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Higher Education: Funding

Volume 721: debated on Wednesday 27 October 2010

Motion to Take Note

Moved By

That this House takes note of the Independent Review of Higher Education Funding and Student Finance.

My Lords, the late John Masefield, poet laureate, once wrote that:

“There are few earthly things more beautiful than a university: a place where those who hate ignorance may strive to know, where those who perceive truth may strive to make others see”.

I welcome this opportunity to debate the central role that higher education plays in our country so soon after publication of the outstanding report produced by the noble Lord, Lord Browne. Last week, my colleague the Minister for Universities and Science placed the noble Lord’s report on a par with those of two distinguished former members of this House: Lord Robbins and the much missed Lord Dearing. I very much echo that view. The noble Lord’s review has earned many plaudits, and rightly so. Of particular importance to me is the spirit in which he has conducted it. While the focus was clearly on funding and student finance, his abiding purpose has been to secure the long-term future of so many great institutions, that they may continue to be the beacons of wisdom and tolerance that Masefield praised.

I cannot emphasise enough that our universities are and must remain centres of free thought and discovery, and seats of learning in both the sciences and the arts. While the Government, who are currently formulating a detailed response to the noble Lord’s report, are clearly concerned with universities’ contribution to our economy and skills base, they will never lose sight of the wider purposes of higher education. There are many experienced figures on all sides of this House whose opinions I look forward to hearing today. Although my own experience is more modest, I am familiar with the HE sector from a number of perspectives: as a graduate and, latterly, a governor of what is now the University of Plymouth and as a governor of Imperial College. I also take a close interest in the UK’s outstanding research base through roles in several organisations, including the Foundation for Science and Technology and some work with the Royal Society.

Perhaps I may begin by reminding your Lordships of the context in which the noble Lord's report was published and by highlighting some of its central arguments. I defer to him, of course, on the detail.

We should not forget that it was the previous Government who invited the noble Lord to undertake this review, but on a cross-party basis. The coalition Government hope that consensus on the future of HE will continue. What cannot continue, however, as the noble Lord concludes, is the current unsustainable system of funding, and any reform must be reconciled with the parlous state of the nation's finances, which the Chancellor addressed in last week's comprehensive spending review. The Chancellor has announced that the overall resource budget for HE—excluding public funding for research, to which I will return—will fall from £7.1 billion to £4.2 billion by 2014-15. This is because we have accepted the main idea in Browne—that money for universities should flow through students rather than the funding council HEFCE. The noble Lord’s was, of course, a review on higher education in England, but it is of interest across the UK. My ministerial colleagues and I will work with the devolved Administrations on how the proposed reforms in England might affect Scotland, Northern Ireland and Wales, so that they can decide how to proceed.

The key point, though, is that money is not being withdrawn from the system but going into the hands of students by giving them loans to cover their tuition. With funding following students, whether they undertake degrees in Portuguese or particle physics, there will be stronger incentives for institutions to improve the quality of teaching and information that they provide. Indeed, it means that those universities which offer a better student experience from the lecture theatre to the careers service, from the library to the union’s bar, can expand to accommodate greater numbers of applicants. That process of universities responding to the expectations of more discerning students is a powerful means to drive innovation.

It is also by far the best option for maintaining quality in the sector, something which would have been impossible had we decided to cut the unit of resource per student or introduced a graduate tax. The noble Lord rejected both as unviable. Neither is compatible with his desire, and ours, to preserve UK universities among our greatest national assets. Higher education continues to deliver a significant lifetime earnings premium to its beneficiaries. The noble Lord has concluded that graduates should make a greater contribution to the cost of their education, but within a system that is both fair and progressive. It is to these fundamental principles that I now turn.

It bears repeating that the noble Lord, Lord Browne, was entirely right to insist that there must not be any up front tuition fee for students. The Government are committed to social mobility. We know that going to university is often a transformative experience, opening new vistas for students and great opportunities. Initial costs would deter people from less affluent backgrounds from applying to HE. For the same reason, we welcome his ground-breaking recommendation that part-time students be exempt from up front fees. This is not only fair in making HE more accessible to older students or people whose work or family commitments make full-time study impossible; it will also stimulate innovation in the sector as universities develop different modes of delivering different courses and degrees.

The goal of social mobility informs other features of the noble Lord's report, including his recommendation for a more generous maintenance grant available through a simplified system which the coalition is now considering. Then there are the graduate contributions linked more progressively than under the existing arrangements to an individual's ability to repay. Not all graduates, of course, go on to lucrative jobs. The noble Lord has proposed raising the income threshold below which no graduate would begin to make contributions. Above the threshold, higher-earning graduates would pay a real rate of interest, but repayments would cease should their salary decrease, say, or they choose to look after a young family. His modelling would mean that the top third of graduate earners would repay more than twice as much as the lowest third. We believe that is fair and progressive.

When it comes to setting higher tuition graduate contribution levels, the Government are keen, like the noble Lord, that institutions demonstrate how they will support the vital work of attracting applicants from less affluent or non-traditional backgrounds. Universities have undoubtedly made progress on widening participation. However, the Office for Fair Access has found that the participation rate among the least advantaged 40 per cent of young people at the top third of most selective universities “has remained almost flat” since the mid-1990s. The Government will support universities to raise their game on access by improving advice for young people at school and college, for example. Indeed, the Deputy Prime Minister has already pledged £150 million for a national scholarship scheme to improve access for students from families of modest means.

It should be clear from this brief summary that the Government accept the overall thrust of the noble Lord’s report. We are currently looking closely at the detail. That is deliberate; it is crucial that we proceed on a sound and sensible basis. There are relatively tight deadlines to ensure that we can amend regulation around fee structures and student support in time for universities to include accurate information in their prospectuses. We will also need to make some changes to primary legislation to adopt the noble Lord’s proposal for a real rate of interest on repayments. At the same time, it is not only prospective students and their families who are dependent on our getting this right but universities themselves and a country urgently seeking to balance the books. We need to handle any transition with sensitivity.

There was another dimension to the spending review that was of huge significance to universities: the decision to protect the overall level of funding for science and research programmes in cash terms. This ring-fenced settlement, worth £4.6 billion in each of the next four years, is unquestionably good news. Across the country we have excellent university departments with the critical mass to compete globally and the expertise to collaborate with businesses and other organisations. The settlement should mean that we can continue to support them. I remind noble Lords that the Research Councils cover the arts and social sciences, in addition to the physical and life sciences. Moreover, Sir Bill Wakeham, at the behest of the Research Councils and Universities UK, has identified a range of efficiency measures, which universities can now pursue to mitigate the effects of inflation and preserve research funding in real terms.

From my association with Imperial College, I recognise the value of a stable investment climate. It allows teams of researchers to plan ahead and gives business, both domestic and international, reassurance that our excellent scientists will be able to complete projects. The same is true for medical charities and other investors. It is vital that we maximise returns on this investment, continuing to produce outstanding research more cost-effectively than any other country in the G8. The Government will continue to support capital investment in priority areas, hence the recent allocation of £69 million to the Diamond synchrotron in Oxfordshire, where scientists conduct ground-breaking research in the life, physical and environmental sciences. Elsewhere, my department and the Department of Health are co-funding the UK Centre for Medical Research and Innovation, alongside medical charities and University College, London. For similar reasons, we welcome the progress that HEFCE is making on developing an assessment framework that combines recognition of the highest levels of research excellence with reward for the impact it has on the economy and society. We will also work with HEFCE to reform the higher education innovation fund to increase the rewards for universities that are most effective in business engagement.

It would be foolish to deny that much work remains to keep the country’s universities on a secure footing, and equally foolish to suggest that the Government have all the answers. Nevertheless, in adopting the bulk of the noble Lord's recommendations—in spirit, if not always in detail—we will not lose sight of what a modern university is for. That is certainly the case in seeking to improve the experience of students so that they may embark upon the next stages in their lives with the skills and confidence to do rewarding jobs, and I mean “rewarding” in the broadest sense. It is certainly the case in making sure that one's financial circumstances are no obstacle to a higher education and at an institution where one's talent and ability can best be realised. It is certainly the case in terms of allowing outstanding researchers, home-grown and international, in English literature as well as engineering, to carry on producing world-class work.

However, I make no apologies for stating that the Government also want universities to help drive economic growth. As the noble Lord, Lord Browne, notes in his report:

“Higher education is a major part of the economy, larger in size than the advertising industry, and considerably larger than the aerospace and pharmaceutical industries”.

In fact, almost every industry, and certainly the trio I have just mentioned, is influenced by the teaching and research that goes on in HE. We want university/business links to go from strength to strength in terms of R&D and in tailoring courses around the needs of employers.

We must harness this valuable asset in a way that gives universities the best opportunity to thrive, and that is by respecting another defining feature of UK institutions besides their traditions and their capable staff. I refer to their long-standing autonomy. Our universities will make a greater contribution to society and the economy by pursuing their various missions with maximum independence from the state.

Better teaching and world-leading research, improved access and social mobility, closer links to business and public services, affordability and autonomy are the principles that will underpin any reforms, and the Government will manage them cautiously with a view to a stronger, more vibrant HE sector. I look forward to the debate and beg to move.

My Lords, the Browne report makes a significant contribution to the debate about the future of higher education in this country, and I congratulate the noble Lord, Lord Browne of Madingley, and the others who were involved in producing it. It is right to say that universities need further funding to sustain their pre-eminence and that students should make a significant contribution to their education. As the Minister said, that education confers distinct career advantages and monetary gains. It is right to reject a graduate tax for several reasons, one being that it would take some 20 years before there was any return.

These things having been said, I find myself in fundamental disagreement with the underlying philosophy of the report and, therefore, with some of its emphasis. It treats higher education as a market in which students are consumers, but higher education is not a market, at least in any orthodox sense. Universities are a public good and are recognised as such everywhere in the world, including in the United States. In other words, they provide benefits from which all citizens gain. These benefits go far beyond utilitarian benefits, which are pointed up in the report. They are far more than just the training of doctors, scientists, engineers and so forth. Universities educate for citizenship. They help create the cosmopolitan outlook that is so fundamental in a diverse, globalising world. This impact stretches well beyond those who receive a university education. It is vital to stress that the arts, humanities and social sciences play an essential role in fostering such a cosmopolitan outlook.

If the report is implemented as it stands, we risk ending up with the worst aspects of the American university system without its redeeming features. I would point out to noble Lords that these redeeming features are substantial. I will list four of them. First, top universities in the United States can operate a “needs-blind” admission system because of the large endowments that they have. British universities will never approach those endowments, certainly in anything like the near future, and will not be able to operate such a system, which is of direct and immediate help to students from poorer backgrounds.

Secondly, in the United States, students can work their way through university because of the credit system, which makes it easy for students to drop in and drop out of university and later resume their university courses. We have kind of analogues here, but we do not have the same system, especially as affects the top universities. This favours students from poorer backgrounds in the United States. I welcome the stress on part-time degrees, but it does not make up for this difference, which is quite fundamental in the nature of university courses in this country.

Thirdly, the state university system is very prominent in the United States. It plays an important part in the university system as a whole. The state university system is in some part, and in some states in large part, publicly funded. Home students pay relatively low fees. This also helps students from poorer backgrounds.

Finally, states such as California have a wonderful system of community colleges. Their FE colleges have some similarities to ours, but they are not a direct analogue. The community colleges allow students from poorer backgrounds to get in and to work their way through their degrees, but they also act as feeder institutions for the top universities. I used to teach at the University of California, which has such a system, at UCLA, Berkeley and Santa Barbara. It was terrific to see students who started right at the bottom of the system get into the elite universities. This included students from all sorts of ethnic backgrounds and underprivileged backgrounds.

These factors by and large do not apply in the United Kingdom. We therefore have to look for other safeguards. Lacking these mitigating factors, the reforms proposed in the report would unquestionably accentuate inequalities and deter poorer students. Richer parents will pay their children’s fees up front, consolidating a track of privilege that already links private schools and the elite universities.

Just as important—and this worries me a lot, given what I have said about the public nature of higher education—the arts and humanities could go into steep decline if we have simply a student finance driven system, with leading departments having to close. According to the QS rankings, we have the number one university in the world—Cambridge. We have four other universities in the top 10. We do not really need as radical a market-driven approach to support and expand the system that we already have. I look to the Liberal Democratic segment of the coalition to try to ensure that social justice remains as important as excellence in whatever emerges from the debate on this report.

It seems relatively easy to see what kind of system you could have which could reconcile these things. It would have three components. First, the massive cuts that universities are going to be asked to take could be reduced. They probably would have to be if there was going to be a net benefit to universities. Secondly, fees should be capped—at around £7,000. That will ensure that quite a lot of money goes into the system, but would also prevent some of the inegalitarian consequences which otherwise will ensue.

Thirdly, the Government should consider introducing specific support for the arts, humanities and social sciences, which are an elemental part of university education. We cannot allow those subjects simply to decline or diminish on the basis of a simple market-driven system. We need some way of reconciling that with support for these essential subjects which contribute so much to citizenship.

In conclusion, it is possible to preserve and enhance excellence in a system that also preserves the essential public benefits which universities offer and which protects the interests of those from deprived backgrounds.

I thank the Minister for the opportunity to discuss this important report from the noble Lord, Lord Browne, on proposals for student financing. I look forward to hearing other contributions to the debate because, as the Minister made clear, the proposals are still being discussed among Ministers and no final decisions on how the report will be implemented have been made.

Nevertheless, there has been some indication that Ministers will accept a cap on fees of somewhere in the region of £7,000, which would alter, in many senses, some of the proposals put forward by the noble Lord, Lord Browne. At that level, as the noble Lord, Lord Giddens, indicated, there would be no subsidy for the arts, the humanities or the social services: a graduate contribution would meet the whole cost of provision.

My right honourable friend in the other place, Vince Cable, Secretary of State, indicated that he had no alternative; he was confronted by the need to find savings of over £3 billion from his budget. A large proportion of his budget in BIS is made up of the science budget, the skills budget and the higher education budget. He judged—I think this is broadly welcomed in the House—that there was no room for cutting the science budget; that science, as the creator and nucleus of growth in this country, should be, and has been, left in cash terms at the level that it was. Similarly, the skills budget was vital to growth prospects. That left only the university budget and it was decided that there was a good case for asking students to pay a larger proportion of the cost of universities, and the report of the noble Lord, Lord Browne, gave an opportunity to do so.

There are a number of good features in the report. I particularly welcome the proposals for part-time students, a cause for which I have fought long and hard in this House for many a year. I am delighted to see that at long last there is to be pro rata provision in loans and grants for part-time students. It looks to be an important change in the structure of university provision in this country because it will provide an incentive, which to date has been lacking, for students to attend their local universities or further education colleges on a part-time basis. For some students, studying for the part-time two-year foundation degree—which, in effect, is the old HND—might be more appropriate to their capabilities and provide them with a stepping stone to further progression if needed. They are practical, vocationally based foundation degrees which, in many senses, meet our skills needs better than some of the wider degrees currently provided. It is a long-fought-for and important option.

I also welcome the proposition that, effectively, the students should carry the money with them; that universities should have to compete for students by offering good value for money in the courses that they provide.

Teaching has for a long time played second fiddle to research, and the long overdue recognition that teaching is important and should be valued in its own right in universities is implicit in the report of the noble Lord, Lord Browne. I like that very much. I should perhaps declare an interest as a former university teacher and I remain a visiting fellow at the University of Sussex. I can remember having like other academics to fill out diaries about how I used my time. It became clear from the output of those diaries that, far from research subsidising teaching, it was the other way round: the teaching budget in universities was subsidising research.

The proposals have also given vice-chancellors what they have long demanded: a stream of funding which comes directly into their coffers rather than, as at present, via HEFCE. That the Government are to keep a cap on it makes it clear that the flow of funding is still regulated by government. Since the Government are borrowing the money to pay the fees, the notion that the arrangement is independent of government is hardly correct.

I have some reservations about the merging of HEFCE, the QAA, OFFA and the Office of the Independent Adjudicator, all to create the superquango of the Higher Education Council. The issue about which I am particularly unhappy was voiced at length in last week’s Times Higher Education; that is, that places in universities are to be regulated by the Government setting the UCAS tariff for student access to universities. I do not see how that could possibly work; it means uncertainty both for students and the universities. It will not be known how many students will come in and in which areas.

What I find most difficult about the proposals is that, for many young people and the not-so-young, the debt will never be paid off. The IFS analysis of the proposals show clearly that, with fees of more than £6,000 a year, more than half of graduates would make repayments over 30 years and never pay off the loans. As the IFS points out clearly, the system amounts effectively to a graduate tax—a 9 per cent supplement on income tax for anyone earning more than £21,000 until they pay off the accumulated value of the debt. Approximately half the students will never pay it off.

The advantage of the proposals of the noble Lord, Lord Browne, over the present system is that it is more progressive: those whose parents’ income is low and whose earnings are low would benefit most because they would qualify for up-front grants and never have to pay the full interest rate or pay off the loan. The charging of the full rate of the interest on those earning more means that the higher earners would pay more. Since only the higher earners would pay off the debt, they would meet all the costs, whereas the low and middle earners, whose debt is never paid off, would benefit from the subsidy implicit in not having the debt paid off. As has been made clear by my noble friends, charging the real rate of interest with a high threshold for repayment is therefore a more progressive system than the present system with its lower threshold and the zero real rate of interest.

Most difficult is the situation that confronts the middle earner—let us suppose that they are a teacher or a social worker whose earnings start, at age 21 when they graduate, at about £21,000 a year and rise by their early 40s to something like £38,000 a year. Through their earning life, they will pay the 9 per cent supplement on income tax—a marginal rate of income tax on all earnings over £21,000 of 40 per cent, rising to 50 per cent when they hit the higher-rate threshold at about £37,000. We may argue about the disincentive effect of raising income tax by 1 per cent or 2 per cent, so a 9 per cent supplement must be a major disincentive. Is it fair that students whose parents have capital and will therefore pay off their loans when they graduate will not have to pay the 9 per cent supplement? It is this feature of the system that I find most difficult. Why should those who come from lower-income families and who earn reasonable but not very high salaries have to live with the incubus of an 9 per cent extra rate of tax for much of their working lives, especially at a time when they are struggling to get into the property market and provide a home for a family? I hope that the Government are thinking of a very generous system for a scholarship scheme. My noble friend mentioned that they would be introducing such a scheme, and I hope that it will be somewhat akin to the old state scholarship scheme that was around when I went to university. I hope, too, that in public service jobs that do not pay too highly there will be very generous golden hellos, paying off the debt for those students who fill those jobs where there are shortages, such as social work or science teaching.

The student loans are coming from the Government. My noble friend said very firmly that money was not being withdrawn from the students; they do not have to pay upfront. We have rather over 1 million students in this country at the moment. If the cap is set at £7,000, it suggests that the student loan book will rise by £7 billion a year, with the maintenance loans on top of that of something like £10 billion a year. The wonders of resource accounting mean that most of that cost will go off the books and not become part of the national debt. If the Government succeed in selling the student loan book, as they want—it is called securitising and is very much what Northern Rock did with its mortgages—the cost will be only the residual cost of the discount required to sell it off, which is probably something like 30 per cent. Nevertheless, that means that there is a net cost to the Government of some £3 billion a year. The original saving on the university budget amounts to £2.9 billion. What the whole exercise has done is to translate that £2.9 billion on current account into £3 billion on capital account. I sometimes wonder whether that is worth while.

The provision of education has long been the mark of an advanced and civilised society. It provides skills useful to individuals in fashioning a career or a vocation, inculcates a sense of shared heritage and broadens the minds of those who take part. It provides people not just with knowledge today but with the prospect of acquiring knowledge tomorrow by creating a lifelong habit for learning. At root, education is a path to enlightenment, social mobility and ultimately self-fulfilment. The goal of any nation must be to continue to improve and extend those benefits to every corner of society irrespective of birth or financial means. That is the context of this debate today. I am very grateful to the Minister for bringing this important subject to the House.

Over the past 11 months, I have chaired an independent panel tasked with reviewing the state of higher education in England. I should like to talk through the thinking behind our conclusions. Our report noted a number of positives. The UK has a world-renowned higher education sector, with three universities in the global top 10 and 15 in the top 100. The sector educates more than 2 million students every year across a diverse range of institutions, including universities, colleges and specialist institutions, and generates around £60 billion of output for the economy.

Besides those public benefits, higher education also delivers substantial private benefits to those taking part. Over the course of their working life, the average graduate earns around £100,000 more than if they had not gone to university after A-levels. That graduate premium is substantially higher than the OECD average. In considering the case for reform, better reflecting the balance between public and private benefit was a crucial first step. However, before designing a new system, we first had to understand where the current system was falling short of expectations. For us, that revolved around three principles.

First, there was quality. Institutions are now better funded than they were a decade ago, but they have limited means of accessing additional investment and income. That is because there is a cap on what they can charge and a cap on how many students they can admit. Students themselves have also failed to report a big improvement in their experience of higher education. There was a strong feeling that the extra student investment was buying little in return.

The second principle was participation. While more students than ever are attending and entering higher education, there remain insufficient places for everyone—perhaps as many as 30,000 qualified students were unable to gain a place at university this summer. We also found that, while access was improving, the social composition of those attending the most selective universities has barely changed since the mid-1990s. Compounding this problem was the inequity of government support being provided to full-time students and not to part-time students, many of whom may have missed out on what may be called the traditional university experience at 18.

The third principle was sustainability. Early on in our review, it became very clear that our higher education institutions lacked resilience to public spending cuts; most of their income still came in the form of block teaching grant provided by government. Although it was not our job to determine the level of spending cuts, we had to ensure that our system allowed institutions to replace public funding with alternative sources of income. We also had to ensure that whatever level of spending was decided on by government, it was affordable for taxpayers over the long term. It does not serve the public interest to keep tinkering with higher education funding.

Let me set out our recommendations to address the shortcomings that I have identified. I begin with quality. A good way to improve quality in any organisation is to make funding dependent on it. For this reason we have proposed a radical overhaul of the way institutions are funded. Instead of receiving most of their money through a block grant for teaching, we proposed that funding must instead, as the Minister said, follow the student through government loans. We put student choice at the heart of our system. So as to ensure that choices are as informed as possible, we have recommended that better information, advice and guidance be made available to every school pupil. School pupils today make choices but they do not make them on good information, advice and guidance.

To improve the student experience, we have proposed that there should be a new single regulator in higher education with powers to enforce and uphold new student charters—a document which for the first time will outline what each university will offer students in return for their investment. Although we have slightly tightened regulation in terms of quality and access, we have significantly loosened it in terms of student numbers and tuition charges. Institutions will face no restrictions on what they can charge for tuition, although in practice they will have to think very hard about whether they offer good value for money.

We have made further recommendations to ensure that higher charges do not impact on participation. For a start, we have recommended that money be made available to finance a 10 per cent increase in student numbers over the next three years. We should end the annual disappointment for tens of thousands of qualified students who may miss out on places each summer. To ensure that no one is prevented from entering higher education, we have maintained the principle that no student be asked to pay tuition costs up front. For the first time, we have also extended that principle to the 40 per cent of students studying part-time. To cover living costs, we have also maintained government loans for all students, with more generous non-repayable grants offered to those from households earning less than £60,000 a year. All that means that no student will pay for higher education; only graduates will pay, and only then according to the level of their success. We have recommended increases in the threshold at which graduates start to repay their loans from £15,000 to £21,000—importantly, indexed with wages. The Institute for Fiscal Studies has estimated that under that system the bottom 30 per cent of graduates will pay less than they do today. Only the top 30 per cent of the graduate output will pay back the full amount.

As the Secretary of State said on the day our report was launched, that is fair and progressive. Crucially, it is also sustainable. After reforming the system of funding twice in the past decade, we believe that the higher graduate contribution outlined in our report reflects a more sustainable balance between public and private funding. Institutions will no longer be paid just for being there. Public money will instead be used more efficiently to invest in priority courses and courses that might be at risk, and to support those on low incomes.

For Government, bigger loans will remain affordable through the addition of a low rate of interest and a levy on institutions charging more than £6,000 for tuition. The reason for the levy is that it is designed to avoid the perverse outcome that institutions charging the most would receive the biggest government subsidy. But most importantly of all, our recommendations ensure sustainability by creating a system that can respond dynamically to what students want.

Ours is a system that loosens controls on institutions and forces them to think more clearly about their mission and how they can best serve their students. It creates a pathway to a larger, better funded and more dynamic university sector that can retain its deserved reputation as one of the world’s best. Crucially, it is a fairer and more progressive system—a system in which people study according to their ability to learn, not their ability to pay.

My Lords, I join others in thanking the noble Lord, Lord Browne, for his report and for his words today.

I would like to reflect particularly on the raison d’être of universities and the impact of this report upon it. Throughout Europe, the origins of university education in Christian culture are abundantly obvious. Salamanca, Florence, Krakow, St Andrew’s, Oxbridge and elsewhere: even the buildings tell of Benedictine or similar origins, rooted not only in the church but in a broader Christian humanism underpinned by a belief in a liberal education. Universities old and new have been founded upon a commitment to human well-being, holistic development and a pursuit of truth for the common good. That commitment is resonant with that earlier European humanistic tradition.

For the church, that understanding is rooted in Christian faith but not unique to it. The church has a continuing commitment to people in the lower socio-economic groups, the poor and the marginalised. It is concerned that, even in the days of austerity, steps are taken to maximise the opportunities for all people to fulfil their potential, whatever their background. In the context of this debate, that would mean ensuring that people traditionally underrepresented in higher education had the opportunity to study at this level. We have been much encouraged about progress in that direction in recent years, and believe that everything possible should be done to maintain that momentum.

In the light of that, there is much within the noble Lord’s report that we would welcome. Here we include, first, the fact that no student will need to pay for their university education up front, as we have heard, and the increase in the salary threshold at which graduates start repaying their loans. Secondly, we welcome the requirement on universities to develop access commitments indicating how they intend to widen participation. This dovetails with the commitment to raise aspiration among those from lower socio-economic groups, encouraging them to apply to the most selective universities. Thirdly, we welcome the increased government support for part-time students.

There are, however, issues that concern us. Student debt is a major concern, not only its size but its common acceptance as standard. At some point debt must discourage applications, especially from within materially poorer sectors of society. Of course, this report comes as a ray of light to some universities in the light of the proposed cuts outlined in the comprehensive spending review. Without the support of student fees, many, if not most, universities simply would not now be able to continue. However, this is a risky wager. Increasing fees will be the answer only if students decide that they are prepared to incur serious debt.

Implicit in the understanding of the European humanistic ideal of education was a continuing commitment to a liberal education. In the report, there seems to be a largely unexamined premise that the primary role of universities is to prepare people for work and to serve the economy. Worryingly, this feels part of a recent trend, seen for example in the previous Government’s framework document for higher education of 2009, Higher Ambitions: The Future of Universities in a Knowledge Economy. This trend goes back significantly further—more than three decades—to James Callaghan’s speech at Ruskin College, Oxford in 1978, which heralded the development of a core curriculum. This was seen to be the foundation for a more instrumental and utilitarian approach to education at all levels.

Of course, the desire for people to find employment and service the economy are clearly goods to be welcomed. Unemployment and poverty are a blight on the lives of individuals and whole communities. My experience over nearly eight years in west and South Yorkshire has made this abundantly obvious. We are nevertheless profoundly concerned that the economic function of universities is emphasised to the detriment of their wider educational role, as the noble Lord, Lord Giddens, suggested. Indeed, there is a danger that they are seen simply as one more set of businesses aimed at encouraging appropriate skills for commerce and industry. The present report appears to encourage such a view, seeing some disciplines—mainly science, technology, language skills and medically related courses—as strategically more important than others.

Universities should certainly continue to receive direct funding from the public purse to teach those disciplines. Our concern is that other disciplines such as the humanities in general—including the arts, social sciences, and most languages—should also receive such support, otherwise departments will inevitably close and the insights of such disciplines will no longer be a part of our public vocabulary. The humanities, far from being strategically less important, contribute an essential understanding of what it is to be human and how we can best live together in creative unity. Witness, for example, the continuing debates on how to create societies where people of different cultures and faiths live together in peace and justice. Such debates require us to engage with several of the humanities—including sociology, philosophy, theology, history and others—to underpin our understanding of our own culture and to work effectively for its future. I would go so far as to say that society needs a soul; I use that term in the way that it has been used concerning a developing Europe and not in a narrowly Christian idiom.

Indeed, Her Majesty's Government have drawn attention to our corporate responsibility in creating a big society. To do so, I would argue, we need tools to describe and analyse our society and culture. Moreover, these tools can be transformative of society. Laying hold of the treasures of human wisdom will stimulate the imagination of this and future generations and direct their passion for the common good. Indeed, the present report notes at one point:

“Higher education matters. It helps to create the knowledge, skills and values that underpin a civilized society”.

That quotation is reminiscent of the last major government-requested report, mentioned by the noble Baroness in her introduction to the debate—the 1997 report, chaired by Lord Dearing. The Dearing report, Higher Education in the Learning Society, argued that universities are,

“to play a major role in shaping a democratic, civilized, inclusive society”,

and to be,

“part of the conscience of a democratic society”.

Still earlier—in my early youth—the Robbins report, which gave birth to the new universities of the 1960s, talked of transmitting a common culture.

There is a noble educational tradition, rooted in the origins of western European culture, that has affirmed the central role of universities in shaping society. A good and broad university education will shape both individuals and the community of which they are part. Human beings are neither simply economic agents in a marketplace nor individuals isolated from one another. We are—body, mind and spirit—creatures of the soul as well as the physical, fed by music, art and worship as well as by science. All of these are important to the holistic development of culture and society.

A man who is a treasury of quotations, GK Chesterton, noted that:

“The virtues have gone mad because they have been isolated from each other and are wandering alone. Thus some scientists care for truth; and their truth is pitiless. Thus some humanitarians only care for pity; and their pity... is often untruthful”.

For the sake of the individual and the common good, our universities must remain places of free-ranging inquiry into what it is to be human and what it means to live together in a civilised way. To neglect those disciplines that enable us to do that would be a serious failure indeed. The novelist and scholar David Lodge wrote:

“Universities are the cathedrals of the modern age. They shouldn't have to justify their existence by utilitarian criteria”.

What is the essential point of a university? The currency of the word has been successively devalued, but a university is a body that engages in research. It is not a glorified high school, technical school or polytechnic, but an institution of higher learning. Successive Governments have offered people at universities courses that are not university courses at all. That is what we should be looking at. I speak as a former Minister in charge of higher education.

My Lords, I will resume where I left off. I very much welcome the opportunity to debate the Browne review. It is a great pleasure to follow the right reverend Prelate and I endorse every word that he said. I declare an interest as a university professor of politics. I am also co-chair of the Parliamentary University Group and chairman of the Conservative Academic Group. I am therefore not short of advice, although the advice that I miss on occasions such as this—as, I know, does the House—is that of the late Lord Dearing.

My starting point is to reiterate what the report notes about the quality of higher education in the United Kingdom and about its contribution to the wealth and—following the right reverend Prelate—development of society. We have one of the best—certainly one of the most cost-effective—systems of higher education in the world. We are second only to the US in research ranking, we continue to be to the fore in attracting overseas students and we outstrip many of our competitors despite spending less as a percentage of GDP on higher education. As has been said, spending on higher education should not be seen as a drain on public spending, but as a necessary investment for our future economic growth. There is a private gain for students in higher education, but a massive public gain in terms of the contribution to the wealth of this country. As the right reverend Prelate said, this is not just the economic but also the spiritual wealth of the nation.

The noble Lord, Lord Browne, and his team, have produced a seminal report. It derives from a fundamental question: can the state afford to pay for a massive expansion in the provision of higher education? When I went to university, I was in a minority of my age cohort. Once we move to a situation where more than 40 per cent of the age cohort is in tertiary education, cost becomes a critical issue. How are we to fund expansion? We have in effect conceded that the cost cannot be met solely from the public purse, and I do not see how, with continued expansion, we can turn the clock back.

Over the past decade, undergraduate enrolment in HE institutions has increased overall by 28 per cent. If we are to expect students to make a contribution, then I accept that the arguments favour loans, with no up-front payments by students, and a repayment system largely along the lines proposed by the Browne report. The case for a graduate tax appears superficially attractive—I have just been reading the arguments advanced by million+—but when one looks at the arguments, the case against it is more than persuasive, not only in terms of administration but in terms of principle. It skews the balance between the centre and universities in favour of the former. I am therefore persuaded by the arguments advanced by the Browne report.

Although I have seen a number of alternatives, I have not yet seen one that improves upon the case made in the report. For the student, the commitment should be seen as an investment package. I believe that it constitutes a worthwhile investment in terms of the difference that it makes not just to income—in effect, the material side of life—but to what may be deemed the spiritual side. It contributes to the growth of the person. The graduate premium is measured in money, but there is much more to it in terms of personal development. The student benefits from the investment but, as the noble Lord, Lord Giddens, stressed, we should not lose sight of the fact that so too does society. There is a correlation between the proportion of young people receiving university education and the economic growth of a society. Students benefit and society benefits.

The Browne report makes a cogent case and I congratulate the noble Lord, Lord Browne, and his colleagues on the work that they have done. Like others, I very much welcome the recommendations on part-time students. There are, though, three aspects of the report with which I take issue, and perhaps I may deal with those before coming to one or two questions for my noble friend.

First, I share the doubts expressed about the creation of a super-quango in the form of an HE council. My fear is that there would be too great a concentration of regulatory capacity in one body and I am not altogether sure that the functions would cohere well in such a body. One thing that I think the Browne report has not taken into account is that the QAA has a UK-wide function. The council will be responsible for ensuring the accountability of HE institutions but I am not clear to what extent the council itself will be accountable. The review mentions only an annual report to Parliament. I appreciate the need to reduce the number of quangos but I am not sure that simply merging four into one is appropriate.

Secondly, it has been mentioned that it appears that funding for the arts, humanities and social sciences will cease. It is not clear why these sectors should in effect be penalised for their success. The intention is to create a market, but if there is a cap then no market may develop in the way that is intended, and the proposals, for reasons I understand, in any event skew the market in terms of preferential treatment. Removing the funding for the arts, humanities and social sciences may undermine the diversity in the provision of courses that characterises higher education in this country, with the effects that the noble Lord, Lord Giddens, mentioned.

Thirdly, although I very much welcome what is recommended in terms of part-time students, I am not sure that the review has it right in respect of postgraduate teaching. That the socio-economic profile one finds at undergraduate level is replicated at postgraduate level is not necessarily a persuasive argument for leaving the situation as it stands.

I turn to the position of government. Clearly, as we have heard, we cannot discuss the review in a vacuum. As the Browne review recognises, we need to maintain investment in higher education, not least in order to maintain our international competitiveness. However, given the cuts in HE, what is being proposed for the foreseeable future is a means of reducing the gap between what is needed and the funding that is available. Crucially, cuts take effect before universities receive increased income from fees.

The cuts have to be seen in context. Funding at the end of the last century and the beginning of this one did not keep pace with the increase in student numbers. The unit of resource fell significantly in the 1990s and is still below the figure of the early 1990s. Universities will be expected to do more as a result of the increase in fees, not least because students will demand more, yet they will find that they receive no overall increase in income. They will have to prepare for the new system at the same time as having to cope with a surge in applications for places next year—a consequence of demography and applicants wanting to avoid the new fee level.

Universities thus need as much certainty as possible and as soon as possible, if they are to plan effectively. Given that, I have three questions for my noble friend. First, can she explain, more than she did in opening, the rationale for the scale of the cuts in higher education? Higher education institutions recognise that, along with others in the public sector, they face a reduction in funding over the next four years. However, over the period of the spending review, the higher education budget faces a cut of 40 per cent. It is perhaps important to stress that the cuts come on top of cuts. One can argue that the Browne proposals are the best way to help make up for much of the shortfall but, as we have heard, the danger is that the Government will impose a cap that will not only limit the scope for market forces to operate but leave institutions short of what is needed to invest and to maintain their international competitiveness. How does my noble friend see universities being able to compete with competitor countries that are investing heavily in universities?

Secondly, can my noble friend say more about the Government's thinking on imposing a cap on fees? The Government appear unwilling to embrace what the Browne review proposes, preferring instead a higher cap. This not only militates against creating the market recommended in the review but, if set at the wrong level, may leave universities notably short of the funds necessary to contribute to future economic growth.

Thirdly, could my noble friend say more about the timescale? This is a fundamental point. Universities have to move quickly to plan for 2012. Prospective students need to know not only what fees will be levied but also what support will be available to them. The danger is that they may know the first but have to wait to know the second. As she said, an increase in the fee level can be achieved quickly by secondary legislation, but everything else requires primary legislation. A White Paper is promised by the end of the year to be followed by a higher education Bill. That obviously will need to be achieved within the present long Session. Time is of the essence.

Implementing Browne and managing a reduction in income, at the same time as having to cope with an upsurge in student applications, places an enormous burden on HE institutions. It is vital that the Government are prepared to act quickly in terms of legislation. There needs, of course, to be thorough parliamentary examination. That means, therefore, not a rushed passage through Parliament but an early introduction, not least to ensure proper consultation. Perhaps my noble friend can enlighten us a little further as to the Government's thinking and, if not, can she at least tell us when we can expect to have the Government’s response?

My Lords, I declare an interest as the vice-chancellor of the University of Greenwich. I should add that I have also spent 10 years in a Russell Group university, 10 years in a 1994 Group university and five years in a specialist institution. I am not saying that I have seen it all, but I have a relatively wide experience of many different types of institution.

I deeply regret, for similar reasons to those of my noble friend Lord Giddens, that I cannot welcome this report. I believe that it is profoundly wrong in the ideological position that it takes and that most, although not quite all, of its recommendations are misconceived. I believe that the quality of its analysis is poor and that many of its claims will not be substantiated when a more rigorous analysis is undertaken of the data on which it draws to make its recommendations. However, I can assure the House that this is not a personal attack on the noble Lord, Lord Browne. I recognise that he took on an immensely difficult task and I am only sad that he and his committee were unable to draw on the resources needed to produce a more convincing report.

It is ironic that this independent review was promised in another place when variable fees were introduced so that after five years the fairness or otherwise of the new system could be examined. At the time, no one could have predicted that such a review would double the fees then proposed and assume that the public funding of 80 per cent of undergraduate tuition would be abandoned. Nor would anyone have predicted that this review would be based on a commitment to the free market that is so extreme that it abandons, to quote Sir Peter Scott, a much respected vice-chancellor and former member of the HEFCE board,

“the very idea of a public system of higher education, built with such care and effort since Robbins”.

For many years, I have believed that students and/or their families should make some contribution to the cost of their university education. However, as my noble friend Lord Giddens has said, it is also the case that higher education brings social and economic benefits to the nation. For that reason it is right that the taxpayer should also contribute. We are all the richer for having highly educated people. The Browne report fails to address this fundamental truth and assumes that the replacement of public grants by fees is a desirable outcome. Many of us beg to differ. When I had some responsibility for the introduction of fees in 1998, they were an addition to public funding, as was the introduction of variable fees in 2004.

There is insufficient time to make all the criticisms that this flawed report deserves, so I will be selective. Although I would like to associate myself with the points made by the right reverend Prelate on the overutilitarian approach of this report, I want to begin with widening participation. The report assumes little or no effect on potential students from low-income backgrounds in doubling the fee debt that they will incur. Because the 1998 and the 2004 legislation did not deter students from poor families from going to university, that does not mean that a fee increase of close to 100 per cent will not do so. The committee is overconfident in asserting that, just because fees are deferred, participation can be protected. Given the much higher costs to be imposed on the individual student, it would be more realistic and in line with elementary economics to assume that a very large increase in prices will lead to a decline in demand.

As the Liberal Democrats went into the election with a pledge not just to hold fees down but to abolish them, I would like to ask those on the Liberal Democrat Benches who are participating in this debate, and the rest of them, how they could possibly support the committee’s proposals on fees. Anyone who wishes to see social justice should be concerned. Perhaps the Minister, too, will tell the House what the Government’s position is, given the potential impact of very high headline fees on young people, as well as on older people without a degree, who are considering going to university. As others have said, the disincentive effect could be very great. That will damage the commitment just made by the Minister to social mobility.

The second issue about which the report is depressingly cavalier is the variable effect of its recommendations on different kinds of university. It appears to be more concerned to increase differentiation between universities and to create a market than to protect the system as a whole and to maintain all our universities. Let me quote from the excellent report by John Thompson and Bahram Bekhradnia, published by HEPI. They said:

“The Committee appears strangely unconcerned with the effects of its proposals on universities whose market position may not be strong and which may not be in a position to sustain even a ‘lower resource’ fee of £6,000. The country needs these universities to thrive and succeed. The reason they may not be strong in the marketplace may have nothing to do with their quality or their standards”.

They went on to say:

“Universities are part of the national infrastructure, and it is in the interests of the country and the responsibility of the government of the day to ensure that universities at all levels of excellence thrive”.

Speaking as a former Minister, I think that this is one of the most regrettable things about the report. Our international reputation is based on strength in depth, variety in research output and a well run system with good teaching in many different kinds of institution. This is one of the reasons why we have been so successful in recruiting international students right across the board. I take issue, as do many vice-chancellors, with the suggestion that universities that are less popular will “raise their game”, to quote from the report, if their student numbers fall, from the threat of going under. As I have suggested, there may be many reasons why they are less popular which have little or nothing to do with the job that they are doing. Again, as the HEPI paper states:

“The national interest would be ill served if they were to fail”.

Moreover, assuming that they survive, why should those universities, with many widening-participation students, end up with fewer resources to teach them, because they cannot charge such a high fee without jeopardising demand? Would we accept that inner-city schools should have less money to teach their students than others? Of course not. Why should we accept that for universities that take those very students from those inner-city schools? I ask the Government—I beg the Government—to ensure that all universities are equally well resourced in their teaching.

Mention should also be made of how the implementation of the Browne report will affect the United Kingdom’s higher education compared with that in other countries. No system in the world has abandoned public investment in undergraduate tuition. No public system charges anything like £6,000 to £7,000 per student. I know many experts in other countries, including the United States—I agree with what my noble friend Lord Giddens said about the US system—who are incredulous that these recommendations can be taken seriously. Moreover, the report’s proposal to have no government-imposed cap is extraordinary. How can any Government abrogate their responsibility to regulate the maximum fee, given the effect that it would have on both access and participation?

We are talking not about washing machines but about a matter of public interest that affects the life chances of many individuals and the nature of our society and economy. Will the Minister make it clear today that the Government will reject the recommendation, as has been signalled once or twice during the past few days? Can she tell the House what the maximum fee will be? Can she also give us a cast-iron assurance that the research-intensive universities will not be allowed to charge a higher fee to undergraduates than other universities? Those fees should be spent on teaching, not on research.

The report is also naive in what it implies about competition and student choice. There is already extensive competition between universities in the existing system: competition for home students, international students, research funding, charitable donations and joint ventures with industry and commerce. The notion that the market will increase competition and allow greater student choice is highly debatable. Choice may in fact become more constrained, because more students than at present will feel that they need to go to their local university to save incurring even larger debts by living away from home. The report accepts that better information will be needed for the market to work, but my experience suggests that, in practice, this will be immensely difficult to achieve and that many potential students will find it difficult either to access or to absorb huge amounts of complex information about what universities are offering.

There are many imponderables in the proposals for repaying the fee and maintenance loans. For example, the Browne report says nothing about the impact on mature students and part-time students. I associate myself with the positive remarks made by other noble Lords about what the committee says on funding for part-time students. The increase in the trigger point for repayments from £15,000 to £21,000 is also welcome. However, the suggestion that some have made—not, I may say, the report’s authors—that that means that many graduates will be relieved from repaying it is surely misplaced. The starting salary of a graduate nurse is £21,500; that of a newly qualified teacher outside London is also £21,500. Even relatively low-paid graduates, such as those in those occupations in the public sector, will have to pay 9 per cent of their salaries immediately on graduating. Some will be paying back over many years while they are struggling with mortgages and bringing up a family.

It would be helpful to hear more from the Government about rates of interest and how they intend to make the system more progressive than the current proposals. Information about when legislation will be introduced is also needed, as the noble Lord, Lord Norton of Louth, said. Can the Minister tell us the likely timetable, as well as indicating whether she agrees that higher fees cannot be announced and introduced until the legislation has cleared the parliamentary hurdles and been enacted? Students cannot apply for places not knowing what the range of interest payments will be when they start repaying. Why are the Government apparently considering a piecemeal approach rather than a carefully considered new higher education Bill that encompasses all the issues that the report raises?

No allowance appears to have been made in the calculations in the report for default. Those figures must be clarified. Will the Government do that? Does the Minister accept that default is likely to be higher when the debt is so much greater? Can she also tell the House how the Government intend to recover the debts of European Union students? A much larger default by those graduates will hardly be fair to British students and graduates and is certainly likely to excite the interest of those parts of the media that are already extremely hostile to the European Union.

The committee’s calculations of the likely cost to the taxpayer of the new fee and loan structures that it proposes are not transparent, because the assumptions made are totally unclear. The experts suspect that they underestimate the costs and that the benefit to the taxpayer from higher fees will be quite a lot less than the £1.8 billion annually that the committee claims. Because the earliest that graduates will start paying back is 2015, the proposed package is likely to lead to higher public expenditure for many years. Can the Minister arrange for some work to be published on the net effects, including details of the Browne committee’s analysis?

I agree with the remarks of the noble Lord, Lord Norton of Louth, on the report’s proposals on reorganising the regulatory system and creating a new higher education council. Those recommendations are not based on thought-through consideration of the issues. It almost seems as if the committee was trying to plug the gap in HEFCE’s work following the drastic reduction in its grant-giving activities. While there is a case for OFFA being absorbed into HEFCE, there is little case for that to happen to the OIA, and a much more careful examination of the pros and cons of having a separate QAA—we must remember that that separation was a recommendation by the Dearing committee—is needed.

Whatever the pressures of the deficit, I ask the Government not to destroy our much admired publicly funded system of higher education by making the changes recommended by the Browne committee, which would do immense damage and be hard to reverse when our economy recovers, as it inevitably will.

My Lords, I thank the noble Baroness, Lady Wilcox, for introducing this debate. The Browne report on financing higher education reinforces and accelerates the trend begun with the Dearing report of 1997. As the noble Baroness, Lady Blackstone, said, it is a trend which essentially and eventually leads to the privatisation of tertiary education in the UK. Only today, press reports have said that the LSE, founded by that great bunch of Fabians, is considering going private. That is perhaps a portent. We have moved a long way from the old so-called mixed economy, the partnership between the state and the universities that existed during the four decades after World War II.

The terms of reference of both the Dearing and Browne reports meant that proposals were framed very narrowly. It is unfortunate that we have to debate Browne before the White Paper dealing with HE, which is due out in the next few weeks. Neither report could take a wider view about the structure and purpose of third-tier education. That constraint inhibits a full debate on the subject—a debate which has never really been conducted since the Robbins report and which is long overdue. If the Browne proposals are fully implemented, privatisation will become a more overt policy. Of course, a totally free market in higher education can be seen as a coherent model to follow—not that I would follow it—but I urge some caution in leaving the university system to market forces, for there are likely to be many consequences both intended and unintended that flow from that.

In the first place, the top-tier institutions will have to further rationalise and restrict the number of research and teaching areas they provide. This has already happened with the closure, for example, of a number of chemistry, language and philosophy departments. Market forces have dictated such closures. The fundamental question is: are universities to be allowed to determine such rationalisation on an individual basis or should some national criteria be applied? To take some specific examples: how many universities should offer subjects like architecture, palaeontology, archaeology, oceanology or nuclear engineering—one, two or half a dozen? We know the answer in the case of nuclear engineering: none. It has long since disappeared. A more systematic approach is needed along the lines of the inquiry conducted in the 1980s by the noble Lord, Lord Oxburgh, which rationalised the number of geology university departments in the country. This is not an exercise which should be left to the three funding councils, as the needs of the UK university system as a whole should be the focus. That includes a consideration of possible institutional mergers.

That last point leads on to my second set of consequences. Second-tier higher education institutions will be decimated. Three have already been mentioned in the press as being near bankrupt, and I believe that many more will become unviable in the not too distant future. Too much attrition at this level of tertiary education risks impeding one of the Government’s proposals for introducing two-year, fast-track degrees. Similar to initiating a series of Oxburgh-type reports to secure an optimal range of academic disciplines, we need a parallel set of inquiries into the optimal mix of higher education institutions along the lines of that conducted by Clark Kerr in California nearly half a century ago.

As the noble Lord, Lord Giddens, has said, that inquiry provided for California universities at the level of Berkeley, UCLA, Santa Barbara et cetera which could provide the full range of degrees: bachelor, master and doctoral. Then there was the spread of high-quality state colleges that offered bachelor and master degrees in places such as San Jose, San Diego, Los Angeles and Bakersfield. As the noble Lord, Lord Giddens, mentioned, there were also numerous community colleges that provided diplomas and the first two years of an undergraduate degree. I, too, have taught in California. I have suggested before to the House that such a scheme should be applied on a regional basis in the UK. I also suggest that, in much the same way as the newly created academies are seeking to restore what was good about the old grammar schools, such regional schemes should seek to restore what was good about the former CATs and polytechnics: namely, the provision of more vocational training.

Finally, I repeat to the House: if this generation of legislators, who benefited from no fees and had maintenance grants during their university careers, seeks to impose swingeing costs on future generations of students it must recognise the intergenerational inequality involved. Two steps should be undertaken. First, there should be a retrospective, hypothecated tax on those who graduated between 1948 and 1998 and, secondly, a graduate tax; that is what I want, rather than loans at high interest as the Browne report advocates. I do not believe it is beyond human ingenuity to devise such a tax. I fear that will not happen and that we will continue to muddle along.

In winding I therefore ask, as many previous speakers have done: when are we going to have the coherent debate that is long overdue on the whole future of tertiary education in this country? I ask the Minister to give me the assurance that when those discussions take place, particularly following the White Paper, both vice-chancellors and students’ unions will be fully and frankly involved in discussions about the Browne report and the White Paper.

My Lords, as the pattern of introductions to this House and subsequent maiden speeches has unfolded since the summer, two things have emerged that I have identified and very much welcomed. First, there is our genuine gratitude for the welcome we have received here from all parts of the House. If I may say so, for those coming from another place there is a strong personal preference for its lack of tribalism. There is also the very strong support and advice we have had from all members of the staff at all levels. Secondly, there is a theme which is perhaps appropriate for the difficult times for our economy and our country: a sense of obligation arising from the honour we now enjoy to those of our citizens in need of help or encouragement in difficult times.

Looking further ahead, I now feel that it is not just the passing of the years in my own case which makes me want to look forward beyond my own children’s generation to that of our grandchildren as well. This is highly relevant to tonight’s debate on the excellent report of the independent review led by the noble Lord, Lord Browne, because I firmly believe that our universities—not just the household names which have established themselves over the years, generations and centuries—remain one of this country’s glories. We know that their reputation is high in international terms; that has been done on relatively limited resources. At the same time, over the two generations which have now passed since the Robbins report, we have effected a rather British kind of painless but radical change from elite student involvement to popular involvement, and exposed many young people and adults, too—they are often forgotten—to the social and educational benefits of higher education, as well as its income and instrumental benefits, without destroying the quality of the system. More did not mean worse, though it did mean different and more diversified.

At this point, I should properly declare an interest as vice-chair of the governors of the University of Wales Institute, Cardiff, which of course gives me an exposure to a different funding council. Perhaps I might mention in passing on the report that there are some rough edges in the proposed changes in connection with institutions in the devolved Administrations; I leave that now. I also declare an interest as a recently co-opted governor of the University of Northampton, although on that we greatly look forward to my noble friend Lady Falkner’s contribution because she is chancellor of that university. Both of those are post-1992 universities. I have another good reason for remembering that particular year, as in its dying days—after the Act had already passed through into law—I was privileged to be asked to serve as higher education Minister.

My later experiences as a governor convinced me that the complexity of the sector makes it wholly unsuited for centralised control. Fortunately, the self-restraint of successive Ministers of differing parties has at least broadly maintained the concept of autonomy, on which indeed the success of the sector has been founded. However, it strikes me that the constraints and developing policy problems of that time, almost 20 years ago, are still very much alive. I used to call that some kind of bizarre, sequential slow-bicycle operation, punctuated by occasional official reports led by Members of this noble House—the winner being the Minister who stayed upright the longest, without falling off and occasionally changing policy.

We still need, as we did then, to balance student numbers and aspirations against Exchequer cost both for tuition and for maintenance; to reconcile quality and unit cost; to secure access and social justice; to balance the vocational with the quite non-vocational; to tune research and teaching activities; and, of course, to lever in external funding wherever practicable. The Browne review exposes that, in our present arrangements, something has to give, and if it is not to be—and I do not wish it to be—either quality or student numbers, then those students who are participating must be prepared to contribute in due course out of their future earnings streams, and they will increasingly feature as consumers of the system. I therefore welcome and endorse the strategic approach of the review. It will, however, need very close attention to the detailed impact on all the multiple types of students, and, of course, on institutional stability itself.

I am particularly glad that we are beginning indirectly to unpick the traditional and increasingly costly straitjacket of the full-time student award which has applied all the way back to my own undergraduate days and has led to a kind of two-tier system, regulated and unregulated, with part-timers, until now, excluded from support. However, we need to ensure—I am sure the Minister will have regard to this—that all students of ability and their families need not feel deterred by the weight or threat of future debts. I believe that we can secure this on the broad basis of the review's proposals.

On wider university funding issues, the current spending review is, of course, even more directly relevant. At this stage I simply put down a marker for the broad area of humanities and the social sciences as well as the physical sciences, as by definition universities need to have at least a spread of competence and excellence.

We have generally, so far, done well by students and their universities. We have expanded the system without compromising it. We recognise, as the review does, the compelling constraints of today's economic situation, but we need not despair, and it is our duty to find a way through them.

My Lords, I warmly congratulate the noble Lord, Lord Boswell, on his outstanding maiden speech. I know him well through his active and effective membership of the Science and Technology Committee in the other place. The Science and Technology Committee in this place works closely with the committee in the Commons—hence our relationship—and so I had expected a clear and eloquent speech. However, I think that he has excelled himself.

The noble Lord’s interests and experience in Parliament are exceptionally broad. By profession he is a farmer and an economist, but down the Corridor he has been government Whip; Parliamentary Under-Secretary of State for Education and Parliamentary Secretary for Agriculture, Fisheries and Food; and an opposition spokesman for what seems almost everything over the years. I know that we all welcome him enthusiastically to his place in the House and are confident that he will make very valuable contributions to our activities.

I congratulate the noble Baroness, Lady Wilcox, and the noble Lord, Lord Browne, on his review. I just hope the fact that the noble Baroness has in effect called this debate on behalf of the Government is symptomatic of a new era when the Government want genuinely to listen to others before making the final decisions themselves.

Academics are famous for their dislike of change, and yet most of our universities have continuously adapted to changing circumstances and some are among the longest lived of our social institutions. Universities are slow to act because scholars’ timescales are long and their interests diverse. They are complex societies, but wise. They recognise the inherent complexity of their organisations and have the intellect to cope with that complexity. The Government should be reminded of this before they start imposing change upon them.

I have started in this way because it is not possible, especially in dealing with our leading universities—and I declare my interest as a past vice-chancellor of the University of Cambridge—to tamper with some of the funding streams without looking at the totality of their funding. All of their income streams, whether addressing teaching or research, or meeting ongoing costs, capital enhancements or student support, are closely intertwined and interdependent. In my experience it is almost impossible when allocating resources to distinguish between the various activities of academics, to decide what is scholarship, what is research or teaching, or even what is administration.

As an engineer, I ran from my laboratory to the lecture theatre where I found that the best way to capture the interest of the students was to talk about my research and what others were doing that was new, and after the lecture I met my colleagues to decide how we could finance the redevelopment of our teaching laboratory before spending the hour before lunch reviewing a new textbook for a publisher. I remember during my time we were asked by the funding council to tell them how much time we spent on teaching and how much on research. We complied, because it does not pay to bite the hand that feeds you, but there was no accurate way to do this. At the time—and I think it is probably still the case in most of our leading universities—to the best of our ability to estimate it, the money received for teaching was insufficient and we were in effect subsidising teaching with research money, and yet at others universities I was told by their vice-chancellors that they had to use teaching money to seed research. Government and councils of higher education should leave these matters to universities themselves and not try to be prescriptive. There are large differences between our universities, but in the vast majority of cases they will make the best decisions.

So how does this relate to the review of higher education funding and student finance? I hope it illustrates why the coalition must not make decisions about teaching and student finance without also deciding what is to happen to all the other sources of funding. The first is research funding, especially QR—the stream that used to flow according to the research assessment exercise and now depends on the research excellence framework and which in our leading research universities is much larger than the amount they receive for teaching. The coalition must also decide about CIF—the Capital Investment Fund—which is capital for learning and teaching, research and infrastructure. Universities have come to rely on this money to maintain their equipment and infrastructure, and it has been essential in maintaining their capabilities in research at a level that encouraged investment from the private sector, from industry, which incidentally seems, depressingly, to be declining. This stream from the private sector is of crucial importance and has to be carefully monitored. Then, closely connected with industrial involvement, there is the third stream of funding aimed at encouraging enterprise. Finally, of great importance to universities, there are the research councils. Fortunately, as the Minister said, there is good news here. As an aside, I must express my appreciation, as the chairman of the board of the Diamond Light Source, that the money has been provided for the very exciting final phase of that project.

If the Government or the funding council—or councils—intend to change any of these streams, they should be aware that the changes may conflict with what is planned for teaching and student finance. If the other streams are to be stable, it is possible to assess the adequacy of the proposals set out in the broad-ranging Browne review, which, with the exception of the levy that is proposed if universities decide to charge fees above £6,000, I strongly support. The levy is regressive and will, in effect, put the universities in the role of tax collectors, which is not appropriate. The money provided by universities for bursaries at fee levels above £6,000 would also presumably be, in effect, taxed, which is even more inappropriate. I would like to see flexibility in the cap if it is to be imposed, but I regret that this may not be politically acceptable.

If the reduction in the funding of BIS is to feed through to the teaching money passed on to the universities, then—to the extent that estimates can be made—the student fee will have to increase to £7,000 to maintain present levels of overall funding; that is, to keep the situation much as it is today. According to the estimates I have recently been given, this still leaves expenditure exceeding income. To balance these would require a fee of £8,000.

As a final comment, I observe only that as the money provided by the funding council declines, so do the reasons for our leading universities to go on accepting government regulation. We might reach a level where independence becomes feasible and too attractive to resist. The noble Lord, Lord Giddens, has mentioned the US universities. I think it is well known that the top US private universities, through their success as research institutions, receive up to a third of their funding from government—in their case from federal and state sources. There is no reason why our leading universities should not gain similar support for their research. I conclude by asking the Minister to reassure us that the Government will take the totality of university funding into account before making their final decisions about teaching funding.

My Lords, I, too, welcome this report for addressing the key issues of the teaching component of higher education and student finance. It is a great pleasure to follow the noble Lord, Lord Broers, who was an excellent vice-chancellor at the University of Cambridge. I declare an interest. Like other noble Peers, I have been a professor at universities, including Cambridge and UCL, in various countries. From this experience, I can well understand that excellent students do not necessarily want to go to excellent universities. All universities are very peculiar places, as was slightly implied by the noble Baroness, Lady Wilcox, and each one is peculiar in its own way. We should not assume that everybody wants to go to the particular peculiar one that is supposed to be the best. This should be welcomed, not deplored.

This report takes forward the 2006 Act. The report responds, in a sense, to the questionable assumption, which has been addressed by others, that there are not enough funds for a largely state-funded university system. This position is not held by most other European countries. I am sure we can all agree with the positive remarks in the report’s introduction about the research leadership of UK universities. However, the report also criticises quite strongly some teaching and other aspects of our universities. These are partly structural and relate to the proposals for university funding. I shall return to that in a moment.

The fundamental point that we need to discuss is how to ensure that a large proportion of UK school-leavers and all suitable mature students have excellent higher education. I approve of the egalitarian thrust of the report, given its essential assumptions. However, to have this wide involvement without the fear of debt, government funding must have a high priority. As the noble Lord, Lord Broers, said, this funding must also match and be integral to the maintenance of universities’ other roles. As the noble Lord, Lord St John of Fawsley, said in his rather unorthodox intervention, universities are for more than research; they are also places of knowledge. If you have been in industry—or, as I was, head of the Met Office—you know that one of the most valuable things about universities is that they are centres of knowledge. It is not something that universities often recall, but their knowledge is usually more valuable than their current research, although sometimes the research is important as well.

All parties have contributed to the tremendous progress in higher education in the UK since the 1960s. At that time, many able school-leavers certainly did not go to university, as I saw when I worked in industry. Now we have figures of 40 or 50 per cent. Furthermore, in the UK, we have a very high level of course completion. Many of the courses in the United States have a completion level of around 30 per cent. That is a very strong feature of the UK system.

The report emphasises how higher education policies are vital for the interests of the UK. One aspect is our competitive position, relative to other EU countries. If we cease to subsidise courses, many of them, as is reported in the Sunday newspapers, will go to the Netherlands and Sweden. I am a visiting professor in the Netherlands, which has very good universities.

However, the report also sees it as being in the UK’s interests to maintain certain specialised subjects, such as engineering, science and languages. I welcome the prominence of engineering. The noble Lord, Lord Browne, is a distinguished engineer and Professor Julia Higgins was also involved with his report. Engineering does not always get such prominence in government reports. I congratulate the noble Lord, Lord Browne, on that point. As a student, I benefited from a scholarship from the Institution of Civil Engineers.

Observers from other countries and UK employers are not particularly impressed by the structure of courses in English and, I believe, Welsh universities. I am surprised that this point has not been made. It is interesting that around the world almost no new universities are set up on the English or Welsh model. Some are based on the Scottish model, which is excellent. We should be cautious about that. The reason is that our courses are exceptionally narrow. As the right reverend Prelate the Bishop of Wakefield pointed out, it is the narrowness of British higher education courses that many countries find extraordinary. Employers also find it extraordinary. It means that people entering technical employment have absolutely no idea of the history, politics or culture of the country that they are working in. We need specialist and generalist education. This is not, I am afraid, a point that I find most academics agree with. As the noble Lord, Lord Smith of Clifton, said, we certainly need a more fundamental discussion about higher education.

One might imagine that financial incentives to universities and students could provide a basis for more general higher education courses. This is even more necessary now that AS-levels are to be de-emphasised. I was very impressed as a schoolboy when I heard CP Snow speak to us at Westminster School, around the corner, about his visit to Russia in the 1950s. There, physicists and mathematicians also had to take literature papers. He reminded us that the kind of question a top physicist or mathematician could answer in Russia in the 1950s was: “Discuss the character of Natasha in War and Peace”. Would you find that in any other country?

At the other end of the political divide, in the United States first and second-year students of literature have to take courses in astronomy and geology. In Arizona State University, which I have been to recently, dance majors have to take mathematics. This really causes trouble to my mathematical colleagues. Nevertheless, it happens. We are miles away from that but we discussed it in England. In the 1950s and 1960s, Cambridge University thought scientists needed to know a bit of culture and vice versa, so there were lectures at 5 pm, which of course did not last very long.

In the 1960s, we also had a whole batch of new universities. I was at Warwick, where we studied Enquiry and Criticism to enable people to learn more generally. Keele had Plato to NATO, as the Times called it. These all petered out; they all said that there was not enough time, which is ridiculous. That is why people are not using the British model of university. I noticed an absence of this perspective in the speech by my noble friend Lord Giddens, who quite rightly commented that it is very important to maintain humanities and social sciences as well as technology, but in the United States, it is the fact that humanities professors have to teach people in other faculties that gives them a funding stream that enables those pure knowledge departments to survive. You have a philosophy department because the philosophers are teaching scientists. It is not rocket science in terms of economics, but we are a long way off it.

Another welcome feature of recent developments in the university world is the increasing number of students studying and researching for second degrees. Funding is called for on page 41 of the report. Will the Minister assure us that the withdrawal of government funding for teaching will not reduce taught graduate courses in universities? They are nothing like as extensive in the UK as they should be. People have been moaning about this since the 1960s. There is a much smaller number of specialist graduates leaving universities, as our former Prime Minister, Mr Brown, emphasised on many occasions.

While commending the report, there are some big issues about the health of the higher education system in England and Wales which needs to listen to more radical ideas than those one currently hears in university common rooms, Whitehall and Parliament.

My Lords, two years ago, I shared a platform in India with one of India's brightest young best-selling authors, Chetan Bhagat, and he said that what young Indians wanted above everything else—what they really craved, what they were hungry for—was education. India has some of the brightest people in the world and many are now leading education institutions such as the Harvard Business School, where the dean is Indian, and some of the largest companies in the world, such as PepsiCo, where the chief executive is Indian. Yet, in the latest Times Higher Education world university rankings, India, a country of 1.2 billion people, did not have one institution in the top 200. Fifteen years ago, China did not have one university in the top 200; today, as the noble Lord, Lord Parekh, told me yesterday, it has five in the top 100. What is the bet that 15 years from now India will have several?

In this country, we have been fortunate enough to have had a head start of 900 years. Education in this country rests on an esteemed and ancient foundation. Oxford and Cambridge were among the first universities established in Europe during medieval times, and over the centuries that followed we never stopped innovating, developing and enhancing higher education. Students and the importance of study have rightly been held in the highest regard, and today we can look around this country at several world-class higher education institutions and justifiably feel very proud.

Earlier this month, on 1 October, at Cambridge University, where I am privileged to have studied and where I currently hold four positions, our new vice-chancellor Sir Leszek Borysiewicz—known as Boris—in his opening address as the university's 345th vice-chancellor, quoted the university's mission statement, which is,

“to contribute to society through the pursuit of education, learning, and research at the highest international levels of excellence”.

That is what Cambridge and so many other universities in this country do. Britain constantly punches above its weight. We have under 1 per cent of the world's population and are five times smaller than the United States, yet we regularly have four or five universities featured in the top 10 worldwide. We have produced the second highest number of Nobel laureates and are bettered only by the United States. We have the highest number of publications within the top 1 per cent of citations in Europe, above Germany and France.

It is incredible that we can say any of this. It is incredible that higher education in this country is such a success story because, despite having top-class higher education institutions, our annual spend on education as a percentage of GDP has been very average over the past decade. In 2006, 10 EU countries spent more on higher education as a percentage of GDP than us. With spending as a percentage of GDP at 1.1 per cent in this country, the United States soars ahead of us at 2.9 per cent—nearly three times higher—and a staggering 1.7 per cent of that is generated through private giving. Therefore, even the American Government’s spending on higher education of 1.2 per cent of GDP is higher than our entire spending on higher education. It is incredible that we have been able to do so much in Britain with so little and that we have been able to compete with universities in the United States, where tuition fees are often tenfold what students pay in this country. Compare the two countries' top universities: Harvard's endowment is $25 billion, while Cambridge's endowment is $6 billion.

Taking all this into consideration, can we truly justify a fall in the higher education budget—excluding research, which I am glad to hear—from £7.1 billion to £4.2 billion by 2014-15 as proposed by the CSR? That is a 40 per cent reduction. This is sheer lunacy. I know that this phrase is overused, but it seems to be falling on deaf ears: an investment in education is an investment in our future. We talk about ring-fencing certain areas of spending, and education should have the strongest and highest of fences. I am all for increasing universities' power to make their own decisions and, as the Minister said, the great level of autonomy in our universities is partly responsible for their success and a major reason why we have been able to maintain a competitive edge against our European competition, such as France, where state control is at a much higher level. However, there is a big difference between state control and state funding. There is a big difference between regulation and support.

We are all well aware that this country’s public sector spending was out of control under the previous Government, that we have lost our sense of balance and that cuts need to be made. Where are our priorities when we spend £190 billion on welfare and pensions when we know that tens of billions of pounds of that is being abused and taken advantage of? Fortunately, the coalition Government are beginning to address the welfare issue, and I am delighted about that, yet we are trying to cut the higher education budget by 40 per cent over the spending review period. This is being penny-wise and pound-foolish. We are not the only country in hard times right now, we are not the only country that has to face the harsh reality of cuts, we are not the only country with several dark years ahead of us, but we are in the minority when it comes to slashing away at higher education spending. Our competition is investing at this time, not cutting. How much lower than 1.1 per cent of GDP spending are we going to go before we realise it was far too low in the first place?

Benefaction created the great colleges of the great universities of Oxford and Cambridge; it was benefaction that built the great universities of Harvard and Stanford in the United States; and what better example of benefaction can I give than Cambridge celebrating its 800th anniversary in 2009 by launching a campaign to raise £l billion by 2012? I am delighted to say that we reached that target in June this year, two years ahead of schedule.

Over the past 50 years, as the percentage of the population going into higher education has gone from 6 per cent to 45 per cent, we have developed a mindset where we have relied on government for university funding. It is amazing that only now have we woken up to the importance of benefaction and universities raising their own funds alongside the government support. The Browne review enables universities to do so through charging their own fees, in the way that we already charge our foreign students—and what a contribution they make. In 2005, the UK made £1.39 billion in tuition fees and an additional £2.35 billion in living costs. Foreign students are one of our best export earners, but unlike other exports where our goods are shipped out of this country, we bring our foreign students into the country and build lifelong bridges with them, the generations after them and their countries. I am proud to have been one of those students years ago. Ten per cent of academics in our universities were born outside the United Kingdom. Five of the past six Nobel laureates based in the United Kingdom are foreigners, and we were on course to continue in this profitable and successful vein with levels of non-EU international student enrolments increasing by 25 per cent between 1998 and 2008 until the Government introduced their cap on immigration—what a mad cap idea!

It is quite obvious that public spending has to come down and I applaud the Government for aiming for a target of 40 per cent of GDP in public expenditure. But let us consider what we are gaining from an investment in education: it is way above the £60 billion of output about which the noble Lord, Lord Browne, spoke. Just look at the brilliant Eureka UK report, published by Universities UK, on 100 discoveries and developments in UK universities that have changed the world. The contraceptive pill, the MRI machine, stem cells, fibre optics, combating modern slavery, plate tectonics, keyhole surgery, black holes and pulsars are all from British universities, and the list goes on.

Over and above that, we have the breadth of universities in this country. I was privileged to be chancellor of Thames Valley University for five years. It is now called the University of West London. This modern university had centres of world excellence, including the London School of Hospitality and Tourism, which is one of the best institutes of its kind in the world. Its alumni include the head chef at Buckingham Palace and the secretary of the Oxford and Cambridge Club. In our banqueting department, there is our deputy manager, Stefane Portes, as well as Pawel Pietraszewicz. Our nursing college is the number one in England. The university also has the famous London College of Music, where the father of the noble Lord, Lord Lloyd-Webber, was principal.

We need to review the future of higher education in this country, but we need to do it in tandem with higher government investment. That is what our competitors are doing. I congratulate my noble friend Lord Browne on his excellent review. Its presentation, thoroughness and rigour, intentions and content are all superb. I agree with the rejection of a graduate tax programme. I appreciate the review’s opinion that higher education institutions,

“safeguard knowledge, catalyse innovation … strengthen civil society. They bridge the past and future; the local and the global”.

However, charitable giving accounts for only 0.2 per cent of higher education’s income streams in this country, compared to 8 per cent in the United States. In other words, it is 40 times higher in the US. Where relevant, we also need to look at corporate sponsorship and overseas income. The more funding that is available, the more that there will be to allow access for students from disadvantaged backgrounds.

The noble Baroness, Lady Wilcox, mentioned the context of the report. In the Browne review, the Government let the cat out of the bag in the last sentence, which states:

“These measures create the potential to allow the numbers of student places to increase by 10% and enhance support for living costs while still allowing public spending reductions to be made”.

There you are: the timing and circumstances surrounding this review speak for themselves. This, I believe, is the issue most of us have with the review. All its brilliant qualities are overshadowed as it opens itself up for interpretation as a tool to justify cuts, as opposed to a tool of positive reform.

The report could also have addressed the global reach of our universities. We need to be enterprising and to take advantage of opportunities to collaborate with universities abroad in countries like China and India. We have to wake up to these possibilities, as the additional income stream that this could provide is vast, as well as enabling us to continue to be competitive. This is the future and it is not too late for us to get on board. By cutting our higher education spending we are being foolish. Instead of enhancing and bolstering our competitive advantage, we are handicapping ourselves, which is sheer madness.

In business, when building a brand or a company, you talk about your unique selling proposition, your core competence and what gives you the competitive edge. In our tiny country, our higher education institutions form, as the Treasury's spending review 2010 quite rightly puts it, the jewel in our crown. Nothing must be done to jeopardise this because the returns we get on this investment will ensure the future security and competitiveness of our country. What is more, you can calculate percentages of GDP—you can crunch numbers—but you cannot put a price on, quantify or compare the value of education. The returns that we receive from every penny we place into higher education are unequivocally, unquestionably, truly priceless.

My Lords, before making my contribution, I would draw attention to the Register of Members’ Interests. I am employed by the University of York and I am a council member at Goldsmiths College. These are not easy issues. They are good issues to discuss and debate over many months and years, but it is not easy to come to a conclusion. I do not think that anyone has made a speech in which they have pretended to have the answer. These are tough issues and this is a chance to get it right, which is why this debate is so important. In that respect, I welcome the report by the noble Lord, Lord Browne, and his committee. A lot of work and consideration has gone into it, and it has presented us with an opportunity to have a long-needed debate. I shall return to this important point later, but the report goes somewhat beyond the remit that the noble Lord was given.

I welcome some of the report. The emphasis on funding for part-time students has to be welcomed. We wanted to do that when we were the Government, but we did not find the money. It will be interesting to see how the coalition Government respond. The report’s wish for the training of lecturers in terms of teaching skills and a qualification has not been mentioned. That has to be welcomed. It would bring lecturers up to date with teachers in further education and in schools.

I also welcome a simpler administration of financial support. The thought of applying for financial support at the same time as applying for a university place makes sense. Another point that has not been mentioned in the debate is that the report welcomes the continued expansion of higher education. My party set the target and expanded places in higher education year after year. There has been comment from other parties and outside Parliament that it is wrong to expand higher education to include more students. I very much welcome the part of the report that goes almost further than that and says that everyone with the aptitude to do well and to succeed ought to be able to go into higher education. I like that aspiration which supports the view that we took. The financial arrangements addressed by the report illustrate a shift. It is not just a recommendation about a higher cap. This shift opens up a new debate and it makes this report particularly important.

I shall address four points, two of which have been mentioned and a further two have not. First, this review comes at a time when students will be asked to pay more for courses, but when public investment is being lessened. That is an important difference from when we discussed this issue on previous occasions. Secondly, this is a climate in which there will be less investment in public services and in higher education.

My third and fourth points are the most important. What is proposed is likely to introduce differential fees. Although that term was often used of the 2005 Act, it did not happen. Almost without exception, everyone raised their fees to the £3,000 limit. In my view, that did not put people off applying to higher education. If you want to go to university, you and your family will do your utmost to enable you to get there. If all fees are £3,000, you will find a way of getting the £3,000. There was significant help from the Government, which was a consequence of getting the Bill through the House of Commons.

One university perhaps charging more could change the pattern of applications. Thankfully, there is no evidence that students chose not to apply for university when the fee increased to £3,000. However, a differential fee will influence the university to which students will apply. The evidence is in what happened. More university students decided to stay at home because it was cheaper. It was not because they necessarily wanted to study at the university down the road, but because it was cheaper. Students will now be offered an opportunity to secure a degree at differential costs and many from lower-income backgrounds will choose the cheapest route. In that sense, this is a different report and invites a different debate.

I have often thought—but this is more instinct than evidence-based—that the problem for students from less affluent backgrounds is not the fee, which is not paid up front, but the maintenance money; the cash to keep you going while you are on the course. This is the great divide between students from wealthy backgrounds and students from less affluent backgrounds, who find it tough because they do not get a hand out from their parents. I worry a great deal about the number of students from less affluent backgrounds who work an incredible number of hours to pay their way through university. Is the Minister concerned about the maintenance grant envisaged? Will it put an end to that discrimination in the system?

More fundamentally, as other people have said, the report makes a shift in that it adopts a market approach to finance and will allow student choice to drive the system. That means that student choice will determine the funding in the teaching grant and course provision; there will be more courses in subjects that students choose to do. By its very nature it will determine the size, and maybe even the survival, of institutions. It is easy to make an argument in favour of student choice and students driving the system; it is slightly more difficult to ring warning bells about it. However, I shall try to do so because it is an imperfect lever for driving the system.

I say this for two reasons, one of which has been explained far more eloquently by my noble friend Lady Blackstone and I am backing up what she said. First, students are not the only stakeholders in our higher education system: the economic needs of the country, the economy of every citizen, regional economics, regional economies, regional employment, regional survival and regional prosperity are all stakeholders. How can investing in skills down the road, which we do not know exist but which industries that are about to be born may need, be driven by current student choice? Cultural heritage, literature, the arts, social sciences and history were all referred to by my noble friend Lord Giddens and all are important. I am not convinced that student choice will protect all those stakeholders.

My second reason for being worried about student choice being the driver in the system is that students will consider things other than course quality. When the Minister opened the debate she said—it was no more than poetic licence but it was a nice sentence—that one of the matters students would consider was the quality of the bars. I know she is right, but I doubt whether we should have a system whereby the quality of the bar drives student choice and student choice drives the survival of our institutions in higher education. Students will choose a university for many different reasons—because it is where their friends go, where their brothers have gone, where their parents have been or where they live; whatever seems right for them. I worry about that.

The report acknowledges that there will be market failure. That is why more money has been put into STEM subjects, but it is not clear how long that funding will last. I am not sure whether the Browne report is saying that there may be market failure in the STEM subjects now but in future years we might be able to accommodate market failure anywhere else. I made a list of where market failure might appear in the near future. We could not tolerate, could we, any region of this country not having a university? One of the good things we have done over the past decade is to make sure that every region does have a university. Cornwall and Cumbria used not to have universities. Surely we could not tolerate a system where the market meant that one of our regions did not have a university. Surely we could not tolerate a system where higher education did not offer a broad range of subjects. If that is the type of civilisation we want to be, surely we could not tolerate a system where some subjects were squeezed out. Surely we would want to protect university teaching expertise that the student driver might not be delivering on. What provision is there, other than the STEM subjects, to counter market failure elsewhere in the system? If the market is driving the system, there will be failure other than in STEM subjects.

The last point I wish to make has been addressed by my noble friend Lady Blackstone and is absolutely crucial. We have a richly diverse higher education system but for the past 15 or 20 years the funding and accountability mechanisms have not always reflected that. It has meant that all universities have had to compete for the same funding streams—where the money comes from—and so every university wants to be research intensive because that is where the money is. The subjects that they are good at have not bought them recognition and they have not bought them money. I have asked myself whether the report solves that problem or makes it worse. I fear it makes it worse. It highlights that there will be money from research grants, the possibility of charging higher fees and encouragement for philanthropic giving, all of which play to the strengths of our research intensive universities. I do not mind that—I do not have a problem with it—but I value and cherish the rest of the sector as well.

We do two things: we praise the fact that over the past few years we have more young people from non-traditional backgrounds going to university; and we bemoan the fact that they have not gone to the Russell Group universities. Where have they gone? They have gone to the old polytechnics and places like that. They deserve recognition for that, both in an accountability framework and in money.

The real problem with the report is that it has almost gone further than we expected. Its roots were to solve the problem of the previous Government having to put in a cheque before they were allowed to raise the fees above £3,000, or whatever inflation has made it. However, it has opened up a debate about the nature and shape of higher education. I welcome that, but I wonder whether, as a Government, a nation and a Parliament, we have taken on board and clearly understood that what we are about to decide is not only the level to which fees should be allowed to rise but what the shape of further education might be over the next 10 or 20 years.

For me, the higher education agenda is about world-class research, widening access, knowledge transfer, regional strength and development, and social mobility. It is also about links with further education and schools. Further education, which is responsible for the education of more than 30 per cent of our people, has not had a mention today. All these sectors need to be incentivised and rewarded if they are to survive. My worry is that the report does not do that. As we consider this issue and go forward on it, I would welcome the coalition Government seeking to widen the debate to ensure that we get all these issues right.

My Lords, even if the Government had not imposed a massive 40 per cent cut in the allocation of funds to universities for teaching costs, as they have now done, there would still have been a need for a report of the kind that my noble friend Lord Browne of Madingley was commissioned to produce. Given the success of the 2006 reforms in university financing—in my view they have been a remarkable success, resulting in greater investment in and greater autonomy for the universities without any falling off of demand for places or in the quality of applicants; rather the contrary—I would argue that they need to be built on, not dismantled.

However, those reforms were not sustainable in the long term within the parameters laid down in 2006, for reasons largely of parliamentary arithmetic and not objective consideration. The universities were being prevented, and still are, by law from recovering the full costs of the teaching that they provide. They were also being prevented from responding to the demand for places, while the provisions for subsidising student loans were running out of control. Now, with the cuts, the review and action to follow it up have become matters of life and death for our universities. I should declare a non-pecuniary interest as someone who has been involved for the past 12 years in university governance, first at Birmingham and now at Kent, but the views that I am expressing are not those of either institution.

I offer my sincere congratulations to my noble friend and his colleagues on producing such a crisp, clear and compelling report. He has explained a complex subject in manageable terms. His prescriptions seem for the most part to be what is needed, even if they are not what many of us, in an ideal world, would have wished for. I am grateful particularly for his dismissal of the false trail of a graduate tax, which would be neither implementable nor equitable.

However, I have doubts about some aspects of the report’s prescriptions. First, I am not entirely convinced by the rather tortuous provisions for removing the cap on tuition fees in its entirety, with a rising government levy on fees above £6,000. Does this not risk getting the worst of both worlds, widening the gap between the small number of top universities and the others while not really satisfying the elite group, which could well end up taking fewer UK students? Would not a substantially higher cap than the present one, with a further review after a fixed time, be a simpler and more acceptable way to proceed, so long as it fills the gap created by the Government’s cuts?

Secondly, I suggest that we should be a bit careful about how far we go in applauding and encouraging competition in the university sector. Well run universities have nothing to fear from a bit more competition, which variable fees could bring about. However, unlike with businesses, competition for profit is not universities’ raison d’être. Competition for academic excellence is what they are about, which is not the same thing.

Thirdly, the approach to cutting back the government grant for teaching, which it is clear cannot be avoided in one form or another, is a bit too crudely utilitarian. Do we really believe that science, engineering and medicine, along with the rather oddly named “strategic languages”, are the only subjects worthy of government support? Are the creative arts, social sciences and humanities of no value or benefit to our society? If so, I fear that most members of the Cabinet devoted their formative years to the wrong subjects.

Fourthly, while I see the logic of rolling up three of the present four quangos in the higher education sector into a single higher education council, I question the wisdom of including within its scope the Office of the Independent Adjudicator. This office performs a quasi-judicial function and needs total independence. Joining it with a body that performs regulatory and financial allocation functions could end up damaging the legitimacy of the adjudicator’s rulings with no serious benefit in efficiency or cost.

So much for my comments on my noble friend’s admirable report; what needs to be known now is the Government’s reaction to it and their intentions over implementation. I was most grateful to the Minister for her opening statement, which began to do that, although I think that she has a fairly long way to go. So far, the Government’s comments have been pretty vague and general. There is talk about a White Paper; there is talk about action being taken before the end of this year. The universities need clarity and certainty and they need it in the early months of 2011 if they are to be ready to work within the scope of the new arrangements by September 2012. I hope that the Minister will say more about the timetable and the procedures. Will primary legislation be required—I think that she suggested that that would be so—and, if so, for what elements? I also hope that the Government will give an absolute undertaking not to allow a gap in time to arise between imposing the cuts and empowering universities to have access to new funding. They should ensure that capital spending under way is not starved; otherwise, irremediable damage could be done.

The Browne report does not cover the whole field of higher education finance, as it says nothing about research funding or postgraduates. How soon will the Government be in a position to clarify the situation on research now that the science budget seems to have been spared the worst of the cuts? Nor does the report cover an issue that will crucially affect one of the universities’ most buoyant sources of non-governmental finance: access to visas for non-EU students, postgraduates and faculty. I echo what my noble friend Lord Bilimoria said on this. Can we be assured that the review of immigration will not result in barriers to these categories of student? Surely there is a better way of dealing with abuses to the visa system than the imposition of arbitrary caps and imposing more complex and more costly procedures on bona fide applicants, who now make up one of this country’s primary invisible exports.

A lot is at stake in the present review of university financing. If Britain is to be a successful competitor in a knowledge-based global economy, our universities need to emerge strengthened and not weakened. If the big society is to deliver the benefits sought of it, the universities must be available to all who want to go to them and are academically qualified to do so.

My Lords, that was one of many very interesting speeches in this debate. I share the noble Lord’s concern about a levy and the capping of fees because, if there is a benefit in a competitive model, it is in allowing people to do what they want, which an artificial cap would stifle. I do not share the noble Lord’s concern about competition. I shall return to that, because that concern has been expressed by a great many noble Lords today.

I bring no particular expertise to the debate except as a long-ago consumer of higher education and currently a vicarious consumer through my children. However, I see just a hint of complacency in the status quo. We keep going on about the wonderful universities that we have. An international reputation surrounds about three or four, maybe five or six, of our institutions, but the other 125 do not compete on that international scale.

I am surprised that the higher education industry is so well represented in this House. They used to say in the House of Commons that the third largest party was lawyers; I am beginning to think that the third largest party here is people who work in one way or another in the higher education sector. They have to face up to the fact that the student experience—here I speak with some knowledge, for my son is at a Russell Group university—has deteriorated and is, frankly, awful. I shall come back to why that is so and how these proposals might improve it.

There has been some discussion about whether the benefits of higher education are public or private, material or spiritual. They are all those things, which are all important ingredients in the input and the output. The sector should be expanded so that all those who are capable of benefiting from higher education can do so and are not discouraged by whatever the fee and financial arrangements are. I am glad that the coalition has found in implementing cuts in the department a way of protecting the budgets of science and further education and replacing the income that will be lost to universities through student fees. The happy coincidence of that and the excellent report of the noble Lord, Lord Browne, produces a viable solution.

A noble Lord pointed out that most of us here went to university on a full grant and asked that we speak objectively about it, without hypocrisy. I suppose that the answer is that I went to university on a full grant, which was of huge benefit to me; I do not know whether I would have gone otherwise. However, I think that only one in 12 of the population went to university at that time—they were all male, so it was one in 12 of the men. With a third of the population going to university now, I simply do not think that that model is viable. If we had advance fees, it would be manifestly unfair and discouraging of people from poorer backgrounds. The fees are such that even somebody on an income of £30,000 or £35,000 a year would struggle with them. I, too, do not like the idea of a graduate tax. It would be a way of nationalising universities, because there would be no guarantee that they would receive the money. They would still be knocking on the Treasury’s door every year asking for their budget and it would not create the consumer relationship between student and university that I want to see—I am talking here particularly about undergraduate education. I thought that the figure for what the average graduate earns in excess of non-graduates during their working life was far higher than the £100,000 a year quoted by the noble Lord, Lord Browne. I thought that it was something like £500,000. Whatever it is, they pay a great deal more tax already, anyway, as a result of that—probably more than their education costs. The important thing is that the fee provides a direct relationship between the customer and provider or the client and the institution, however one wants to describe the relationship.

The Government did the right thing in 2004 when they introduced fees, but what they did not do was to allow the logical extension of that; they did not allow a market in higher education to develop. Having a market does not necessarily mean having competition for profit. It can mean doing things in different ways, with a variety of things that might appeal to different kinds of students. The result of a cap on fees and on the number of places was that all universities charged the same and competition and choice were stifled. What I like about the review from the noble Lord, Lord Browne, is that it recognises that letting the market develop and the sector expand will create variety and choice and improve quality. Consumers will, I hope, start to behave more like consumers, which I thought that they would do when the fees were introduced—in 2006, I think. However, because all the fees are the same, I do not think that they do. We need universities to compete for students, which might happen if there were a slight excess of capacity rather than a slight shortage. I urge the Government not to place a cap on fees or to introduce the levy recommended by the noble Lord, Lord Browne. If nothing else, the higher the general level of fees, the more it will encourage new entrants into the sector, which I would like to see. That is why I wanted to spend a couple of minutes talking about choice and variety.

Why are almost all undergraduate courses in this country three years long, with six months a year spent at university? That is based on the Oxford and Cambridge model, when people needed to go home to help with the harvest. It assists people who want to do research, because the burden of undergraduate teaching is imposed on them for only half a year, but there may well be people who would say that they could do their degree in two years. If someone is at university only for 75 weeks, it could easily be done in two years and it would cost that person less. It might cost the same in tuition fees, but the cost of maintenance and living away from home would be less. Why might that variant not be introduced? It will not be introduced with the present system, but it might if we had a liberalisation of the funding of this sector.

Why in this country do we not have liberal arts colleges as we do in the United States, which only teach undergraduates? They do not attempt to do research and there is very little postgraduate education. Many of them do not do expensive science subjects. Why does that type of institution not exist in this country, except for the University of Buckingham, which offers a two-year course?

The research assessment exercise has had a pernicious effect on undergraduate education. I am sure that it is right that a large amount of the funding to our great universities goes on the quality of their research. That is where the Nobel prizes are won and where the international reputation is acquired and maintained. For the undergraduate teaching function, however, we all know that the best teacher may not be the cleverest person. That is true in schools and universities. In my old college at Cambridge, I heard the master say about someone who taught me, “I couldn’t afford to keep him now, because his research output was not enough to get through the research assessment exercise”. But he was a wonderful teacher of lawyers. Several High Court judges and one justice at the Supreme Court were his pupils. That sort of person is very valuable and is not being facilitated by the effects of the research assessment exercise.

Something has been made of local universities, where people can live at home and go to what were polytechnics. We need to see more of that. All this—two-year courses, liberal arts colleges, places that only teach undergraduates, perhaps not doing very expensive subjects such as science and local universities where people could live at home—has to do with choice. This variety will, I hope, be provoked, promoted and encouraged by the mechanisms suggested in the Browne review, which I think that the Government welcome.

I turn to the subject of quality. The system will lead to greater variety and choice. I speak as a vicarious consumer of education. Several of my friends’ children are either at university or have just left it and their experience is so far removed from mine or from that of most Members of this House as to be almost unrecognisable. My son does not have a tutor, as far as I can tell; if he does, he does not meet him or her very often. He has no tutorials, while I had three hours a week of tuition with two or three other people and a don, which was the most important part of my education. He gets one seminar every three weeks with about 30 people in it. When he suggested to the head of faculty that his dad would pay a bit more to find a PhD student who might spend an hour a week with him explaining some of the bits of economics that he did not understand, not only did he get no assistance but he was made to feel that that was seeking an unfair advantage.

There has been a serious deterioration in the quality of undergraduate education. That is partly, of course, a result of the deterioration in the money involved and therefore the staff to student ratio, but it is also a result of the emphasis on research and the attitude in universities that undergraduate education is not really their primary function. If liberal arts colleges and two-year courses were introduced as a result of freeing up the market mechanism, that would give universities a kick and make them think a bit more about the undergraduate education that they provide. If students are paying more and have a choice about how much they spend—it might be £4,000 in one place and £5,000 or £6,000 in another, maybe even more if they want to go somewhere such as Imperial, which provides a more expensive education—they will pay far more attention to what they are going to get. That can only be good in provoking improved quality in universities.

I congratulate the noble Lord, Lord Browne, on his report and the Government on their reception of it. I urge them to take it to its logical conclusion and allow the market to develop. That will lead to improved quality and improved choice. If I ran a university, as a great many speakers in this debate have done, one thing that I would like to be free of is government interference. This seems to be a route to that end.

My Lords, I, too, thank the noble Lord, Lord Browne, for his report. Having left school at 15 and never having run a university or worked in any form of university, I am honoured to be the chancellor of Teesside University, and declare an interest. I am very proud of the achievements of Teesside University, which is the current holder of the Times Higher Education’s University of the Year and the Outstanding Employer Engagement Initiative awards. I am also very pleased to see my university shortlisted in the category of the most entrepreneurial university in the country. All this success takes place in the year that my university celebrates its 80th birthday and I look forward to the continued success of my institution in the coming years. It is from that background of success that I look at the recommendations of the independent review of higher education funding and I am grateful to the noble Baroness, Lady Wilcox, for initiating this important debate.

My starting point is that the last 20 years have seen us make outstanding strides in providing individuals and employers within the UK with the higher level skills and knowledge necessary to allow us to compete effectively with the increasingly knowledge-led global economy. Any revised system of student funding and financial support must recognise the importance of continuing to provide opportunities for people from all parts of society to fulfil their potential in order that they can make the maximum possible contribution to our future economic, social, environmental and cultural success. The progress that we have made in recent years has been significantly enhanced by the way in which we have evolved a university sector, in which institutions of different types have been encouraged to pursue diverse missions, playing to their unique strengths, and making complementary contributions to the overall success of the system. For example, in the case of my own university, that contribution has included supporting new business start up and knowledge transfer, activity underpinned by an outstanding working partnership with employers across all business sectors; facilitating over 18,000 students per year to undertake higher education on a part-time basis, predominantly alongside work; and achieving a record, virtually second to none, in facilitating the progression of students from socially disadvantaged backgrounds who are, in many cases, the first generation of their family to participate in higher education. In addition, we have developed an outstanding working partnership with local further education colleges that is widely recognised as one of the strongest in the country, and has included the development of effective progression routes for both academic and vocational learners, supported by the development of Teesside University-funded higher education centres on each college campus in the Tees Valley. Most importantly, we have underpinned all this with the pursuit of improved levels of quality, retention and student attainment.

So I speak from a perspective based on success, inclusion, partnership and excellence. It is on that basis that I particularly welcome the recognition of the noble Lord, Lord Browne, of the importance of maintaining and, indeed, expanding the provision of higher education opportunities, and the crucial recognition of the importance of it being both free at the point of entry and subject to a progressive system of loan repayment. This will, I believe, enable individuals from all parts of society to take full advantage of the opportunities that higher education can offer.

I also welcome the proposals for a simplified system of student financial support, which would enable students from the most disadvantaged backgrounds to receive a combination of loans and grant income to meet their living costs during their period as a student. That is very important. However, I am against creating a completely unregulated market for university fees because this would have a damaging impact on our ability to deliver on the Government’s commitment to enable the brightest people from all parts of society to attend the most selective universities as it is unlikely that students from the most disadvantaged backgrounds would be willing to contemplate the levels of fees and living-costs debt that would be incurred by attending a university charging at the top of the price range. Although it is good to see that the noble Lord, Lord Browne, proposes to raise the threshold for loan repayment to £21,000 a year, and to restrict the interest payable on the amount owing until graduates are in receipt of an income at that level, it is very important to note that the overall level of debt owed by a graduate is likely to continue to rise on a year-by-year basis until such time as their annual earnings reach £40,000 a year—a fact that will be a cause of great concern to many potential students and their families. That is the area to which the Government need to give greatest consideration. They need to look at imaginative solutions for tackling this debt issue. They particularly need to ensure that they talk to students, student unions and young people as they will be faced with these problems, not the people involved in this debate tonight.

Further, it is important to recognise that in some parts of the United Kingdom, such as the north-east of England, there is still a lot of work to do in correcting the major higher skills deficit arising from a historical lack of higher education opportunities in that region. This results in a number of talented individuals with little record of prior educational attainment returning to higher education at a later stage in their career. Therefore, it is important to recognise that the proportion of students without the traditional qualifications to meet such a threshold varies dramatically throughout the country. We will need to reflect that fact in any allocation system that is introduced to cater for these non-standard entrants into our universities.

I also warmly welcome the proposal to begin levelling the playing field between part-time and full-time study by allowing part-time students to access fee loans on the same basis as full-time students. However, I stress that for many students, particularly those studying in professional areas, the part-time student experience is fundamentally different from that of the full-time student. I ask Ministers to think carefully about making any assumption, implicit or explicit, that part-time students are simply following by a different mode the same course as full-time undergraduates. The reality of the diversity of our higher education provision is much more complex than that, as institutions with extensive experience of part-time vocational and professional higher education seek increasingly to utilise the workplace; as the needs of the economy emerge; and as the current and previous experience of students become fundamental elements in their part-time learning experience. I urge Ministers to develop a very flexible approach to support part-time students which recognises the uniqueness of their circumstances.

I am pleased to note that the review of the noble Lord, Lord Browne, recognises the importance of widening participation funding for those students for whom higher education is not part of their heritage, and who are drawn from the disadvantaged communities which can most benefit from the transformational power of higher education. I encourage Ministers to ensure that that crucial funding reaches the universities that do the most to transform such individuals and their communities. In recognising the broader social, cultural and community benefits of higher education, it is important to ensure that the proposal within the noble Lord’s review to utilise the additional revenue generated from student fees to substitute for government funding does not lead to a position where universities are unable to afford to offer humanities, social sciences and arts-based programmes that underpin so much of what is good about our universities and our society, as has been said many times in tonight’s debate.

In conclusion, I hope that I can persuade the Minister to share some of my views and perhaps to visit Teesside University, which has won the University of the Year award, to see what a great place it is, because it truly is a great place. I perhaps sound the wrong note in the House of Lords in saying that in many ways universities are the workplaces of today. People no longer work in the steelworks or in ICI; they work in the university, which is very important to the town. Indeed, the whole town revolves round the university. Everybody appreciates the contribution that it makes to the economy. I urge the Minister to come and see what the University of the Year does and what can be achieved in an area of very high unemployment with poor educational opportunities, where people are striving to make the university successful to benefit the community and its students. I welcome the Browne review as something that we need to debate going forward. I hope that it will bring long-term, sustainable benefit to our excellent higher education system.

My Lords, I declare an interest as chancellor of the University of Northampton. I also benefit from the remunerative employment of my spouse at the London School of Economics. I congratulate the noble Lord, Lord Boswell of Aynho, who, as MP for Daventry, was a steadfast friend of the University of Northampton. His maiden speech demonstrated that he is as trenchant as ever. We look forward very much to hearing his future contributions.

We find ourselves at a critical juncture in the future of higher education in England. The excellent debate that we have had tonight nevertheless feels somewhat unreal in the sense that one imagines that all has been well with the funding of higher education until this point. We know that this has not been the case for at least a generation. When a fully state-funded system moves from catering for the needs of 10 per cent of the population to those of nearly 50 per cent of the population over some 30 years, it is inevitable that questions will need to be asked about who pays for this. It is also evident to me that it could not possibly be defensible that those whose children will not avail of this opportunity should still be asked to pay for the mainly middle-class students who benefit from a university degree. It is both inequitable and regressive for general taxation to be used to benefit a particular section of society; to paraphrase the Prime Minister, those who have sharper elbows than others.

This is not to deny the overall benefits to societies from universities, but simply to point out that it is taken as given—hence the continued financial support from the public purse, albeit reduced, that the review recommends. There is little doubt in the current economic climate that the current system of capped income-contingent loans is inadequate to meet the funding requirements of universities and their students in order to maintain excellence. There is no doubt that the current economic climate has led to a more radical set of options being suggested in the Browne review. This has also been helped by the emerging consensus among most of those involved in higher education that tinkering at the edges is no longer feasible and that smaller cuts to HEFCE funding, combined with another increase in the income-contingent loan scheme, would neither meet course costs nor somehow put off the requirement for universities to have increased funding. So the options left on the table were to have a graduate tax or to follow through with the proposals of the noble Lord, Lord Browne, for a graduate earnings contribution. Several noble Lords have spoken about the challenges posed by a graduate tax as well as its inherent inequalities, so I will not repeat those views.

I turn to the proposals of the Browne review. I start by congratulating his panel on having achieved a balance between equity, quality and sustainable funding. Like most reviews, in answering questions it also raises a number of fresh ones, which I hope my noble friend the Minister will be able to answer in her response tonight. While society is undoubtedly strengthened by the expansion of higher education, I accept the principle that those who benefit financially from an optional life choice, which is what a university degree is, should bear the bulk of the costs of that choice.

I shall speak about the concerns expressed about the utilitarian nature of these proposals. As someone from an ethnic minority who speaks to numerous disadvantaged students from ethnic minorities, as well as to those who are not, I want to share with the House the idea that many young people have aspirations to be financially independent through employment. They look to their degrees to get them a job that will enhance their positive freedoms—the “freedoms from”. The idea of the longer-term benefits of sagacity and intellectualism are not foremost in their minds when they are 18 and contemplating the rest of their lives. Utilitarianism has its role as well, alongside the ivory towers.

I also welcome the expansion of places and of the funds following the student. In the past few years we have seen a situation where able students have been prevented from fulfilling their aspiration for a university degree because HEFCE’s control of the number of funded places has prevented them from going. The review estimates that there were some 20,000 to 30,000 qualified applicants who were unable to obtain a place over the past five years. It cannot be right to have a random lottery that tells you that you have met the criteria for entry but you cannot go this year, and perhaps not even next year, as there is a cap on numbers driven by budgetary constraints.

I turn to the other welcome development: the availability of funding for part-time students. I went to university later in life and obtained degrees through both full-time and part-time courses. Nevertheless, I worked throughout my undergraduate and postgraduate degrees. The most difficult aspect of this was finding the funding up front when doing my master’s. Most part-time students who are not on employer-funded courses need to build up a nest egg to see them through the two-year or three-year commitment that they make, just to cover their living costs. The additional burden of having to take out a commercial loan to pay for up-front fees provides an incentive to chuck it all in and go full-time to take advantage of the option that full-time courses currently offer of deferring payment till later.

The sustainability of university finances has been an on-going theme for my generation. We in Britain take great pride as a nation in featuring well in international league tables and in counting the number of Nobel laureates that our research institutions produce, yet at the same time we cultivate a culture whereby students, academics and indeed the governance of our institutions can somehow be delivered by muddling through. I am glad that the noble Lord, Lord Browne, has dispelled the notion that our university budgets can continue to be trimmed without any impact on teaching standards or research excellence.

In plain English, the review attempts to provide the best possible education at the lowest possible price, hence the lifting of the cap on fees to allow individual institutions to charge what their students will bear. I would therefore be dismayed if the backbone of the review—removing the cap and allowing a market to develop—were to be abandoned for the lowest-common-denominator position of a fixed, yet higher, fee; it would meet the demands neither of students nor of universities. I also say to my noble friend Lord Smith of Clifton, who I see is back in his place, that a cap would ensure that those elite institutions that he was worrying about, such as the LSE and Cambridge, would indeed go private.

Alongside this uncapping is an essential corollary: that those charging over £6,000 will have to return a proportion of the additional income to the Treasury on a sliding scale. These levies are to be used to offset the costs of education for those who will be earning under the threshold and hence will require a subsidy. This is a progressive response to a significant challenge, as it will also put an onus on those charging higher fees to improve access. I hope that the Government will resist calls for a cap, which to date has plainly been seen to be unworkable.

My final point concerns the improvement of access. I welcome the proposals in the review for improved guidance for pupils on the benefits of higher education and for informed support to ensure that they are able to make the best choices of courses in line with their aspirations. The review proposes that the UCAS portal will allow pupils to compare courses and their relationship to employment options after one year of graduating. I wonder if this is not too short a timeframe for assessing the success or otherwise of your future degree. Will the Minister consider a longer timeframe, monitoring the progress of a graduate in employment for perhaps three years to give a better picture of the future? This would help school-leavers making difficult decisions.

While the review has detailed how the service in schools may be professionalised, will the Minister explain how older part-time students might also be similarly assisted? The UCAS portal will not be directed at them but their investment is as deep, if not more so.

On widening participation, I also urge the Government to go further than the review and consider making the first year free for all those pupils who have been recipients of the pupil premium. There is also the on-going question of how students from disadvantaged backgrounds might be encouraged to enter the elite institutions. The Sutton Trust research shows that around 3,000 pupils with results at GCSE and A-level that would enable them to attend elite institutions do not apply; the noble Lord, Lord Browne, mentioned that himself in his speech. The review also points out that these institutions spent some £400 million in 2009-10 in trying to improve access yet, perversely, the review leaves it to institutions to determine how they might improve access in the future when OFFA is subsumed into the superquango, the Higher Education Council. It is curious that the Higher Education Council will also be the adjudicator of appeals. The importance of independence for both an access regulator and an appeals adjudicator is significant, and I hope that the Government will consider that carefully.

The proposals are far-reaching and radical. As one who has sat through numerous debates in this House over the years, listening to noble Lords despairing about the quality of education as well as the reductions in funding for universities, I am convinced that the time has come for a radical, progressive and lasting solution. If the Government consider the proposals carefully, blunt their rougher edges and come back with the fundamentals nevertheless intact, we will have gone a long way towards an equitable solution for funding high education.

My Lords, I find myself in agreement with a great deal of what the noble Baroness, Lady Falkner, has said. I warmly welcome the proposals in the Browne report, and I congratulate the noble Lord and his team on them.

It must have been tempting, and the noble Lord referred to this, to tinker with the details of the tuition fees scheme in the hope of not offending anyone too much. If that had been done, a great opportunity would have been lost. By approaching the issue from first principles and basing its recommendations on those principles, the Browne review opens up the possibility of freeing universities to meet the needs both of students and of the national economy and—if the Government hold their nerve; I will return to this—of extricating the Government from their present invidious position.

Of the six principles on which the Browne report is based, I think many of us would agree that the most important is the third:

“Everyone who has the potential should be able to benefit from higher education”.

That was the principle of the Robbins report nearly 50 years ago. Sadly, however, as the noble Lord, Lord Norton, pointed out, the Robbins principle that higher education should be provided at taxpayers’ expense to all those capable of it was a practical proposition when fewer than 10 per cent of young people went into higher education, but is totally impractical when over 40 per cent do.

I differ from the noble Baroness, Lady Blackstone, and the noble Lord, Lord Giddens, not on their principles but on what experience shows us. Successive Governments, unable to ask the taxpayer to provide the necessary resources to fund a free higher education system but unwilling to grasp the political nettle of asking students to make a contribution, have been slowly strangling our higher education system, as the noble Baroness, Lady Falkner, said. The cap on tuition fees has produced some absurd anomalies. Universities suffer a loss on almost every UK and EU undergraduate they admit, which the universities have to meet by diverting funds from research or by being forced to subsidise students from wealthy families with funds which they could use to support students from less wealthy families. Universities also have a strong, almost overwhelming, incentive to recruit foreign students, to whom they can charge realistic fees, rather than our own UK and EU students, to whom they cannot. This has been bad for our universities, but it has also been bad for successive Governments caught between the rock of asking the taxpayer to provide more and more funds and the hard place of turning to the only other source—the students themselves.

The Browne report provides an opportunity for the Government to get their fingers out of this mangle. By providing for a direct relationship between the student and the university, as the noble Lord, Lord Maples, pointed out, it will produce an energising stimulus to both—to the student to demand the best and to the university to provide it. The recommendations ensure that no student is prevented from attending university by having to meet the costs up front.

Of course, we would all prefer that no student had to accumulate liabilities to be met from their future incomes, but, as the noble Lord pointed out, and as history tells us, that is no longer a practicable possibility. Graduates have to meet those liabilities only if, consequent upon their degrees, their income is sufficient to enable them to do so. When we talk about a progressive system we should remember that, if the beneficiaries of higher education did not meet the cost, the taxpayer would have to do so. As the noble Baroness, Lady Falkner, pointed out, there is nothing progressive about the half of the population who do not have the benefit of higher education having to pay for the advantages of those who do.

There is one other point that I want to make about progressivity. Some have criticised the proposals of the noble Lord, Lord Browne, on the grounds that an interest rate is to be charged to graduates who pay back over a period and, in consequence, they will pay more than those who pay back immediately. However, the interest rate proposed is the rate at which the Government borrow—2 per cent over inflation. You could not get a rate like that from any other lender. Those who could pay back immediately would be well advised not to do so, and to maintain the loan.

Just as I have been delighted by the thrust of the Browne recommendations, I have been dismayed by subsequent hints that the Government will keep their fingers in the mangle by imposing some sort of ceiling on fees. I beg the Minister to advise her colleagues not to do so. If they do, they will regret it. All too soon, they will be faced again with the need for the cap to be raised and they will incur the political odium of having to do so. This really is a situation where, with one bound, our hero could be free.

If the Government want to make the system more progressive, I would urge them to do it by looking at the interest rate on outstanding debt for high earners. I also urge the Government, in introducing this new scheme, not to offset every pound reaching the universities from higher fees by corresponding reductions in the teaching grant—especially the teaching grant to arts subjects. It is wrong in principle for the Government to discriminate in that way—many speakers have made that point—and it is also likely to be ineffective. Universities will simply recycle money from the science subjects to the arts, which they are already being forced to do by this year’s HEFCE grant. It would be better to freeze the teaching grant or make a smaller reduction in it, which would in turn reduce the hike universities may feel they have to make in tuition fees, and consequently reduce the political odium for the Government. Given that, in the short term, teaching grants and tuition fees come from the same pot—notably the Exchequer—the short-term effect on the national finances would be neutral.

My Lords, I am grateful to the doughty noble Baroness, Lady Wilcox, for initiating this debate and I congratulate the noble Lord, Lord Boswell, on his thoughtful maiden speech. My interest in these issues is longstanding. I am currently the president of the School of Oriental and African Studies in London, and was recently elected to serve as the principal of Mansfield College, Oxford—a post that I will take up next year.

In the mid-1990s, I chaired an inquiry—a commission—into widening participation in further education. As a result, a foundation in my name, of which I am president, was established by that sector. It supports further education students from some of the most disadvantaged backgrounds going into higher education. We do that through bursaries, mentoring and work placements. It is those students who face the most serious disadvantage and who triumph against the odds, as well as the many more who have the potential to succeed in higher education but who have never been afforded the opportunity, who are at the forefront of my mind.

The recommendation to remove the cap on tuition fees concerns me greatly. It is said that higher fees and student debt do not deter those from poorer backgrounds from applying to university. I listened with interest to those Members of this House who suggested that. That assertion is supported apparently by the increasing application rates to UK universities, but they are increasing to the point where this summer huge numbers of students were denied a place at university because the outgoing and incoming Governments were unwilling to provide the funding for the number of places necessary to meet that record demand.

However, we must not be too complacent about the issues of equity and access to higher education. I know that first hand from the many students who come through the Kennedy bursary scheme. These include young women who became pregnant at the age of 15 or 16, but who return to education in their 20s, or young men who get into trouble and cannot survive at secondary school, but see the light again in their 20s or later. Many of them are people who are overcoming huge disadvantages and hurdles. They are very easily disincentivised if they think that they will face long-term debt once they go into the workplace.

Taken separately, fees, grants and loans each have an effect on participation in higher education. The Institute for Fiscal Studies—not popular with the current Government, but a substantial body—gave evidence to the Browne review and stated that higher fees in fact have a deterrent effect on participation. My noble friend Lady Morris explained that there was clearly a cut-off point at which it was felt by less well off families that they just could not meet the challenge. When the fees were increased in 2006, the negative impact was outweighed by the positive impact of increasing student support. The Government must be mindful of that evidence as they plan their response to the recommendations of the Browne review and not tip the balance in the wrong direction, giving the disadvantaged the sense that higher education is beyond their reach.

Like other noble Lords, I welcome some of the proposals. The disparities between the treatment of full-time and part-time students have also been one of my longstanding concerns. They have been totally unjustifiable. Part-time study often provides a second chance to those who missed out earlier in their lives, and it is therefore right that they should receive access and the same support as full-time students in the form of loans to cover their tuition fees. It is particularly good that they will not have to pay those fees up-front. I also welcome the rebalancing of levels of grants and loans to those students. However, one thing that I will raise is that there was no mention of London weighting to reflect the higher costs associated with living and studying in our capital city.

I return to the issue of higher fees. I remain to be convinced that allowing universities to charge higher fees, thereby introducing a market in the price of courses, will not leave students, particularly those from poorer backgrounds, choosing courses based on cost rather than suitability. All the evidence is that students from disadvantaged backgrounds choose the university closest to home and choose courses in subjects where they have shown the most talent at school. Often, they are much more anxious about taking on courses of a different kind, such as law and medicine. When so many selective universities continue to struggle to guarantee fair access to those from underrepresented backgrounds in spite of their many efforts to do so, it seems bizarre that the Government should consider adding higher course costs to the catalogue of factors that prevent some of our brightest students from accessing our most academically elite universities. The vista of a fee debt being carried into the future is the stuff of nightmares for many working-class people.

This is all the more concerning given the proposed changes to the arrangements for monitoring the performance of institutions in widening participation and in providing financial support. We have heard about the creation of a new superquango, the higher education council. It is understood that universities will have to agree an access commitment, with what the report describes as tougher scrutiny taking place. This is all remarkably vague and noncommittal. I notice that the requirement that institutions charging the maximum fee must offer a minimum bursary to students from disadvantaged backgrounds—one of the main concessions that Back-Benchers obtained in 2004—has been abandoned by the Browne review. I should like to see an absolute requirement to provide bursaries, particularly for those universities that will charge more. There can be no doubt that the current system of institutional bursaries is far too complex, and I welcome any simplification. Clearly it is true that people receive poor advice and guidance, and any improvement on that front is a benefit. However, what we in the Kennedy Foundation have discovered is that there is a real need for mentoring as well as money if we are going to provide any package of support to those who are disadvantaged.

One impressive element of Mansfield College, Oxford, is that it was the first college to embrace the ideas of widening participation and of students coming from further education to Oxbridge. I should like to see that extended. Grants for students must be the quid pro quo for any lifting of the limit on the charges that universities can make. I am concerned that we will see the arrival of Tina. Noble Lords may wonder who she is. Tina is the mantra that we hear too often nowadays: there is no alternative. The noble Lord, Lord Butler, said it was no longer practicable to leave students without debt. I say to the House that this will have a very damaging effect on the legal profession, in which I have had a very satisfying career. That will not be possible for young people from the kind of background that I came from, because of mounting debt.

I will mention one other area that deeply concerns me. The plan to remove all public subsidy for degree courses in the arts, social sciences and humanities makes no sense, economically or culturally. The Browne proposals would remove nearly all of core funding in some universities. Certainly, this is true for SOAS. This is in effect the privatising of our teaching function. The implication is that there is no benefit to society in students taking degrees in Arabic, history or development studies, which is quite evidently untrue. The other day the Deputy Prime Minister said that the Government had looked carefully at the case for a graduate tax, but had dismissed it as unworkable and unfair. I am disappointed that the report of the noble Lord, Lord Browne, did not consider the alternative put forward by the National Union of Students. It submitted its own fully costed and economically tested proposal, not for a lifetime graduate tax but for a progressive graduate contribution model that would have seen payments linked to earnings for a fixed period of 15 years only—so there would have been an end in view. This would have had the advantage of eliminating the concept of tuition fees—and debt linked to fees—altogether. However, it seems that those proposals have not been examined and I ask the Government to look at them.

I will say finally that education changed my life—something that is true for a number of Members of this House. My parents left school at 14, my older sisters at 15. Having the opportunity to study law in London turned my life around in immeasurable ways—not just in the utilitarian sense of allowing me to become a lawyer and improve my earning capacity. I had a fulfilling and stimulating career, but it also enriched me in many other ways; for example, in the friendships that I had with people from totally different backgrounds from those I would otherwise have known. I learnt about worlds far beyond the one that I grew up in. I learnt about politics, music, literature and art, which I knew nothing about in my own home. I learnt about other cultures and traditions, and I acquired habits of learning and disciplines of mind. That is what education does for people. However, it is not just of value to those who receive it. Education has been a source of social vitality, and the more people we include in the community of learning, the greater the benefit to us all. Education strengthens the ties that bind people. It takes fear out of difference and encourages tolerance. It is the means by which our values and our wisdom as a society are shared and transmitted across generations, and it helps people to see how the world ticks. It turns them into better citizens.

That is why I think that the review of the noble Lord, Lord Browne, is wrong in essence. Universities must not be treated as purveyors of a commodity, with students as consumers. Like the noble Lord, Lord Giddens, I see our universities as part of our nation's common wealth. As such, they deserve investment, and our students deserve support as a government priority. It is the primary responsibility of a civilised state to enable bright young people to surmount dark and difficult beginnings. For the university to remain what our poet Masefield described as a thing of beauty, as the noble Baroness, Lady Wilcox, said, it has to be available to the talented, whatever their background. I hope that the Government will think carefully before endorsing this review in full.

My Lords, I, too, thank the Minister for having introduced today's debate in such a civilised manner. I also congratulate the noble Lord, Lord Boswell, on his maiden speech. I have had the opportunity over the years to work with the noble Lord on the issues of education in the Commonwealth. It is good to see him among our number, bringing his experience to bear.

I am privileged to be a member of the courts of Newcastle and Lancaster universities, and a governor of the LSE. I also do a certain amount of professional advisory work with De Montfort University. They are all exciting universities with very different roles to play. However, I am a resident of Cumbria and it would be quite wrong to participate in this debate without bringing to the attention of the House the anxiety that exists among the academic and student community in the new university there about its future and survival, and what the funding issues mean for them. These issues must be resolved without delay.

Our first objective—this has been a repeated theme in the debate today—should be to establish the purpose of higher education, and indeed of education as a whole. There is of course a functional, utilitarian role of enabling society and the economy to operate. However, there is also the visionary, creative role, which ensures that we have questioning, inquiry that is critical in the best sense, and self-fulfilled and confident citizens—not just sophisticated consumers, but citizens playing a positive role in open democracy, able to ask questions, not just to tick boxes. It ensures a society where originality is valued—a society marked by its qualitative characteristics, not merely its quantitative dimensions. Hence the vital significance of the arts: of classics, literature, music, sculpture, design and, not least, architecture.

The challenge, I believe, is that still literally hundreds of thousands go to their graves without realising their potential or what they could have been. In a society capable of so much scientific and technological achievement, it seems an absolute disgrace that we still tolerate this situation. However, we must not confuse vocational training and education. Of course, we must have the advanced skills to produce sustainable growth and wealth but this cannot be an end in itself. History, I suggest, will judge us by what we do with the wealth that we generate and not just by the quantity of that wealth.

That brings us to the issue of debt. At the moment, our society is totally preoccupied with it, and the Government constantly remind us about the dreadful nature of debt. I find it an amazing contradiction that we can merrily embark on a system which says that it is absolutely natural for students and large numbers of people to start their lives with a huge debt and that this is a culturally inescapable part of our society, when at the same time our society says that debt is wrong on a national level and the Government tell us every day that they cannot do anything because of debt. It is difficult to overestimate the fear of debt which exists in many of our less affluent, well endowed communities.

Before we take a look at the proposals, perhaps I may add one other word. Why do we always accept—we have heard it said in the debate this evening—that it is not practical to think of free higher education when we do not question free primary and secondary education? The truth is that, as in so much of the qualitative side of life, ours is a society which puts a higher premium on private affluence than on public wealth. Until we get that balance right, we will always struggle to find imperfect solutions. Basically, we have sold out on the principle of saying that we can have a decent society only if we give priority to public wealth and public well-being.

With regard to the other proposals, perceptions matter. In the universities in which I am involved, I have worked quite hard on issues of access and I am fairly certain that, with apprehension about still-larger debts, there will be a psychological effect on access. I have only one slight difference with my noble friend Lady Morris of Yardley in what I thought was a brilliant speech. She said that if people want to get to university, they will find the funds to pay for it. I know of communities where there is no aspiration whatever because people have not been exposed to the opportunities. Really deprived communities in which what my noble friend said is just not true can be found on the west coast of Cumbria. People do not think about universities as relevant to them, and there is all sorts of potential trapped in that reality.

I believe that, whether it is intentional or not, there is a danger that the proposals could produce two tiers within our higher education system, both within individual universities and between universities. I fear that there will be an increasing tendency for students to study what they think they can afford and what will produce a quick income rather than what they really want to study and have the capability of studying. I also suggest—there has been allusion to this, but we know it—that in the real world wealthy universities will attract big endowments and big financial support, and those that are less wealthy will continue to struggle, so the differences will grow. There is also the question of international comparisons. This has not been mentioned but is it not possible that some potentially good students will say, “Hang on a moment. I can get a rather good university education at a much smaller cost in France or Germany. Why do I have to have all this struggle with debt in my own society?”? It was even put to me the other day that someone might decide that they can get a rather good university education at Cape Town, with all the stimulus of studying in a completely different environment. Why accumulate all this debt to study in this country? Of course, that underlines the greater emphasis that other societies give to public wealth and well-being.

Above all, I join my noble friend Lord Giddens in stressing the qualitative future of our society and the fact that this depends as much on the arts and social sciences as on physical quantitative dimensions. Philosophy, ethics, psychology, anthropology and sociology are all crucial to making a success of our society, and it is just stupid not to understand that. At places such as the LSE we are always grappling with the challenges that confront humanity at the moment. Perhaps I may spell out some of them: climate change, global economic functioning, social exclusion, health and well-being, international trading systems, unemployment, security, international development, race relations, conflict resolution, peacebuilding, human rights, financial risk and regulation, bioscience and societies, and public policy in general. These are the real issues facing humanity and this is where the social sciences will become absolutely indispensable if we are to find a successful solution.

Then of course, in a wider cross-section of universities, an important and growing contribution is being made to what I call professional calibre. I think of the courses being provided for the police, probation officers, social workers, youth workers, community workers and teachers. What is being recognised here—and there have been some extremely enlightened chief constables who have seen it very clearly—is that you need professionally well trained police but that you also need well educated police to make a success of policing in an increasingly complicated society. I am afraid—this is not in any way a criticism of the noble Lord, Lord Browne, and his report but a comment on the dangers inherent in the Government’s approach on funding—that we are going to see this qualitative work in the professions undermined because the universities will suffer from less funding; and because the bodies that have helped to finance, or in a sense commission, those courses will be forced to cut back on the higher education and university elements within the courses because of their reduced budgets. If the Minister can give me some attention for a moment, it seems to me that this is a crucial issue that deserves priority attention.

There is also the whole reality of the cuts and unimaginative targeting which will affect the entire approach to cross-subsidising studies. In much of the work to which I have referred, the matrix of studies is terribly important. From that standpoint, departments which are more expensive and more difficult to sustain have a crucial contribution to make. With this more targeted approach, what is going to happen to the cross-subsidising of courses? I suggest, as others have done, that universities are not places for market experiments. I think of the late Harold Macmillan talking about selling the family silver; and I think of the characteristics of a society that knows the price of everything and the value of nothing. All too easily, I can see cutthroat competition arising among universities, driving down quality and trying to attract students at rates which students will more easily be able to afford.

The Government repeatedly tell us that we are all in this together. If we are all in this together we need a strategy for higher education as a whole and we need a comprehensive approach which makes sense; we do not want to see one institution against another. Unashamedly, I hold to the old philosophy that what dignifies the term “university”, and any institution worthy of the name “university”, is the concept of a community of scholars—not an institution in the marketplace fighting to survive and fighting to attract students over other universities. In an ideal civilisation, universities as a whole should be a community of scholars and should not be at each other's throats, trying to ensure that they survive in the marketplace.

We all know that this country has been through a terrible economic crisis. When we think about it, we all know that the origins of that crisis lay very much in the realm of values and ethics. That is why, in our higher education system, we must be certain that we are not producing high-powered technologists, high-powered economists and the rest in a vacuum of ethics and philosophy. Surely, the more advanced and the more complex the challenges become, the more important those issues are for us all. Therefore, I hope, before the Government rush in to any solution, that they become very clear about what it is we are really trying to do.

My Lords, at this stage in the debate I cannot help feeling pretty mesmerised by the extraordinary range of knowledge and expertise that we have heard from a large number of the contributions today. In particular, I identify the noble Lord, Lord Boswell, who is a very welcome newcomer to the House and who has a great knowledge of higher education. I enjoyed his speech and I have noticed that he has been sitting here throughout, listening to everyone.

Like others, I ought to declare an interest as a former vice-chancellor of the independent University of Buckingham and as an honorary fellow of Christ’s College, Cambridge. Those are two very different universities but they are part of the 130 or more extremely diverse universities. To my mind, every institution ought to be judged by comparing it not with its neighbours but with its own mission and objectives. Every university is different.

I welcome the thrust of the report by my noble friend Lord Browne—namely, that if there is, in the face of an economic crisis, a diminution in the amount of taxpayers’ money available, the student must come to the fore. I regard myself as having been very privileged to have been to university at a time when I did not have to pay fees. I am very conscious of that. Students, not the state, have to become the real customers of universities where they pay more but, at the same time, do not pay fees up front; where they have a progressive repayment system that gives greater help to the less well off or to those who earn less later in life; where the threshold is increased to £21,000 over a 30-year period; where we work towards a level playing field of access for all; where part-timers are now treated the same as full-timers, which I welcome; where there are fewer controls imposed on universities; and, therefore, where there is more autonomy for universities. All that must be welcomed, although I have reservations in a number of areas.

I would like to draw on two experiences, which are relevant to the debate, concerning the University of Buckingham. First, I preface my remarks by saying that I am not in favour of no taxpayer support whatever for the university world, but I am in favour of diversity and having a range of universities, some of which should be wholly independent. By paying the true cost, what is the effect? The student comes first; the student is highly motivated, works extremely hard and gets a lot of personal attention. What is the outcome? For the past five years, the University of Buckingham has come top of the national student survey for student satisfaction. That tells you quite a lot. At the same time, the record on employability of those students is immensely good.

The second point about the University of Buckingham is that I want to stress that my noble friend has recommended in his report that the fast-track, two-year bachelor’s degree should be taken seriously and has a contribution to make in the whole pattern of ranges of degrees that we have in our system. The late Lord Beloff pioneered the two-year degree at Buckingham, beginning in the 1970s. We are talking about 40 weeks in the academic year, instead of roughly 30 weeks—the same number of weeks in two years as, for example, students at Cambridge or Oxford would do in three years, with the same quality and standard of degree achieved in two years. Staffordshire University and other universities have been doing pilot projects and evaluations on that. Of course a two-year degree does not suit every student, but it suits some students. It may particularly suit the mature students, while it may not suit others who could do better and flourish better on a three-year or four-year degree. Nevertheless, it plays an important role in the whole system. It requires sustained hard work and four terms in the year but it also saves one year of fees. Therefore, the student is released one year earlier, either to go to work or to assume postgraduate studies or whatever. We need to recognise that the financial viability of such short courses would be strengthened or enhanced if it were possible to charge tuition fees that are 25 per cent or 50 per cent higher per annum, say, than those for the three-year courses, in order to treat the two-year and the three-year degree with parity. I hope that that will be seriously considered by the Government if there is to be a cap at all.

Many of my noble friends and others have mentioned Cambridge, with which I am also identified—a centre of excellence, without any shadow of doubt—where the combination of tuition and maintenance fees is £18,000 a year and where the university fills the deficit of £9,000 from its own resources. I repeat the point made by my noble friend Lord Butler and others: it would be much better to start by having no cap at all but, if we must have a cap, it must be flexible. There must be differential fees recognising the different roles of universities. Some universities are already considering adopting their own student loan schemes. If we are to retain a common approach, it needs to be highly flexible.

We should be concerned, and I am sure that every noble Lord is, that there is real growth in the resources of our universities—not simply replacement funding, but real growth, notwithstanding the toughness of the present climate—recognising that we pay a far lower sum as a proportion of GDP than a large number of other countries, not just the United States. To my mind, as taxpayer support diminishes, so the private sector has to be encouraged in every way that one can conceive to fill that gap to increase resources for universities—in addition, of course, to tuition fees.

The precondition for the success of this new policy is to create a climate where there is a wide range or battery of incentives for raising more resources privately, much more than we see today, from challenge funding, matching funding, which I know that the previous Government introduced, to better charitable giving. We have to give credit here to the Labour Government for the introduction of gift aid, but we need to go far further than that now. We should provide incentives to increase endowment funds for universities. I do not favour the view that it is impossible to do that in this country. I agree that we are not like the United States and that the culture of giving is not so strong here as in the United States, but we should not be negative about this; we should be positive. In the United States, there are lifetime legacies and planned giving schemes. There are all sorts of ideas from other countries that we ought to be picking up.

As has been mentioned, Cambridge has the largest endowment fund of any European university—I think that it is now £7 billion, thanks to its having raised £1 billion recently in its appeal. Cambridge provides support on a sliding scale for all students with parental income below £50,000. It is giving support on a needs-blind basis. Harvard, we know about: it has much bigger endowment funds. Princeton has far bigger endowment funds. That is what we must fight for. It will be a very big challenge for the Chancellor to meet that point. Otherwise, we have a negative atmosphere of simply talking about replacement funding. We want growth and we look to the Chancellor to fuel that and help it along—in addition to collaboration in resources raised for research in universities and business in the local community. That is my main message and the main point that I ask the Government to take seriously. If we are to meet the challenge to maintain our place as a country with a reputation for really high-quality universities that are centres of excellence, that is the way we must go.

As the 25th speaker, I had better say something different from what anyone else has said. First, I very much welcome Lord Browne’s report. I have waited 23 years for something like this to happen. It has at last happened. In 1987, when I was on a summer holiday, my colleague Nicholas Barr sent me a paper in which he argued that all higher education undergraduate funding in the UK should be on an income-contingent loan basis. We all fell on it with amazing pleasure that at last someone had got something right.

As someone who had no education in this country—I was educated in India and the United States—I could not understand the inequity of British higher education funding, which allowed people from class groups A and B to swan around for three years, to get a degree and to move into the top two deciles of income, all at the taxpayer’s expense. Normally, of course, the taxpayer did not have the benefit of higher education. The middle classes, of course, beat their breast about low access levels, but they did nothing about the quality of secondary school education and therefore the situation continued.

The inequity of British higher education funding has been justified by the idea of externalities. Of course, if someone gave me a lot of money I would praise it as doing a lot of social good—of course I would. Why wouldn’t I? However, it is a fallacy to say that, because education has externalities, it should be funded in the way that we fund it. Perhaps that is partly true, but a part of education is being funded as long as we fund university research and capital expenditure that the undergraduates benefit from. Even after Browne, undergraduates will not be paying the true cost of their higher education.

Another inequity in the British higher education system that has been happening for the past 30 years is that non-EU students are the only category who pay the real cost of higher education. They pay £10,000. Even after Browne, we are talking about only £6,000—and everybody is saying, “My god, the sky is about to fall”. If the true cost is £10,000, why do we not charge £10,000 and get on with it? The nature of an income-contingent loan system is such that not only are there no upfront costs, but it is not like a mortgage. I am sorry to say that we have spent a lot of time devising this; I have put intellectual effort into it. It should not be like a mortgage, because the cohort pays for it, not the individual. Very importantly, it exploits the inequality of income outcomes among the graduates. By having a threshold and a proportionate share, eventually some people will pay more than they have borrowed while others will pay less. It is one of the most equitable systems that I can think of.

I hope that we go ahead with Browne, although, as I said, I have reservations about £6,000 being too little—and I am not making this up. In 1998, when the then Labour Government said that the level should be set at £1,000, I am on record in this House as saying that it should be at least £4,000. When they said that it should be £3,000, I said that that was nothing; it should be £7,000. I have been ahead of the curve—or behind it, however you want to look at it.

This is a good opportunity not to get stuck with £6,000. We really should find out the cost of educating an undergraduate. Come on, it is not rocket science. Then, let students have a transparent choice of how much they will pay through an income-contingent loan and let us see how much the poor taxpayer will pay for the whole thing. Let us also ask the taxpayers if that is what they want to do.

My noble friend Lord Giddens talked about the American system. I have always thought—since I was in America—that the American system was much more egalitarian than the British one. In the American system, you more or less have to fend for and educate yourself—banks give loans and people save or work while studying. The American system also has flexibility whereby you can take some credits now and some later. As my noble friend Lord Hunt pointed out, that is what gives the American system its strength.

British universities are silos. You enter and you make a contract for three years. You cannot escape and, if you do not finish the course, you do not get a piece of paper for it. You do not get any credit—you fail. They have taken your money and they have failed you, thank you very much. The education is also very narrow; there are no liberal arts colleges. That is why not a single Commonwealth country has followed the British model of higher education. Nor have they followed our way of financing it, but that is another matter.

If we get to the position of adopting the Browne system of higher education, profound changes may happen to the British university system. I cannot wait for it. I know people who say, “Competition is horrible. It is terrible”. We endure competition everywhere else. When it comes to Murdoch owning BSkyB and other television stations, we say, “No, we must have competition. We cannot let Murdoch have a monopoly”. I think that, similar to what the noble Lord, Lord Luce, said about Buckingham, competition might force some universities to specialise, to offer different packages and accelerated degrees and to give people a different kind of education. Universities should be different. One thing that I hold against the Conservative Government is that the great Education Reform Bill, as it was called, reduced diversity in the system by making all the polytechnics and CATs universities. Everyone started wearing gowns and flouncing around. There was diversity but it was reduced. We need more diversity. We need universities that offer only a few courses—maybe only humanities or social sciences. Why not? The LSE offers only social sciences and it is a perfectly good university. It may be that financial change will lead to much healthier changes in the British university system than there have been so far. I know that it always shocks the British mind that anything could be better than what we already have, but it is possible that we could have a better university system.

Another fallacy is that uniformity is equality. Uniformity is not equality. Even if there has to be a certain level of fees, there is no reason why every university should be forced to charge the same fee. In a debate some years ago, when we were discussing the 2006 rules, the noble Lord, Lord Quirk, said that perhaps universities should be allowed to charge an average, across all their courses. They could then discriminate, between courses, what they charged.

The crucial point is what the Government are willing to pay up front to the student by way of subsidy of the front-end costs. Let us say that the university can charge whatever it wants but the Government will subsidise only a £6,000 or £7,000 per year education. If Oxford, Cambridge or the LSE want to charge £20,000, they must find loans for the other £13,000, which will have nothing to do with the Government. That will leave a perfectly good system in which we do not have to tax universities for charging. There is no need for clawback. We could say that £7,000 is what the taxpayer will pay up front while we are financing the loan. If universities fancy themselves as Harvards, they must make arrangements for a particular loan package, which they will offer to their students. Those students will go to Cambridge, Oxford or the LSE because they believe that doing so will enhance their future income. That is why people go to university. They also go there for culture and so on, but actually they go for income. We could easily have a sort of cap on what the Government would pay, with universities then being free to charge whatever they wanted. That would simplify matters. It would force universities, as the noble Lord, Lord Luce, said, to seek endowments and funding of a different kind to help to subsidise the loans that students take out.

I wanted this to be done before there was any prospect of a cut in government spending. This change in the way of financing higher education has nothing whatever to do with the general budget of the Government. The Labour Government should have done it 10 years ago when we had the money. Had we done it when we were prosperous, there would have been fewer complaints. We did not; we lost our nerve. In 1997 I hoped that the incoming Government would adopt as policy our recommendation of an income-contingent loan system. They did not and the rest is history.

We have to make it quite clear that the grounds for doing this is equity—equity for the population, most of whom pay indirect as well as direct tax and most of whom will be on income levels that are well below what a graduating student would earn in his or her first job. An income of £21,000 may seem like peanuts to us but it is about the mean income and way above the median income. Therefore, a graduating student will end up in the top two or three deciles. We are not talking about poor people and certainly not about poor deserving people. The rich may be deserving, but I doubt it.

We have to allow lots of flexibility and allow universities to do different things. We have to make such packages that the only commitment that the Government have is the extent to which they will fund the income-contingent loan system. For the rest, we can allow the dreaded market to take care of it. If you think that the market is not a good thing, look at the United States. The chart on page 16 of the Browne report shows the proportion of graduates aged 25 to 34 against those aged 55 to 64. In most European countries, there has been a spread in the percentage, but not in America. Why is that? It is because historically Americans have been able to go into higher education in large proportions because they have a flexible, non-bureaucratic, non-government-funded system. That is the secret of achieving equitable higher education, which may be counterintuitive to most of us.

My Lords, the first time I spoke in this House was in the debate on the Defamation Bill introduced by the noble Lord, Lord Lester, and 12 QCs and two High Court judges spoke before me. In this debate, it seems that everybody is either a leading academic, a former vice-chancellor or the master of a Cambridge or Oxford college, apart from the noble Lord, Lord Browne, but I am sure he fits into that pattern somewhere.

We are indeed indebted to the noble Lord, Lord Browne, for his report on higher education funding. He has sought to resolve an issue that has been growing in difficulty ever since the nation embarked on a policy of industrial-style expansion of higher education in the 1990s. I suspect that if we do not grasp this opportunity, we will return to it in the not-too-distant future. The noble Baroness, Lady Blackstone, is not in her place, but I make no apology for having opposed the introduction of up-front tuition fees in 1998 and the imposition of variable tuition fees in 2005. I maintain my belief that education should be free to those who qualify on merit to access our universities, and like the Secretary of State I am proud to have fought to offer a generation of students an education that was free to me and has given me such fantastic opportunities all my life. However, I am equally convinced that without continued investment in the high-level skills and research talent of the nation, we will never be able to compete in a world where increasingly knowledge and innovation are key to global success.

In a perfect world, these two ideals could be satisfied through the public purse, but ours is far from a perfect world. The inevitability of a shift from the state to the student for the funding of teaching began in 1998, but was made inevitable when in 2008 the current economic crisis engulfed the nation. The recommendations of the noble Lord, Lord Browne, were inevitable, but they suggest quite alarmingly that the final destination is uncapped fees, a fully fledged market in higher education and a private higher education system. I share the fears of the noble Lord, Lord Judd, over that, although the noble Lord, Lord Desai, seems to be quite excited by the prospect. We are not quite there yet, but make no mistake, that is the journey we appear to be on, and I suggest we think very hard before taking it.

Does it matter? Is that not where the most productive economy—the United States—already is? Are we not merely playing follow my leader in some elaborate game of intellectual musical chairs? Well, yes, it matters. The Secretary of State states that it matters, which is why I applaud his desire for consultation and his willingness to produce a White Paper. The noble Lord, Lord Browne, has set the scene. He has made some shrewd suggestions, and his core proposals for raising the cap on fees, making repayment more progressive and simplifying yet improving the most generous student support system in the world are to be commended. In particular, the move to extend student finance to part-time undergraduates is, as many noble Lords have said, one of the most progressive and enlightened initiatives in decades.

However the belief of the noble Lord, Lord Browne, that the market will raise standards, offer students a better deal and improve teaching and research outcomes needs to be challenged. He must know that without US-style variability, it will be impossible to create a market based simply on price and quality. He also knows that without some restraint in terms of numbers of students and courses offered, we could get further distortions in the workforce, particularly a decline in STEM graduates, as institutions chase low-cost, high-return students. The belief too that a competitive higher education market will improve access to leading research institutions is hugely misguided, although the report rightly recognises that access is more to do with the failure of our schools system rather than the fault of our leading universities.

I do not want to repeat or rehearse the many superb comments and concerns raised by other noble Lords. Instead, I want to point to a serious weakness in the report by the noble Lord, Lord Browne, which I trust the Secretary of State will address when producing his White Paper. The noble Lord, Lord Browne, failed to say that his expertly crafted solution to higher education funding was predicated on an existing model of higher education in the UK that is arguably—I repeat, arguably—not fit for purpose.

The noble Lord, Lord Bilimoria, was right: much of what our universities offer is globally superb, but far too much of the system basks in the excellence of our research output and there are serious concerns, as the noble Lord, Lord Browne, points out. It is time to stop trying to make the post-Robbins higher education system fit the 21st century and to take a long, hard look at the whole of our post-19 education and skills offer. In the past 20 years, we have moved to a mass higher education system with 45 per cent of our 18 to 24 year-olds attending university. I applaud that, as I do the enormous efforts that the previous Government made to increase participation for under-represented groups. But, faced with the dual challenges of budget deficits and increased competitiveness from a rapidly changing global higher education market, surely the starting point for any review should have been the function and then the form of higher education, rather than simply the funding.

Providing universities with a replacement income stream without the sector having to accept serious reform is a lost opportunity. Surely, if local government, the health service and our Armed Forces have radically to re-engineer their services to meet 21st century needs, so should our universities. It is simply not enough to ask for reform within universities. We need to reform the whole sector.

The Minister talks about greater efficiencies following the Wakeham review and of possible amalgamations or joint use of back office facilities, but if these are solutions, why have not cash strapped university chiefs already done them? It is because they and we are locked into a mind set that says fundamental institutional reform is somehow an admission of failure. It is not: it is an admission of reality and of clarity of mission based on what is best for students, the regions and our nation, and not simply the institution.

Our higher education system is there primarily to do two things. It is to provide intellectual and practical skills to our students, and to provide a research base to fuel the knowledge economy in the widest sense, both societal and commercial. To provide the latter we must have world-class research departments and we must foster world-class indigenous talent. It is remarkable that we have four universities in the top 10 in the world, and that with 1 per cent of the population we produce 9 per cent of world scientific literature and 14 per cent of citations. Our aim should be to build on that and not to be satisfied with it. To do that we need greater research and teaching focus. Already 90 per cent of research funding goes to some 30 universities—perhaps 30 is too many.

We must also question the current institutional freedom to develop postgraduate schools. Currently, all 165 HEIs can offer master and PhD courses, even if they have a relatively small faculty. Does this produce the research talent that the nation seeks or does it simply serve to give some institutions status at the expense of that talent? In the US, with 14.3 million students, 2,297 HEIs have degree-awarding powers, 1,094 of which award post-bachelor qualifications, but only 654 award research doctorates. Yet in the United Kingdom, with 1.9 million students, every one of our 165 universities and higher education institutes has the power to offer PhDs, and 149 currently do so. Will the Minister at least confirm that the forthcoming White Paper is prepared to examine the need for a smaller, more focused, research-intensive university sector? A more focused research sector could then be charged with recruiting the very best talent our nation can offer and provide students with sufficient scholarships, bursaries and loans based on one simple criterion—ability.

The premise that such a system is operable across all institutions, as now, is simply not tenable. The pursuit by many higher education institutes of the “research dollar” has changed not only behaviour but has distorted mission to a point where the teaching of graduate skills to meet the needs of our societal and commercial economy has been devalued. Just as we need to review our research and postgraduate offer, we need to seriously look at how we can deliver the higher level skilled graduates our economy needs at a price both our taxpayers and students can afford.

It was interesting that in his analysis the noble Lord, Lord Browne, studiously avoided what the late Lord Dearing called in his 1997 report the third funding stream for higher education—the employers’ contribution. I am disappointed that employers, who, after all, are beneficiaries of a robust higher education system, have not found their way into the funding mix. Yet the need to provide business facing level 4 skills is as vital to the UK as is our research base.

To this end, I hope the forthcoming White Paper will look at encouraging a merging of the missions of our post-19 FE sector with those universities that are predominantly concerned with teaching high level vocational skills—a new sector that matches in teaching vocational skills the aspirations already present in research excellence; a sector that allows our best further education colleges to compete in the skills sector without having to go cap in hand to either the HEFCE or individual universities for the right to accredit their courses.

Such organisations operate elsewhere in both Europe and, particularly, the US, where the community college or liberal arts system is respected and effective. We have the basis for such a system in many parts of the existing FE and HE sectors, and it is here where the new engine room of the 21st century higher education system can emerge—a sector that recognises the close links between social and business enterprise locally and regionally; a sector where students can earn and learn; a sector where exorbitant “hotel” costs and resultant debt can be avoided; a sector where skills can be developed through a myriad of pathways that are directly relevant to local and regional economies.

The Browne report is not a take-it-or-leave-it solution but a catalyst for real change. Now is the time not to be timid; now is the time to be radical—even if it means less vintage port in some of the hallowed corners of the HE empire.

My Lords, I, too, congratulate the noble Lord, Lord Boswell, on his maiden speech, and I thank the noble Baroness, Lady Wilcox, for initiating what, for me, has been as much a tutorial as a debate.

I agree with many noble Lords who have spoken that we should never forget that the pursuit of learning is a crucial hallmark of the good society. I agree with my noble friend Lord Giddens that university education makes a huge contribution to the spread of cosmopolitan values, which is important for the future of our civilisation. The public benefits of higher education extend far beyond the purely economic.

Having said that, the universities play a crucial economic rule. They are crucial to our success in the knowledge economy, which is particularly true in Britain at the moment when we need a new wave of entrepreneurial, science-based innovation to rebalance our economy away from its overdependence on the City and financial services. In the present circumstances the Government are right to prioritise research over teaching. I think it is what a Labour Government would have done as well, although I do not think they would have gone so far as to scrap the teaching grant for all humanities subjects, which seems extreme.

We have to recognise also that university education, in addition to its public benefits, brings huge private benefits to the individual. That is why the principle of student loans that are free up front but repayable on an income-contingent basis is sound. It was a reform made by the previous Government of which I was proud, and the public finance situation today makes its extension inevitable; a graduate tax is not a practical fiscal alternative.

The noble Lord, Lord Browne, is to be congratulated on the clarity and frankness with which he has set out the options for us. The test of the Browne report will be its impact on wider participation. I think that we are all agreed in this House that higher education cannot be an opportunity that is simply confined to an elite. A genuine opportunity to participate regardless of income, background and circumstance has to be on offer to every individual capable of benefiting from it.

I speak from this perspective with some passion. I must declare an interest as a director of the several-times-mentioned University of Cumbria, which was founded in 2007 to widen participation in an area where it has been historically low. I also had the privilege of getting into Oxford from what was then Carlisle Grammar School, on a full grant, from a railway clerk's family where no one had gone to university before. As with the noble Baroness, Lady Kennedy, that whole experience has transformed my life.

The University of Cumbria has been weak financially. Although we have turned things round in the past nine months, it is heavily dependent on teaching income—as many of the post-1992 universities are—with a core curriculum concentrated on the arts, education and health. For an institution such as this, which does not have significant research grants and receives very few overseas student fees and very little commercial income, the withdrawal of all HEFCE teaching grant except for STEM subjects is a devastating shock. The university will have to set a fee of more than £7,000 simply to survive.

No one can be sure what the long-term impact of such a change will be. How many working-class students will be deterred from applying by the prospect of running up more than £30,000 of debt at a minimum for a standard three-year degree? And, frankly, the debt will be more than £40,000 if their family income falls just outside eligibility for a living-costs grant. With these levels of debt, will such students feel confident that the job that they hope to get at the end of their course will justify the risks? Let us be clear: these are not kids who imagine they are going to be masters of the universe in high-rolling City jobs at the end of their university life.

I know that the answer of the noble Lord, Lord Browne, is that if their income is below £21,000 a year, they will be obliged to pay nothing. I accept the argument that his proposals are more progressive than the present arrangement. That is good, but it is not good enough. Will prospective students see university as a worthwhile investment if it raises their salary from the median income before tax, which a noble Lord mentioned is around the £21,000 a year threshold? If the consequence is that their salary is upped to the 75th percentile, which is £30,000 a year, will they think that it is worth taking on all that debt for that?

My fear is that the likely long-term consequence will be a narrowing of the higher education sector and tougher competition for students between institutions, one in which new institutions such as Cumbria University will be at the sharp end of change, both because of our geographical isolation and because we lack the long-established institutional reputation of other places. Is this sort of shake-out what the Government want? If we are to avoid this, there is a responsibility on both government and higher education institutions.

A more free-market system of higher education can work only, as it does in the United States, with a much more generous system than we have of grants and scholarships. Frankly, I regard the Government’s proposal to establish a national scholarship fund of £150 million as tokenism and deeply inadequate. Someone mentioned that Harvard has an endowment of more than $25 billion. Even in the financial bad times of the past five years, Harvard has had an annual income of 4.7 per cent on that endowment—well over $1 billion for a single institution. Of course, getting equivalent endowments for British universities may never be realistic, but we can make a start. I suggest a couple of things to the Government. In all seriousness, could we not hypothecate some of the revenues from the Government's new tax on banks, designed to curb bankers’ excessive bonuses, towards a university scholarships fund? That would be immensely popular in the country and would do a lot, if the banks accepted it, to restore their reputation in society.

The Browne review proposes a difference between those who earn less than £21,000 and those who earn more, in what they pay. I would add a further progressive twist. Why not charge all high earners a higher interest rate on their student loans than the one that the Browne report proposes? I was delighted that the noble Lord, Lord Butler of Brockwell, seemed to think that that might be a sensible idea. We could use that money to provide scholarships and grants for low-income families. I recognise the logic of the recommendation from the noble Lord, Lord Browne, to continue teaching grants for expensive medical courses, but three-quarters of the public servants who earn more than the Prime Minister are doctors and consultants who have benefited from those subsidised medical schools. Could they not pay just a little bit more on their interest rate on their loans to plough that back into their institutions?

Institutions will have to adjust as well. We will have to look at how we cater for part-time students—and I welcome the proposals from the noble Lord, Lord Browne, in that regard. We will have to restructure our curricula, expand overseas and be more commercial. But that kind of reconfiguration from a university involves time, and we need phasing and certainty about the path of future government support. At the same time, some very quick decisions have to be made, because universities must publish their prospectuses soon for 2012-13. We need to get on with making these decisions in the knowledge of what the financial position will be.

I add a final word as a Carlisle lad who went to Oxford on a full grant. I hope that the Government will be cautious about lifting the fees cap. It could be possible if we got to a situation whereby a much wider generosity was shown in scholarships and grants. But financial support is not enough; essential for me was the support and encouragement of my school. I am glad that Sir Martin Harris, who has studied this issue with great care as the director of fair access at the Office for Fair Access, believes that school support is the crucial factor in encouraging wider participation at all levels of academic ability. We need much closer engagement between Oxbridge colleges and state schools in certain areas, between the provincial redbricks and the estates which surround them and between institutions such as Cumbria University and their local communities. However, to do that requires dedicated funding for wider participation which must be preserved, not cut as 16 to 19 funding will be. This dimension of widening participation and sustaining the progress that we have made is lacking in the Government’s approach. It will be crucial to the long-term acceptability and political viability of the recommendations of the noble Lord, Lord Browne.

My Lords, I begin by congratulating my noble friend Lord Boswell on an excellent maiden speech. It brought to mind years past when he was the gamekeeper as the Minister for Higher Education and I was the poacher as one of those wretched vice-chancellors who tried to wheedle money out of him. I suspect that we spent a large amount of time arguing over the terminological point of when an efficiency saving becomes a cut. I think we agreed that when it had gone on at 2 per cent per year for 10 years, it no longer constituted a series of efficiency savings. We are again discussing a financial gap. I congratulate the noble Lord, Lord Browne, and his colleagues on bringing this conversation to a sharp point—we need to make decisions. The report has been produced speedily and efficiently. I hope that the Minister will reassure us that the Government will make up their mind about what they are going to do with equal speed and efficiency. Given the sword of Damocles that is hanging over us—of a 40 per cent cut for a large number of universities—we need to know what the Government’s intentions are, and we need to know that quickly. That point has been well and often made in the debate.

The report is good in most parts and in a sufficient number of parts for it no longer to be the curate’s egg, but at least, perhaps, the bishop’s egg. It is a significant report which has much in it to commend it. What is good about it? First, it sets the right direction of travel. This is a route on which we are embarked. This is not a moment when we can turn back for all the reasons that have been well laid out in this evening’s discussion. The noble Lord and his colleagues recognised that this is not a start-from-first-principles moment but is a moment when the great tanker is sailing forward and has to be kept afloat. The future of millions of young people and, indeed, of our country, depends on the continuing viability of the university system. This is not a time to reopen the design of the boat. However, I take the point made by the noble Lord, Lord Willis, that a much broader discussion is needed. I shall come back to that in a moment.

The second good thing about the report is that it is pragmatic in its approach. It realises its place in contemporary social history. We have heard the figures—just after the war, 2.5 per cent of the population went to university; now the figure is 45 per cent. We are in a different world. For many of us, it is a much better world, but there are consequences and real costs. We have a university system that is mature, complex and, in places, very sophisticated. Parts of it have been 800 years in the making, other parts are of more recent manufacture.

The report also recognises the practical constraints of a funding system that is not able to sustain what we are doing. If my colleagues on the opposition Benches have better suggestions in this regard, I should like to know what they are, and why the previous Government allowed a gap to open up in the funding of universities. That is the reality. That is where we are. We must proceed from that point. Any better suggestions are clearly welcome. The report accepts that there are two financial constraints. The first is that we cannot afford to continue to fund universities in a way that was devised for a much smaller system. That is the reality. The second is that the financial die was cast four or five years ago when this House and the other place passed legislation to allow for the charging of fees. That is the context within which we are operating. It was inconceivable that we would turn back on that.

The great quality of this report is that is essentially a pragmatic response to that situation. Would that it were otherwise; I agree with all the visionary statements that have been made about providing free higher education at source for those who have the ability to benefit from it, but the reality is that we now have a mass system that we are not able to afford—even more so over the next four years than perhaps we had first guessed. Those who wish to reject its conclusions should come up with better proposals about where the money is to come from.

As I have suggested, however, and this was a wise decision, the report does not raise some of the big and continuing questions that drove the Robbins report and, to some extent, the Dearing report. It assumes, as I have said, that the ship has set sail and must be kept going. Priority number one is that the system has to be kept healthy, with no institutions going to the wall because of inadequate and inefficient government action, or the lack of it, over the next year or so.

None the less, the big questions remain. I appreciate the passionate speech of the noble Lord, Lord Willis, on this; I am not sure that we would end up going in the same direction but he is right to say that we need to discuss these questions. We are long past the discussion raised by Newman, which some of my academics colleagues would like: what is the idea of a university? That presupposes a small, one-size-fits-all operation. It is a 19th-century model, but we in Britain entered the 20th century and, eventually, the 21st century. However, there are fundamental questions that have to be asked. I put two of them to your Lordships now.

The first question is an obvious one: what are universities for? There is no single thing that they are for. I shall show off my humanities background because I am going to be controversial: as Wittgenstein would say, the word and the uses of the word “university” are attached not to a single meaning but to a whole family of meanings that have connections and resemblances to each other. That is the philosophy seminar over. That point is fundamental to how we conduct the discussion. We have diversity, although not enough, and not as much as we should have for the size of our operation. If we are going to cash in—sorry, I should not use expressions like that; I stand corrected—if we are going to make the most of that diversity and indeed enhance it in all the ways that have been laid out before us, we must look for variety in what is compatible with education at a higher level, and indeed at an excellent standard.

In some ways, the second question is more difficult and has raised questions in the minds of many of my colleagues here: what should society reasonably expect of universities that it funds or part-funds? That is a perfectly fair question. By “society” I do not just mean the Government, although they are included; I mean those who pay taxes and those who have never been to university. They are paying for this system. What might they reasonably expect, and what is the case that we put to them for that funding continuing in some form or another? If we had asked in 1992—although that was not the moment to ask this—what society expected of our university then, we would have a rather different system from the one that we have now. There would have been some clarification about the directions in which society thought it reasonable for universities, en masse and individually, to go with the funding that backed them.

That is the high-flown stuff. I shall make one or two specific comments and suggestions about the report in a moment, but I make the point that there is no better time than a recession to get on with the discussion about what society expects from universities and what they are for. Do it now; do not let it wait until we have the next funding crisis. The settlement proposed by the noble Lord, Lord Browne, and his colleagues is an interim one—have no doubt that we will return to this question.

I have one specific suggestion to make as a result of what I read in the report, and I would be interested to know whether the Government are contemplating such a possibility. If I were still in the business of helping to manage, direct and lead universities, I would look very carefully at the possibility of privatising parts of them—not least in the arts faculties, some of the social science faculties, certainly the law faculties and probably some of the business studies areas. I say privatising in the sense that if the proposal goes ahead, and some version of it will, the funds that were originally available for those areas will not be coming in through government grant, but through fees paid by whatever system we agree to. If you are bringing in £7,000, £8,000 or whatever, why not take the extra step and say, “We will free ourselves from direct government interference and use that money to plan and develop in these areas which we think are important”? I do not think those subjects are not important—quite the reverse. In that way we may be able to civilise the relationship between humanities, for example, and government departments, and never again have a Secretary of State who implied that he thought the study of medieval history was pointless—a crass error that happily will not be repeated, I hope. That was a year or two ago—not this year.

The universities should be planning such an option and the smart ones will be. What would it be? Let’s have a business plan and let’s see how cost-effective it would be and how we can protect the quality of those subjects that have been so well expounded by my colleagues along these Benches. Such an option is possible. If you think that it is not, what about the USA? Harvard, Yale, Stamford, Princeton and New York universities all have excellent humanities faculties. They have used their resources to employ some of the best people as teachers. Chicago still provides the basic course that every student must take covering western civilisation. I have seen that happening. I have been there in classes, watching it. It is fascinating. These private institutions have not trashed the humanities and they have not trashed those areas of social science that can contribute so much to our country and the quality of life here. I go with all the stuff about civil society and what you need from the humanities area. I make a serious suggestion. Government cannot compel this, they cannot drive it, but they can make sure that there are no obstacles in the way, because there will be civil servants who suck their teeth at such a radical suggestion. If that suggestion is worth pursuing, please give encouragement to those universities which can pursue it—and a number of them could very well do that.

I have two or three points of quick reflection on the report. There has been a lot of discussion about the market and whether this is an appropriate way to talk about universities. Look at what we are doing with overseas students. It is a market in which universities have developed a presence, capacity and ability, while some have developed bad habits. Go out to Hong Kong or Singapore. Some have developed bad habits—markets are like that; but so are centrally planned states, as we have noticed. But it can be done and it has been done. There have been some losses. Look for the undergraduates coming from sub-Saharan Africa, for example. They are not coming here, and that is what the market has done. There have to be other ways of dealing with that. There are other ways, and there are good people trying to do something about it. However, I accept that there are costs to a market, but it can work—and it is working in the area of overseas students.

On a point of irony, we have come almost full circle. Keith Joseph must be twitching with delight in his grave. He was the one who suggested that we might have student vouchers whereby the money follows the student and goes to the university, and the stimulus that that would produce would be beneficial. He was ridiculed and reviled for that by the university system. However, by a miracle—this is the genius of the Browne report—instead of having student vouchers when you turn up at university to demand your pound of education or whatever, you will have a student IOU. Not only will we have the drive of the independence of the student input, the state is not paying for it—the student is. Keith Joseph will be giving three cheers from the nether regions.

I will make one point about the graduate premium. We overplay the graduate premium of £100,000 on average. It is there, but not for a large number of graduates whom I taught, because of the kind of jobs they do in schoolteaching, social work, nursing and so on; and if it is there, it is £100,000 on average over 40 years. We can all do the sums. That means £2,500 a year on average, or about £50 a week before tax and national insurance. That means, if you are lucky, you would get a moderate West End theatre ticket but would not be able to afford an ice cream in the interval. It is not a huge sum of money when you lay it out in those terms—if that is the average figure. I know that there are many more who earn much more as a result of a university education, and they, too, should help to pay for it.

My last point is that the market being proposed wants to move students toward certain areas of national importance—STEM subjects and languages. Universities cannot do this on their own. Government policies have created a situation in schools where student choice has been leading students in droves away from those subjects. The consequence will be that you may create a market, but unless something is done about what is happening in schools, and the quality and volume of teaching in science and languages, you will not have a market in which to operate. Are the Government tying up, in the way that joined-up government should, this element of potential policy with the way in which schools are being organised? I look forward to the Minister's response.

My Lords, I start by declaring my non-pecuniary interests. I have visiting fellowships at Cambridge and Warwick universities. I also express—rapidly, as time is moving on—my appreciation for this early opportunity that the Government and Minister have provided to debate the report of the noble Lord, Lord Browne. I thank all noble Lords who have engaged so effectively and powerfully in the debate—and not least I thank the noble Lord, Lord Browne, himself. I congratulate the noble Lord, Lord Boswell, on a fine maiden speech. I used to negotiate with him and promise to carry on arguing with him. I now find that I share that experience with the noble Lord, Lord Sutherland of Houndwood, and I have no doubt that we will all enjoy it. I say to the noble Lord, Lord Sutherland, that Sir Keith was indeed reviled, not least by the noble Baroness, Lady Thatcher, who told the world that on that matter he had not briefed her.

When the Minister repeated Vince Cable's statement on 12 October, I said that the entire history of the debate on the scale of the United Kingdom's—and latterly, the English—system of higher education, and on how it and its students should be funded, had been going on for so long that it was essentially free-standing from the current controversy about the nation's financial circumstances. So it should be, if we are to have what the noble Lord, Lord Smith, described as a coherent debate on these matters. However, having read and discussed the comprehensive spending review, as we all have, I know that it will be necessary to deal with the interplay of the Browne review and the CSR. It is necessary because of the threat to our universities. Having had the chance to study the report in more detail, and having heard what was said today, I now feel also that the report signals nothing less than a true, but in our view little considered, paradigm shift. Many speakers have expressed the same conclusion in other words.

Before considering the monumental shift that is proposed, and to which I understand the Government have pretty much committed themselves, it would be churlish not to welcome some conclusions of the noble Lord, Lord Browne. For a start, he confirms an aspiration for higher education that I believe has been shared on all sides: that,

“teaching at our HEIs is sustainably financed, that the quality of that teaching is world class and that our HEIs remain accessible to anyone who has the talent to succeed … The quality of teaching and of the awarded degrees is the foundation upon which the reputation and value of our higher education system rests”.

I am wholly with him and I take that to be the guiding principle of all that follows. The report concludes that all those who benefit from higher education should contribute to the cost—holders of degrees and the nation as a whole. Again, I endorse the principle, as did Sir Ron Dearing, as he was when he published his report. Incidentally, Lord Dearing was never a university student but he understood this sector very well, and at the heart of his understanding lay his grasp of the value of universities at the core of our national infrastructure. I say to the noble Lord, Lord Butler—

I am grateful for that information. I obviously read the autobiography that he wrote before he got to that point in his life.

I was going to say to the noble Lord, Lord Butler, that as a taxpayer I have paid for many things that I do not consume and probably never will, but I would rather live in a society that helps people who have not enjoyed the benefits that I happen to have enjoyed.

It is right that student contributions should be repaid when they are affordable to the graduate and collected through the tax system. It is right, as my noble friend Lady Morris stressed, to endorse expansion in a world where qualification is increasingly sought by individuals and society, and where, as my noble friend Lord Sawyer said, the opportunity has been developed by so wide a variety of higher education institutions, such as the one of which he spoke so highly. It is right that the growing numbers of part-time students should enjoy the same benefits in a broad sense, and that makes sense, particularly as people choose to study in different ways and at different stages of their lives. I know that the precise arrangements recommended in the report are thought by some vice-chancellors to be somewhat defective. I do not make a big point of that. If the principle is right, a modest redesign by those running the institutions could probably overcome any problems.

By raising the fees under the student finance plan—and it is essential today to interrogate some of the detail—it is easy to understand the argument that HE finances could have been restored to levels closer to those that obtained before John Major drove down the teaching unit of resource by a terrifying 40 per cent. I do not believe that we will see this report as the restoration that the Government intend to make. Rather, I should like to think that it was the mission of the noble Lord, Lord Browne, in part at least, to attempt that restoration. Therefore, the noble Lord’s proposals might have been grasped, in this discussion as elsewhere, as a mechanism to adjust the balance struck for the fee contribution in 2004 for students starting in 2006—a mechanism denounced by the Liberal Democrats not only as wrong but as the start down a slippery slope, and, my gosh, it is slippery. In short, it has been portrayed by the Government, and perhaps even by the noble Lord, Lord Browne, as being simply a financial adjustment. The noble Lord acknowledges his explicit aim at page 19 of the report: it is to enhance the income of institutions. He could be thought simply to be taking further the enhancement from the levels of 2006—not that that has fully restored the unit of teaching resource.

I said that I think it is a paradigm shift and I shall say why. For decades—certainly since Robbins in 1963—and in a variety of evolving ways, the state has allocated student numbers, has even threatened universities with hefty fines for exceeding their quotas, and has effectively set the price for courses wherever and however they have been delivered. This level of control, for which on occasions there were at least very good reasons, enabled Higher Education Ministers to go further in their control of universities than probably some people would have desired. They wrote each year to the funding council letters containing ever more detailed instructions. I remember reading some that the noble Lord, Lord Boswell, wrote. They were letters sometimes half the length of a short novel with instructions passed on by the funding council to institutions as advice, of course, which had to be followed.

The noble Lord, Lord Browne, changes the basics, and it may well be that we have seen the last of those central directions. Students carry with them the major sums to finance teaching and, to coin a phrase from commerce, to make the market. It is for those reasons that I agree so strongly with my noble friends Lord Giddens and Lady Blackstone. Students will decide where to take their money, will take their decisions on the basis of what is on offer—I understand the principles behind all that—and will be restrained only by the entrance requirements of the institution. The report recommends both a 10 per cent increase in numbers almost immediately and at the same time the removal of barriers to access. Like the noble Baroness, Lady Sharp, I can see how numbers will be very difficult to predict in any effective way. I can also see, as my noble friend Lord Liddle said, the need for certainty in the long run for universities and how hard it would be to achieve in this environment.

Given the excess of demand over supply, these new customers—that is what they will be—may well decide that even more places are needed. If I have understood the arguments about financial support for students from the poorest quartile correctly, it may encourage more applications; we may make ground on the United States, where about three times as many students from that background enter higher education, but I am candidly doubtful that will happen. I do not really believe it but it will be a great change if it does happen. Like my noble friends Lady Kennedy and Lord Judd, I think there is a misunderstanding about debt aversion and the way in which it affects families in that quartile. Perhaps too few of us have come from a background that has lived through that process.

On the other hand, numbers may not increase, which is my fear. Whatever the number is, I make this general point: increase or no increase, quality is sustained in large measure by having an adequate unit of teaching resource. That is what we do not have. None the less, this is a new paradigm created by a huge shift in student contribution and more or less unrestricted places. We had all better draw a deep breath and grasp the ramifications. Although we have held the view, in the past, that the state is a significant beneficiary, it will make a far less significant contribution. The report of the noble Lord, Lord Browne, is not an adjustment to finance; it is a fundamental policy shift and at the moment we have considered very little argument about the character of that shift. The noble Lord, Lord Willis, was appealing for a wider debate on those very issues. I do not mean to put words in his mouth but I think that was the burden of what he said. That has not been discussed. It is a massive policy shift, which takes little account of the complex issues which were set out in a very powerful speech by the noble Lord, Lord Broers.

I ought to add, before anyone claims that this is merely a replication of the successful American model, that it is not, on the evidence. Of course, American universities achieve higher levels of private income than English universities do, but they also, as has been noted in the debate, receive significantly higher proportions of state and federal public money as well. The noble Lord, Lord Bilimoria, was absolutely right about that. Their scope for scholarships and bursaries is richly endowed and there is a culture of giving which puts us to shame. From my time on the Front Bench on the other side of the House, I can tell the House that we have neither the culture nor, apparently, the appetite to change the culture to that extent here. I regret that. I was told that it would all change, but it did not. Although Cambridge has unquestionably been successful recently, I gave up making any financial plans on the basis of helpful interventions from the tooth fairy.

The changes in the Browne report are most likely to lead to what one eminent civil servant recently described to me as universities weaning themselves off the state. In the newly proposed circumstances, can the Minister tell us whether the Government will encourage vice-chancellors, as I think the noble Lord, Lord Sutherland, just invited her to do, to say that they would prefer to go private and that that is the route now being taken? That is why it is a paradigm shift. Are the proposals to that end now before us? Is it true that a new Statement will be made in the early days of next week? Here is a fundamental problem in the report: is it to be addressed that fast? I accept that universities are a public good and they will be eroded in that role, as my noble friend Lord Giddens so eloquently said, if we take a simplistic view of the character of the market which they are being asked to enter.

I know that there were a number of questions raised on 12 October and I ask them again because the CSR was not then published and I was told that they could not be answered before it was published. London Economics has provided a well researched analysis showing that there may be—may be—advantages for the poorest quartile. That would be an advance, but it also shows that it may discourage that group. Even more, it shows that people on middle incomes—those whose parents cannot pay upfront—will pay back far more for far longer than those on higher incomes as a result of the report. The richest are likely to pay back their loans by their late 30s. It will take middle-income earners at least 14 years longer. Some will not pay back their debts. As the right reverend Prelate the Bishop of Wakefield, said, it is a risky wager. I think that it is more than that; I think that the race has been fixed. Women graduates, given their career patterns, will be in a still worse position—they will be subject, in my view, to a form of discrimination. I repeat my question of 12 October. Will the Minister confirm whether that analysis is correct or whether there is specific information which refutes it?

Finally, on debt, there is a vital question about unintended debt falling on HEIs. I understand that the CSR cuts will be made in institutions a considerable time before increased fees arrive, creating negative cash flow and operating deficit. I go further than the noble Lord, Lord Hannay: will the Minister confirm today that no HEI will suffer financial loss because of that sequencing and that HEIs will have the interest and other charges on any finance and related transaction costs met by the Government? Many in the universities will look for an urgent answer to that question.

There remains the final theme that has run through the debate and is of the greatest importance. I started by applauding the restatement by the noble Lord, Lord Browne, of the value of our universities to our country. They are at the leading edge of science, innovation, culture, arts and competitiveness. They speak eloquently to our civilisation. The report makes that point briefly but very effectively in its first chapter, although I fear that it may have unintentionally increased the risk to all of those objectives.

Universities are at the strategic centre of our future prospects, as the noble Lord, Lord Liddle, said. Harvard economics professor Robert Reich argued that any nation's primary assets are its citizens’ skills and insights. Businesses in the leading-edge economies migrate to wherever the best and most consistent renewal of those skills occurs, where that inventiveness takes place. Without that, no advanced economy survives; no deeply civilised culture endures. As I believe one noble Lord said, that is the competitive edge. It is our future. There is no other. It is intrinsically interwoven into the development of the arts, humanities and social sciences. Many speakers, not least the noble Lord, Lord Hannay, have emphasised that point, and I share that concern because of the removal of funding from such a wide spectrum of study.

If we are asked in all seriousness to look ahead to full recovery and growth, it is inevitable—it is not any special pleading which tells us—that universities are the surest strategic weapon at our disposal. That is a proposition that has been tested and proved time and again. I thought, mistakenly, that it was the burden of what the Prime Minister said in his speech at the CBI. The noble Lord, Lord Sutherland, asks where alternative sources of money will come from. In most countries, even those facing difficult financial circumstances, that has been an investment which the state has still thought valuable, for the reasons that I have given.

I understood that the task of the noble Lord, Lord Browne, was to grow that indispensable resource. I believe that it must have been his intention. It was to bake in the principles that I cited from him about international reputation in teaching. It was once again to boost the teaching unit of resource. It was to accomplish what Lord Dearing and the Government tried in 2004. However, the outcome, taken together with the CSR, is that there is to be about a 75 per cent cut in the teaching unit of resource, to be made good by students contributing a matching sum from their own resources for a long period of their lives.

If the cap is set at £7,000, it may just about even up the books, although many people think that it will not. It will create not a penny more. The Government's solution is not investment growth but to stagger on. Real growth, as the noble Lord, Lord Luce, described it, will not occur, and this is despite the evidence of all the advantages. In a Written Answer on 7 October, I learnt that the commercial spin-off value of university flotations between 2003 and 2010 was more than £2.6 billion and growing.

Is this truly how we imagine that we will secure our world-class higher education system? We will not only be uncompetitive, which has been the great fear, but I suspect that many international institutions will question whether we are really worth co-operating with, let alone competing against. I cannot believe it is possible that as a result of the CSR we have so radically undermined—and will undermine—so great an asset and so set back the most certain path to growth.

So I return to the question that I asked on 12 October and which was not answered. Was the noble Lord, Lord Browne, made aware that the Government were going to inflict a cut of the same order on the higher education teaching budget? That is a question about the strategy that he was asked to follow. It is a question for the Government, because it is the Government who set the terms of this discussion.

We will keep returning to higher education. I know that this House will certainly debate it time and again. We will certainly debate any deterioration in the state of university finance. But if we are to do what we really want then there has to be a very much wider debate, as many noble Lords have said, about the character of higher education and what we want it to achieve.

Many people in the system have told me in the last days that Browne is the only game in town. They have tended to tell me this in a fairly dispirited way. They, and we, understand the downside of it being the only game in town—precisely that it is, apparently, the only game in town.

My Lords, I thank noble Lords on all sides of the House for an excellent debate. The noble Lord, Lord Liddle, said that it was a tutorial and that is what it was for me. I thank the noble Lord, Lord Browne, for the work that he did, which enabled us to have this debate today. I also congratulate my noble friend Lord Boswell on a lucid and eloquent maiden speech. He is distinguished as a former Education Minister and has great experience in another place. He will be a great asset to your Lordships’ House. We look forward to hearing his views voiced often in this Chamber.

I should like to respond to as many questions and comments as I can but with one necessary and obvious caveat: there are two major pieces of work that set the context for reform of our higher education system—the report by the noble Lord, Lord Browne, and the comprehensive spending review. The Chancellor has already stated that we will build on the recommendations in the former to put universities on a sustainable financial footing so that we can maintain the quality and competitiveness of the sector. We will also provide financial support and solid advice to individuals to make sure that a decent university education is not beyond any person either because of pecuniary need or because of inadequate information. The Government will shortly produce a detailed set of plans covering both areas and I cannot pre-empt that this evening.

The thoughtful contributions from the noble Lords, Lord Maples and Lord Sawyer, the noble Baroness, Lady Morris, and others, illustrate the challenge facing the Government in responding to the Browne recommendations. The noble Lord, Lord Maples, strongly advocated the benefits of competition and unrestricted fees. The noble Baroness, Lady Morris, and the noble Lord, Lord Sawyer, are very concerned by that prospect. Both views are inspired by genuine concern for the welfare of students and the success of universities. The Government will truly find it challenging to please everyone, but we will do our best.

My noble friend Lady Falkner made some most interesting suggestions about improvements to access. She suggested that pupils receiving the pupil premium who have the desire and aptitude to go to university might get a first year free. We will carefully consider whether this could be achieved, building on the excellent work that many universities are already doing to support the neediest students.

Social mobility is non-negotiable for the coalition. We will improve the advice and guidance available to young people so that they are aware, for example, of the qualifications required for different courses and careers—and well in advance of applying. We will establish clearer, alternative routes into HE besides school or sixth-form college and we will communicate more effectively the considerable financial support available to applicants from poorer backgrounds. We note carefully what the noble Baroness, Lady Kennedy of The Shaws, had to say about the importance of fair access and of mentoring and raising the ambitions of all our young people. It might well be that lower expenditure on bursaries but higher expenditure on mentoring and links between universities and schools would prove more effective in improving fair access.

Just as we are determined to put the challenges, pleasures and rewards of a university experience within reach of people young and old, part-timers and those looking to develop new expertise, we also expect that experience to equip graduates with the knowledge and skills required to make their way in the world. The financial reforms conceived by the previous Government did not always lead to a qualitatively or quantifiably better student experience. We will expect universities to do better this time around, whether through better teaching, improved contact time with faculty or relevant preparation for life in the workplace and beyond. As my noble friend Lord Maples argued, allowing greater competition—such as new providers and alternative modes of learning—will help, boosting what is already a diverse sector.

The noble Lords, Lord Smith and Lord Hunt, asked whether departments will be allowed to close. It is not for the Government to tell universities which subjects they should teach or in which departments those subjects should be taught. That is for autonomous universities to manage for themselves. However, they will need to become more responsive to demands from students and employers.

I will deal with student support and university funding separately. For the former, I reiterate the recommendations made by the noble Lord, Lord Browne, which, in the Government’s view, set the right strategic direction and to which we are currently preparing a detailed response.

The noble Baroness, Lady Blackstone, asked about the default rate on higher fees, default by EU students and modelling. The repayment regime will be more progressive, which means that low-earning graduates will repay less than they do now. This is a welcome feature of the proposal of the noble Lord, Lord Browne, so it is not a question of greater default but an assurance to students who end up as low-earning graduates that their repayments will be fair. The European Union graduates will be required to pay their graduate contribution. There is no evidence so far that they are less willing to do so than home students. However, if they are, they will be pursued and their repayments enforced by the courts if necessary. To answer the final question asked by the noble Baroness, I can confirm that the Government plan to release data that underpin the financial modelling.

No students, part-time or full-time, will be required or expected to contribute to the cost of their tuition until they graduate. As graduates, they will begin to make contributions only once they earn a specified income, which will be higher than it is now. Should their earnings fall beneath that threshold, contributions would cease until earnings recovered. Full-time students from disadvantaged backgrounds can, in future, expect a more generous maintenance package, linked to their family’s income.

My noble friend Lady Sharp asked how we will help middle earners, especially those in valuable but low-paid professions. At 9 per cent of earnings over £21,000, these graduates will contribute at an affordable rate. Remember that this is not like a credit card debt. It does not affect one’s ability to obtain a mortgage or to get on the housing ladder, because it is income-contingent. Here I welcome the helpful, well informed comments of the noble Lord, Lord Desai. On bursaries and golden hellos for teachers and social workers, I must defer to the Secretaries of State for Education and Health, who oversee these schemes.

I have skipped away from the question asked by the noble Baroness, Lady Morris of Yardley, about protection for non-STEM subjects. The noble Baroness is right to remind us of the importance of universities teaching a wide range of subjects as part of our civilised society. I can reassure her that the coalition Government will keep this goal in mind when we consider our response to the report by the noble Lord, Lord Browne, and when we come to implement our decisions. I can also reassure her that we take very seriously the need to ensure that the poorest students get adequate financial support for living costs while at university.

The noble Baroness, Lady Blackstone, my noble friend Lord Smith and the noble Lord, Lord Hannay, asked about the timing of the government response, the HE Bill and the future of HEFCE, OFFA, QAA and OIA. The noble Baroness, Lady Blackstone, and my noble friend Lord Smith asked whether there would be a full government response about the shape of the higher education sector as a whole. We have committed to a higher education White Paper this winter followed, subject to parliamentary time, by an HE Bill later in this extended Session. This will invite views on a wider framework for higher education, including on the roles of HEFCE, OFFA, QAA and OIA. We are open to suggestions but, as my colleague the Minister of State for Universities and Science has already made known, we do not find the idea of a superquango inherently attractive. However, we accept the point made by the noble Lord, Lord Hannay, that universities and students urgently need to know the financial position and rules for the year 2012-13, and we will ensure that this is not delayed by lengthy discussions about quangos. We hope to make an announcement shortly.

I remind noble Lords that the previous Government had already reduced the spending on higher education institutions for 2010-11 and planned to go further. Tuition funding will in future be channelled much more through students themselves instead of through a block grant. Universities will decide what they charge for their courses but, as the Deputy Prime Minister has signalled, we expect to set a cap beyond which these charges cannot rise. We do not envisage unlimited university fees for UK and EU undergraduates, and if students are being asked to accept that they will, as graduates, face higher contributions than currently, we will expect a stronger performance from universities on fair access, transparency of information for students and parents and the overall quality of the student experience.

The noble Lord, Lord Norton, suggested that the Government should remove completely the cap on tuition fees. As the Secretary of State and the Minister of State for Universities and Science have stated, the Government recognise the concerns that uncapped fees would put off some applicants, particularly those from low-income families, and the need to balance these against the needs of our research-intensive universities to compete with their global competitors. We therefore have reservations about removing the fee cap completely, and the Deputy Prime Minister has made that known. The Government will put forward proposals on fee levels very shortly. I hope that also answers the question asked by the noble Baroness, Lady Blackstone.

Several noble Lords, including the noble Lord, Lord Giddens, and the right reverend Prelate the Bishop of Wakefield, raised concerns that these proposals on the arts and humanities would be to the detriment of the arts, humanities and social sciences. Many noble Lords spoke eloquently about the social, cultural and spiritual value of these subjects. On this, I wholeheartedly agree. These necessary reforms would not abandon the arts and the humanities and we will, through billions of pounds of investment in student support for tuition costs and in generous funding for research, continue to enable these disciplines to thrive. I make no apology for investing money in subsidising the teaching of STEM subjects because it is important to limit the proportion of costs that are passed on to graduates of these more expensive courses.

The noble Lord, Lord Bilimoria, and my noble friend Lord Norton spoke about the Government reducing public spending on higher education by so much. It is certainly true that in the spending review we have accepted that we need to reduce the public spending that we pay to universities via HEFCE, but that does not mean a straightforward reduction in the money that universities can secure from the public purse. If more funding flows to universities from those who study there and the Government lend students the money to pay that contribution on favourable terms, our overall GDP expenditure on higher education need not fall.

The spending review also contained several assumptions about efficiency savings within universities. They were focused around pay, pensions, procurement and shared services. It will be for each autonomous institution to decide how it will respond. More information about HE funding will, as usual, be contained in the annual grant letter to HEFCE, which the Government will send at around the turn of the year.

My noble friend Lord Norton of Louth suggested that we will not be able to compete internationally, as other countries invest in higher education. Let me be clear: the current level of investment in higher education is significant. However, the country is committed to delivering a tough deficit reduction programme. Only by rebalancing the contributions to higher education between the state and the beneficiary can we avoid a damaging impact on the quality of higher education.

I return to the related matter of research funding. The Government have recognised the substantial contribution that universities around the country make through research to economic growth and to the overall health and cohesion of our society. The decision to protect public investment in our highly productive science and research base represents a major investment in future growth. University reputations are built not just on teaching but on the quality of their research. The excellence of university research is also a critical factor in investment decisions by international companies. UKTI has used the strength of the United Kingdom research base to attract hundreds of R&D projects into the country.

I might now be taking the next points out of the flow of my response, but at least the noble Lord, Lord Willis of Knaresborough, the noble Baroness, Lady Blackstone, and others will get an answer. When I referred to the proposed HE White Paper and the HE Bill, I should have added that I welcome the suggestions that various noble Lords have made on the issues that we should consider in that White Paper, including the remarks made by the noble Lord, Lord Willis, about the spread of degree-awarding powers and research funding. We will consult widely with the sector, students and experts, such as the noble Lord, when formulating this White Paper.

The noble Baroness, Lady Kennedy of The Shaws, referred to NUS proposals on graduate contributions. The progressive repayment system proposed by the noble Lord, Lord Browne, shares many of the attractive features of a graduate tax and of the NUS proposals. I welcome the questions from the noble Lord, Lord Triesman, but I am sure that he will understand that I cannot pre-empt the Government’s full response, which will be announced shortly.

In conclusion, I remind noble Lords of the stakes involved in university reform. The Times Higher Education world rankings, which were issued a couple of months ago, highlighted the jewel that is our HE sector. The United Kingdom is home, once again, to 29 institutions in the top 200, second only to the United States of America.

League tables of this kind never tell the whole story, of course, but they at least provide a part of the narrative where higher education has become a global endeavour, where academics and students are mobile internationally and where universities in emerging nations are rising in stature. At present, the UK punches well above its weight. The quality of our higher education is one of the best adverts for our country and this must continue.

The challenge is to make sure that UK institutions dominate league tables in a decade’s time and in decades to come. We can meet one part of this challenge by building research partnerships with universities overseas, and that is happening already. My colleague, the Minister for Universities and Science, will be making a second visit to India next month, where he will discuss our role in this. However, much of the challenge will come down to introducing effective changes at home, for a renewed focus on higher education as a driver of social mobility, business growth, innovation and skills development is critical to our shared future.

The notion of a shared future brings me back to my starting point in this debate: the idea of autonomous institutions stimulating the curiosity and creativity of our people, reminding us of our common heritage and inspiring us in regard to human potential. The Government are duty bound to protect this invaluable national resource, and we will.

Can the Minister make a little more coherent the eloquent remarks she made about this being an international matter and that Britain’s place in the international market is strong and needs to become even stronger? Given the incoherence between that and the issue of immigration, I do not see how the two can be fitted together in the timetable she has given. Universities are being hampered now by the immigration system that is temporarily in place, and they do not know whether they will be hampered even more by the one that will be put in place. Can she not say anything about bringing some coherence into these issues?

My Lords, I am afraid that the noble Lord, Lord Hannay, has taken us to the point where guidance in the Companion says that we should consider finishing the debate. I have heard the debate throughout, both in the Chamber and out, and the noble Lord has raised an important point. I am sure that my noble friend will take the opportunity, through other measures in the House, to respond to him. I know she would wish to do so but, as Chief Whip, I invite her not to do so tonight.

Motion agreed.

House adjourned at 10.18 pm.