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University Funding (Yorkshire)

Volume 514: debated on Tuesday 20 July 2010

Mr Amess, Huddersfield is not a coastal town, as you might have noticed, but I am very fond of all things Whitby and Broadstairs. So that is a declaration of interest in the subject of the last debate.

This is the first Westminster Hall debate I have secured in the new Parliament and I do not apologise for returning to a subject that is absolutely crucial to all our regions. I say “all our regions”, but I remember the Chancellor’s recent speech, in which he said:

“Between 1998 and 2008, for every private sector job generated in the north and the midlands, 10 were created in London and the south.”—[Official Report, 22 June 2010; Vol. 512, c. 176.]

In so many ways, we are two countries. We are, first, a country of the regions outside London and the south; and secondly, a country of London and the south. I understand that when the future of the regional development agencies was being discussed, it seemed that London, the south-east and the south-west would lose the particular focus that had been put on them. Is it not true that we must address the imbalance between the regions in terms of employment and innovation?

Many years ago, when Sir Keith Joseph became the Secretary of State for Education he gave a reading list to all his civil servants and junior Ministers. My approach in my speech today will be rather like that. Furthermore, I would like anyone who takes note of this debate to appreciate that Yorkshire and Humber is a microcosm of all the regions: the problems that Yorkshire and Humber has are similar to those that all the regions outside London and the south-east have.

I would like to refer everyone to the recent reports from the National Endowment for Science, Technology and the Arts and the ERA Foundation about the productive capacity of our country and innovation. In particular, the NESTA report sets out four scenarios for the future of Britain’s productive capacity, which go to the very heart of the concerns I am expressing today about the funding of universities. In doing so, the report is concerned with how we will make a living and achieve a good standard of life for the citizens of this country.

The first scenario that the NESTA report sets out is that we carry on doing more of what we are already doing—we carry on as we are. However, all the testing that NESTA has done of that scenario shows that it will not work; it will not increase productivity and jobs or get the economy moving again. The second scenario is that we invest entirely in and focus completely on a rebirth of manufacturing. Although that scenario is not entirely discounted, it is certainly not seen as an overall answer to the question of how we can re-energise our productive capacity.

The NESTA report focuses on the third and fourth scenarios for the future. They involve changing the whole nature of our economy, turning it into an innovative one in which we seriously apply innovation to all its sectors. On reading the NESTA report, time and again we find that the real agent for delivering such change is our universities, and that if we do not use them to take a lead and innovate, we will not achieve the increase in productive capacity that we must achieve if our constituents are to have “the good life”.

The ERA Foundation report is also interesting. Many people do not know this, but the royal commission for the great exhibition of 1851 made so much money that Prince Albert was able to invest in buying most of Kensington. Imperial college, the Victoria and Albert Museum and other such institutions are built on that land, and they have the freehold and receive the rents. Through the ERA Foundation, they provide a lot of money—between £60 million and £80 million, I think—for research into productive capacity, manufacturing and much else.

The ERA Foundation report, which came out at about the same time as the recent NESTA report, puts more emphasis on manufacturing than the NESTA report does, but like the latter it says that manufacturing must be highly innovative. Indeed, it says that manufacturing must be led by innovation and by small and productive new enterprises. Again, universities figure prominently in improving our capacity to deliver. So when I talk today about the particular challenges in Yorkshire, I am actually talking about something that is good for our whole country—investing in higher education.

The data show that we invest about 5% of GDP in education. That figure is a little higher than the average for OECD countries but it is not the highest—I think the average is about 4.6%—so we should not get carried away. Even with all the work and investment in education that has gone on during the last 13 years, we have still not become the OECD or world leader in investing in education.

I used to chair the Education Committee, or whatever else it was called during the 10 years I chaired it, and time and again we looked at the increase in per capita spend on education. Of course, the great fashion—it was also absolutely the right fashion, in that it was an evidence-based policy—has been to invest in early years education: education of the youngest age group through to school-age. Later on in the age range, one sees that investment in higher education has been less than in education generally.

Higher education has therefore been fighting to do more with less for a long time, and people must bear that in mind. Those who campaigned against what the Labour Government called “variable fees” and what the then Opposition called “top-up fees” should bear it in mind that the reason why I was always totally in favour of top-up fees and why the Committee eventually came out in favour of them was that we could not see any other way of getting a high level of investment in university teaching and research salaries. Indeed, Mr Amess, if you look at the figures you will see that nearly all the money that has been raised from the top-up fees fund—whereby people make a payment towards their fees, capped at £3,000—has gone into the salaries of researchers and lecturers. British universities have been greatly blessed by having that ability to pay a decent wage, so that they can attract and retain the top talent.

Mr Amess, I want to refer you and everyone else here to three other pieces of reading. The first is the recent speech on higher education by the Secretary of State for Business, Innovation and Skills; the second is a speech by Professor Malcolm Grant, the president and provost of University college London; and the third is an article by Professor Steve Smith, the president of Universities UK. I hope that people will read those speeches and articles and balance them against each other. The Secretary of State made a good and balanced speech, saying that we must do even more with less. He also indicated that there were certain ways in which we can raise funding and he spoke about how that funding is retained—or not retained—in universities.

I should first declare that I worked for Leeds university for 11 years and did a lot of work on open innovation in conjunction with other Yorkshire universities. I examined a lot of research on universities, which I will elaborate on later if the hon. Gentleman gives way again.

Sometimes, the debate is about whether some universities should be privatised, but in fact, only 3.6% of the income of the American Ivy league universities comes from the private sector, and British universities already receive 2.8% of their income from the private sector. Having listened to the hon. Gentleman’s arguments about university funding, I just want to say that privatisation of universities is not the route to go down.

I will certainly not be advocating the privatisation of universities in my speech. Some privatisation has taken place already. The university of Buckingham was much vaunted and much publicised, but what does it do? It specialises in the easy stuff—training lawyers and accountants. At the moment, all the private sector seems to be choosing the easy, soft stuff on the margin. I have certainly not seen anyone come forward and say, “We’re going to start a proper university that teaches the tough, expensive subjects.” I agree with the hon. Gentleman.

The Secretary of State’s speech was good, but it failed to address innovation, universities’ role in leading it and recent partnerships between universities and the private sector—partnerships with small and medium-sized enterprises, with manufacturing and with the service sector, which employs 57% of the people in my constituency. Only 10% now work in manufacturing; 33% work in health, education and the local authority. Universities have good partnerships with SMEs country-wide and, interestingly, worldwide. Universities working in partnership have a role to play. The Secretary of State underrates their key role in future investment in this country. This is my most serious point: if we are going to haul our country properly into the 21st century and compete with the productivity of Germany, France and emerging countries such as India and China, we must use our universities in a way that we have not done in the past.

This is not the time to cut back; this is the time to invest in universities and to increase the money flowing into them. I have talked to all the universities in Yorkshire. A 25% cut will mean tremendous staffing cuts. One leading university in a major city told me that it will mean cutting 1,000 jobs in the city. A university in the next largest city—hon. Members can guess from the size which cities I am talking about—says that it will lose 600 jobs. Those figures are from one university; both cities have two universities. The 25% cut in the higher education sector may not be a disaster in the short term—perhaps we will be able to live with it for a while—but it will have enormous long-term effects on our industrial future.

I will not speak for too long, as I want to give the Minister a chance to respond. Yorkshire’s universities boost the region’s economy by £3.68 billion and play a critical role in generating jobs, creating innovation and driving enterprise. They are the most important source of innovation and partnership in the regions. That is recognised across parties; I am not making a narrow party political point. We are discussing a potential decision arising from the present state of the economy.

It does no one any good to exaggerate the state of the UK economy. I refer people to a recent article by Sam Brittan, a known Conservative, the brother of a well-known Conservative politician and a supporter of the coalition. He says that it does nobody any good to exaggerate how bad the UK economy is, and shows carefully that the exaggerations are not true. We have gone through an international meltdown of financial services and a world recession, but Britain has not come out as badly as people think.

I know that the coalition Government like to exaggerate, because that is what all new groups do when they take over. They say, “We’ve looked at the books, and it’s so bad we’ve got to take draconian measures.” That does not help anybody. We must take a realistic view of what we can and cannot afford. I could make myself unpopular outside this room by saying this, but if I were seeking to reduce overall expenditure, I would cut other areas that are perhaps more sensitive in the public imagination—health, education and other Departments—long before cutting into the potential of our productive sectors and our capacity to grow through the higher education system.

We have two countries, as I said. To make things more dramatic, I return to the provost of University college London. Unfortunately, he echoed quite a deplorable comment made in a speech by an Education Minister in the present Government who was a good member of my Select Committee. That Minister said that he would prefer an Oxbridge graduate with no teacher training qualification over someone from a rubbish university with a postgraduate certificate in education. I thought that that was a terrible remark. Malcolm Grant fell into the same trap, saying that research money to rich universities should not be cut and that he would rather see “pile ’em high and sell ’em cheap” universities go to the wall.

Malcolm Grant should visit the university of Huddersfield, which is a cracking good, innovative university. We do not pile ’em high and sell ’em cheap; we emphasise quality. Recently, I went to an end-of-year exhibition by our design students that ranged from high fashion right across to automotive design. People graduating from that university are snapped up all over the world for their talent. I have here a document announcing a new programme in Huddersfield: “Towards an alternative nuclear future: Capturing thorium-fuelled ADSR energy technology for Britain”.

I say to the provost of University college London that there are nine universities in Yorkshire and 43 in London. If I were considering the economic regeneration of the regions, I know what I would do if cuts had to be made. I do not want to cut anyone’s money; I do not want to close universities serving communities in the most challenged parts of London. However, if push came to shove, I would move 10 of those universities to other places in the country. That would ease congestion in London and make a real difference to some towns that do not have the privilege of a higher education institution.

The universities sit at the centre of what I call my big society. When I go back to my constituency, what is the centre of my big Huddersfield? It is the university. The university employs the biggest and most talented group of people, a lot of whom are well paid. Many live locally and are leaders in the town’s civic pride. That is important to a big society. Also, they are often close to the third sector. I have been a social enterpriser all my life—I am told that I have started about 48 different social enterprises—but we in the third sector are in danger. Despite what the coalition Government have said about being in favour of the third sector, it is going out of business rapidly. The people who used to fund social enterprises and the third sector have either been abolished or think they are in danger of being abolished, and the funding used by social enterprises is unavailable. Many of them are going out of business or battening down the hatches until we find out what the alternatives are to the funding we have become used to.

We need to be a highly innovative nation and to invest in higher education. There ought to be someone—I hate to use the word “tsar”—who is responsible for innovation in every university campus. They should report directly to the Secretary of State on how much innovation there is, how successful it is, and what partnerships there are. I approve of all that. There needs to be new ways of doing things more efficiently and effectively, and of using resources better. I believe in all that, but for the future of our country, our regions and Yorkshire we must move steadily and steadfastly. We must invest in higher education, in innovation and in our future.

I congratulate the hon. Member for Huddersfield (Mr Sheerman) on securing the debate. In the last Parliament, as Chair of the Select Committee on Children, Schools and Families, he was a very authoritative voice on all aspects of education and he brings that knowledge and skill to today’s debate. I am very sorry that my right hon. Friend the Minister for Universities and Science is not here, but as I am sure the hon. Gentleman is aware, he is attending the Select Committee on Business and Enterprise. My right hon. Friend sends his apologies—I am very much a stand-in.

The hon. Gentleman is passionate and knowledgeable about this subject and he has shown that today. I thank him for the role he plays in partnership with Kingston university in my constituency. He is a trustee of the Rose theatre in Kingston, which has a partnership role with the local authority, local business and Kingston university in relation to creative arts. That is the sort of partnership he was talking about during his speech.

The hon. Gentleman is also an honorary doctor. I should put it on the record that I am an honorary fellow of Birkbeck college, London, which is showing the way in how we can be more innovative in the higher education sector. I was interested to note that he referred us to Sir Keith Joseph’s reading list. I am not sure if he wanted us to read the books on that list—probably not; I think he was creating his own reading list. I was delighted that he included a mention of the recent speech made by my right hon. Friend the Secretary of State for Business, Innovation and Skills. He was generous enough to say that it was a good and balanced speech, although he made the point that it did not mention innovation, which was the main focus of his speech today.

I reassure the hon. Gentleman that the Government are keen to do what they can to promote innovation. We share his desire to ensure that higher education institutions in Yorkshire and, indeed, across the country are able to maintain their reputation for world-class research, which has been one of Great Britain’s key comparative advantages in recent decades. Although there will be some tough decisions to make, we are determined that when we make them, we will not put that huge reputation and the benefits that the wider economy gets from the work of our great universities at risk.

On the point about innovation, something to which the hon. Member for Huddersfield (Mr Sheerman) did not refer—or he may have done in part—is that when universities in the Yorkshire region come together, they have an outstanding opportunity to be the leading nanotechnology specialists in the world. Indeed, York university has one of only four machines in the world that can photograph molecules down to that level and see them lined up, and Huddersfield university has one of the most precise measuring instruments in the world.

Overall, innovation is part of the bread and butter of universities. Will the Minister give some thought to how he can free up universities to enable them to capitalise on the intellectual property that they develop? At the moment, they struggle to do so because their charity status means they are unable to make a profit. If they did, they would be hit by VAT, which would be bad for them. If we can change some of the rules that they play by, a huge income stream would be available to universities, which would bring into universities the investment that we all want to see.

I am sure that my right hon. Friend the Minister for Universities and Science will want to reflect on those remarks, because we will be searching for new revenue streams. It is incumbent on this Government to do so as we make some difficult decisions about public funding. The hon. Gentleman’s comment is therefore very helpful. The university of Huddersfield is exceedingly expert in that area and has a unique nano-lab facility. As he was saying, that shows the great research facilities that are in the Yorkshire higher education institutions and how they benefit when they work together either across Yorkshire or, indeed, in the N8 group more broadly across the north.

Yorkshire ranks No. 1 in all the regions in terms of attracting inward investment—£28 million a year—for new start-up businesses.

I understand that. It is one of the reasons why I wanted to say to the hon. Gentleman that, although there will be a difficult funding climate—as colleagues are well aware—it is worth putting it on the record that Yorkshire universities tend to fare reasonably well compared with their counterparts in other parts of the country. That is in no small part due to their strong research performance. Yorkshire universities receive a level of research funding per higher education institution that is above the UK average, and two of its institutions are among the 20 that receive the most research funding in the United Kingdom. He is absolutely right. The Government are keen to ensure that they can build on that success.

The higher education sector is a success story for Yorkshire. The university of Huddersfield in the hon. Gentleman’s constituency illustrates what Yorkshire universities can achieve. I have mentioned the nano-lab, but the cutting edge Centre for Precision Technologies is also showing what Yorkshire universities can do for precision engineering. Huddersfield university has other areas of expertise, including automotive engineering, motor sport, computer games, electronic and electrical engineering, and multi-media and music technologies. Kingston university in my constituency also has many areas of expertise in engineering. Given Kingston’s past, those are particularly related to the aeronautical industries. I share his commitment to ensuring that universities are able to develop the innovative capacity they have shown in the past. Despite the problems that will arise over the next few years in ensuring the funding is fair, we must ensure that such a capacity to innovate is not lost, as it can play its part in reducing the public sector deficit.

The hon. Gentleman said that we should not talk down the state of the British economy. There is no desire to talk the economy down, but there is a desire to deal with the huge challenges we face—a public sector deficit that is 11% of GDP, and the highest public sector deficit within the OECD. The Government cannot sit by and do nothing. I am sure he will admit—he is such a reasonable person and is very knowledgeable—that the previous Government were considering some significant reductions in funding in this area for this year. If anything, compared with the grant letter of December last year, this Government are putting more money into HE this year for the 10,000 places, which has led to some debate. The previous Government were planning £600 million of spending reductions to take place in future years. On financing the HE sector, this Government have not uniquely decided that they want to consider reducing spending; they are taking on the previous Government’s proposals.

I am sure that the Minister’s officials will have looked at the speech I made in this Chamber in January, in which I complained about the previous Government’s cut to university funding. So I agree with him on that. However, what does he think our competitors are thinking? Higher education is the one sector in which we are the world leaders—we compete with the Americans, the Australians and the Canadians—but suddenly we are going to start cutting it by 25%. That is what he is predicting—25%.

I am glad to see that the hon. Gentleman is claiming consistency in that he says that he criticised the previous Government for their spending cut proposals. We share his vision of the crucial role that universities and innovation play in our economy, the productive sectors and so on. There is no dispute in that area, but there is a dispute about the role that the university sector must play in facing up to the immediate public finance problems facing the country.

I apologise to the hon. Gentleman because I am running out of time. I shall conclude by saying that there are no easy solutions to the challenges that this country—this Government—faces on public spending. We should not run away from those challenges, because it will be in the long-term interests of our university sector if we face up to them. With the help of Lord Browne’s review, which will conclude in the autumn, we will have the knowledge base and understanding to put forward a fair and equitable settlement. Such a settlement will ensure that our universities have sustainable funding and that access to universities is not undermined.