Post-18 Review of Education and Funding

Analysis by Universities UK estimates that these changes would result in middle earners paying back more—£11,823 more over their lifetime—while higher earners would have to pay back less, saving almost £19,000 in repayments. The LSE has already highlighted that this would disproportionately impact upon female graduates, so while the Statement lauds the progressive system that the Government believe is currently in place, the report introduces a highly regressive system. Given the Minister’s regard for education as a great engine of social mobility, I hope that he and his colleagues will immediately reject this recommendation and other regressive changes to the student finance system, and commit to working with whoever the new leader of his party is to ensure that there is a fair funding model for further and higher education. Perhaps he could even take this issue up with those colleagues who are running for leader, however many there may be.

I would also be grateful if the Minister could confirm whether the Government are prepared to consider the report’s recommendation that graduates’ lifetime repayments should be capped at 1.2 times the original capital in real terms. While it does not offer a solution to the problem of overwhelming student debt in itself, a cap is an interesting idea that deserves further consideration.

On cost and funding, this is apparently going to be a major issue, because the report recommends that the Government increase central funding. However, the fear is that these reconditions, if adopted, will be at the cost of universities. There is an implicit assumption within the Treasury that universities can and will make efficiency gains to make up for funding shortfalls, which currently stand at around £1.8 billion a year. Take that money away from universities and they will suffer. Some universities may increase their efforts to recruit more lucrative, high fee-paying international students; the reality is that without a substantial and appropriate increase in central government funding the shortfall will burgeon, to the detriment of students and those in wider society who benefit from this country having a skilled workforce. Further shortfalls will inevitably mean reduced spending involving redundancies, recruitment freezes, smaller annual pay increases and cutting student support services—that is just for starters. This would limit opportunity, damage universities, decrease the number of highly skilled employees that business needs and reduce our international competitiveness at a time when modern Britain needs it most, not least in the post-Brexit world.

The problems that need addressing with further and higher education funding are plain to see. We hope that the next Prime Minister will commit to ensuring that the system of funding will benefit students, employers, universities and our communities across all four nations of the UK, and that political uncertainly does not mean that this review will—as so many other reviews have been under Mrs May—be kicked into the long grass.

We welcome the recommendation that:

“The unit funding … for economically valuable adult education courses should be increased”.

I still think it sad that the general interest programmes which colleges used to provide have gone. They were a valuable source of social mobility and improved health and well-being. They encouraged adults into learning for the fun of it. I taught French and Spanish classes way back when to people who were inveterate learners, and all the better for it, but those days of happy free learning have—alas—gone.

The capital investment of at least £1 billion is well overdue, as is the recommendation that:

“Investment in the FE workforce should be a priority, allowing improvements in recruitment and retention, drawing in more expertise from industry, and strengthening professional development”.

The FE workforce has been underpaid for far too long.

As was mentioned, anyone who does not have an undergraduate degree will be entitled to a lifelong learning loan allowance. This will allow them to receive tuition fee and maintenance loans for any level 4, 5 or 6 course. It is welcome that the ELQ rules that prevent students receiving public funding for a course at the same or lower level than one they already possess should be abolished for levels 4 to 6. This rule has prevented many people retraining for fresh opportunities.

On apprenticeships, we should also like to see more emphasis on the Richard review recommendations:

“An apprentice must be new to the job or job role”,

and that the,

“upskilling of the adult workforce … should not be bundled with apprenticeships”.

The apprenticeship levy seems to be having the reverse effect of encouraging adult upskilling at the expense of new entrants to the workforce.

It is good that universities offering degree-level courses at level 6 should award an interim qualification to students who complete their first one or two years, allowing those who drop out to still have a certificate to show for their efforts. This might in time encourage credit accumulation and transfer to enable them to take their part-qualification on in the future. This has been on the cards for years and has never found a market. Will the Government encourage a new push for credit accumulation and transfer between colleges and universities?

With many good things in these parts of the review, we do have questions over the university proposals, as the noble Lord, Lord Bassam, set out. We regret that the review has been undermined by a shoddy, regressive change to student loans, which we rather suspect has been influenced by No. 10. How much less will students now repay? This is, of course, a trick question. Graduates will now pay their loans back earlier and for 10 years longer. Most new graduates will pay about £15 a month more than under the current system. Bringing maintenance grants back will ensure that students from the poorest homes do not have the most to repay. Augar’s proposal for student loans for higher further education learners is a good start but it is not radical enough. As our economy changes rapidly, everyone will need to retrain and upskill throughout their lives.

I have some questions for the Minister. First, does he agree that the Government must compensate universities in full if the tuition fees cut goes ahead? We hear that teaching grants should be increased to reflect the loss of funding to universities that a cut in tuition fees will bring. However, the grants should be allocated to reflect the cost of teaching the subject and the subject’s social and economic value. Where will subjects such as ancient history sit and will pure research become a thing of the past? If the funding is not made up, universities will doubtless cut their widening participation budgets and drop subjects that are too expensive to teach; I do not include ancient history in that group. Secondly, will the Government curb the sky-high interest rates put on loans after people graduate? The Government make a great deal from middle-income graduates because the interest rates bear no relation to the cost of government borrowing. Thirdly, given the crisis in NHS recruitment, will the Government bring back nurses’ bursaries?

We probably need to go further. As Martin Lewis has argued, for most graduates, the current system works a bit like a graduate tax, so why not turn it into one? All the frightening language about “fees”, “loans” and “debt” disappears overnight. Students from wealthier families, who bypass the system by paying tuition fees up front, instead pay their fair share. The system becomes more progressive and most graduates would pay a little less. There are, of course, problems with a graduate tax too. We would want to review the proposals to see what impact it would have on widening participation and on universities’ budgets. However, it seems that the Conservatives have encouraged Philip Augar to put a catchy headline on reduced fees above the truth. Does the Secretary of State realise that Augar’s positive recommendations for further education have been undermined by these regressive proposals for student loans? Has the Treasury approved an increase in teaching grants to cover the tuition fees cut? If not, the Prime Minister will have achieved the impossible: charging seven in 10 students more to go to university, but paying universities less to teach them.

Our party would be keen to create personal education and skills accounts, giving every adult over 25 the opportunity to learn for free wherever they want, whenever they want, with careers guidance in place to support them along the way. Good careers guidance is key to much of the benefit in these proposals. The more people enjoy learning and the more they learn, the more ready they are to learn more, which in the long term benefits our economy, making it easier for employers to find the higher-skilled and more creative people they will increasingly need as technology develops. We hope that the Government will support the FE proposals to the hilt, but look again at the changes to tuition fees which may well disadvantage those the Government most want to help.

The Government and the panel agree that maintaining an income-contingent repayment system is the fairest way of sharing the cost of higher education between the taxpayer and those who benefit directly. Even early in their careers, at age 29, earnings of students who attended higher education are increased by around 26% for women, and 6% for men, compared to similar students who did not attend. On average, doing a degree has strong earning returns—over £100,000 over a lifetime—as mentioned in the Statement. The repayment system is fair and progressive. Students do not need to make any repayments on their loans until they are earning £25,725 per year. However, we must remember that the 2012 fee reforms enabled the Government to lift the cap on student numbers, since when we have seen record rates of 18 year-olds entering full-time higher education. Having said that, the Government will consider the panel’s recommendations carefully and conclude their review at the spending review.

I also took note of the comment made by the noble Lord on the lifetime cap. That will also be part of the mix. With great respect, I beg to differ with what the noble Baroness said about funding. We continue to engage with stakeholders to deliver a post-18 education system that is both joined up and supported by a funding system that works for students and taxpayers. I point out that since 2012 the total income for universities in England has increased by around £6 billion, and resource per student is at an historic high. The IFS estimates that the 2012 reforms increased real funding per student by almost 25%.

The noble Baroness also spoke about T-levels. The good thing about T-levels, as I have said in the Chamber before, is that they are employer-led. They are put together in conjunction with employers and it is very important that we remember that.