That this House takes note of the findings and recommendations in the Universities UK report, Opportunity, growth and partnership: a blueprint for change, published on 30 September.
My Lords, as a former chief executive of Universities UK, I appreciate the interest of this House in debating the findings and recommendations of its recent blueprint. It is good to see so many speakers from all sides of the House. The report sets out a stark question in which we all have a stake: how can we ensure that our universities are in a stronger position in 10 years than they are today?
Universities are one of our great national assets. They are a source of real strength in the UK. They provide opportunities for individuals from an ever-wider range of backgrounds. They are essential to our current and future economic success, to strong public services and to flourishing towns and cities in all parts of the United Kingdom. As the report argues, the success of our universities and our country are intertwined. Neither can be said to be in the most robust health today. It says forcefully that as a nation we have a choice. We can allow our great universities to slide into decline or we can act together to ensure that they take a different path and thrive in the next decades.
Our higher education sector makes a £265 billion annual contribution to the UK economy. This means that for every £1 of public money invested in higher education across the UK, £14 is put back into the economy. Universities play a critical role in supporting public services, with more than 191,000 nurses, 84,000 medical specialists and 188,000 teachers expected to graduate between 2021 and 2026. The Government have set out a number of missions. Universities have a central role to play in achieving each of them. They will play a foundational role in the industrial strategy and continue to be a source of competitive advantage to the UK in our position on the global stage. They are a major source of export earnings and attractors of foreign direct investment. In short, they are engines, which we need to be firing on all cylinders.
We all know that our universities are facing enormous financial challenges. This is also true of students, of course, who struggle to make ends meet as costs rise and maintenance loans fail to keep pace, an issue to which I shall return. However, the blueprint sets out to be about much more than funding. It considers the central missions of the university sector and what the country needs of it. It asks what is working well and what could be better. It is consciously self- critical.
In putting together its contents, Universities UK asked a set of commissioners—some of them from this House—to act as critical friends and to hold a mirror up to the universities to allow for a thorough examination of what needs to change in the future. I commend that approach. I am pleased that the noble Lord, Lord Willetts, as the commissioner for chapter 6, is contributing to the debate today. The commissioners were largely but not exclusively drawn from outside the higher education sector to give fresh and more objective inputs, drawing on their diverse range of expertise. Universities UK also consulted closely with its 141 members and with stakeholders such as the CBI, and with related sectors, to hear and input their views.
My Lords, it is a great pleasure to follow the noble Baroness, Lady Warwick of Undercliffe. I am delighted that she has secured this timely debate on the future of our higher education system. It is timely because the financial condition of the sector is worsening very rapidly. She mentioned in her excellent remarks that 40% of universities are likely be in deficit next year and that a further, or perhaps the same, 40% have low liquidity of less than 40 days’ cash. Updated analysis suggests that as much as three-quarters of the sector will be in deficit next year, suggesting that conditions are deteriorating extremely rapidly. Like the noble Baroness, I welcome the Government’s move to increase fees with inflation for the next financial year. It is an important step. It is a shame that it has taken this long, and it is a shame that, as she said, the sector has had almost a decade of real-terms erosion of undergraduate tuition fee income. I am glad that this decision has at last been taken. It was a real abdication of responsibility on the part of more recent Governments to have let this issue drift in the way that it has. It is no way to provide certainty for institutions vital to our success as a knowledge economy and, as she remarked, has led to needless job cuts, programme closures and increased dependence on the volatile income from overseas students, welcome though they are.
Above all, the freeze in fees has been detrimental to students themselves, who have, in many cases, seen their institutions lack the resources they need to provide them with the high-quality teaching and wraparound support they want during their studies. That is why I echo the noble Baroness’s pleas for the Government to ensure that the uplift in tuition fees is undertaken on an ongoing basis throughout this Parliament. People can disagree on whether it was an easy decision for the Government to take. Personally, I think that an automatic uplift of tuition fees with inflation should not be a big drama in our system. It is a real cost that institutions experience. The Government need to recognise that and accept their responsibilities towards institutions that are critical to our performance as a highly innovative economy.
My Lords, I too thank the noble Baroness, Lady Warwick of Undercliffe, for securing this important and timely debate, and for her excellent introduction to the topic. I declare my interest as an emeritus professor of biology at Oxford University and as the cofounder and chairman of a university spinout company providing software to the financial services industry.
I wish to speak about research in our universities. As has often been repeated, we have a number of truly world-class research universities in this country. Only the US has universities of comparable stature. There may be many reasons for that, but one point to note is that the institutional structure of research in the UK is more similar to that of the US than, for instance, that of France and Germany, where research institutes take a bigger share of the research landscape.
When the late Lord May of Oxford was government chief scientist, he analysed the relative performance of the UK in science and showed convincingly that we outperform most other countries in scientific quality and output per pound. He speculated that one of the reasons might be that we invest in research in universities as opposed to separate research institutes. As Gordon Moore, the creator of Moore’s law and the former CEO of Intel, put it: invest in research in universities and you get three bangs per buck—research, innovation and education—but invest in institutes and you get only two.
I shall make one simple point about investment in research in our universities: the quality of research in our top universities today is a reflection of investment made decades ago—not last year, not in the last five years, but probably during at least the last 30 years. You cannot simply turn research on and off; it is a long-term venture and therefore deserves a long-term strategy. That is true whether you are talking about the basic discoveries of pure research or their translation into outcomes that save lives, save the environment and are a source of prosperity. It took Dorothy Hodgkin, Britain’s only female Nobel laureate, 35 years of research at Oxford University to elucidate the structure of insulin. The Oxford malaria vaccine was the result of 20 years of research effort.
My Lords, I am grateful for the opportunity to speak in this debate. I too thank the noble Baroness, Lady Warwick, for tabling it. My reflections are rooted in conversations and experience in the sector within the diocese of Gloucester. I declare my interest as a pro-chancellor of the University of Gloucestershire, of which the noble Lord, Lord Bichard, is chancellor. It is one of 14 universities in the Cathedrals Group of universities, based on a Church of England foundation and ethos and with an explicit dedication to enhancing and expanding a greater plurality of routes into higher education.
This report rightly highlights a number of areas for reform and poses useful questions about funding. It is well known that universities drive local and regional growth. I agree with the report’s recommendation that universities should have a key role in local growth plans. The University of Gloucestershire recruits heavily from Gloucestershire and the surrounding region, and there are currently opportunities from the cybersecurity hub linked to GCHQ to do more to collaborate with and meet the needs of local employers.
On expanding opportunity, I welcome the report’s analysis that, to meet the challenge and widen participation, universities, schools and colleges should and could work better together to improve outcomes. I long to see learning communities in which every member can flourish. To do that, we need to work hard to break down the barriers that prevent people accessing university, be they issues of disability, age, ethnicity or religion. We need to be intentional about the things that will enable this, and to think long term. Initiatives such as reduced offers for disadvantaged students can and do help, as is evident at the University of Gloucestershire.
The report argues for a reformed funding structure for universities in England, encouraging the Government to work with the sector to establish a more reliable financial foundation. This is key; universities need to have assured, stable incomes. This is about coupling the wise and courageous leadership of vice-chancellors, staff and councils with a government-led initiative. In the University of Gloucestershire, I have seen a drive in income, a continuation to develop a university more connected with its partners, students and prospective students, and a commitment to reduce costs, which has not been without considerable pain. I see good business practice and a commitment to being commercially astute, but what can the Government do to encourage and enable this? For example, as other noble Lords have said, the recent tuition fee increase seems only to mitigate the national insurance increase. International students are another significant matter, as has been mentioned; will the Minister provide clarity on them?
My Lords, I congratulate UUK and the authors of the blueprint for change, which aims over a 10-year timescale to strengthen the universities sector. While our universities are one of this country’s great strengths and more than hold their own internationally, we cannot be complacent.
While the decision to increase fees in line with inflation will be welcomed by the sector, more innovative thinking by the Government on how to finance universities in the medium and longer term is really important and necessary. I am sceptical about continuing to load all the increases in funding on graduates. Although initially young applicants from disadvantaged homes were not deterred by high fee repayments, there are signs that this is no longer the case. Moreover, mature students have been deterred for a long time. What consideration are the Government giving to longer-term funding? What mechanisms, if any, are being set up for a radical review considering all the options, which might even include the possibility of a contribution from affluent parents?
The report’s chapter on expanding opportunity notes that there is a continuing large gap in the participation rates of disadvantaged students compared with those from more privileged backgrounds. The poorer areas of the country have far fewer applicants than wealthier ones. It proposes that the Government and the sector collaborate in reaching a target of 70% participation in level 4 attainment by the age of 25. I would have preferred it to say by the age of 30 since, in my experience, there are many mature students wishing and trying to return to study between the ages of 25 and 30.
The target of 70% is ambitious, and it must include an improved offering for FE as well as a much better apprenticeship scheme than is currently planned. How do the Government intend to distribute the rather small expenditure increase that has been announced for the endlessly neglected FE colleges? What incentives, if any, are they planning to encourage meaningful university and FE partnerships? Would she agree that the national training programme for disadvantaged pupils in the school system mentioned in the report should be extended to FE colleges, so that their students too can be encouraged and supported to progress to university, as well as being helped to improve their skills?
My Lords, I declare an interest as a professor emeritus of the University of Dundee and its previous chancellor. I have also been associated with the University of St Andrews.
I applaud the Government for recognising that a more sustainable approach to the funding of higher education and research is needed. I am pleased to see that the Government have protected the R&D budget and full funding of our association to Horizon Europe. As highlighted by the Universities UK report, brilliantly introduced by the noble Baroness, Lady Warwick, I hope that, going forward, the Government will recognise that more will be needed to ease financial pressures on universities to support emerging blue-skies research and develop infrastructure to do so.
I will briefly mention two areas that deserve further attention—one was briefly mentioned by the noble Lord, Lord Krebs. The bedrock of the UK ambition to remain a leader in science and technology is doctoral education in UK universities. But there are worrying signs. Although talented overseas doctoral students flock to UK universities, which are second only to the USA, domestic demand, particularly from talented students, is falling. This and the reduction in funded PhD studentships are likely the next university crisis.
Of the 113,000 PhD research students, 46,300 are from overseas. A recent report suggesting that there would be fewer funded places in the future is worrying. Engineering and Physical Sciences Research Council training centres will fall from 75 to 40, leading to some 1,750 fewer funded places. The Arts and Humanities Research Council is reducing its numbers of funded PhD students from 475 to 300. The Wellcome Trust, once a major funder of doctoral students, particularly in the life sciences, is to severely reduce its support following its new strategy. Universities currently provide some PhD studentships and considerable other support for doctoral education, but this will be an early casualty if universities face further financial pressures.
My Lords, I congratulate the noble Baroness, Lady Warwick, on bringing this debate to the House. I declare my interests as a visiting professor at King’s College London and a member of the council of the University of Southampton. I was also one of the commissioners who served on the UUK exercise. The chapter on which I was most heavily engaged concerned international students. It is excellent that the Government are now preparing, and have committed to produce, an international strategy for higher education—of course, my noble friend Lord Johnson was himself responsible for an excellent one in the past—and I hope that the Minister will be able to tell us what timescale that is on. I shall put two specific points to her about that strategy.
The first point concerns visas. The Minister is a former Home Secretary, and if I pressed her on the cost of visas, I know exactly what her answer would be, so I will not press her on the cost but on another problem with visas: the speed of getting them. There is an internationally competitive market whereby some overseas students apply for a range of different universities around the world, and for several visas, and they are waiting to see whether they get their US visa, their Canadian visa or their British visa. If the British visa process is the slowest, they have already committed to going to Canada before we have even had an opportunity of getting them here. I hope the Minister will undertake to pursue the speed of visa issuing with the Home Office.
Secondly, I ask the Minister to raise the issue of international students with the Department for Business and Trade. There is enormous opportunity here for trade negotiations, whereby we make a commitment that we will extend access to our student loans for British students going to study abroad. The moment that the conversation with another country is about exchange and reciprocity, about saying, “We want more of your students to come here but it would be great if some British students could come to you, and we will provide them with a loan to do so”, we can make much more progress on growing international student numbers.
My Lords, I declare my interests as a former chancellor of Cranfield University and current chair of the Royal Veterinary College, which is ranked globally as the number one vet school in the world. Nobody should have to follow the noble Lord, Lord Willetts, on the subject of higher education: I want to raise a complaint about that.
I too welcome and support Universities UK’s thoughtful report, and the admirable introduction that the noble Baroness, Lady Warwick, gave in launching this debate, and, indeed, her work in prompting this debate. Her speech really laid out how flourishing universities are key to Labour’s missions. I also thank the Minister for the encouraging way in which the department has set off in its relationship with the university sector, first, in recognising the deep financial crisis being faced by universities, in the face of what was previously the total intractability of the Government to recognise that there was a crisis at all. Secondly, the ministerial team has shown real commitment to a partnership approach with the sector. Thirdly, it is welcome that Ministers have recognised that our universities, in their teaching and research, are vital for the Government’s and indeed the nation’s growth agenda, with the nurturing of skills and talent that the noble Lord, Lord Willetts, talked about, and the world-class research, which is the bedrock of innovation and drives new technologies and approaches, not only to solve the problems of today and tomorrow in the UK but to form the basis of new global export industries.
The UK has always been very good at innovation, but we are not very good at providing a better environment for spin-out and scale-up. We really have to find a way to avoid the distressing repetition of promising start-ups being bought by the USA and others and relocated away from the UK. We should welcome the Chancellor’s recent commitments on pension reforms to enable more UK investment in promising UK businesses. Our research and innovation success is also highly improved by being able to attract high-quality international junior and senior researchers, but there are severe hurdles in their way. Can the Minister tell us how the Government will reduce or stagger the upfront costs for healthcare and visas, how the graduate visa can be developed further and how the Turing scheme can be extended to encourage young international researchers to spend some time here?
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The blueprint advocates five shifts: to expand opportunity, to improve collaboration across the tertiary sector, to generate stronger local growth, to secure our future research strength and to establish a new global strategy for our universities. Chapters on each of these topics address where performance is strong and where it could improve, generating recommendations for universities as well as for government on how we go about that. The blueprint also sets out three foundational areas where change is needed: putting universities on a firm financial footing, streamlining regulation, and improving how the impact of universities is assessed. Throughout the report, there is a lot of emphasis on what universities can do themselves. As the president of Universities UK, Professor Dame Sally Mapstone, says in her foreword, it is “consciously reform-driven”. Happily, it anticipates many of the same areas for reform that the Education Secretary, the right honourable Bridget Phillipson MP, set out in her recent statement to the other place, to which I will return.
Each chapter generates practical proposals for change, which I hope will provide a foundation on which the Government can build in determining their own approach to university reform. I have said that the blueprint is not exclusively about funding. However, it also puts forward very clear proposals in that area and about student support.
I believe it is widely understood in this House that the funding of universities across the UK is structurally unsustainable. In England, the most recent Office for Students report on the financial sustainability of the sector indicated that 40% of providers expected to be in deficit in 2023-24, and a rising number of universities reported low net liquidity days. Does my noble friend agree that joint efforts from the Government and the sector are of the utmost importance to ensure that higher education returns to a stable financial footing?
University research and development activity is world leading, but the current system relies on a disproportionate and growing cross-subsidy from universities to make this activity viable. Given the financial deterioration of universities, this has produced a huge gap in funding and renders this vital activity exposed. Fees from international students currently make up some of this shortfall, but I think we all agree that this is not a robust or sustainable solution. An ambitious and long-term approach is needed to ensure that the UK retains its international competitiveness and continues delivering on the Government’s ambitions for economic growth. I hope the Minister will comment on this.
For students, rising living costs in England have coincided with below-inflation increases in loan funding for many years. The removal of grants was, in my view, a retrograde step that I would like to see reversed. The blueprint argues that both fee and loan levels should be linked to inflation on an ongoing basis, and that grants should be restored. It proposes a two-phased solution to the sector’s funding challenge. The first phase is to be focused on stabilisation, and the second on an enduring solution that puts universities on a path to longer-term sustainability.
The new Government should be congratulated for their swift action on the first goal in the recent announcement on tuition fees and maintenance loans. The decision to end the near 10-year freeze in tuition fees cannot have been easy for the Government, but it is the right thing to do. The financial sustainability of the university system is not a challenge that can be ducked. Inflation has eroded the real value of student fees and maintenance loans by around a third, which has proved unsustainable for both students and universities. Last week’s announcement was a hugely important and courageous act, but only a first step. This inflation linking must become automatic each year.
Alongside this—and I congratulate my noble friend the Minister on her personal contribution to this—the Government have sought to stabilise international recruitment through efforts to communicate to international students that they are welcome and appreciated, and that the Government wish to support their ambitions. I ask my noble friend to go one step further and confirm that the graduate route is here to stay, and that action will be taken, at long last, to ensure that international students are properly presented as largely temporary visitors in migration statistics.
On the research side, we look to the Government to reverse the long-term decline in QR funding—a feature of all four nations of the UK.
The decision to index-link tuition fees and maintenance loans for one year cannot, as I have said, be the end of the matter. We need to carve a path for a second phase to transform the sector’s finances longer term, through a package of reforms. This is where universities must work with the Government to ensure that the Treasury is utterly convinced that investment in the university sector will assist in fostering stronger growth, getting more people into high-wage jobs, reducing social inequalities and supporting our national ambitions, through both a better skills system and our industrial strategy.
The five priorities for reform set out by the Education Secretary last week speak to these challenges. The blueprint shows that universities are ready to answer the call and are primed with ideas about how they can deliver. However, we should be clear that linking fee income to inflation does not solve the sector’s financial problem. It just stops the real value continuing to decrease. It seems churlish to mention that this one-year uplift will be more than offset by increased national insurance contributions, but that is the fact of the matter. As we approach the comprehensive spending review, there is a clear case for an injection of further public funding to go beyond stopping the slide to equip universities adequately to meet the Government’s reform priorities. This will also allow for rebalancing the way that we fund higher education with a fairer balance between public funding and graduate contributions, reflecting the fact that universities deliver both public and private benefits.
I am a firm believer that universities have to be architects of their own solutions. Universities UK has committed to leading a transformative programme of work that will bring universities together to share learning and good practice in efficiency, transformation and income generation. The work will also build on the sector’s rich tradition of finding efficiencies through collaboration by exploring the appetite for additional regional or national shared services. Universities UK’s transformation and efficiency taskforce is leading on this work. It will be established by the end of 2024 and will report in summer 2025.
I stress that across the university sector a huge transformation is already under way. As many noble Lords will be aware, universities in all parts of the country and of all types have been trying to balance shrinking budgets against rising costs. I am sad to say that a staggering number of jobs have been lost. Huge changes in the way that many universities organise themselves have been accompanied by changes to course offerings, reducing module options and, in some cases, cutting whole programmes of study. Some of these changes will be good and necessary, but many do us great damage, such as the worrying loss of modern foreign language programmes. There is an urgent need to act. Universities can and must take this head-on, as they are doing, but the Government must act too. It is in all our interests to do so.
Ahead of this debate, I consulted Hansard. In the past five years, there have been 44 references to “world-leading universities” across this House and the other place. There is great commitment and willingness across parliamentarians, the sector and wider partners to sustain and better our world-leading universities, but there is a clear choice. Our world-leading university sector can be allowed to slide into decline, or institutions and the Government can work together to ensure that the sector delivers for the nation into the 2030s. I hope the Minister will confirm that this is the path that they will take. I beg to move.
The OBR forecasts inflation of 2.6% next year and a further 2.9% in 2028-29. This is an ongoing issue and the Government cannot simply leave the uplift as a one-off. If it is treated as such, it will deliver about £1.5 billion of additional income to the sector over the course of this Parliament to 2029-30. However, that does not in itself address the issue of real-terms erosion of institutions’ income. They will continue to see a real-terms erosion of income per student of 11.4% over the course of this Parliament if the Government do not continue to uplift fees with inflation in the later years of this Parliament.
The real-terms hit will be all the greater for the probably quite considerable number of institutions that find themselves unable to pass on this increase in tuition fees this coming financial year because they are too late to update the contractual position to students to whom they have offered places already. I would be grateful for the Minister’s thoughts on this and whether she has made any assessment of how many universities will actually be in a position, at this relatively late stage, to uprate their fees for this coming financial year.
It is clear to me that, as the noble Baroness said, many institutions will not just be barely standing still following this one-off uplift; many will be going backwards. The net position, as a result of the other recent policy changes, including the increase in employer national insurance contributions, suggests that the sector overall will be down rather than up. I have seen analysis that suggests that the sector will bear almost £400 million in increased costs from national insurance contributions, compared with increased income for English providers of only £300 million, so it is clearly not assisting the Government overall at this stage, even though, as I said, I welcome the move to increase the fees. Perhaps the Minister might indicate how much of the fee increase, if any, will be left for universities following the rise in NICs.
The last few weeks have not been a bonanza for the sector by any means. That said, it needs to accept accountability for the additional public money being invested in it. The write-offs associated with the increased fees could amount to about £450 million over the course of this Parliament, and it is important that the Government continue to ensure that there is robust quality assurance and assessment of where institutions are delivering value for money and high-quality teaching in their performance. I am glad to see that the TEF, as well as B3 metrics, will continue to play an important part in that respect.
If we look to the future, we see that the system that has brought us success in the past is under serious threat. In 2022-23 there was an estimated £5.3 billion deficit in university research funding. As the noble Baroness, Lady Warwick of Undercliffe, has said, research in universities really is reliant on cross-subsidies from other activities, and that is not really sustainable.
There are two main reasons for the deficit. First, research is not funded at full economic cost. The estimate in the blueprint report is that about 69% of FEC is recovered by universities. Secondly, as has been mentioned, the QR funding stream is not sufficient to fill that gap; it has declined by 15% over the past decade. Across the university sector, the cross-subsidy for research from overseas students and from other activities accounts for over one-third of research income, compared with only one-sixth of research income from UKRI, the major government funding agency. Paradoxically, the more successful a university is in securing research funding, the bigger the gap that has to be filled. Last year Oxford University secured £789 million of research income, the highest of any university, but that poses a massive financial problem for the university in cross-subsidising that income from other sources.
The truth is that we are not investing enough public money in research. Our public investment in R&D is 0.5% of GDP, which places us 27th out of 36 OECD nations—less than the OECD average of 0.6% and substantially less than countries such as South Korea, Germany and the United States, which invest between 0.66% and 0.99% of GDP.
It may be several decades before we see the full effect of the squeeze on university research, and by the time it becomes acute it will be too late. However, there are already warning signs. Between 2016 and 2020 there was a 17% drop in the UK’s share of highly cited papers, one of the key metrics of our performance. If our research quality and output drops, so will our future economic performance. Wealth creation in the future will depend on brain, not brawn. Crucially, it is likely to come from unexpected discoveries motivated by pure curiosity.
I end with three questions. First, does the Minister agree that we need to take a long-term view of research in our universities, with a long-term commitment? Secondly, does she agree that our public spend on research is too low? If we are not prepared to create more jam, should we try to spread the jam less thinly? Thirdly, does she have a view on what proportion of publicly funded research in universities should be ring-fenced for pure curiosity-driven research, which is likely to be, in unexpected ways, the source of future prosperity?
I hope that at the heart of this debate is a recognition that higher education in this country needs to be actively supported in order to develop and to remain being for the common good, and a recognition of the commitment of our universities to supporting and developing individuals, the community and the very social fabric of our nation. I greatly look forward to hearing the rest of the contributions and, in due course, the Minister’s response.
The concept of lifelong learning and how to put it into practice is not really addressed in the report, although many of its recommendations are relevant. A commitment to attaching a high priority to lifelong learning by the Government would be welcome. We all need to go on learning throughout our lives.
I turn now to the UK’s role in global higher education. It is surely right to continue to benefit from the recruitment of large numbers of overseas students, which was introduced by the Blair Government 25 years ago. The obsession with immigration figures has recently posed a threat to granting visas to overseas students which include a short period of employment in the UK after they graduate. I, and a number of other speakers in this debate, have asked previous Governments to take students out of the immigration figures, as happens among most of our competitors. Will the new Government address this? An internationally diverse student body benefits both British and foreign students, who will work in an increasingly globalised world. They need the knowledge and the curiosity about the world beyond these shores to do so.
As the report makes clear, UK universities need to collaborate in research with colleagues around the world. Brexit damaged our opportunities to do so in the EU. The restoration of the UK’s participation in the Horizon programme is hugely welcome, but more joint projects must be developed between research-intensive universities in this country and right across the world if we are to retain our high status internationally in research and innovation. The report asks for a global strategy from the Government. It is surely needed if we are to maximise our opportunities and our research output.
I conclude in hoping that the Government will continue to respect the autonomy of universities. Of course they need to be regulated, but that regulation, as the report argues, needs to be much more effective and efficient. It should also support more flexible courses, which can be followed by older students during their working lives.
Doctoral researchers are a big cost centre, with low cost recovery. Universities have subsidised doctoral research from fees from overseas students, as we have heard, and from other sources, such as the QR funding. In the past, universities have done this training on the cheap, thanks to 30 years of university growth. By the way, talented overseas PhD students are keen to come to the UK and stay, innovate and help grow our economy, as was mentioned. But, for this to happen, the Government need to introduce more stability in student and post-doc migration policy, as was alluded to. We need them to be able to stay and grow our economy, like in other countries. Otherwise, it does not make sense for the UK to grow brains only for other countries to benefit.
My second point is also relevant to universities’ ability to support research. An important part of this is the QR funding, mentioned in some detail by the noble Lord, Lord Krebs, so I will not go over it again. Although there has been a welcome increase in charities funding research, charity research support funding—CRSF—has not seen a commensurate increase or an increase with inflation. The cost recovery of funding related to charity-funded research is now less than 57%. If this continues, it would undermine the important partnership for research between government, charities and universities.
On successful research institutes, I disagree with the noble Lord, Lord Krebs, who said that, for institutes, the return is two to one, as opposed to three to one for universities. I might have said that it is four to one for institutes, such as the Institute of Cancer Research. This not only carries out fundamental research, particularly in cancers, but has been responsible for producing 60 drug molecules, two of which have been on the market for treating breast cancer and prostate cancer. It also trains half the number of UK oncologists. But it benefits from this research support only due to the funding it gets through the CRSF-related funding, which is not enough for it to support its doctoral students. Over the years, it has therefore supported this activity to the tune of £30 million, which it has to raise from other sources.
There is a need to look at the level of QR and CRSF funding with some urgency. With the spending review in mind, there is a need to look at a more sustained model of university research funding. I hope the Government will be sympathetic.
I very much agree with what my noble friend Lord Johnson said about fees; I strongly endorse his point. It was treated as though it were a heroically difficult decision. I asked the Library about the history. The Blair Government considered £5,000 fees; we ended up with £3,000 fees, but it was well known at the time that the Prime Minister himself and some of his advisers wanted £5,000 fees. They introduced £3,000 fees, which they indexed for several years with no fuss whatever—they just got on with indexing them. If they had done £5,000 fees and simply indexed them every year since then, fees would now be £9,545, almost identical to the level which the Government are now putting them at, but with some associated HEFCE grant; there were still teaching grants as well. The noble Baroness, Lady Blackstone, was right to say that we either need an injection of public money alongside, or fees will need to go even higher.
One of the most disappointing features of the argument about the recent indexation was the amount of confusion and misunderstanding about how the fees regime works. A lot of people linked it, somehow, to student hardship. The cash students need to live on at university is a completely different issue but does need to be tackled. Very few people realise that if the repayment formula is fixed, there is no increase in your monthly or annual repayments; it is just that you will repay for a bit longer.
One lesson from this, so that we do not slip backwards and see the type of anxieties to which the noble Baroness, Lady Blackstone, referred, is that it is really important that the Government keep on communicating the realities of how this system works, so that no disadvantaged student in a college or a sixth form thinks that he or she somehow cannot afford to go. I have to say that, in the last few weeks, Martin Lewis has once again been a voice of sanity, explaining the truth of the system, which is very different from some of the widespread misconceptions.
Unless we have a significant increase in fees, or further public expenditure support alongside, sadly, there will be universities that get into very serious difficulties. Will the Minister tell us when we are going to see a clear statement from the Government of what the process is for a university that runs out of cash? What happens? This could well be tested in the next year; we need authoritative guidance in the absence of a bolder proposal to increase fees.
Finally, I comment on one other issue. This is a Government who have an admirable commitment to raising the growth rate. Universities can really contribute to that. The industrial strategy had, I think, 11 references to FE colleges, which is admirable; it had two references to higher education, both in the context of research, and we have had eloquent statements about research. Universities are just useful for educating people in practical, vocational skills. There are 160 employer and other credentialising bodies that credentialise students who emerge from university. Will the Minister place in the Library the DfE estimates not of how many courses there are but of how many students are studying vocational courses that are in some way credentialised or vocational? Universities have an invaluable vocational role and I very much hope that, in the next stage of the industrial strategy, they are identified as a key sector, meriting particular support from the Government.
As several noble Lords have said, at the moment university research is precariously subsidised by cross-subsidy from other university funding streams, particularly by fees from the growing number of international students. As the UUK report outlined, international students must not just be seen as a cash cow; they are highly welcome for the diversity that they bring to our student bodies and the life of our universities. There needs to be a clearer compact between the universities and government on where the balance between UK and international student numbers should lie, because that fundamentally influences the discussions on the future trajectory for tuition fees.
We might have the carpet drawn out from under our feet by Mr Trump who, in his first term, sabre-rattled about refusing to fund students to study outside the USA. Notably, despite his sabre-rattling, the number of US students in the UK increased during that time, which I hope will continue in his second term.
We should also thank the Minister for the tuition fee increase but, as many noble Lords have said, it has been counteracted in many institutions by the increase in national insurance contributions. That has been particularly so for specialist institutions such as the RVC, where the increase in national insurance contributions is by a factor of four the size of the benefit from the student tuition fees. I welcome the commitment in the Universities UK report and by the Government to work together with the sector on future tuition fees, efficiencies and the reduction of the regulatory burden. I welcome the Universities UK task force on efficiencies, which is being established as we speak.
I make one last point, which is about student hardship. HEPI did a report on students in paid employment and, quite frankly, it upset me for days. It showed that 56% of students have paid employment, working on average 14.5 hours per week. If that was not bad enough, 80% of students who have been in care are working in part-time jobs and, for many, they are not exactly part-time jobs; they work many hours, approaching full-time. I cannot envisage what it must be like to hold down almost a full-time job and try to do a gruelling university course. That is particularly so in the case of students in longer-term studies, such as veterinary and medical studies, where the courses are long and that has to be sustained over a long period of time.
Although I welcome the maintenance loan improvements, I join the noble Baroness, Lady Warwick, in calling for the restoration of maintenance grants. Can the Minister say how this regressive and discriminatory situation for students from poorer backgrounds can be reversed?