income from UK students and UK government funding has shifted significantly in the last decade, and this is the core of the problem. In 2010, funding from government was close to three times the level of tuition fee income. Ten years later, following the raising of tuition fees to over £9,000 and cuts in government funding, fee income was almost 2.7 times the level of government funding—an almost straight swap. This reliance on fees for half of income is so important in understanding the problems.
For good reason, the Government have capped fees since 2017 and they are now fixed until at least 2024. But galloping inflation means that, in real terms, the fee of £9,250 is now worth just £6,585 and government funding has not then filled the gap. Ours is the lowest level of government funding for universities in the OECD, hence the financial pressures. Teaching domestic students is now done at a loss, so recruiting more UK students to fill the gap does not necessarily help. That has led some to rely on international students; income from this source has been growing rapidly, by around 12% per year—but I do not believe that this can continue for ever. Students pay the highest fees in the OECD and are starting to get less in return. The Institute for Fiscal Studies has found that spending on students fell by 18% in real terms in the last 10 years, as universities try to make savings.
I take over as chair of the Council of British International Schools in May. Four hundred schools around the world are members, educating over 165,000 students, and their recent survey was revealing. It found that 96% of their pupils go on to university: 44% of them in the UK, 19% in their host country and the remainder shopping around globally. What is striking is that the UK is becoming less attractive, with 29% of schools reporting it as a decreasing choice of destination for their students. Why is that?
When asked, the students give a variety of reasons. For 65%, it is the cost; 35% mention Brexit; and 26% mention the cost of the visas and the post-study work entitlement. What a massive lost opportunity. Public First recently did some work for Universities UK and found that 64% of the public believed that the UK should host the same number of—or more—international students. Given that the continued growth of overseas students is crucial to relieving the financial pressures on universities that I have set out, can the Minister update us, in her response, on whether the Government plan further restrictions on international students? Can she confirm the Government’s commitment to the graduate visa route and whether they remain committed to their international education strategy? The Turing scheme is a relative success and nurtures an important global mindset by facilitating international student exchange. Therefore, it makes no sense for us not to do our utmost to reciprocate by hosting more students in this country.
Alongside the increasing income from students, it is reasonable to ask whether there is more that universities should and could do in terms of savings. There are problems here with the impact on staff leading to further industrial action, but there are also questions of what that means for students themselves. Students are already struggling with the cost of living crisis and a student maintenance package that is the lowest in seven years. They are borrowing money, half of which will never be repaid. Teaching has been cut and accommodation is hard to find for too many. Post Covid, many students are struggling with mental health problems and have lost out on teaching contact time due to strikes, so dropout rates have increased, further hitting university finances. This is especially important for our public services. Of the MillionPlus members, 66% of university graduates work in the public sector, and they tell us that applications for nursing are down by over 18%, when we need an increase of 20% to meet our targets. As the Minister knows, there is a similar story for teachers, where applications from those wanting to enter teacher training are down by over 15% and are much worse in priority secondary school subjects. I do not believe that further savings that impact on the student experience are sustainable.
The other pressure on our university system comes in the critical area of research. The research function of British universities punches well above its weight. We have one of the lowest levels of investment in the OECD, yet the academic impact of our work is ranked the highest in the G7. Funding is based both on overall university performance and on grant funding for specific projects. However, it is not designed to recover the full cost of undertaking the research. In 2020, only 71% of research costs were recovered, which means using income from teaching funding and elsewhere to fill the gap. I have already discussed the problems in that area. Clearly, the lack of access to the €84 billion Horizon scheme has added to these problems as one of the self-inflicted harms of the Brexit deal with the EU. I am delighted that the Windsor agreement allows that to be reopened. Can the Minister update the House on the progress of those negotiations?
All of that said, the state of university finances looks a bit of a mess. Government policy deliberately shifted universities to a reliance on fee income. The reality of that creating unsustainable levels of debt has meant capping that source, so this vital sector is now in some trouble. We need innovation and change; there is no easy solution. Having seen the economic reality of gambling with our money, thanks to Liz Truss, we also know that there is no magic money tree. While we are waiting for change across our education ecosystem to create something fit for purpose for people and the economy, we also need an answer to give confidence to the sector. We have seen, through councils such as Croydon and Thurrock, that, when push comes to shove, the Treasury will intervene to stop our local authorities from going belly-up. I hope that I have made the case that our universities are too important for us to allow them to be vulnerable.
The Government did the right thing in protecting customers in the wake of the collapse of Silicon Valley Bank earlier this month. Can the Minister assure us that, somewhere between the Office for Students, the Department for Education and the Treasury, someone is working on a plan B so that students and staff at our universities will be assured that they will not be left high and dry, as the business model for our universities looks like it might be running out of road? I beg to move.
In this context, together with the Department for Education, what plans does the Minister have to encourage partnerships between United Kingdom universities and others within the EU, thereby ensuring that the United Kingdom has access to EU funding for higher education and research as a third country and non-EU member state—purposes which, in its present form, the Turing scheme cannot facilitate? Does she also agree that revised entitlement to funding, such as for the Horizon scheme, should apply uniformly, without differentiating across the United Kingdom?
Then, as an active member of its intergovernmental committee, there is the United Kingdom’s position as a key operator within the human rights affiliation of 46 states of the Council of Europe, which in Strasbourg has prepared the European outline convention for cross border co-operation at local level. Higher education institutions in the United Kingdom will wish to take up this opportunity. How will the Department for Education assist them to do so?
Online learning proved its worth during the Covid pandemic. It is still essential for thousands of displaced Ukrainian students and for a great many others elsewhere. Yet apart from in emergencies, online learning remains extremely relevant, owing to its enabling of reduced costs for education, research and students. Does the Minister therefore consider that online learning has a major part to play in reducing financial pressures on higher education?
During its fairly recent G7 presidency, the United Kingdom committed to help promote education in the third world and elsewhere in countries where education systems do not fully operate. What actions have the Government taken since then? Which combined initiatives are in progress? And at all teaching levels, further to promote and provide education overseas, where it is required, does my noble friend agree that, in terms of both quality and cost control, by far the most effective deployments are distance learning online programmes?
Such delivery connects to the need for public/private partnerships in various fields, yet certainly including higher education. In the city of Dundee, for instance, the online games industry works with universities. Increasingly, and in any event in the interest of their own employment recruitment, most sectors of industry have a reason to support good education. Does my noble friend concur that education deliveries through public/private partnerships are cost effective, timely and of sustained quality? If so, what steps are the Department for Education taking to advance and increase these partnerships?
In summary, the best approach to reduce financial pressures upon universities is a proactive one. That applies to all manifestations of the problem and how to tackle them. Yet, not least do the three aspects just outlined reveal why an innovative approach is essential. They illustrate the need for stronger government encouragement to international partnerships between universities, the associated advantages to their localities, and the separate case for supporting public/private partnerships to assist education both at home and abroad. These are some of the necessary prescriptions for raising standards, lowering costs and benefiting communities.
I will mention an institution that I relied heavily upon when teaching at Hawthorn High School, in Pontypridd. The University of Glamorgan, now the University of South Wales, generously gave of its time and facilities to my A-level students in preparation for their radio coursework submissions. It allowed us access to a fully equipped radio studio, when all I had in school was a double cassette recorder. This engagement not only allowed students to produce the best technical examples of their work but took youngsters from backgrounds where university was not part of their experience into the campus itself, where they saw that they too could look to engage with a university education in their future lives. It was an important aspect of the university within the community, and I could share many more examples, if time allowed.
The National Audit Office report noted that it collects a great deal of data on institutions to check the validity of the economic model, but smaller institutions question why they have to give the same amount of information as large ones. Perhaps the Minister could address this concern in her remarks and say whether the Government agree with the remarks of smaller institutions regarding information overload. When they speak to the Office for Students, perhaps they could ask how this could be reviewed and refined. I believe that the OfS is trying valiantly to refresh its comms approach. I hope it will improve the situation, and I trust it will set robust metrics to measure its success on this. What is the Government’s view on whether the OfS is communicating effectively.
As well as having clearer comms, the National Audit Office review recommended that the OfS should
“improve where necessary and then reauthorise student protection plans for all providers to ensure they remain adequate and can respond to new risks.”
The Office for Students must get this right. The “responding to new risks” part of the recommendation is absolutely crucial. Threats to the sector are evolving all the time, so the OfS must see its role as proactive: to foresee these risks and see them off before a university fails. Although the OfS sees the risk of multiple provider failures remaining low, the consequences for an area of its local college going under are simply too catastrophic for the regulator not to do everything in its power to set the conditions for success.
On this basis, I have several questions for the Minister. Are the Government satisfied that the OfS has the appropriate clout—I mean the regulatory tools and powers—to monitor the financial health of institutions effectively? Does the Minister believe the OfS is sufficiently alive to the financial instability of many institutions, and does it see its role as preventive or simply reactive? Should a provider fail, is the regulator confident it could mitigate the damage to the undergraduates and staff, and to the surrounding local economy? What is the Government’s overall assessment of the financial stability of the sector, and what are they doing to support it?
Over the next five years, it is predicted that universities alone will help set up more than 20,000 new businesses and provide more than £11.5 billion of support and services to industries and not-for-profit companies. Instead of the worrying trend of treating the sector as a convenient political arena for a culture war, it is imperative that the UK Government do everything they can to protect the jewel in the UK’s crown.
Additionally, the financial settlement for the Turing Scheme is to be renewed on a yearly basis, so HEIs can no longer assure students applying for their degree that funding will be available for a year abroad. This creates considerable uncertainty for students, particularly for those whose degrees would historically have been expected to include a year abroad component—for example, language degrees. Can the Minister say what plans the Government have to ensure a long-term commitment to funding the scheme and make sure more certain levels of funding are available, so that students can plan and universities can commit to students of modern languages and others who would like to study abroad?
By the time funding is confirmed with institutions and then with individuals, students need to have planned their period of residence abroad. This makes planning difficult for universities and causes significant anxiety for students, who plan their year abroad with no guarantee of financial support. However, we know that the value of modern languages for trade and general economic competitiveness is widely acknowledged. Furthermore, the uncertainty of funding disproportionately affects the widening participation of students.
I should also like to raise part-time higher education in England, which has long been the Cinderella of the HE sector, where financial pressures are very acute. Wonderful organisations such as the Open University and Birkbeck have long opened opportunities for adult learners, or indeed younger people who choose to study at their own pace. I need to declare an interest as a fellow of Birkbeck and a long-time supporter of the Open University. Enrolment has dropped. We know that all students are struggling with the cost of living, but pressures will be particularly felt by part-time students. They tend to be older—seven out of 10 are aged 25 and over—and, as a result, are more likely to have significant financial and caring responsibilities. Part-time students in England are also unlikely to be eligible for government support with their living costs. The vast majority—90%—are excluded from maintenance support, and part-time students are unable to access support offered to students who are parents via the parents’ learning allowance and the childcare grant. Financial burdens are also likely to have an impact on student well-being and mental health, again feeding through to a heightened risk of non-continuation.
Part-time higher education is a critical enabler for flexible lifelong learning. It is desperately needed to spread opportunity to all and boost productivity, but it needs support and incentivising, with government policies and funding. Why is it, for instance, that part-time distance learners are still locked out of maintenance support in England, apart from a very small minority who have a serious enough disability to be able to claim it? That is clear in the Government’s response to the lifelong loan entitlement consultation, but there is no reason why. However, this support can be accessed by part-time students in Wales. At this morning’s meeting of the Education for 11-16 Year Olds Committee, we heard that Wales is leading the way in a number of educational initiatives—I am sure that is music to the ears of the noble Baroness, Lady Wilcox. If it is good enough for Wales, why is not good enough for England?
The LLE feels optimistic. We Liberal Democrats proposed a skills wallet that would provide grants, not loans, which are more acceptable for adults with many calls on their purses. We are very pleased to see an end to the ELQ rule, and trust that the new per credit fee limit will be applied as the rule and not the exception.
In her reply, can the Minister offer any assurances on the future of modern languages in the UK and the future of part-time learning? Both are significant for our economic prosperity, our well-being and our place in the world.
I have heard noble Lords on the Government Benches deploring the fact that the student experience at university has deteriorated, but they do not seem to accept that increased commercialisation might have something to do with it. I have real concerns that there is a growing backlog of repairs and maintenance in universities and much-needed capital expenditure, which will not only impact on the student experience but will have health and safety implications for the future.
In his introduction, my noble friend Lord Knight referred to the value to local and regional areas of having a university, and I support that statement strongly. I am thinking of a town which is crying out for a higher education institution. It would provide much-needed jobs and income and transform the community. When the Government are talking about their levelling-up agenda, they might consider the transformative impact of setting up a university in such a town.
Some have said that the financial pressures might lead to the closure of some university institutions. I hope that we never have to face these dilemmas, but a worse fate would be the inexorable decline in standards throughout the whole system. We have such a lot to lose in the UK, with our deserved reputation for centres of excellence, but the uncertainties around Erasmus and Horizon funding and the inadequacy of Turing funding are already showing a downward trend in the international league tables. It was the height of irony for the Government to name the scheme after Alan Turing, a genius who was tortured by the state and whose name will now be linked to a poor-relation funding scheme.
Returning to the fall in value of student loans, I point out that the recent Education (Student Fees, Awards and Support) (Amendment) Regulations 2023 were considered by the Secondary Legislation Scrutiny Committee. It referred to a report by the Institute for Fiscal Studies stating that
“the value of loans has been reduced by more than £1,000 in real terms compared to 2020–21”.
The DfE has accepted that these proposed changes will, overall, have a negative impact for students. Although there was some mitigation via hardship funds and the Office for Students, the Secondary Legislation Scrutiny Committee concluded that
“the mitigating actions outlined by Department will not compensate for the loss in the real value of maintenance loans”.
The equality impact assessment stated that the 2023-24 uprating
“will likely lead to a further erosion of students’ purchasing power”
and that women, mature students, those on low incomes and ethnic minority students would be particularly
“adversely affected by the real term decrease in the value of the loan”.
This result will achieve the exact opposite of widening access and levelling up. Reeling off a series of one-off government funding announcements does not disguise the Government’s failure to recognise the importance of higher education.
I have run out of time, so all I can say is that I agree wholeheartedly with the comments of the noble Earl, Lord Dundee, on the importance of international co-operation between universities.
I believe that there should be greater clarity in defining the priorities and objectives for HE policy. I would argue that it should be first and foremost about providing that education and training to UK students in order to create a productive workforce and a civilised society. The economic benefits arising directly from the sector, such as £20 billion of export earnings, £100 billion of GDP and the driving economic force in many local communities, are hugely important, but they are a welcome by-product of the central objective of providing the best possible education for current and future generations. Research is of course vital but, whereas teaching is universal to all HE institutions, research is more concentrated—not, I should emphasise, in Russell Group universities alone but wherever specialised expertise resides.
I believe that thinking about HE policy in this way is essential for any fair and successful reform of funding. Not only is it necessary to increase the overall funding for the sector in real terms, it needs to be implemented in a way that ensures, as far as possible, that the costs fall fairly and proportionately on the different stakeholders. For instance, there is disagreement about the extent of cross-subsidies between teaching and research most of all, but this issue must be resolved as part of any sustainable changes to the funding of the sector. With the cap on tuition fees for domestic undergraduate courses frozen in nominal terms, and therefore falling in real terms at an accelerating rate, there is increasing divergence between the fees for domestic undergraduates and what the market for foreign students may be able to bear. There must be an increasing risk that, however much vice-chancellors and their governing bodies are committed to the mission of teaching UK students—as I have heard them say—an unreformed system will inexorably increase the pressure to further emphasise the recruitment of foreign students for narrow financial reasons.
In my remaining time, I will touch briefly on the importance of smaller, specialist institutions. LAMDA, of which I am the vice-chair, is one, along with other world-leading drama schools, music conservatoires and the Royal College of Art, which has been rated the number one art and design college in the world for eight consecutive years. Through the OfS, the Department for Education provides additional funding for some specialist institutions in recognition of the higher costs involved in teaching these specialist courses, as well as the proportionately higher costs that come from being a small, stand-alone institution. Sir Michael Barber, the first chair of the OfS, has recorded the importance that he attached during his term of office to protecting and enhancing the position of such institutions. That support is very welcome and, I believe—I would, wouldn’t I?—fully justified. The world-leading reputation of these institutions and the quality of the education and training provided are fundamentally based on their small size and independence; I say that without denigrating the excellent courses in these areas provided by larger, multi-faculty universities. Can the Minister confirm that the Government remain committed to supporting smaller, specialist institutions at historic levels or higher?
Turning to research and innovation, there are intense funding challenges on universities in sustaining their infrastructure and talent pools. The challenge that we face is that virtually all forms of research run as a loss-making activity that must be supported by teaching and, in turn, as has been explained by myself and other speakers, that is dependent on overseas students. Having an internationalised learning community brings immense cultural and academic benefits to campuses, but there are systematic risks of universities becoming overly dependent on particular countries’ markets at a time of rising geopolitical tension and geostrategic competition. The risks are clear. For example, if relations with China were to deteriorate, we would be in a very challenging position. Does the department have a plan to cope with this situation if we hit such problems?
Sir Paul Nurse’s recent review recommended increases in the full economic cost recovery provided by competitively allocated research grants and an uplift in the block grant QR funding. He also highlighted underlying issues with the precarity of early career research pathways that are in large part a corollary of short-termism in the way public funding works, leading to pressure and stress on those involved.
As the Financial Times has reported, universities are having difficulties in the initial phase of the Turing scheme, with shortfalls in expected annual allocations and delayed payments, in some cases leading to places not being taken up. The inability of universities to provide certainty about funding to students only compounds the problems for those from more disadvantaged backgrounds, undermining their willingness and ability to pursue opportunities.
Finally, it is vital to a world-class UK research and innovation endeavour that the UK enjoys broad access to Horizon Europe. The real prize here is not access to the funding pool, but the huge, collaborative multiplier benefits of working with leading scientists and researchers across Europe and leading on multi-country researcher consortium bids. As the House will be aware, British universities have already experienced challenges in recruiting world-class researchers because of the enduring climate of uncertainty over participation. It is not just Horizon that has given problems; the sudden withdrawal from collaborative research funded by the Official Development Assistance programme two years ago also hit the UK’s reputation. As has been pointed out recently in the Times Higher Educationsupplement, much of the damage, coupled with the broader effects of Brexit, has already been done and will be hard to recover from. Nevertheless, a return to Horizon in a timely and efficient manner is vital to the UK’s ability to attract and retain leading British and global research talent and investment.
University administrations have reacted to the financial stringencies that have prevailed over many years by endeavouring to reduce their salary bills. University lecturers have, on average, lost 25% of their real incomes since 2009. I believe that that figure is way out of date as a consequence of current inflation. Meanwhile, the disparities in their incomes have increased, with the top earners moving rapidly ahead.
The collapsing value of the USS pension fund has led to the expectation that the retirement income of academics will be reduced by 35% relative to previous expectation. Whereas security of employment was a traditional compensation for the relatively modest earnings of academics, their employment has become increasingly insecure, with a large proportion of staff on short-term contracts. Academics who previously would have benefited from tenure are now subject to dismissal when the administrators judge that they have become surplus to requirements in consequence of restructuring plans.
The commercialisation of higher education has led universities to become increasingly responsive to consumer demand, and they have adapted their teaching accordingly by alleviating or abolishing difficult or demanding courses which are often at the core of the disciplines. The managements have aimed to expand the more profitable activities at the expense of the less profitable ones. Thus, at the University of Leicester, at which I am an emeritus professor, business studies, which represent a profitable cost centre, have been expanded while the mathematics department has been affected by numerous redundancies. This surely flies in the face of a widely recognised national priority to foster STEM subjects.
The academics have reacted to their loss of income and pension rights, and to their excessive workloads, by striking. In some cases, the reaction of the management to the strikes has been grotesque. Queen Mary University, my erstwhile university, has enjoined its students to report striking staff, while threatening to dock full pay for 39 days if those named fail to reschedule their missed teaching. Last July, it deducted 21 days’ full pay from more than 100 staff who had refused to mark students’ work in June as part of a national boycott. Their intention had been only to delay the marking. Staff have been resigning in protest.
Universities in the UK are chronically understaffed on the academic side, albeit the number of administrators has grown to outnumber the academics. The lack of academic manpower has been met by employing postgraduate students to teach classes, which is not always done adequately.
The governance of universities by professional administrators is in marked contrast to the circumstances that prevailed when I joined the academic ranks in the 1970s. Then, the administration of universities was in the hands of senior academics and academics who had opted to serve their universities in an administrative capacity instead of pursuing a research career. Such people are no longer available for this role; the likelihood is that they have been weeded out in consequence of their poor research performance. The hypertrophy of the administration has largely been a consequence of the audits demanded by governments in pursuit of transparency and accountability. There is a research excellence framework, a teaching excellence framework and, latterly, a knowledge exchange framework, each of which has engendered its own bureaucracy.
Academics no longer have any ownership of the processes they mediate, and their loyalty to their institutions has largely been destroyed. Nowadays, the academics and the administrators constitute mutually hostile factions. What has transpired is an old-fashioned and atavistic struggle of the management against the workers. We are witnessing the rapid decline of British universities.