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University Vice-Chancellors: Pay

Volume 629: debated on Wednesday 11 October 2017

Motion made, and Question proposed, That this House do now adjourn.—(Graham Stuart.)

It is a pleasure to have the opportunity to introduce this Adjournment debate and to have two hours and 20 minutes in which to discuss this important matter.

I would like to set out a bit of the context around my request for this debate. During the summer, a league table of vice-chancellors’ pay was published, showing that the average pay of a university vice-chancellor was somewhere in the region of £280,000 a year. That struck me as a large sum of money, particularly in the current atmosphere of relative austerity. I was particularly upset to notice that the vice-chancellor of my own local university, the University of Bath, a non-Russell Group, middle-ranking university, should be right at the top of that league table, in pole position at No. 1, on £451,000 a year, plus a very generous package.

Since being elected in 2001, I have been an ex officio member of Bath University’s court. I confess that it does not involve me in a great deal of hard work, but nevertheless I have been very pleased to be associated with Bath University, which—let me be absolutely clear—is a good institute of higher education that has done exceptionally well over the past several years. However, it seemed to me that I could no longer be part of the governance of Bath university, in however much a titular capacity, while its remuneration committee showed such an error of judgment as it displayed on this occasion, hence my action over the summer.

Since then, I have been inundated with correspondence from all sorts of people—not only constituents, but young people who are burdened with debt, and university lecturers, particularly those working at the University of Bath—in support of the action I took, and in some cases providing me with very long accounts about why it was right that we should look at restraining this part of public sector expenditure. I found those arguments to be compelling.

I very much welcome recent Government interventions on higher education funding, as announced by the Prime Minister recently in Manchester and reiterated by the Minister in his statement earlier today. They are absolutely right, and that will have given a great deal of comfort to those going through higher education, as well as to universities themselves. As the Minister rightly pointed out earlier, the quality of British higher education is of vital importance, and the changes made—to be fair, by the Labour party when in government, and then continued by the coalition and then Conservative Governments—were necessary to safeguard the quality of British universities and higher education in the UK. They are to be wholly welcomed and are absolutely right, but we do need to address the fundamental issue of student debt, which is causing so much grief to young people and, by extension, to the party of government. I hope that in the review the Minister alluded to earlier today we can find a solution that goes some way towards satisfying the concerns of young people in this respect and of course their families, who are usually co-contributors to higher education costs.

Mounting student debt is one of the problems of our time. Currently, young people are leaving university with an average debt of £42,000. Although, theoretically, that debt may never be repaid, and in lots of cases never will be, it is a burden that young people feel acutely. The Minister understands that and is doing what he can to look at that issue. I wish him well in his quest.

This is not simply about tuition fees; it is also about housing costs and the high rates that young people have to pay for university-related accommodation, which is often of an inferior or distinctly mediocre standard. It seems to me that that is sometimes a covert way of universities raising yet more money.

Given that universities are relatively well off, I think we all would agree that they need to be particularly careful about spending money. That comes to the crux of what I want to discuss. This debate is at a time of relative restraint in pay across the public and quasi-public sectors. We have seen, as Members of Parliament, the results of that, with the concerns expressed in our mailbags and the bow wave of pressure to relax restraint that has been in place for some years now. People see that and examples of where it has not applied, and they make adverse comparisons. When people see very high pay leaping up and up, they are entitled to feel aggrieved, particularly when they feel they have some direct involvement in paying for what they see as excess. That certainly is the case here, as my mailbag has demonstrated.

In the past five years, vice-chancellors’ pay has increased by 17.4%. It now averages £278,000 a year. At Bath, it is £451,000 a year. By comparison, the chief executive of the Royal United Hospitals Bath NHS Foundation Trust receives £185,000 a year, which most people would think is pretty good. He runs an organisation that is just as complex as, if not more so than, the University of Bath; the university employs 4,800 people against the Royal United’s 3,015.

It is right to compare those salaries with that paid to the Prime Minister, and the reason is that people generally feel it is inappropriate for people in the quasi-public sector and public sector to be paid multiples of the income of the Prime Minister unless there is a very good reason.

I was happy to join the hon. Gentleman in resigning from the University of Bath’s court. I never quite understood why I was on the court. I resigned in a previous incarnation, so it was only right and proper that I resigned on this occasion. Does he agree that one problem with university vice-chancellors is that they have other ways in which to supplement their income, such as where they live and their expenses, and that that information should be in the public domain? The University of Bath was very hesitant to share that information.

I absolutely agree with the hon. Gentleman. I will come on to some of the benefits later on in my remarks, and it will not surprise him to know—I suspect he has read the report, as I have—that the University of Bath features large in the University and College Union’s report on this subject, regrettably, as one of the arguably worst examples of what I certainly represent as excess at the top of higher education in this country, which is the matter we are seeking to resolve.

The Prime Minister is paid £152,000 a year. The Prime Minister, of course, heads the Government, and it is extraordinary therefore that the vice-chancellor of Bath University should be paid £451,000, which is pretty much three times the salary of the Prime Minister. I think most people in this country would have a general sense that that is odd, to put it mildly, and needs quite considerable justification.

I thank my hon. Friend for securing the debate and congratulate him and the hon. Member for Stroud (Dr Drew) on the principled way in which they resigned because of what I and many other people see as an outrageous amount of money. Does he agree that the pay of vice-chancellors should be clearly linked to performance measures? One performance measure must be successful job destinations, with highly skilled and highly paid jobs for students.

Yes, up to a point. If my right hon. Friend will allow me, I will come on to performance-related pay later in my remarks, which I have a little over two hours to make.

I spoke to the hon. Gentleman about this matter earlier today at the Northern Ireland Affairs Committee. The Government have advised that they will deal with fat cats in the boardroom, but little has been done on this issue, which is why this debate is appropriate and necessary. At Queen’s University in Belfast, the vice-chancellor’s wage rose from £230,000 to £249,000 in 2014, but the university does excellent work and has partnerships involving medical research and discovering new drugs. That figure pales into insignificance when one discovers that the vice-chancellor of the University of Huddersfield earned £364,564 in the financial year to 2016. Is it not time to address that?

The hon. Gentleman is obviously correct. That is why I am bringing this matter to the Floor of the House. There is an issue with Governments seeking to control pay in that way in the private sector, but not in the public and quasi-public sectors, where things are quite different due to the large sums of public money. It is perfectly legitimate for this place and for Ministers to be involved in some of that, certainly in setting the right environment for the determination of pay settlements. We will be in an unhappy, uncomfortable place if we continue to see the escalation of recent years.

The University of Bath is in my constituency, so I take a great interest in this. A motion raising concerns over the vice-chancellor’s pay was discussed during a meeting of the university court in February this year. The motion was defeated by the votes of the very people who had benefited from decisions on pay, despite the clear conflict of interest, which raises grave concerns about the governance of our universities.

I absolutely agree. The functioning of remuneration committees in universities needs to be addressed. Ministers have recently set out a vehicle for doing so, and I will come on to discuss the Office for Students and how it might be used to increase transparency about remuneration.

Remuneration committees are, to put it mildly, opaque. How they are constituted and how they operate varies, and their willingness to be open also varies greatly between institutions, as the University and College Union has made clear. Bath is probably not an exceptional example of transparency in the setting of vice-chancellors’ pay, and that lack of transparency means that the quality of those settlements is likely to be diminished. We know that well in this place, because we have been through some of this in our not-too-distant past. Sunlight is the best disinfectant, and the public getting to see what is going on often acts as a restraint on pay and benefits. Any transparency that can be linked to the process and to this part of the quasi-public sector has to be a good thing.

We also need to discuss what has happened to pay more generally within higher education. Much of the disaffection that has been expressed to me since the early summer has come from the academic staff of our universities. They have expressed some frustration that the rewards for institutions achieving great things appear to be accruing to higher management staff and vice-chancellors, whereas they have seen little benefit. They have seen their salaries increase by 3.8% over five years, which is in contrast to the average 17.4% increase for vice-chancellors, and the average pay for a tenured academic is a little over £49,000.

That seems rather strange, particularly in the context of performance-related pay. If we seriously believe in performance-related pay in the public and quasi-public sectors, we cannot simply except the majority of the workforce from that form of remuneration. That makes no sense, particularly since the drivers of quality in universities are clearly those at the chalk face—those at the laboratory bench. They are the drivers of the good-quality student experience and quality research for which this country is renowned and which we must maintain. Those people are being alienated by the egregious awards that they see coming out of remuneration committees to senior people in universities. The demoralising effect must be fully understood. When remuneration committees consider top-level pay and their legitimate need to attract high-quality people to the top of their institution, they must also understand more clearly the effect of such rewards on those who do the work.

Less than a week ago, a group of students came to my surgery telling me that rents on campus are going up by 8%. Is there any wonder that people think that students who are already under huge financial pressure will pay the high salaries of some of the management of the university? The public perception is there and it reflects badly on the reputation of our universities.

I am particularly concerned about university accommodation, as I said earlier. As I understand it, the position at the University of Bath is that accommodation is ring-fenced, in the sense that receipts from halls of residence are ploughed back into more halls of residence. The position in Bath is slightly unusual and it would certainly not be right, from what I have seen, to suggest that the University of Bath is using accommodation directly as a cash cow. However, it is certainly the case that the university is making a significant profit year on year from the accommodation it provides to its captive audience on the fringes of the city of Bath.

My hon. Friend is being incredibly generous in giving way, and that is typical of him. Does he agree that it is not just an issue of vice-chancellor pay but of senior management pay and the random way in which professors are paid from university to university, sometimes using significant amounts of funds? There is also an issue of pay disparity in senior management between men and women. There is some suggestion that BBC-type problems might be affecting our universities.

I am at a slight disadvantage on my right hon. Friend’s latter point, because my interest in this matter was sparked by Dame Glynis Breakwell, the vice-chancellor of the University of Bath. She is right at the top of the pay league table, so my local experience clearly does not bear his point out. I would not be surprised, however, if that was the case. The trouble is that the lack of transparency around a lot of this material in the university sector means that it is quite difficult to make that comparison. Were it to be the case—and I suspect he is right—I would clearly want the universities to address it, as it is simply not acceptable.

I was interested in my right hon. Friend’s earlier point about performance-related pay, and in preparing for the debate I did look at those universities that had significantly increased the level of vice-chancellor pay in the recent past and compared that with improvements as judged by the Complete University Guide set of metrics, which is used by most pundits and commentators to compare universities. The students certainly look at those figures very closely when deciding where to go.

I stared at the figures and compared and contrasted them for some time, and I could not see any correlation between improved pay for vice-chancellors and improved metrics. Indeed, there is some suggestion that there is an inverse correlation, which rather bears down on the point about performance-related pay. I can see very little evidence of it operating here. We need to be careful about performance-related pay, because it is set by remuneration committees and, unless its terms are available for scrutiny, the goals could be eminently achievable. That would make a mockery of the whole thing, which comes back to my central point: we must have transparency in how pay is set if we are to have any confidence in our current system.

I absolutely accept that vice-chancellor pay and benefit packages are a tiny part of a multi-billion-pound consideration in higher education. That point was made clearly by Lord Willetts when he was the universities Minister. He rightly sought to put the whole thing into perspective, but my worry is that in the remuneration of vice-chancellors and senior people in higher education we have a window into what might be going on more generally in the universities sector. If we are seeing such egregious examples of the misuse of public funds and student indebtedness, as I believe we are in this case, we wonder what is happening more generally in this sector.

Universities have charitable status. The Higher Education Funding Council governs that, with this subcontracted by the Charities Commission, which has written to me on this subject. It is important that we emphasise that charities—universities, in this case—have charitable purposes; they are meant to use their moneys for charitable purposes, to demonstrate charitable good. They should not be using money unless they can demonstrate that that expenditure in some way satisfies their charitable purposes.

The University and College Union’s report of February 2016, for which I am in its debt, sheds interesting light on this subject, because it discusses not only pay, but other benefits. Although many universities did not respond to the UCU’s request for information, and so we need to be slightly guarded about its conclusions, this report nevertheless gives us some useful data. For example, it shows that Bath’s vice-chancellor spends an average of £313 a night for hotel accommodation and that Middlesex University’s vice-chancellor spends an average of £448 a night, whereas the Independent Parliamentary Standards Authority will allow MPs £150 a night in London and £120 a night outside it. I make no comparison between MPs and vice-chancellors; what I would say is that £150 a night seems reasonable. People will not often hear a Member of Parliament being nice about IPSA, but I am nice about it; for the record, I think it does a good job in general and it has pitched that about right, because we can certainly get accommodation in London for £150 a night or outside London for £120 a night and we will not be living underneath the arches. How someone can spend £448 or £313 a night, inside or outside London, is a little beyond me—it is probably beyond my experience. That is an example of what I mean about the use of funds for charitable purposes. In what way does that expenditure advance the charitable purposes of these institutions?

It gets worse, however, because the report goes on to consider air fares. Twenty-one universities that responded to the request for information—there may well be more that decided not to respond, because they do not want to share their information, for obvious reasons—ranging from high-end Bristol to the frankly obscure, send their principals only by first-class or business-class air travel. That is a remarkable thing. The vice-chancellor of the University of Bath spent £23,000 in 2014-15 on air fares and, according to the report, flew exclusively by first or business class. Members of Parliament will know full well that IPSA will take a dim view of any Member seeking to claim for anything other than economy. The Minister may well be familiar with the ability of Ministers to fly long haul by business class if they have a meeting the next day—most Departments would allow that for Ministers, and I certainly recall it—but for short-haul flights of less than three hours most certainly that particular benefit would not be got. It seems excessive for universities—remember the point about their charitable status—to have their principals and senior staff fly first or business class habitually. In this day and age, that seems wholly excessive.

It gets worse still. Many universities provide accommodation for their vice-chancellors. The report lists accommodation occupied by vice-chancellors, and some of it looks rather attractive, particularly that in Bath. At No. 2 in the catalogue is the vice-chancellor of the University of Bath, who in 2014-15 occupied accommodation worth nearly £3 million, which I think would seem excessive to most. It would probably seem excessive to the parents who have recently delivered their children to university halls of residence, many of which are distinctly shabby.

My chief concern about all this is the lack of transparency. The University and College Union makes transparency the crux of its survey and report, and it is right to do so. In seeking the information it has sought, it has found that universities have in many cases been reluctant to engage, and we are beginning to see why. It found that 71% of those universities that responded had their vice-chancellors as members of their remuneration committees. In most walks of life, that would be considered a strange feature of a remuneration committee, even if the individual who was the subject of a particular discussion absented him or herself from the room while their issue was being discussed, because pay for an individual is not seen in isolation; it is seen against the backdrop of other senior pay within the institution and senior pay in other institutions.

I perceive a cartel operating in higher education, with vice-chancellors, and senior university staff generally, sharing each other’s remuneration processes to their mutual benefit. I am of course not in any way suggesting that there is some deliberate attempt to do that, but that seems to me to be how it might work in practice. In short, remuneration committees appear to be unsatisfactorily shadowy for organisations operating in the public or quasi-public sectors. We see instances of minutes not being published, and of redacted minutes being published. When we are dealing with public funds and student indebtedness, that is unacceptable.

My other concern is about leadership. Vice-chancellors are quintessential leaders; leading is what they do. If they are not leaders, they are nothing at all. Yet some of the most senior, such as the vice-chancellor of the University of Oxford, have been bleating about being paid less than footballers and bankers. That does not strike me as leadership. At a time of pay restraint in the university sector, as well as in others, it seems to me wholly inappropriate for the leaders of these organisations to be complicit in a system that gives them a pay rise that is way out of kilter with that being awarded to their staff. That is wholly wrong and I hope that, going forward, we will see the same sort of restraint among the senior echelons of higher education as we have seen further down the pay scale.

I shall finish by being nice about the vice-chancellor of the University of Bath, because Dame Glynis Breakwell has done a grand job, over many years, and the University of Bath is a fine institution. Dame Glynis deserves warm thanks and praise for all the hard work she has put in. I do not blame her for her extraordinarily generous remuneration package; I do blame the system that has allowed it. I am pleased that a lot of the things the Government have been talking about recently—particularly the Office for Students, which I know my hon. Friend the Minister will talk about in a moment—will help in that respect. In particular, the OfS will add transparency to the way in which senior people in higher education are paid, bearing in mind the charitable status of those institutions, and the fact that they are in receipt of large sums of public money and the proceeds of student indebtedness. If it manages to achieve that through reforming not only remuneration committees, but the general atmosphere and ethos around this, it will have done a good job and that will be an early indication that it will be a worthy successor to the Higher Education Funding Council.

The purpose of this debate was simply to discuss how we might restore some balance and confidence to this particular element of university finances. I fear that I have hardly ingratiated myself with senior university administrators. I hope very much that we will continue to remunerate appropriately these heads of our wonderful national institutions, but most can agree that pay for university vice-chancellors has become excessive and that, in the months and years ahead, we need to do something about it.

I congratulate my hon. Friend the Member for South West Wiltshire (Dr Murrison) on securing this important debate on university vice-chancellors’ pay. I am grateful for the opportunity to set out how the Government have prioritised value for money in the higher education sector, and to touch on our plans to address the issue of senior staff pay.

With students and taxpayers heavily invested in our world-class higher education system, the Government are determined that value for money should be a key priority. To that end, the Higher Education and Research Act 2017 introduced reforms to increase competition between providers and to promote greater choice for students.

The Act introduced a new regulator for the higher education sector, the Office for Students. Once it comes into being next year, the OfS will develop a new risk-based approach to regulation. For the first time, all registered higher education providers in England will be part of the same system. This new regulatory framework will promote diversity and innovation in the higher education sector in the interests of students. It will drive up quality and standards, incentivise better teaching and learning, and inspire the growth of sector-relevant skills to increase employability.

Under the Act, one of the duties of the OfS is to have regard to the need to promote value for money in the provision of higher education by English providers. It will ensure more transparency for students so that they can have greater confidence that their money is being well spent.

We introduced the Teaching Excellence Framework with the intention of raising the standard of teaching in higher education and giving students clear information about where they are likely to receive good teaching and to get great outcomes from their time at university. Almost 300 providers took part in the first trial year of the TEF, including all but two English universities and more than 100 colleges and private providers. Excluding those with provisional ratings, roughly 75% of entrants received either a gold or silver award.

We are making it a priority for students to know their rights and to have fair contracts that enable them to take action if the reality of their experience does not match what was advertised. With a view to ensuring students obtain value for money, the OfS will use its powers, including setting a regulatory condition for providers to create an environment in which providers fully meet their obligations to students as consumers, and students will be able to build an understanding of their corresponding rights.

If a student is not satisfied with their course or provider, they may wish to switch to a different one. That has been difficult for many students up until now. The Act places a duty on the OfS to monitor and report on arrangements for students to transfer, and empowers the OfS to facilitate, encourage and promote such arrangements.

The Department for Education will shortly be launching a consultation on behalf of the OfS. That will include a proposed condition of registration requiring providers to publish information on their student transfer arrangements.

Many universities are large and complex organisations. Highly skilled and talented individuals are needed to run these organisations effectively. In some cases, universities may be competing internationally to secure the right managerial expertise. Higher education providers are rightly private, autonomous and independent institutions—they are not in the public sector and they are not really in the quasi-public sector—and they are solely responsible for setting the salaries of their staff. Nevertheless, these providers also have a public service mission, as my hon. Friend mentioned. With public funding providing the sector’s most significant single source of income, there is a legitimate public interest in promoting the efficiency of providers. This must include senior staff pay.

There is a risk that increasing salaries diverts money away from a provider’s core mission of teaching and research. Exceptional pay can only be justified by exceptional performance. The Government have consistently used their annual grant letter to HEFCE to call on universities and their remuneration committees to exercise restraint on senior staff pay. In my most recent letter, I made it clear that efficiency must include demonstrating restraint in setting senior pay. The Department’s consultation will contain proposals reflecting my requests that the OfS introduces a new condition of registration requiring the governing bodies of providers with access to student support to publish the number of staff paid more than £100,000 a year. For staff paid more than £150,000, providers will be required to publish their justification for these salaries. In the event that a provider fails to meet the requirements of this condition of registration, the OfS will be able to use its powers, which include monetary penalties, to take action.

The OfS will also issue guidance to help providers to meet the requirements of the condition of registration, and use its power to investigate the governance of an institution through assessments of management effectiveness, economy and efficiency where there are substantiated concerns.

I thank my hon. Friend for his work on this. Will the consultation also look at potential gender-related pay disparities?

I am grateful to my right hon. Friend for mentioning that because we do indeed plan to ensure that such issues are considered by the OfS.

Arrangements will also be made to compile and publish data on the levels of HE senior staff remuneration beyond what is required by the registration condition, with a particular focus on protected characteristics such as gender and ethnicity. Further to this, I have called on the sector to work through the Committee of University Chairs to develop and introduce its own remuneration code. Such a code should encourage greater independence of remuneration committees, the publication of the pay ratio of top to median staff pay and explanations of top pay increases that are greater than increases in average pay in an institution as a whole. I am pleased that the CUC has confirmed that it plans to take forward the development of this code.

I am confident that these actions, in addition to our wider reforms to the higher education sector as a whole, will deliver much greater transparency and accountability, as well as improved value for money for taxpayers and for students. We have legislated to facilitate greater competition within the sector and choice for students. We have successfully promoted measures such as the TEF to help to students to make better informed decisions that affect their futures and enhance teaching quality, and we have acted to address escalating senior staff pay.

Let me be absolutely clear, for the avoidance of all doubt, that I want to see the relentless upwards ratchet in senior staff pay come to a halt, and I am confident that the measures the Government have put forward through the OfS will achieve that. I hope that my hon. Friend the Member for South West Wiltshire is reassured by the Government’s strong action and, once again, I congratulate him on securing this important debate.

Question put and agreed to.

House adjourned.