Higher Education Reform

Statement

The following Statement was made in the House of Commons on Monday 4 November.

“With permission, I would like to make a Statement about the future of our higher education sector and the changes that we will be making for students in the upcoming academic year, 2025-26.

Before I go further, I want to make clear the approach that this Labour Government take to our universities and, above all, to the students whose education is their central purpose, because the Conservative Government did not just talk down universities; they talked down the aspirations of working-class families across our country, and they dismissed the ambition of our young people and undermined their opportunities. This Government take a different approach. We are determined to break down the barriers to opportunity, and higher education is central to that mission.

Higher education is part of what makes our country great. It enriches our culture, powers our economy and sustains intellectual traditions stretching back centuries. It is a beacon of opportunity—to students not just from this country but from across the world—and a sector of which everyone in this House ought to be proud. But when this Government took office in July, we found a university sector facing severe financial challenges. With tuition fees frozen for the last seven years, universities have suffered a significant real-terms decline in their income. We also found a regulator subject to political whim, unable to focus on the challenges our universities face. A succession of Conservative Ministers faced with tough decisions had, for year after year, ducked them time and again.

We inherited in our universities, as across so much of our public sector, the consequences of long years of shameful abdication of responsibility: long years in which I heard too often from students of the gap between the course they were promised and the experience they had, about the trouble they had making ends meet as they worked hard not merely at their studies but often at two or more jobs on top; long years in which I saw the amazing research our universities deliver but how infrequently those triumphs drove wider success; and long years in which I heard from international students, who make such an important contribution to our country, that the previous Government had made them feel neither valued nor welcomed. That is the mess that Opposition Members left behind, but where the Conservatives shirked the hard choices, this Government have not hesitated to grip the challenges we face and take the tough decisions to restore stability to higher education, to fix the foundations and to deliver change.

We have accepted in full the recommendations of the independent review of the Office for Students. We have also brought new leadership to the office and refocused its work to monitor universities’ finances and to hold leadership to account. I thank Sir David Behan for his work both leading the independent review and now as its interim chair. We have paused the commencement of the last Government’s freedom of speech legislation while we consider the impacts on universities, students and the regulator because, although universities must be home to robust discussion and rigorous challenge, regulation must also be workable.

I am here today to make two sets of announcements on higher education reform, addressing the challenges our students and universities face, and gripping these issues as a responsible Government. First, we will fix the foundations. We will secure the future of higher education so that students can benefit from a world-class education for generations to come. That is why I am announcing that, in line with the forecasts set out in the Budget last week, from April 2025 we will be increasing the maximum cap for tuition fees in line with inflation to £9,535—an increase of £285 per academic year.

I understand that some students may worry about the impact that the increase will have on their loan debt, so I want to reassure students already at university that, when they start repaying their loan, they will not see higher monthly repayments as a result of these changes to fee and maintenance loans. That is because student loans are not like consumer loans; monthly repayments depend on earnings, not simply the amount borrowed or interest rates, and at the end of any loan term, any outstanding loan balance, including interest built up, will be written off.

Increasing the fee cap has not been an easy decision, but I want to be crystal clear that this will not cost graduates more each month as they start to repay their loans. Universities are responsible for managing their own finances and must act to remain sustainable, but Members across the House will agree that it is no use keeping tuition fees down for future students if the universities are not there for them to attend, nor if students cannot afford to support themselves while they study. I therefore confirm that we will boost support for students with living costs by increasing maximum maintenance loans in line with inflation, giving them an additional £414 a year in 2025-26. I also confirm that from the start of the 2025-26 academic year a lower fee limit of £5,760 will be introduced for foundation years in classroom-based subjects such as business, social science and humanities. The Government recognise the importance of foundation years for promoting access to higher education, but they can be delivered more efficiently in classroom-based subjects, at a lower cost to students.

The change that the Government are bringing about must go further, so my second set of announcements signals the start of deeper change for our students, our universities and our country. Today, I will set out the scale of our ambition to build a higher education system fit for the challenges not just of today but of tomorrow. In the months ahead, we will publish our proposals, because in universities, as across our public services, investment can come only with the promise of major reform. The contribution of higher education to our economy, our communities and our country must grow and strengthen. That begins with universities doing more to spread opportunity to disadvantaged students, in both expanding access and improving outcomes. Our most recent data shows why. The gap between disadvantaged students and their peers in progression to university by age 19 is the highest on record. I will not tolerate that shameful divide any longer. Universities can and must do more, and they must rise to the huge challenge of technological change, supporting adults with the flexibility that they need to retrain. That is why we confirmed in the Budget that we are pressing ahead with the lifelong learning entitlement.

While the UK is home to many world-class universities, it is time that all students in higher education in this country feel the benefit. It is time to raise the bar further on teaching standards, to improve our world-leading reputation and drive out poor practice, and it is time to ensure that all students get good value for money, which, if we are honest, has not always been the case in the past. Furthermore, universities must do more to raise their impact beyond their gates. They must do more to drive the growth that this country sorely needs by attracting talent from around the world, joining with Skills England, employers and partners in further education to deliver the skills that people and businesses need, and shaping world-class research to create good jobs across the country. Members across the House will know how important universities can be for the areas that surround them—not just local economies but local communities. I want universities to work harder to embed themselves in those local communities, as civic anchors—the beating heart of local life in our towns and cities—not ivory towers far from local concerns.

Lying beneath those challenges must be a further transformation: a renewed drive for efficiency. Students and taxpayers support the costs of our universities. They are right to expect that every penny is spent effectively. We will not accept wasteful spending. Universities must rise to the challenge, which means ensuring that the pay of their top teams is fair and justifiable. I am determined that our world-class higher education sector does not merely survive in the years ahead but thrives, supporting students in every corner of our country and at every stage of their lives. I am determined that our universities become all that I know they can be. The scale of our ambition demands a new approach, rooted in partnership, so I look forward to partnering with the sector, the Office for Students and UK Research and Innovation. I will work closely with Ministers across government, in particular the Secretary of State for Science, Innovation and Technology, to deliver a reformed and strengthened higher education system for our country.

As today the Government look to the future, I am reminded that more than 60 years have passed since the Robbins report on higher education was presented to this House, with its famous principle that

‘courses of higher education should be available for all those who are qualified by ability and attainment to pursue them and who wish to do so’.

That principle drove the expansion of higher education over the decades that followed, under successive Governments of both parties. It is central to the thinking of this Government today. That is why responsible Governments must treat universities not as a political battleground but as a public good. It is why Government Members want to see the continued success of our young people, and it is why we are determined to ensure the sustainability and success of our higher education sector, not just in the years ahead but for decades to come. I commend this Statement to the House.”

My Lords, after relative silence in the Budget about the higher education sector, we on this side very much welcomed yesterday’s Statement from the Secretary of State for Education, but it raises a number of questions. I appreciate that the noble Baroness may want to write on some of them, but I hope that others require just a yes or no.

In the Statement, the Secretary of State talked about being “crystal clear” with students that their monthly repayments, once they graduate, will not increase. She was less than crystal clear about the fact that their total repayments will typically go up over the life of the loan. Can the noble Baroness confirm that I have understood that correctly? Have her officials calculated how much more the average student will repay once they have graduated?

The Secretary of State also talked about how she will

“secure the future of higher education so that students can benefit from a world-class education for generations to come”.

In his recent blog, Nick Hillman of the Higher Education Policy Institute took figures from the Institute for Fiscal Studies on how much the income of universities will increase as a result of the changes announced yesterday and the increase in the national insurance contributions they will need to make as a result of the changes announced in the Budget, as calculated by the Universities and Colleges Employers Association. He estimates that the net benefit to universities will be about £18 million, or £45,000 per institution.

The noble Baroness said earlier today that we on this side of the House need to understand that you have to raise money to fund public services. I assure her that we understand that very well, but the serious point is whether the two decisions the Government have made in recent days will make a material difference to universities or not. It would be helpful to be clear on that. There is also the impact of cutting fees for foundation-year courses. Is there a figure for the impact of that? Can she clarify what this means for undergraduates who have already started their course, as there was some confusion in Wales when fees were increased recently and it played out differently in different institutions? It would be helpful to know whether this will be applicable to those already part-way through their studies. The Statement was also silent on how this impacts postgraduate student fees and the disabled students’ allowance. It would be helpful to understand those changes.

My Lords, we welcome the Secretary of State’s Statement on universities in the Commons yesterday. Labour introduced student loans, and in opposition Keir Starmer wanted to abolish them. No doubt he cannot because of the £22 billion black hole.

We know that in 2015, the Liberal Democrats paid the price for making a pledge on tuition fees that we could not keep, but our reforms at least made the system fairer by giving more support to pupils on low incomes and ensuring that the least well-off graduates repaid the least.

Now, our universities are crying out for government to look at their funding, which has remained frozen for eight years. The Conservative Government, while espousing their importance, did nothing but abolish the maintenance grant, so that living costs became a barrier to university learning for disadvantaged students. The previous Government also cut the repayment threshold to £25,000, so that today’s students have to repay hundreds of pounds more per year than older graduates on the same salary. They lengthened the repayment period from 30 to 40 years, so today’s students will still be paying back their loans in 2066.

Does the Minister agree that the crisis in funding must be addressed, and have the Government considered how to support universities without raising fees? Will the Minister look at the benefits of international students and give universities stability in this area of policy? Finally, will the Minister look at how universities spend their allocation of £10,000 per student, so that students get value for money and a good university education experience, and the money is spent as efficiently as possible?