I thank all noble Lords who are to participate in this debate. I am very conscious of the knowledge and experience of the Peers down to speak and await all contributions with great interest. It gives me great pleasure to debate this report and the review of post-18 education and funding that it informs, not least because I no longer have to keep noble Lords in suspense about the publication date—“shortly” or “soon” becomes “now”.
I reiterate my thanks to the panel led by Philip Augar for its exceptional work. The panel consulted a wide spectrum of experts and received almost 400 responses to its call for evidence. I also thank all the stakeholders, including colleagues from across the House, who contributed to the review. Alongside Dr Augar were Professor Sir Ivor Crewe, Jacqueline de Rojas, Professor Edward Peck, Beverley Robinson and, last but certainly by no means least, the noble Baroness, Lady Wolf, who I am pleased to see is in her place today. On behalf of the House I thank her for her hard work and effort.
Noble Lords will be eager to know what decisions the Government are going to make. Your Lordships will not be surprised to hear that I cannot commit to any decisions here today. But I come in listening mode and am prepared to answer as many questions as I can.
Whatever route a student chooses, post-18 education should set them on a successful path for their future. We recognise that good careers information, advice and guidance are vital to help people of all ages make informed decisions about their options, including routes into further and higher education. That is why we launched a comprehensive careers strategy, as well as investing more than £70 million each year until 2020, to help ensure that young people and adults received high-quality careers provision. Meanwhile, the Careers & Enterprise Company has also invested in more than 150 employer-engagement programmes, benefiting 540,000 young people.
However, it is important to remember that most students in post-18 education are not at university. As Augar emphasised, further education and technical colleges play an essential part in delivering the modern industrial strategy, with its long-term plan to boost productivity. We are all more likely to have multiple careers during our working lives and must be conscious of the need for reskilling and upskilling.
Around 1.5 million jobs in England are at risk of some automation in the future. That is why we are bringing together businesses, workers and government through the National Retraining Scheme, which will help prepare adults for future changes to the economy, including automation. We will also look carefully at the panel’s recommendations on how we can encourage more flexibility across our post-18 system to support people in accessing the right education for them throughout their lives. I share the Secretary of State’s strong belief that both the HE and FE sectors can, and should, continue to thrive together. To ensure a genuine choice for young people, and to give employers access to a highly skilled workforce, we want to see a system where technical education has the same weighting for a young person as an academic route.
My Lords, I too welcome this timely debate and thank the huge number of organisations that sent us briefings. It shows the importance of the work we are talking about. We all welcomed the Government setting up the Augar review and there was excited anticipation and expectation. Here at last was an opportunity to put right the inequalities in our post-18 education system. I am afraid, however, that the editorial in the Guardian summed up my feelings about the published review. It said that the proposed rebalancing of the post-18 system meant,
“that FE colleges are no longer quite such poor relations”.
Further education, for so long the Cinderella of the education system, may look just a little bit better dressed, but is still very far from being invited to the ball. The media headlines were not about the rebalancing of vocational education but all about the impact on our universities. I do not think it was a helpful message from the spokespersons of the wealthiest universities that, should their income suffer, one of the likely cuts they would have make was to their outreach activities. Their budgets for increasing diversity and encouraging disadvantaged students would be the first to be cut. This was not a particularly helpful or thoughtful comment on the review.
Of course, the real beneficiaries of the proposed cut in fees will not be those who take out huge loans: they will be paying even more back over the longer repayment period. The beneficiaries will be those better-off students who do not need to take out a loan: they will benefit from a cut of £7,500 over a first degree course.
Both broadcast and print media paid scant attention to what was said about England’s 200 further education colleges, which are the backbone of our vocational training provision. Our further education colleges represent the essential engine to meet our growing skills gap.
My Lords, like the noble Lord, Lord Storey, I intend to focus my remarks on the Augar review’s recommendations on further education, always a neglected area of public debate, not least in this House. Before doing so, I want to pick up on one aspect of the review concerning universities.
Unlike some commentators in the HE sector, I greatly welcome the recommendation to reduce tuition fees for undergraduates to a maximum of £7,500. The coalition Government’s decision to treble fees at one go was a mistake and unlikely to be sustainable, as we are now seeing. I can think of no other example where the price of a public service to the user, in this case graduates, has been increased by so much at once. There are several unfortunate outcomes, including the need for huge write-offs of unpaid loans, leaving a large problem for the public finances in the longer term, and the disastrous decline in part-time and mature undergraduates.
I welcome the recommendation to return to government grants to make up for the loss of fee income but regret that it is focused on STEM subjects. We must stop perpetuating the myth that science and engineering courses hugely outweigh others in their usefulness and value to the economy and society. For example, courses that prepare people for jobs in the creative industries, financial services, business or public sector management, as well as in education or social work, are as important. Can the Minister say categorically whether all undergraduate courses will have their funding made up by grant if fees are reduced to £7,500?
I now turn to further education. The Augar committee must be congratulated on taking up the cudgels on behalf of the colleges and the intermediate-level vocational and technical courses that they provide. It has been a feature of Conservative Governments to neglect FEs. When Labour took over in 1997, there were many failures in education that needed addressing after 18 years of Tory rule, but there were few greater than in further education. Close to a third of FE colleges were running deficits—in some cases, very large ones—and capital grants were far below what was required. The way they were managed needed attention, as did the training of their teaching staff. The Government addressed these issues, along with providing a 12% per annum increase in their funding.
My Lords, I will begin by declaring a few interests. I was chancellor of Newcastle University, a very good Russell Group university, for a number of years; I have been the elected chancellor of Oxford—the last election that I won—for 16 years; and, after I left the European Commission, I was a member of the working group that established how the European Research Council would work. Over the years, British universities have done exceptionally well out of peer-driven research under the ERC.
I should confess at the outset—it is good for the soul—that I have not always read every word of reports that I have commented or given speeches on. However, I did read every word of this report. It is extremely well written—I hope that does not sound patronising. There are one or two blemishes: I think the phrase “low-tariff universities” does not do much justice to the English language. However, by and large, it is well presented and extremely well written. The comprehensive referencing is probably a tribute to the number of academics on the panel. If you follow through with the referencing to the end of the report, you discover the IFS report indicating that graduate earnings have a great deal to do with the lifestyle of the graduate before university. This sort of drives a hole into one of the arguments the panel uses elsewhere for determining the value of courses. However, it is an extremely good report overall. It will provide very good resources for future discussions on higher and further education—I hope that is not too back-handed a compliment.
The rumour was that this would be the Government’s answer to the Corbyn effect at Glastonbury and that, because people thought that young voters had gone to Labour because of the promise to get rid of tuition fees, the right answer was to find a Tory version. Frankly, I think that that is a lot of baloney. Most students are too smart to think that you can get rid of all tuition fees without having some effect on public spending elsewhere. After all, they are not running for the leadership of the Conservative Party. They are perhaps a little smarter on the existence or non-existence of money-bearing trees. Also, reducing the tuition fee by £1,750—in what is, after all, a pretty regressive package of measures—will not have very much effect on young people’s voting habits. However, the decision to reinstate maintenance grants is very welcome. I hope the Office for Students will also think that, because it has been rather critical of our bursaries at Oxford, which are more generous than maintenance grants. I hope it will think again on that.
My Lords, I first declare an interest as a member of the panel that produced this review. I thank the Minister and other noble Lords for their kind words. Obviously, I hope that the Government will implement our recommendations but I start by commending them for recognising that post-secondary education is, increasingly, for and about everyone, not just a small part of the population.
This is the first English Government-commissioned report, since Robbins in 1963, to look at post-18 education overall. Media coverage, predictably, has focused on universities; I have to say that the Minister’s opening remarks rather did so too. What matters for this country now and in the future, in my opinion and that of my fellow panel members, is the overall system. We have tried to produce a system of interlocking recommendations, which should—please—be treated as such, as far as possible.
In my limited time, I shall highlight three overarching conclusions which drove our very long list of specific recommendations. Before doing so, I emphasise that our terms of reference excluded any significant increase in total spending. We had to consider post-18 education as a single system, without some vast funding increase to make things smoother for everybody. We took that very seriously because we felt it was a realistic position: it was sensible to assume that there would not be much extra spending and to look at priorities and choices in that context.
Turning to our first and most important conclusion, I have to agree that the further education sector badly needs attention. Further and adult provision has been grievously neglected. Some of our headline numbers have, fortunately, been widely quoted: more than £8 billion was committed in 2017-18 to 1.2 million English undergraduates; in the same period, 2.2 million adult further education students received a little over a quarter of that amount—£2.3 billion—from public funding. Our undergraduate numbers have soared; we have one of the highest university participation rates in the OECD. Yet the total number of people in post-18 education has actually declined.
My Lords, the noble Baroness did a good job of explaining clearly the recommendations of the report of which she was a party. I agree with her that Heath Robinson would be proud of the current university finance system. Indeed, it is now so complicated that it reminds me of Lord Palmerston’s famous remark, on the Schleswig-Holstein question, that there were only three people who understood it: one was dead, one had gone mad, and he was the third and had forgotten it. It is that complicated now, and part of the reason is that one reform has been layered on another reform. In the last 20 years, there have been three major reforms of the university finance system. Each Government have engaged in a substantial reform—indeed, as I look around the Chamber, I see the authors of many of them here, with the wounds to show for their works.
I had the misfortune to be closely associated with two of those reforms: the 1997 reform and the 2003 reform. The 2003 reform was the first of the seriously controversial ones, because it required an appreciable fee level of £3,000 being paid by students. I shall never forget that, when we had the general election shortly after in 2005, a friend of mine was standing in a university seat, and the fees were the big, controversial issue. I thought that I would defuse the issue at the beginning of my speech by saying that I knew that on my tombstone will be engraved the words “Tuition Fees”, and somebody shouted out from the back, “Not soon enough”. It got much worse than that, because that was £3,000 and we at least managed to create a consensus. Indeed, I was rather proud of the consensus we established between the two major political parties on tuition fees at the level of £3,000, because in my view big reforms of this kind only stick if you can create a consensus. It was not a complete consensus, because the Liberal Democrats were strongly in favour of abolishing all fees and fought the 2010 election on that.
The big mistake in policy, in my view, was the decision in 2010 to treble fees. That was a mistake in terms of making the policy acceptable, because it broke the consensus. It was the straw that broke the camel’s back in terms of public acceptability to go from £3,000 to £9,000. It was also a mistake in policy, because the universities did not actually require, in terms of any objective assessment of need, that degree of cash infusion. Indeed, they were not capable of absorbing it. All of the Government’s own modelling on the 2010 reform—the noble Lord, Lord Willetts, is not in his place, but he and I have debated this a lot over the years—was done on a fee level of £7,500, because £9,000 was supposed to be the upper limit, and it was expected that most courses would be at £6,000 and that the fees would be varied. What happened, of course, was that every university went straight up to £9,000. Universities could barely absorb the cash, which is the reason why the vice-chancellors are being paid £300,000 to £400,000, and in the case of the University of Bath—which I am afraid I got rather involved in because it was such a scandal—a salary of £500,000. It is not just the people at the top; there was a huge increase in the size of senior management teams and a big sense of resentment inside the universities themselves.
Oh, we do. Well, I may slightly be pre-empting my noble friend’s speech. He has been lobbying—he lobbied me when I was in government—for substantial reform to bring us much more in line with the German system, where young people who do not go on to university have a standard apprenticeship offer, which is what we desperately need as a society.
We have managed the remarkable feat of introducing an apprenticeship levy, which is requiring employers to pay towards apprenticeships, while apprenticeship numbers have gone down. So we have managed the triple whammy of massively increasing resources per head for the most privileged part of the post-18 system, slashing resources for the part of the system that deals with those who have the lowest skill levels at 18, and creating a funding system for apprenticeships which has got more money going in but does not appear to be producing any decent output. If we were not dealing with the crisis of Brexit—and I have to raise that in every speech I make, because it is the opportunity cost and the reason that the Government cannot do anything about any of this—these would be urgent matters requiring attention.
What should we do? I do not think that the current system is sustainable. I know that I am surrounded by people who are deeply engaged in the work of universities, who would love to think that we can maintain fee levels of £9,500 a year, with a 6% real interest rate and the current system. For what it is worth, speaking as a politician, I simply do not think that it is going to be sustainable. There is no other country in the world that has an average public fee level as high as ours that is required to be paid by students. Most European countries that started to go down this road, because of massive public pressure—of the kind we had at the last election, with it becoming a contentious issue between the parties—have abolished them. Most significantly, looking at leading-edge public policy, the Federal Republic of Germany, which introduced modest fees, has abolished them. In the United States, in US public universities—not private universities, which of course is what we spend most of our time looking at—where most students go, fee levels have been coming down and are being abolished in some states, notably now in New York.
My Lords, let me say at the outset that I support much of what has been said already about further education colleges: they need significantly more support. I do so because many of my remarks are addressed at the university sector, particularly our research-intensive universities, and the effect that might possibly be had by the reduction of fees. The Science and Technology Committee, which I chair, is currently taking evidence on research funding of universities. The comments I will make arose during an evidence session in that context.
The Independent Panel Report to the Review of Post-18 Education and Funding in England has recommended reducing tuition fees. It is interesting that we call them “tuition fees”, which suggests the money is used for nothing but tuition. That, of course, is not the case, as those who run universities know well. Maybe, as the noble Lord, Lord Willetts, has suggested, we should call them “university fees”. The panel recommended reducing fees to £7,500 per year, with a broad recommendation for the Government to make up this money through direct teaching grants. However, there is no obligation for the Government to adopt all its recommendations. I hope that they will take that recommendation on board, but there is also no indication as to how these teaching grants will be distributed. I asked the noble Viscount the Minister a question the other day as to who would decide how this grant is distributed. There has been some suggestion in the evidence that we heard that there might be some kind of mechanism on a quality basis, which might be variable in the distribution of this grant.
As Professor Julia Buckingham, president-elect of Universities UK, said to the House of Lords Select Committee, it is vital that the Government ensure that any lost fee income is made up through grants, with a long-term Treasury commitment to fund universities at a sustainable level. Given the current political uncertainty, it is unclear how the next Prime Minister will view the report and whether the recommendations will be cherry picked. Any future Prime Minister and Government must commit to funding universities sustainably. Analysis by Universities UK finds that a reduction to £7,500 tuition fees would result in a £1.6 billion funding gap, which would need to be filled through direct grants. If this funding was not replaced, for many institutions this would reduce research income by between 10% and 60%, particularly for the research-intensive universities. For some it would result in the loss of their entire research budget.
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I will take a step back and look at how we reached this major review—the first review since the Robbins report in 1963—to look at the totality of post-18 education. As many noble Lords will note, our current system of post-18 education already has many strengths. First, we have a world-class higher education system, with four UK universities in the world top 10 and 18 in the top 100. That is truly to be celebrated. Secondly, we have record numbers of 18 year-olds entering university, including from disadvantaged backgrounds. Thirdly, students from the lowest-income households have access to the largest-ever amount of cash support for their living costs. Fourthly and finally, our student finance system removes up-front financial barriers and provides protections for borrowers so that they have to contribute only when they can afford to do so.
We should not overlook all that we have achieved on the back of the Higher Education and Research Act. The Office for Students became fully operational in April last year and will, inter alia, play a key role in delivering the Department for Education’s objectives to improve and support informed choice through the provision of effective information, advice and guidance to all students. The teaching excellence and student outcomes framework now holds universities to account for teaching and graduate outcomes; I will say more about that later. Finally, diversity and flexibility in the system continue to increase; for example, with possibilities for new providers and accelerated degrees.
We are already reforming technical and vocational education by establishing a technical education system that rivals the best in the world and introducing new T-levels in phases from September 2020, backed by the investment of an additional £500 million per year once they are fully rolled out; developing proposals to introduce employer-focused higher technical qualifications at levels 4 to 5 to rival traditional academic options; reviewing classroom-based higher technical education at levels 4 to 5 as part of creating a world-class system; and, finally, overhauling apprenticeships to put quality at the heart of the programme and to increase employer investment and engagement in training their workforces for the future.
I will now focus on the challenges we face, because challenges remain and parts of the system are not working as well as they could. We have seen further growth in three-year degrees for 18 year-olds but the post-18 system does not always offer a comprehensive range of high-quality alternative routes for the many young people who pursue a technical or vocational path at that stage. When young people apply to university, it is based on the assumption that a degree will set them up for a bright future, but today’s analysis shows that this is not always the case. In universities, we have not seen the extent of increase in choice that we would have wanted. The great majority of courses are priced at the same level and three-year courses remain the norm, when some courses clearly cost more than others and some have higher returns to the student than others. It is right that we ask questions about choice and value for money. Although 18 year-olds from disadvantaged backgrounds are now 52% more likely to go to university than they were 10 years ago, they are still less likely than their more advantaged peers to attend the most selective universities or to have the support that they need to complete their degree successfully and achieve a 2.1 or a First.
We have been concerned by the recent large increases in the number of unconditional—or conditional unconditional—offers received by students and the potential impact that these offers can have. We also have concerns about the serious issue of grade inflation. We must not allow the credibility of our world-class universities to be damaged by pockets of low quality. That is why the Secretary of State has tasked the OfS with driving out bad practices which are not in the student interest.
Meanwhile, although the funding system is a progressive one with built-in protections, those elements are not always well understood. Going to university should be a positive, life-changing experience but students need appropriate support, particularly as they matriculate, to deal with the challenges that starting university can include to ensure their well-being.
We have a vision for the future. The UK is truly a world-leading destination for study and research, but we recognise the concerns and that is why we committed to conducting this major review. Studying for a degree is expected to benefit those undertaking it, with improved employment opportunities and a wage premium alongside wider individual well-being and other social benefits. Low-value outcomes are not just about economic returns. High-quality provision in a range of subjects is critical for our public services and for culturally enriching our society. University is not just for investment bankers but for those who will go on to contribute to many other sectors, including our creative industries. We want to ensure that higher education improves the life of students and of wider society and we want to equip students with the information to make the right choice for them about where and what to study. Now our graduate data—commonly known as LEO—represents a step change in our ability to understand students’ labour market outcomes on leaving higher education.
Before I conclude, I want to draw attention to a recent announcement by the OfS. It has awarded £6 million for 10 large-scale projects to encourage higher education providers to find new ways of combating student mental health issues. These projects involve more than 60 different universities, colleges and other organisations, including NHS services, the police and charities, together contributing an additional £8.5 million in matched funding, taking the investment up to £14.5 million.
I greatly look forward to this debate and to hearing the views of all who are speaking today. The independent panel’s report forms an important step on the road to achieving our vision of the post-18 education system. I hope that noble Lords will forgive the cliché, but it rings true in this case: it is not the end of the process but rather the beginning. We will continue to engage with stakeholders now that the independent panel phase is complete, as we work towards the completion of this review. I beg to move.
Just 37% of men and 34% of women undertake post-secondary, non-tertiary education in the UK, which compares badly with the 49% of men and 44% of women across the industrialised nations of the OECD. I understand that £8 billion of government funding was received last year by universities to support 1.2 million students. That was more than three times the £2.3 billion allocated to 2.2 million full-time and part-time students aged over 18 in further education. While the proportion of students attending university has risen over the past decade, the number in all forms of further education has declined. In this country, we have a very elitist view of education in that schools and parents judge their pupils’ success by how many go to university. Last year, I visited an academy in a very poor part of London. As I went in through the door, the banner across the front portal read, “We Want All Our Children to Experience a University Education”. But actually, a vocational education or apprenticeship might be better for many young people. Further education is often seen as for other people’s children.
For many young people, particularly those whose parents did not go to university, their choices at 16 depend on the advice they receive at school. With schools incentivised to direct their students into the school sixth form and then to university, many students are not even told about the vocational options or apprenticeship routes open to them. Only this week, I was talking to a colleague who became the education officer in a local authority 40 years ago. He told me that he always made a point of looking behind the door of the head teacher’s office when he visited a secondary school to see whether there was an unopened box of FE college prospectuses. Is that still the case? I hope not.
At an event hosted by the APPG on Apprenticeships, every one of the seven apprentices invited to meet the group explained that they had been forced to do their own research into starting an apprenticeship. Not one of their schools had offered them any information or guidance. Following the addition of the “Baker clause” to the Technical and Further Education Bill, the Government reminded every school that, since 2 January 2018:
“Every school must ensure that there is an opportunity for a range of education and training providers to access all pupils in year 8 to year 13 for the purpose of informing them about approved technical education qualifications or apprenticeships. Every school must publish a policy statement setting out their arrangements for provider access and ensure that it is followed”.
I struggled to find the necessary policy statement on the school websites that I looked at, even though a model statement is set out in the guidance. Buried on one school’s site was a link from the heading “Not going to uni”, but the link was broken. Does the Minister know how many schools are meeting this statutory requirement?
Much of the report is good, and I will accentuate the positives in the 216-page review. It is encouraging to read that,
“there is a ‘powerful case’ for change in the FE sector … which in recent years has had its ability to innovate and plan for the long term ‘severely restricted’ by the funding regime”.
The report makes some very sound proposals. We support the proposal for a national network of colleges but have to consider the impact on students in rural areas. We very much welcome the £1 billion capital investment fund. We support the proposal that all adults should be able to study for their first level 2 and level 3 qualifications free of charge. We agree that there is no case to set a lower base rate for 18 year-olds in college compared to that for 16 and 17 year-olds. We agree that level 6 apprenticeships should be available only to those who have not undertaken a public-supported degree.
For me, as vice-president of the All-Party Parliamentary Group for the Teaching Profession, the most important recommendation is on the further education workforce. With average salaries being £7,000 less than in secondary schools, it is little wonder that FE colleges struggle to recruit staff. Can the Minister assure us that the 23% contribution to teachers’ pensions, which is hurtling towards colleges, will be funded by the Government?
In many of the technical areas that further education students need to study, salaries in the private sector are twice that of an FE lecturer. In terms of lifelong learning, we must ensure that our workforce is able to access the education that the changing patterns of employment will require. More than 2,000 years ago, Aristotle was able to say with confidence:
“Give me a child until he is seven and I will show you the man”.
Rousseau said much the same thing, with equal confidence, 300 years ago. How times have changed—and at a much faster rate than ever. For those who missed out earlier in their education, or those who need to retrain for a new career, lifelong learning is an absolute must. We must pay tribute to the Augar review for emphasising this.
All of us in our political careers regret things that we have been forced to do or see happen. For me—I hold up my hands—it was the coalition deciding to end maintenance grants. That was a real loss to young people from disadvantaged backgrounds. Now I am pleased that reinstating them has been suggested in the review. I very much hope that it will happen.
Finally, it is interesting to note that Mr Johnson and Mr Hunt have both announced spending plans as part of their leadership campaigns that even their own Chancellor thinks are in cloud-cuckoo-land. I have, to date, heard neither pledge to meet the cost of the Augar review. There is, of course, still plenty of time for each of them to agree to implement this review—at least one of the positive legacies that Mrs May craves.
When the Conservatives came back into power in 2010, once again FE went to the bottom of the pile. Whereas universities have been relatively unaffected by the austerity programme, FE has sustained huge cuts, which continued until very recently. I have often puzzled over Conservative Ministers’ long-standing reluctance to support the FE sector. Why do they not get it? Is it that they just do not know people involved in FE, either as staff or as students? Neither they nor their children normally go to these colleges. Nor is FE given much coverage in the media; it is always about universities or schools.
This debate has been initiated by the Government and I am grateful to them for that. I know that they are trying to fill in time here, as we have little to do with virtually no legislation of any significance while the ghastly saga of Brexit continues. However, I assume that they would not have initiated this debate unless they were prepared to give some indication of their intentions on Augar’s recommendations. Therefore, in commenting on some of them, I will ask whether they agree with them and, if so, what they will do. I would be grateful for a reply that does not just hide behind bland references to considering them in the spending review.
First, do the Government agree with the fundamental contention that it is now time to rebalance spending priorities towards the 50% of the population who do not go to university? Secondly, do they also agree that it is necessary, as Augar rightly states, to address the disparity between those who go to university and those who do not, in the interests of fairness and social justice but also to bring about considerable economic benefits? I am not sure that really came out in the Minister’s opening remarks. Thirdly, I know that the Government are aware of the need to improve skill levels if their industrial policy is to be implemented, but do they accept, as the Augar report argued, that far more needs to be done to expand the numbers with technical and vocational qualifications, in particular through much greater enrolment in courses at levels 4 and 5? The numbers have been falling, so what funding structures and incentives will the Government introduce to reverse this? Fourthly, will they ensure, as the Economic Affairs Select Committee recommended in its recent report, that any changes, especially at this level but at others too, will be flexible, allowing students choice over how long they take to build their skills through acquiring a qualification?
Many universities have invested in substantial capital programmes; in contrast, hardly any FE colleges have been able to do this. Augar estimates that around £1 billion is needed and sensibly advocates doing it on a strategic national basis in line with industrial strategy priorities. Without this funding, the FE sector will be unable to meet the standards required to deliver technical qualifications, nor will the quality of its provision match that of our nearest neighbours in Europe. Instead, its estate will remain in poor condition and high-cost courses will not be provided.
Funding also needs to be restored, as Augar advocated, for level 2 and 3 qualifications. Although more young people now attain qualifications at this level, many still fail to do so. This means that they must catch up later. If this is to happen, we have to restore adults’ entitlement to free tuition for level 2 and 3 qualifications, with flexible routes to attaining them. Do the Government accept this?
Do they also agree that FE colleges are the best way to deliver locally based, permanent and reliable institutions, which, while having some overlap with schools and universities, recognisably provide different education and training from either? Their branding, status and public profile need improvement. This requires initiative on their own part but, above all, requires the Government to stand up for them, resource them and help drive up their standards.
As Augar states:
“Funding rules are complex and inflexible. They impose short time horizons and do not allow FE colleges to respond to local labour market needs”.
The Government must rectify this, as well as increasing the core funding rate for adult education courses and for 18 year-olds, which has unaccountably been reduced.
I conclude by admitting that the FE sector has not been uniformly successful in providing high-quality courses with high completion rates. Greater investment in every teaching staff member’s training is needed. As the noble Lord, Lord Storey, rightly said, their value also needs to be recognised through higher pay, since their pay has fallen considerably below that of secondary schoolteachers. This cannot be right. Employers need to be engaged constructively in the work of the colleges, helping to enrich their courses. This is incredibly important.
I end with a plea to the Government: please mend your ways and put the FE sector at the centre of the education system. Do not let it languish on the sidelines any longer. Do this as a matter of urgency.
As the noble Baroness has just said, the most welcome part of the report is what is said about FE. The report quotes my noble friend Lord Baker as referring to FE as a Cinderella at the end of the 1980s. In 1985-86, I was the Minister responsible for FE and schools. It was a Cinderella then. As the noble Baroness has just remarked, FE—Cinderella—has been very badly treated since then by successive Conservative Governments. In 1990, FE spending per pupil was 50% higher than in secondary schools. By 2015, that had fallen so that FE spending per pupil was 10% below that in schools. We know that FE spending has fallen in real terms since 2010 and the cost has been closed courses, closed and badly maintained colleges, and teaching salaries in FE being much below those for similar jobs in schools. It is intolerable. It is shameful for Governments who have consistently and properly talked about the importance of doing something about low productivity in the British economy. I hope that this part of the report will be implemented by a Conservative Government —if there is one—or any Government in the future. It is exceptionally important.
I want to make three general points about what the report has to say about HE. First, there is a heroic assumption that the money lost to universities in tuition fees will be provided by the Government in some other way. I imagine that universities, their governing councils and vice-chancellors would take that assurance with a warehouse of salt, given past experience about university funding. We are told that any loss of income will be made up by changing the teaching grants so that we will get more in for STEM subjects and less for humanities and social sciences. Unless that happens—and unless there was some adjustment—we would lose about 17% of our tuition fee income at Oxford, for example.
The formula used for the shift from the humanities and social sciences to STEM is pretty absurd. It gets us back to the low-tariff and low-return universities. At some universities, humanities and social sciences may not be taught as well as they might be, but what happens when that is all the university does, such as at SOAS? It has been a very great university, though it is in some financial difficulty at the moment. At Oxford, our social sciences come first in the world in the QS rankings and many of our humanities subjects come extremely high. I do not think it makes very much sense to penalise those as proposed in the Augar report, not least given that we get huge and well-paid employment opportunities for graduates in those areas.
I also have an intellectual horror of talking about the humanities and social sciences in entirely utilitarian terms. I remember being criticised once when I was talking about the importance of people studying translating Voltaire. I was asked what that did for the country’s gross domestic product. It is perfectly true that the answer is, “I haven’t got the faintest idea”, but that is not actually the point. We know that a lot of things are done and taught at universities which would make us poorer as a society if they were not, even if you cannot demonstrate that they make us richer because we do them. I am very reluctant to accept the argument about shifting all the grant from the humanities and social sciences into STEM subjects, although they are extremely important.
I will make two other brief points. First, we tiptoe gently around the question of the different roles of different universities. We have been doing it ever since we doubled the number of universities by calling all the polytechnics universities. This was at a time when, frankly, some of the polytechnics were better than the universities, so it was not a question of suddenly giving the polytechnics a great lift up in the world. In Oxford, there are two fine universities. They do different jobs. We should not be too nervous about saying that universities have different functions and objectives. The report says—and I totally agree—that almost all other countries have very clear categories of university. Why are we in this country not prepared to accept that and face up to it? This is a debate that should be led by the higher education sector itself; it should not be imposed on higher education and higher education institutions by Ministers or quasi-ministerial bodies. It is a debate in which universities themselves should get engaged. Certainly, I do not believe that slightly wimpish phrases about getting the OfS to “bear down” on the cost of some courses is the right way to address a serious issue. If only we had a system like the Californian one we would not have to get involved in all this.
My last point is, I guess, the most important; it might sound disobliging to the authors of this admirable report. Universities are facing tremendous problems with the approach of Brexit whether with or without a deal. There are implications for students, for our research, for the professors and lecturers at our universities, and for our income streams. These are turbulent times; I hope that we will not add to that turbulence the gale force of a complete overhaul of university financing. We should help universities over the next period; the Government have so far been unprepared to say how they see the way forward.
We think this is shameful and short-sighted, and the remedy is not some emergency bailout but to create —to recreate—a high-quality network of non-university provision. We inherited in this country a nationwide set of institutions closely linked to their communities. Every town of any size has a further education college, once commonly known as “the tech”. If we truly want to serve the whole community in the future, those colleges must again take centre stage.
While 18 year-olds can move away from home for three years, adults cannot; while 19 year-olds can study full-time, no adult with a family and a mortgage can do so. Small businesses create the majority of new private sector jobs in this country. They are at the heart of any successful apprenticeship system and an enormous part of our economy. They can work with and relate to a college, but there is very little opportunity for them to engage with a large university. While our universities are indeed world-class—I forgot to declare my other interest as a full-time employee of a fine university—we have created a walled dead end for anyone not university-bound. That is not merely half of our young people; in parts of the country it is well over half. In England today, the overwhelming majority of those not academically successful at 18 never progress to higher qualifications. That should be a source of deep national shame.
Further and adult provision has been underfunded and subject to short-term government contracts and endless micromanagement. But high-quality provision needs to be run in a stable, well financed way. A good comparison is with medical education, which is equally vocational. Most of what colleges do post-18 is workplace-oriented, vocational and technical. We would never run medical schools the way we have run further education. All this provision needs to be stable, expert, well resourced and based in institutions. That is why we made this issue such a major part of our review.
My second point concerns our very first recommendation. It has received rather little attention but we put it first because we thought it so important. I have to disagree with the noble Lord, Lord Storey, and with the Guardian: our review promises quite significant change, and this first recommendation is fundamental. The recommendation is to introduce a single lifelong learning allowance for adults, set at the same level as the loan entitlement that people currently have for a degree but giving individuals far more control over when and how they use it.
Our system at the moment tells young people, “Yes, you have an entitlement. You can have one full-time degree —once. Take it or leave it”. They very rationally think they should take it, and higher education, very rationally, sets out to make an offer that is, overwhelmingly and increasingly, for a full-time full degree. The level 4 and 5 technical qualifications have simply been disappearing, in spite of well-documented skill shortages and employer demand.
Students have a lot of choice of subject but very little choice over mode of study. A lifetime learning allowance of the sort we are advocating would enable and motivate people to split their education. They could take a technical qualification aged 18 or 28, then 10 years later take another, or perhaps at that point go on to a degree. This would give them a strong incentive to hold some money back and a strong incentive to part-fund when they can, because they could keep the money for when they need it. It would give a strong incentive to do some of their higher education in a college and then move to a university later. We believe it would also give a very strong incentive to institutions to develop a more varied set of offers. We put this recommendation first because we think it really matters.
My third and final point comes back to university funding, which will of course be a source of considerable debate. I should like to make two points on this. I do not want to get too involved in progressive versus regressive, except to say that we looked at this as a system—as a set of interconnected proposals. It is the proposals as a whole that we should consider when we talk about whether this is progressive. We believe that something that shifts resources to the 50% of the population who have been grievously served of late, is intrinsically a progressive set of recommendations.
My second point is that we were taken aback by how far funding and costs seem to have become divorced, and how universities have a complex set of cross-subsidies. You always cross-subsidise a bit, but it has become extraordinarily opaque—Heath Robinson would be proud of it. For example, and centrally, since this current system was introduced, the value of teaching grants, with which the Government top up student fees for high-cost subjects, has been comprehensively and progressively eroded. Unlike those in other countries, including Scotland, our universities now receive very little more for a science degree than they do for one in business studies. The funding for physics since 2011 has grown by a mere 6%, but for leisure studies it has grown by 40%. We find it hard to believe that the cost of teaching English has increased so much faster than the cost of teaching chemistry.
More importantly, a system so transparent and divorced from cost is not one that is stable or rational, or that can endure. Therefore, we made some serious suggestions for changing the nature of the funding regime, to make it clearer and recognise costs, because any regime for funding higher or further education must take proper account of both differential costs and the financial incentives that these create for institutions. At present, ours does not, and I hope noble Lords will consider the review and its recommendations with this, and our other general conclusions, in mind. I thank noble Lords.
Although the noble Baroness is absolutely right to say that we need to tackle the issue of FE, it is important to understand that the inequity in the system has got substantially worse over the last 10 years. It is not as if we are moving towards an end point where there is going to be a fairer and better system. As the noble Lord, Lord Patten, said, the words of the report are excellent, but I am afraid that the graphs and figures—I always go to those first, as they tell you what is really going on—are startling. I invite noble Lords to compare Figure 3.1 with Figure 4.3. Figure 3.1, which gives university resources per student per publicly funded degree, shows that in real or constant terms the resources per publicly funded degree in the last 15 years have gone up from £18,000 to £28,000. There is no area of public spending which has been remotely as well protected as universities. However, Figure 4.3, which gives FE college sector total income in constant prices, shows a decrease in real terms, from spending of nearly £8 billion a year 10 years ago to under £6 billion a year now. So what we have done in the last 10 years—we as a Parliament and the coalition Government and the Conservative Government since 2010—while we have all been paying lip service to equality of opportunity and investing in the majority who do not go to university and are dependent on the FE system, is to massively increase resources per head in universities, irrespective of the type of university. There has been no differentiation of the kind that the noble Lord, Lord Patten, was talking about.
It is striking that, for a lot of courses in universities now, the fee level is higher than the actual cost of delivering the course. With fees at £9,500 per student per year, most social science and arts courses do not remotely cost that much to deliver. That is the reason why secondary schools, which teach about three times as much as universities in terms of per hour teaching in the arts, have a fee level—a grant per year—which is half the level of universities now, and that is being cut year by year, although they are the supply chain for the universities. At the same time as that has happened, we have had a huge cut in resources for FE.
On apprenticeships—we do not have my noble friend Lord Layard speaking, who has rightly championed apprenticeships over the years—
I do not think the current system is sustainable, and there will be pressure over time to reduce the fee level. Either universities will have to take the burden of that entirely, which in my view they could afford to do if it was done in a managed way, or there will have to be some shift towards taxation. It is very clear to me that that should be done in the form of adjustments to the higher rate of tax, because only about 15% of taxpayers pay the higher rate. The idea that it would be inequitable to move towards a tax-based system is completely wrong. It depends on which taxes you increase and what system you put in place. If there was a modest increase in the higher rate traded off against a reduction in tuition fees and the money was segmented in some form, it could be done. I say all that not because it will be popular in the House but because it is probably inevitable that that will happen in due course.
The really important recommendation in the report, which is hugely significant for where it might lead in long-term policy, was mentioned at the end of the noble Baroness’s remarks, and that is the proposal for a lifelong loan allowance. The principle of the lifelong loan allowance is, to my mind, incontrovertible, and that is that the state should make an investment in all young people at the age of 18 that is in principle the same: whether you go on to an apprenticeship, further education or higher education, the commitment the state makes to you should be the same. Of course, they will be going to different institutions and many will go into apprenticeships and so on, but it is totally unjustifiable that, at the moment, the state makes a contribution about three times as great investing in students going on to universities, who already, by and large, have most spent on them before the age of 18, with many of them going to expensive private schools. It is totally unjustifiable that they should also then be the beneficiary of so much additional state investment beyond the age of 18.
If the principle of the lifelong loan allowance—that all students get the same investment—is accepted, over time that must lead to new investment going into further education and apprenticeships. Then the big challenge—and I look forward to my noble friend Lord Layard’s speech—is how we create a system that ensures we have an apprenticeship regime in this country that resembles that of the Federal Republic of Germany. I have always taken the view in public policy that R&D stands for “rob and duplicate”: where somebody else does something really well, you should copy it like mad. It is high time that we accepted that many of our continental friends have done a brilliant job of creating high-quality apprenticeship systems, and the sooner we copy them, the better.
The most up-to-date TRAC data published in May 2019 found that there is a £3.7 billion deficit for research in England and Northern Ireland, with recovery of full economic cost for research standing at 69%, because universities do not get full recovery of cost for certain grants as is the case for charities. This is subsidised substantially by non-publicly funded teaching, at 139.3% of full economic cost, and by other income-generating activities such as commercial activities, investments, donations and endowments, with publicly funded teaching broadly breaking even at 98.3% of full economic cost. So research universities do not use tuition fees as they are called, or student fees, for subsidising research; they have to find that money from other sources.
Given the sensitive balance of cross-subsidisation within higher education institutions between domestic teaching, non-domestic teaching and research, it is vital that the post-18 review does not lead to a cut in university funding, with any potential reduction in student fees being replaced through direct grants. Not only is this important to maintaining the quality of the UK’s world-class university sector and supporting work to widen participation for disadvantaged students, but failing to do so may lead to significant funding being diverted within institutions away from research activities. I do not say, as has been suggested, that universities would have to cut their outreach programmes for disadvantaged pupils. I do not think that we should harm universities that have saved money. For example, a fall in funding for domestic teaching might lead to additional international student income and income from other activities being used to plug the hole, and therefore being diverted away from supporting research activities. Anything that damages the reputation of the UK’s higher education sector would also pose a threat to international student recruitment, such as reports of institutional difficulties or even threats of closure, thereby compounding the task for UK Research and Innovation.
Universities use their reserves to fund construction and maintenance of buildings and the purchasing of new equipment. If these resources are increasingly stretched as a result of a cut to funding, universities will be less able to invest in the infrastructure that enables them to gain a competitive edge. For instance, these days to recruit a high-calibre senior academic to start a new research channel costs between £2 million and £3 million to universities. “Non-essential” but highly valuable functions of universities that do not draw in funding are the most likely to be cut. These include smaller research projects, such as those with a local or community focus, and work with smaller industry partners for whom high amounts of matched funding are not possible.
Finally, although the Department for Education may want a reduction in the resources going into universities, at the same time BEIS wants to increase R&D from 2.4% to 3% of GDP, which would require 120,000 to 260,000 more graduates. They need not all be graduates, and the higher education colleges will have a significant role to play, but people will need to be taught STEM subjects to carry out the research and innovation—so a reduction in fees for the universities does have other implications. My plea to the Minister is that, in implementing the Augar review, the Government fund the universities as it recommended, so that they can continue as world-class research establishments.