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Universities: Impact of Government Policy

Volume 730: debated on Thursday 13 October 2011


Moved by

To call attention to the impact of government policy on universities; and to move for papers.

My Lords, I remind the House that the next debate is also time limited. With the exception of the noble Lords, Lord Giddens and Lord Stevenson of Balmacara, and my noble friend Lady Verma, all speeches are limited to six minutes.

My Lords, it is a privilege to introduce this debate on a topic of such importance to the future of the country. This is a Labour-sponsored debate, and I am a Labour Peer, but I speak here primarily as an educator who has spent virtually the whole of his adult life in universities and was for some while the head of a major university institution. As such, I feel deep disquiet about the Government’s policies, as I did about the Browne report on which those policies are based.

Universities are not just an extension of school; they are not some sort of finishing school for a group of privileged individuals to get into good jobs. All universities combine research and teaching; they are centres of creativity and innovation, which have a massive impact on the society at large. This impact is in some part economic; universities in this country have a turnover of something like £30 million—in other words, about one-third of the size of that gigantic institution, the NHS. They create about 750,000 jobs and are often integral to the local community’s economy of which they are a part.

However, I stress strongly that their impact goes well beyond the economic sphere. Universities have an extraordinarily far-reaching impact on our civic life and our culture. They are important for teaching citizenship and diffusing norms of citizenship, for technological innovation and the arts and culture in our society. Universities in this country rank very highly in world terms; according to the Times Higher Education Supplement listing of world universities, we have three such universities in the top 10 and 12 in the top 100, second only to the United States. Our universities are a massive source of attraction for overseas students, in which again we are second only to the US in world rankings.

I stress strongly that the attraction of British universities to overseas students is not simply a matter of economics. Of course, it brings a lot more money into the country, but it is really important to recognise that our large number of overseas students has a tremendous impact on the countries they come from when they go back to them. They carry with them their experience of this country and its institutions. They normally carry with them an affection for this country, and they form a kind of friendly worldwide diaspora. Nowhere is this clearer than in the case of the LSE, an institution of which I used to be the director.

My point in saying these things is not simply to praise universities; it is to argue that these points are crucial to understanding the flaws in government policy. Universities are, above all, public institutions with a massive public impact. As with the National Health Service, the Government seem to be carrying out policies of a sort of ill-considered, untutored radicalism that is not based on in-depth research and with imponderable outcomes. In both cases, these are real-life experiments with little supporting research to back them up. No other country will have a health system structured along the lines that are being proposed for the UK. For universities, Britain—or, rather, England, given the exceptions applying to Scotland—will be a global outrider. It will have one of the very lowest levels of public support for the university system in the industrialised world. That includes the United States. When people think of American universities, they often think of the private universities, which are indeed very important, but they educate only a minority of American young people. Public and state universities in the US are very much larger, and have a confirmed and continued public role in American education.

The Government are fond of saying that the Browne report was commissioned by Labour, and then saying, “Ha ha ha, what would you have done?”. Well, I am not primarily a politician, I am an educator, but here is what I would have done; and I hope that, had Labour been in government, it is what they would have done. I would have had four parts to a framework for the future of universities. First, I would have denied and rejected the ideological thrust of the Browne report, which seems quite alien to what universities are all about. Universities are not a sort of supermarket where education can be chosen like a washing powder off the shelf. Students are not simply consumers, making day-to-day purchasing decisions. They will make a one-off decision. The whole apparatus of a marketplace in which you have consumer-led enterprise seems alien to what universities are and should be about.

Secondly, fees should have been increased progressively, not in the big-bang fashion in which they trebled overnight, with dramatic consequences for the young people affected. Thirdly, as a consequence, I would have preserved a larger chunk of state funding, precisely because universities are public institutions with a massive impact that goes beyond the simple experience of learning as such. Finally, if I had been either a petty dictator or in the right position in the Labour Government, I would have given far more thought to the knock-on consequences of university reforms for job creation and growth, as well as for the wider culture of the country.

This leaves me with a range of questions for the Minister, and I hope that she will respond fulsomely to every single one. They flow more or less from the analysis I have just presented. First, there is a convergence between government policy on universities and government economic policy. A cut is not a cut unless you work out its knock-on implications for employment, welfare spending and growth. The same applies to a massive transfer from public to private funding, which is characteristic of the Government’s proposals for universities. I ask the Minister what modelling has been done of these knock-on consequences. If it has been done, where can I find it? Without it, we simply do not know what the consequences of the reforms will be.

Secondly, the Minister for Universities, Mr David Willetts, wrote a justly well regarded book, The Pinch, a little while ago about the relationship between the generations. In it he argues persuasively that the older generation has accumulated most social and economic resources unto itself, and the younger generation in our society is hence excluded from many of the benefits monopolised by older people—the majority of people above age 40 or 50, or the “baby boomers” as he calls them. Will the Minister tell me how the reforms are compatible with this approach? Loading up massive debt on the younger generation seems to be exactly the opposite of what Mr Willetts is arguing that a just society should be: one where the older generation, being more affluent, helps to support the younger generation.

Thirdly, although Mr Willetts denies this, the arts, humanities and social sciences are especially vulnerable as a result of government reforms, and I speak as a social scientist myself. This will be especially true in middle to lower-level universities. It is difficult for me to see that, when you load up fees so quickly, many students will turn away from subjects that do not have a clear vocational outcome, especially in the lower-level universities. The top universities will do all right; most people want a degree from those universities because it confers market advantages. When you get lower down the system, you have to ask whether students will incur a debt of £30,000 or £40,000 to read history at a university that is, say, 75th in the British league of universities. This is very much open to doubt.

I therefore see government policies potentially producing chaotic consequences, and ask the Minister what the Government will do if departments are forced to close. Will they simply accept that? That would involve the loss of an awful lot of irreplaceable expertise. Suppose student fashion changes two or three years down the line. You cannot simply reinstate those departments. What will the Government do if universities are forced to close down, since some such universities are likely to be in poor, multicultural areas? Are the Government happy that they have a business model in which such universities will simply be forced out of business, with all the consequences for those communities? As I have stressed throughout, universities are not simply a form of economic enterprise. They are crucial for business and the economy, but their functions range so much more widely than that.

Fourthly, the Government seek to contain inequality and promote social mobility in the context of their reforms. However, it is blindingly obvious that these reforms, because of their dramatic nature, will have a negative impact on inequality. This is likely to be so both at the bottom and at the top of the university population. It will surely deter a large number of poorer students from applying to university at all. They will not be covered by the policies that the Government have introduced. It also seems equally obvious that it will increase inequalities at the top, because surely affluent parents will pay off the debts of their children up front, thereby further accentuating the very inequalities among the top levels of our society that we see widening everywhere. Does the Minister disagree that this is almost certain to be the case?

Finally and fifthly, the impact of the immigration cap looks to be seriously damaging to universities, not just in student recruitment but by denying the country the very creativity and academic innovation that are the lifeblood of the university system. On 3 October, a group of Nobel prize winners in the sciences wrote a letter to newspapers about the effects of the immigration cap, in which they said that it is a sad reflection of our priorities that it looks as though Premier League footballers might get exemptions whereas high flying academics might not. However, this is a much more serious issue than that statement implies, because if we look at the history of our universities and our national intellectual culture we see that migrants have played an absolutely fundamental role in science and other areas of university thinking and research. If such people can no longer come, we are simply shooting ourselves in the foot. I repeat what the Nobel prize winners said—it is a sad reflection of our priorities.

I hope that other noble Lords will pursue issues that, for the purposes of time, I have not had the chance to cover. There are many of them.

My Lords, I am grateful to the noble Lord, Lord Giddens, for instigating this debate. However, I take very gentle issue with his memory of the past Labour Government’s higher education policies, given his statement that he was concerned about the speed with which the coalition Government have implemented some of the reforms. It seems to be forgotten that the Labour Government introduced tuition fees in the first place a year after Tony Blair had promised not to do so in 1997, and that the same thing happened again as regards the introduction of top-up fees two years after they had promised not to do so in the 2001 Labour manifesto. They also commissioned the Browne review. I understand that the noble Lord, Lord Mandelson, said in March in this very House that had Labour still been in government it would have needed to double tuition fees at the very least, given the financial situation in which we find ourselves.

It is no secret that had the Liberal Democrats won the general election, we would have done things differently. However, I am proud of the coalition agreement which incorporated more than two-thirds of our manifesto pledges. Unfortunately, tuition fees policy fell into an area that remains unfulfilled, not least because of the size of the deficit and the need to reduce it firmly and to get the UK back to financial balance. However, following careful negotiations, the system with which we have ended up is significantly more progressive than the Labour system we inherited. That is not only our view but that of the Institute for Fiscal Studies. There are no upfront fees for students so that should not deter them from applying. Graduates will start to pay only when they can afford to, once they are earning £21,000 and there will be lower lifetime contributions for the poorest group of students compared with the system that Labour left behind. Importantly, there will also be more support for the Cinderellas of the higher education and further education systems, part-time students—now 40 per cent of our undergraduates—who had previously been shamefully shunned by the Government in a system geared entirely towards full-time students.

I always felt it was iniquitous that the previous Government did not provide any access to loans for fees for part-time students, many of whom come from low-income backgrounds and stay at home in order to study. However, there is an anomaly that I have raised with the Minister in the Education Bill where it is proposed that part-time students should start to repay their loans from the April three years after they commence studying, if their earnings reach £21,000. As I said in Committee on the Education Bill the other day, while I think this is probably a fairly small group of students, I know from my experience in higher education that mature students often make the decision to study while continuing to work part time. While an income of £21,000 sounds like a good deal for a 21 year-old, it is not a high salary for someone with home and family responsibilities to juggle alongside their study. I worry that this may deter some excellent prospective students from taking up their places on courses. There is also the fundamental question of equity. A full-time student undergraduate on a four-year course, whether an engineer or a linguist, will not be asked to start repaying until their course ends whereas part-time students are being asked to start repaying at three and a half years, regardless of whether they are close to finishing their course or not.

I had some involvement with Aimhigher in my previous role as the executive director of the Association of Universities in the East of England, and while I regret its demise—it has done some good work—I welcome the clearer direction on universities to actively target students from backgrounds where they may not have previously considered a university education.

For me a surprising element of the White Paper Students at the Heart of the System was the proposals regarding extra places for those HEIs taking students with AAB or equivalent qualifications. It seems to me that this may have a law of unintended consequences, with the possibility of bidding wars, and a real impact on recruitment for some of the middle-ranking universities. I hope that I am wrong. I give an example. Certain specialist courses such as medical or pharmacy courses might well be affected if numbers fluctuate fairly strongly in either direction. We are discovering that it is fairly easy to close down a university department but I know from experience that it takes a very long time to build up expertise, plan and then implement a new department. It is not always possible therefore to respond as quickly as is the case with more straightforward courses at, for example, a further education establishment. The impact on medical and healthcare education could be quite serious.

Today I have received a letter from the noble Viscount, Lord Hanworth, who is unable to be in his place. He writes wearing his professional hat as an academic at Leicester University about the difficulties that universities are having with the UK Border Agency in recruiting international postgraduate students who are partly funded by being employed by their host university and partly by bursary. In a bizarre decision, UKBA is now refusing to accept a university's guarantee that it will be paying that salary and maintenance grant, and so the students are being refused entry visas. This has long been a perfectly acceptable way of making up a package for postgraduate students which benefits both the student and the university in the short and the longer term. As a result, the university now finds itself short of teaching assistants. UKBA accepts guarantees from overseas governments and foreign institutions but not our own class one universities. I hope that the Minister will be able to find out more about this for the House and report back in due course.

Finally, I welcome the coalition Government’s focus on improving and widening participation. Funding provided by the Higher Education Funding Council has already enabled the Open University to attract 20 per cent of its newest students from the 25 per cent most disadvantaged communities. I hope that these priorities, and, indeed, the funding streams that support them, remain in place beyond 2012, as this work in delivering real results for individuals, universities and this country as a whole must continue.

My Lords, I remind noble Lords that this is a time-limited debate. When the clock hits six you have had your six minutes.

My Lords, we are dealing with a world where the giants of China and India are surging ahead. How will a tiny country like ours compete? I have built a business from scratch and I have always tried to focus on core competences and unique selling propositions. Even when I have nearly lost everything on three occasions, when you have had to cut costs to survive and adapt or die, the one thing you never cut is your core competence because that is what enables you to survive, grow and compete. One of the utmost core competences of the United Kingdom, the jewel in our crown, is our higher education system. As we have just heard, on any ranking we have four out of the top 10 universities in the world—after the United States we are No. 1—including Oxford and Cambridge. We have ancient universities and modern universities. I was chancellor of Thames Valley University for five years and proud of it. It is now the University of West London. At the other end of the spectrum, I hold four positions at Cambridge, my old university. We are to elect a new chancellor this weekend.

I thank the noble Lord, Lord Giddens, for initiating this debate. I agree with a lot of what he said and will reinforce it. This Government’s decision to cut public expenditure is absolutely right. It has been far too high, approaching 50 per cent of GDP.

It is cutting away at the Government’s call for us all to be in this together. The Government are using a broad-brush approach to cutting expenditure when they should be much more selective. Why did they have to cut university teaching funding by 80 per cent? Why, as a result, did they have to force student fees to increase nearly threefold to £9,000? The average fee is going to be £8,200. The Government’s higher education White Paper, Students at the Heart of the System and the review of my noble friend Lord Browne on higher education funding are all very well. My noble friend produced an excellent report, but he was conned. That report was used by the Government as a way of cutting higher education funding, as a result forcing the fees to go up by nearly three times.

There is a basic misunderstanding about the starting point, which is that we as a country spend between 1.2 per cent and 1.3 per cent of our GDP on higher education, while the United States spends 3 per cent. The OECD average is 1.5 per cent and within the United States, as we have heard, public spending is more than 1 per cent. So we should not have cut higher education spending, we should have maintained it, increasing and encouraging more funding from student fees, philanthropy and the private sector. That is what we have not done.

Universities generate £60 billion of revenue, £12.5 billion from foreign students. This is phenomenal. They employ 700,000 people, a workforce that benefits the whole country. It is wrong to say that the public who do not go to university should not pay for those who do go. Those who leave university benefit the whole country and its competitiveness. What the White Paper completely neglected was postgraduate studies, Masters and PhD research. The Government have frozen funding. They have not cut it, although they have done so in real terms. We spend 1.7 per cent of our GDP on research, while the United States spends 2.7 per cent. How can we compete and continue to punch above our weight when this is the situation?

Students will leave higher education with loans repayable over 30 years. It is a noose around their necks. Is this the way to encourage wider access? Is it not going to deter students going to university, particularly as we have heard, those from poor backgrounds? Also, what about the burden of these loans on the Exchequer? Many indications say that the taxpayer would have been better off by keeping funding for university teaching and not providing long-term loans, which are expensive.

We are letting down our universities and the Immigration Rules do not help. I sit on the advisory board of Cranfield School of Management, where I am an alumnus, and we have noticed a drop in foreign students, particularly those from India. Anecdotally we hear comments from students from India, asking: “Does Britain want us any more?”. Do we not want to attract the brightest and the best from the world? As the noble Lord, Lord Giddens, said, there is far more to it than the fees that foreign students bring in. There is also the soft power and the generational links. My grandfather came to university in this country. My mother did and so did I and that will carry on for generations to come.

What about philanthropy? At Cambridge, to celebrate our 800th anniversary, we raised £1 billion. That is what we can do. What about access? Thames Valley University has so many part-time students, and I am delighted that there is to be funding of part-time students. It is wonderful news and I congratulate the Government. The Open University has been doing great work in this area for years.

We are being penny wise and pound foolish, trying to save £2 billion in teaching funding when the cost of running the Department for Work and Pensions, whose expenditure is £200 billion a year, is also £2 billion. I was privileged to write the foreword to Big Ideas for the Future, published by Universities UK and Research Councils UK. This is a publication of more than 200 world-changing research initiatives coming out of our universities, in health, humanities, business, high-tech, energy, food and drink. These are transforming this country and the world. This is what our universities produce and they enable us to be the best in the world: in high value-added manufacturing, engineering, design and creativity. These are the things that put the “great” into Great Britain and come from the foundation of our universities. By cutting university funding and deterring access to universities, we are shooting ourselves in the foot.

What about this ivory-tower mentality of trying to create a market? Who are the Government trying to fool? What nonsense is this? We need a balanced education in humanities, science and the arts and in every way. If we are to provide a balanced higher education, we need a balanced economy and society.

We are tampering with something very precious and I urge the Government to reconsider what they have done, not just in the interests of our students, nor of our universities, but in the best interests of this country to enable us to compete in the future.

My Lords, I thank my noble friend Lord Giddens for initiating this important debate. I am delighted to follow the noble Lord, Lord Bilimoria. I agree, I think, with every word of his speech and I shall follow some of his themes. I have two non-remunerated interests to declare: I am an honorary fellow of my old college in Oxford and I am also a fellow of the University of Worcester, which in recent years has been Britain's fastest-growing university. There was an interval of 850 years in the start of teaching at these two universities, but each is an important member of the British higher education sector and both are being badly affected by government policies.

I can think of no other part of the United Kingdom economy where organisations are fined for being popular and successful. I wonder how many people realise that not only are the Government next year withdrawing 10,000 people from universities altogether and putting a further 20,000 into a competition, they will also fine universities £3,700 for each student they recruit over the so-called control number. That is despite the fact that more than 200,000 people were unsuccessful in securing a university place both last year and this year.

Quite apart from the distress and disappointment that this policy will cause for individual students and their families who had set their heart on a university career, this is an incredibly short-sighted policy for the British economy, particularly with unemployment for 18 to 24-year olds having reached almost 1 million. The CBI is predicting that by 2017, 56 per cent more jobs will require people to hold graduate-level qualifications, while the demand for people with no qualifications will fall by 12 per cent.

To say that the Government are sending mixed messages is a huge understatement. On the one hand they appear to be saying that student numbers can be switched on and off like a tap, according to national economic conditions at the time. On the other, they are telling parents and young people that a university education is such a great investment that it is worth taking on huge piles of debt to cover the tuition fees that, as the noble Lord, Lord Bilimoria, said, are nearly tripling to up to £9,000 from September next year.

The truth is that by investing in students and in universities, you are investing in the country's future. Fewer graduates are unemployed, compared to people without a degree, they are generally more productive, they are more likely to start new businesses, gain professional qualifications, and provide more employment for others and, over a lifetime, they will earn more and pay more tax.

The assertion that there are too many students and too many universities is nonsense. I get very angry when people talk about Mickey Mouse degrees from some of the newer universities. Let me give the House just one statistic from the University of Worcester, still a new university and, as I said, the country's fastest growing. Last year 93 per cent of its graduates went straight into jobs—putting Worcester ahead of its rather grander Russell group neighbours, Birmingham and Warwick. It has even done better in this regard than my own university of Oxford.

I will say a word about just two subjects, nursing and midwifery, although there are others I could mention. Before the general election, David Cameron promised to increase the number of midwives in England by 3,000. He described them as “overworked and demoralised”. The University of Worcester has a really successful nursing and midwifery school. The Nursing and Midwifery Council rated the university's provision as “good”, the best possible grade, in all five areas of its annual monitoring review, particularly noting that the university attracts excellent applicants to train in midwifery. The 30 per cent rise in applications in 2009-10 was followed by another 30 per cent rise in 2011. There are now 40 applicants per place for midwifery and more than 10 per place for nursing.

In partnership with the hospitals, trusts and healthcare providers, the University of Worcester is the only educator of midwives in Herefordshire and Worcestershire. The quality is excellent and it gives thousands of mothers and their babies the best possible professional help before, during and after childbirth. You would have thought that the authorities would wish to build on that success and provide for growth in the number of places, especially given the Prime Minister's pre-election promise and the call by the Royal College of Midwives for an additional 5,000 midwives to be trained. The college says that that is necessary because services are at breaking point and both the quality of care and the safety of mothers and babies are threatened.

What has happened? The number of midwifery places the university is commissioned to offer has been cut by the strategic health authority from 52 in 2009-10 to just 45 in 2010-11 and 47 in 2011-12. Nursery places were reduced by 40, from 228 in 2010-11 to 188 in 2011-12 and the same percentage cut of 17.5 per cent has been applied to nursing for all universities in the West Midlands. That makes no sense at all. Cutting university places is short-sighted and it is damaging the country's economic recovery. The cap on student numbers has to be removed and those universities that wish to plan for growth and can demonstrate that they are popular and successful must be allowed to grow.

My Lords, I thank the noble Lord, Lord Giddens, for introducing this very important debate on a hugely important subject. I declare an interest as the principal of Jesus College, Oxford.

As has already been said, the UK university sector is an outstanding success. In fact, it has been said that it is second to the United States. Actually, that is not quite right. If you correct for population size and investment—remember the United States invests 15 times as much as the United Kingdom in universities—we have three times the success rate, relative to investment, in the world’s top 20. If you go farther down the league table, the story is the same. In short, our top universities are not just globally outstanding, but, as a whole, our university sector offers unparalleled value for money—three times as much value for money as the American system.

Given that extraordinary success story, it might be thought that the Government’s attitude would be, “If it ain’t broke, don’t fix it”, but the university sector is being thrown into a period of unparalleled turmoil, change and challenge. Why is that? One motive, which has already been referred to, is to reduce the deficit in public expenditure by transferring costs from the public purse to the private purse. As has been pointed out in this House by the noble Baroness, Lady Sharp of Guildford, the supposed saving is purely an accounting trick to get costs off the balance sheet. There is no long-term saving to taxpayers. The second motive is to create a market—or supermarket, as the noble Lord, Lord Giddens, said—with students browsing as customers and universities responding by diversifying and improving their product range.

I happen to support greater diversity among higher education institutions, but is the market really a market? It turns out that many universities will charge the same £9,000 fee, so the market is not as diverse as the Government had hoped. At the same time, it is not a free market but a tightly regulated market, in terms of price, numbers and the distribution of the customer base. In short, the policy is a muddle.

As the noble Lord, Lord Giddens, has already mentioned, the arrangements will have unintended consequences. Let me give you an example. The Government have said that they are keen to encourage more students to study science, engineering and mathematics—the so-called STEM subjects—but do not forget that those degrees take four years to complete and, therefore, the new arrangements with £9,000 a year loans will very likely discourage people from studying them. As I have discovered in my own university, for those universities that charge £9,000, because of the way in which the HEFCE funding formula works and in spite of the premium of STEM subjects, there will be a shift away from funding STEM subjects towards the humanities. I would like to ask the Minister whether those consequences are regarded as positive benefits of the new arrangements for funding.

The White Paper, published earlier this year, is remarkably quiet about graduate students’ education. Another unintended consequence that I can envisage is that students, finishing their undergraduate degree in a STEM subject, with perhaps £45,000 worth of loan, will not be encouraged to go on and take a postgraduate degree, which is essential for many of the jobs that we need to fill in science, engineering and other technical subjects. Does the Minister agree that the new arrangements will have knock-on effects for postgraduate education? Can she explain, more generally, what the Government’s approach to postgraduate education is in light of the new arrangements?

I now want to turn briefly, as it has already been mentioned, to the subject of international students. I speak with a personal perspective here because my father was an immigrant to this country as an academic and went on to win a Nobel Prize. He also contributed hugely to UK scientific research. We have already heard that UK universities are significant contributors to exports—Universities UK estimates a figure of £5.3 billion in 2007-08. In my own university, Oxford, 32 per cent of the teaching staff, 47 per cent of the research staff and more than 52 per cent of graduate students are from outside the United Kingdom. Our fastest growth area is for graduate students from China and India. That mobile talent comes to the UK because of the outstanding reputation of our universities. Not only do they come here to be educated, but, when they go home, as the noble Lord, Lord Giddens, said, they exercise great influence in their own countries, which can lead to future trade links of immense benefit to this country.

However, the present immigration controls and settlement restrictions under consideration will do great harm to the competitiveness of our universities. Recent figures from the Russell group suggest drops of between 20 and 80 per cent in the numbers of applicants from Asian countries. Our competitors in other countries are absolutely delighted that we are shooting ourselves in both feet by making it harder for our great universities to attract overseas talent.

I close by quoting from the former Poet Laureate, John Masefield, who once said,

“There are few things more enduring than a University. Religions may be split into sect or heresy; dynasties may perish or be supplanted, but for century after century the University will continue, and the stream of life will pass through it, and the thinker and the seeker will be bound together in the undying cause of bringing thought into the world”.

I hope that the current Government will support, rather than destroy, these enduring institutions.

My Lords, I, too, am grateful to the noble Lord, Lord Giddens, for the opportunity to contribute to this important debate. First, I declare an interest as chancellor of the University of Bedfordshire.

Many noble Lords have already touched upon causes for concern about government policies and their impact on universities. I wish to concentrate on two particular aspects central to the White Paper published in June that worry me greatly. These are the proposal to fund through a “core and margin” model and the proposal to relax the criteria for degree-awarding powers and hence university title. We are told that the White Paper will create greater competition for university places and will enable more students to go to the university of their choice, but the reality is very different. The reality is that the distribution of funding for universities will be more closely aligned with the A-level results of students. Universities that ask for A-level grades of AAB will become better resourced than those that provide access for less advantaged students.

The Government are creating a higher education system that will reinforce existing social inequalities. Affluent school leavers from well-resourced schools have far better chances of gaining AAB grades than those from less advantaged backgrounds. The universities they will attend will also now be much better funded than others. Where is the Government's much vaunted goal of social mobility in this proposal?

The “core and margin” model will create a pool of 20,000 student places that only those higher education institutions that charge an average tuition fee of less than £7,500 will be allowed to compete for. This is intended to enable new providers to enter the higher education system and to stimulate competition. It is an approach that acknowledges the price of everything, but the value of nothing. This philosophy of “pile them high, sell them cheap” represents a race to the bottom. This policy will force universities that admit students with lower entry grades to reduce their fees below the level at which the Treasury decided the loans system should be funded. In effect, it cheapens and degrades the prospect of those students who are not fortunate enough to achieve high A-level grades. It provides a take-it-or-leave-it bargain basement. Again I ask: where is the Government’s goal of social mobility in these proposals?

My second cause for concern is that the Government propose to amend the criteria for degree-awarding powers. The White Paper contains a proposal to grant university title to organisations that provide no teaching or research. How can that be? Is it right, and in the long-term interest of our students and our society, to encourage providers that operate in the shareholder, rather than in the public, interest to access UK university title and taxpayer-backed investment?

Let me illustrate the point with my own university. The University of Bedfordshire has a board of governors, all of whom are unpaid, with many from FTSE 100 companies. Like other universities, we compete for UK students and trade internationally, backed by the global reputation associated with the standards and the quality which we must deliver under the current criteria for university title. We undertake near-market research and research that is acknowledged to be internationally excellent, and we promote a knowledge exchange with local businesses and international companies. Some 99 per cent of our students are from state schools; 35 per cent of our students are from black, Asian and minority ethnic groups; 43 per cent of our students are over 24 when they enter university; and 60 per cent of our students qualify for the full state maintenance grant, meaning that they come from families with incomes of less than £25,000 a year. The University of Bedfordshire contributes £300 million to the local economy and, beyond any monetary value, we contribute to aspiration and social cohesion. We do all of these things because we are run in the public interest.

I am not in favour of a closed shop. However, I am in favour of the UK retaining the current criteria for teaching and research degree-awarding powers, and I am utterly opposed to the reputation of the UK’s universities being irrevocably damaged by lowering the bar for degree-awarding powers.

My Lords, I, too, thank the noble Lord, Lord Giddens, for this debate. It is very timely, coming as it does 12 months after your Lordships debated the Browne proposals. When I spoke in last year’s debate, I said that the proposals of the noble Lord, Lord Browne, would be a further acceleration towards the privatisation of tertiary education. I said that, while it would not be my preference, it is perfectly rational to have a free, untrammelled market in higher education, or to maintain the “mixed economy” that has been the main operating principle followed by successive Governments during the last half of the 20th century. The worst of all worlds would be to have a largely privatised system subject to bouts of ministerial interference.

I predicted that the consequences of the Browne proposals would be the adoption of a spate of rationalisation and consolidation schemes in both top and bottom-tier HEIs. That is already happening: north of the border, Glasgow has announced the abolition of courses in Czech, Polish, German, Italian, Portuguese, Russian and Catalan, leaving only Spanish and French as the modern languages it offers. This was reported in the Independent on 24 April. In the Guardian of 3 May it was reported that London Metropolitan University, itself the product of a merger, intended to axe two-thirds of its courses, including history and philosophy. This is only the start of the latest round of closures; previous years witnessed the abolition of many chemistry departments and the total demise of any fully fledged nuclear engineering provision. The process will continue and gather pace in the coming years.

Leaving individual universities to decide what they do means that the overall pattern of English university provision will not be based on any coherent strategy. As I said by way of example, how many departments of palaeontology should there be? At least one, presumably, but that is by no means guaranteed in the current haphazard and fragmented state of decision-making. David Willetts claimed in the Guardian on 20 September last that his policy was in line with,

“all three major postwar reports”—

Robbins, Dearing and Browne. This is an absurd contention: the Robbins committee had a very wide remit to review the entire system across the UK, whereas the other two were much more circumscribed, being limited to financing and fees without regard to any other consequences. David Willetts was not comparing like with like.

Not that that is his only failing; there are many to choose from. First, he forecast that relatively few universities would charge the maximum permitted fee of £9,000, whereas a considerable number have already said that they will, including a number of second-tier ones. Secondly, he forecast that while a proportion of graduates—those earning very low salaries—would not have to repay their loan debts, there would be an overall saving to the taxpayer. Reversing the ratio of costs of higher education from 60 per cent public funding with 40 per cent private, to 40 per cent public funding with 60 per cent falling on the individual will not, it now appears, achieve the savings to the Exchequer originally predicted. Mr Willetts got his sums wrong. With average fees of £8,678 per annum, this will lead to a shortfall of £450 million by 2014, as reported in the Guardian of 21 April. A similar calculation came earlier from the Institute for Fiscal Studies. Will the Minister, in winding—I have given notice of this request—please state what the current DBIS estimates are of the savings that will accrue to the public purse by 2014 and will she provide the data that support such calculations? These are crucial statistics that must be updated and published on a regular basis. Furthermore, it is clear that large numbers of graduates will remain in debt for most of their working lives. Mr Willetts was accorded the sobriquet of “two brains” some years ago; a ratings agency might reasonably now reassess this assessment.

There are further problems. First, the rate of return on a first degree has declined. The lifetime earnings premium that went with a degree is now much less than it was. Secondly, the world recession has seriously reduced the prospect of graduates securing well paid careers. It is no wonder that many school leavers are questioning the value of going to university. A decline in HE participation rates is predicted by vice-chancellors and UCAS. Furthermore, today’s newspapers are reporting a significant decline in applications to FE colleges from 16 year-olds. The combination of these new factors will lead inevitably to many university closures, mergers or takeovers and certainly to massive reductions in course offerings across the board.

In response to the emerging chaos, Ministers have come up with a number of policy refinements, if that is not too grand a description of the series of knee-jerk reactions they have been forced to turn to. Ministers continue to assert that the new system of fees and loans will be more equitable than the existing one. The deputy leader of the Liberal Democrats, my right honourable friend Simon Hughes, was co-opted by the Government to improve access. He suggested 10,000 means-tested scholarships of £3,000 per annum to be allocated through schools to bright, disadvantaged pupils, but this will be but a mere sticking plaster. A government advertising programme to explain and promote the new system was also announced, but this and the Hughes proposals will not really tackle the problem. The stark fact is that the new fees/loans scheme is so complicated that it cannot be easily or simply explained and that makes it very bad politics, which further compounds the problems.

The Government need to undertake a thoroughgoing review, on the scale of Robbins, of their HE policies for England, or risk a decline, as many noble Lords have said, in the international reputation of our universities and the quality of the service they give to our citizens. There must also be a radical reordering of our policy priorities, in particular away from military adventurism, so that proper resources can be allocated to our university system. Within the coalition, the Liberal Democrats need to insist on these measures if they are to recover any credibility with the electorate on tuition fees and the costs that fall on individuals who undertake higher education. The chaotic system of English higher education must be addressed and remedial action taken.

I remind noble Lords that when the clock reaches six minutes—there are many academics here and I am sure that they can work this out—they have reached the end of their time. Otherwise, we risk not leaving enough time for the Minister to reply to noble Lords’ questions.

My Lords, I will bear that injunction in mind. It is a great pleasure to follow my noble friend Lord Smith. We first met when we were part of the thin red line of vice-chancellors about 15 years ago.

Higher education has been one of the great success stories of modern British history—and God knows there have not been very many. We have heard from the noble Lord, Lord Giddens, how this is demonstrated by the current standing of our universities. The THES table shows that one-third are in the world's top 200. That is three times better than Germany. There are a number of reasons why we have done so well. I am sure that the first is the existence of the block grant. This was a public funding commitment, financed by the Treasury. It gave universities a sense of stability and reassurance, which continued under the previous Labour Government. They introduced tuition fees, but as an addition to funding, not an alternative.

Secondly, universities could plan. They could adapt to changing circumstances. They enjoyed autonomy. The University Grants Committee, founded in 1919 by the greatest of all our Prime Ministers, operated at arm's length, which helped to ensure efficiency of management.

Thirdly, there is a very strong commitment to research excellence. The academic Research Assessment Exercise was overregulatory and had many weaknesses, but it ensured that university teachers kept research as an absolute priority. This has been reflected in our world ratings. One issue I will point out is that the result of ending the binary divide has meant that some of the newer universities have had the same research criteria applied to them that is applied to some of the older universities. I do not believe that to be fair.

The final advantage is a highly personalised teaching system. In my long experience of Oxford tutorials, my average class size was two. Often it was one. By happy chance, that one is sitting in front of me: my noble friend Lord Liddle. I am very honoured that he is there. This is very different from other countries in Europe. We have very much closer contact. I know from my wife's country, France, how remote and impersonal teaching is there.

All these assets are seriously disadvantaged and threatened. The block grant is being substantially replaced by a system of student-based funding, which is alarming and even catastrophic in the humanities and social sciences. No objective test has been applied to show why subjects such as history, the social sciences and foreign languages should be discriminated against in this way. It threatens a fundamental aspect of our universities.

Secondly, universities cannot plan with confidence. The effect of the new system of funding is that universities cannot be sure of the resources at their disposal, particularly when, contrary to ministerial forecasts, almost all are putting up fees to the top level of £9,000. There is deep uncertainty about university finances, though I say to the Minister that universities can also help themselves. The extraordinary stipends paid to vice-chancellors—far higher than anything I ever received—are a disgrace at a time of economic stringency.

There is a serious threat to graduate schools and research. We have heard about many factors, such as the problem of getting overseas students into our graduate schools. We are losing an essential component of universities.

Finally, teaching is being weakened. With cuts in funding, the teacher-pupil ratio is getting worse. I admit that this is not new under this Government; it was happening before. However, it is unfair to students and to some of the newer institutions that are less well financed.

Why is this happening? The noble Lord, Lord Giddens, explained the essence of it. In education, as in the National Health Service, the assumption is that you run a university as a business. You set up a report written by a businessman, and that is what you get. The assumption is that higher education is a market, students are consumers, universities should fulfil business needs and competition will drive up quality. All of these are fundamental misconceptions and not a sound way of determining what universities should teach, how they should mark degrees and the nature of those degrees. It will lead to tension between intellectual toughness and the soft option.

This is the wrong way to promote higher education. When other countries are increasing their funding, we are diminishing ours. Universities are seen as instruments of business and the market economy. It is a crude, philistine approach. We should revert to the policy of all parties—Liberal, Conservative and Labour—for most of the 20th century. We should see university education, as they did, as a public good and the basis of any civilised society.

My Lords, I, too, am very grateful to the noble Lord, Lord Giddens, for this opportunity to talk about universities. As all noble Lords have said, they are one of the country's greatest treasures. I have been lucky to spend almost all my working life as an academic, university chancellor, head of an Oxford college and, perhaps most precious of all to me, working with Lord Robbins and his committee to produce his great report. Together with the subsequent Dearing report, it gets to the essence of what universities are about. Of course, it was produced in 1963, when only 5 per cent of youngsters went to university. The committee daringly proposed raising that figure to 15 per cent by 1980. Now we are close to 50 per cent; we have mass higher education. To me, that is something of which to be proud rather than ashamed. It follows the American style, and other noble Lords have spoken about some of the implications.

Nothing can justify the spending review’s treatment of the universities. I wonder whether it has something to do with the fact that it did not come from the Department for Education, which is where higher education should be dealt with, along with everything from nursery schools upwards. That is an organisational point. The noble Lord, Lord Giddens, and other speakers—above all, the noble Lord, Lord Krebs—spoke well about what this means for universities, which are faced with turmoil and muddle from Government and from various reports. There is no doubt that standards are at risk. Some courses and universities will go to the wall, and standards may also face a downward slope from an international point of view.

What makes this doubly unacceptable is that the spending review's cuts came on top of an already underfunded system. It is not as if we were flush and therefore could face it. The noble Lord, Lord Bilimoria, gave us the figures. The essence is that we spend 1.3 per cent of GDP on higher education. The OECD average is 1.5 per cent. The United States spends 3 per cent. It is quite a different world, from which we have much to learn. It was a moment for being positive about universities, on which our future depends in so many ways—the economy, society and so on—rather than setting them on a downward slope. Since others have spoken so well about the finances and the implications and the disquiet that all this justifies, I will confine myself to a couple of other basic points. The first, already referred to by the noble Lord, Lord Morgan, is that within those cuts from the spending review, the priority of cuts—in other words, the negative side—has gone to teaching. Whatever the rest of us may think of the equality of teaching and research as university roles, the spending review authors thought differently. Research has been much more protected and I understand the reasons. I look to HEFCE—where else can one look to?—to ensure that this trend against teaching in universities is halted. It is a very dangerous trend.

Finally, my particular concern is for the humanities, the social sciences and the arts. These are not regarded by today’s leaders as of strategic importance. It may be that they do not earn as much money, and as easily, as the sciences and technology, which I am not going to argue against. Who would? But a lot of people sadly in high places are somewhat anti the humanities and the social sciences and the arts. From the point of view of a civilised country to which I was lucky enough to come many years ago, this is a dangerous trend and I look again at HEFCE to ensure that the humanities are protected.

I still look back—I am sentimental in that respect—to the Robbins days when everything depended on the UGC. I look to the future in which government intrudes much less than now and concerns itself much less with details. Obviously overall funding is a different matter. It is left to HEFCE to ensure that we have a first-class system, as we have now.

I declare an interest as the chancellor of the University of Leeds and another as a fellow of my old college. I join others in thanking my noble friend Lord Giddens for securing this debate, and for all that he has said on the economic side, and my noble friend Lord Krebs. There is nothing left to be said there really; the case has been made, so all my stuff for that has been scrawled out. I might make the six minutes.

The British universities, as the noble Lord, Lord Morgan, said, have been an extraordinary success since the last war, like the creative industries. They are the two greatest successes in this country, and we meddle with them at our peril. When so much else stagnates or sinks, their success must be supported. That is not being done at the moment. Apart from their academic success and the way they groom this society in the right civilised and cultured direction, they have been social engineers on the very highest scale. They took a 7 per cent intake not many decades ago and turned it into a 45 per cent intake, without breaking down, without disruptions, without strikes and without any of that sort of thing at all. They took it on board. In the process, in my view—from looking round and having something to do with universities—they enhanced the universities; they made the universities better. The great growth that has been talked about by the noble Lord, Lord Giddens, has come in the last two or three decades since that happened. This is down to dedicated academics and intelligent management. Moreover, in my experience of 10 years at Leeds, the universities foster well-educated, democratic, young, culturally literate citizens whose contribution to our society enriches it and who totally contradict the glib soundbites about a broken society.

In our near future, the knowledge industry and the creative industry could be just as crucial as manufacturing once was, but it needs to be attended to and not assailed as it is at the moment, so when universities complain in measured and temperate terms we should be careful to heed them. Here are a couple of points from the vice-chancellor of the University of Leeds, who is also the chairman of the Russell group. On visa changes, the Government have changed student visas—as has been said, but this is a specific instance—to remove the right of international students to work for a year or so after they graduate in the UK. At Leeds this has led to a fall already of 30 per cent in students from India, which was a great source for us in all sorts of ways: socially, culturally and economically. Apparently Indian banks are cutting student loans as post-study is no longer available. The estimated loss in revenue to us at the moment is £1.2 million and rising, quite apart from the loss of influence in national prestige and quite apart, as has been pointed out, from the interconnectedness between India and this country from those people coming here and from our students going over there. As has been said, that is a massive plus that we are jettisoning. I cannot see any sense in it, nor can anyone else I know who has anything to do with the university.

On the question of research, the Government have sought to protect research funding from the full force of the cuts, and for that they must be thanked. They maintain the level funding in cash terms. That sounds okay, but this flat cash is equivalent to a loss of 20 per cent in real terms over the life of this Parliament alone. It has been said—and it needs to be repeated, it seems—that countries such as France, Germany, America, not to mention China, are investing more and more in real terms in research and sciences because they know it works. They know that it delivers. They know that it delivers jobs, wealth and new opportunities. They know that it delivers the future. We are cutting back. We are supposed to be the clever country. We started all this a couple of hundred years ago. I cannot understand what we are about. We will fall behind—obviously we will. This is not good for the growth of the economy, or more generally for our international competitiveness.

We have to recognise that widening participation is a complex issue and we have to resist the tendency to blame the universities for a much wider social problem. The solution has to be compound. As well as effort from the universities, it requires improvements in secondary school performance, increasing student attainment, better advice and guidance for school students, particularly at the age when they choose their A-levels, as well as financial support for those 16 to 18 year-olds who really need it. We have a plan and a strategy at Leeds to encourage that in that neighbourhood of Yorkshire, which is proving to be quite successful. We are doing the same at Oxford.

The universities are essential to our future prosperity because of their ability to change, to invent, to reinvent, to engage the serious mind and to engage in those mind games that now dominate world commerce and world progress. Ideas rule and we have to be there, up with those rulers. There is a book of which I am a great admirer. It is written by the father of my noble friend Lord Evans. It is an early masterful work of oral history called Ask the Fellows Who Cut the Hay, and that is what it means. The fellows who cut the hay in the universities are the vice-chancellors, the professors, the lecturers, the researchers. In my experience, they are men and women, as we have heard, of great international distinction. They are public servants. They are not self-serving or alarmist. What they say has real merit. Your Lordships’ House will, I am sure, listen to them and pass it on. These things are far too important to be meddled with confusingly. They deserve close attention and scrutiny from us. The universities liberate our young people into a future that they deserve to have.

My Lords, I want to draw attention to the impact of government policy on the provision of modern language degrees, and I declare an interest as the chair of the All-Party Group on Modern Languages. There might at long last be a glimmer of hope that the Government have grasped just how detrimental it would be to allow the teaching and learning of foreign languages to disappear. I warmly welcome the announcement last month by the Foreign Secretary that the decline of language teaching in the Foreign Office would be reversed. As well as reopening the Foreign Office’s language centre and a 30 per cent increase in spending on language teaching, he announced an increase in the number of jobs overseas for which language skills will be an absolute requirement.

In the business world, too, language skills are increasingly required, but UK-educated graduates are finding themselves at a disadvantage in a global labour market alongside their peers from other countries where graduates are more likely to be able to work in two or three languages, including English. Over 70 per cent of UK employers say that they are not happy with the foreign language skills of our graduates and are being forced increasingly to recruit from overseas.

This year, only 1.5 per cent of the 51,000 applicants for EU jobs in Brussels were British, and the obvious explanation is that they simply do not possess the required working knowledge of a second language. The review of university funding carried out by the noble Lord, Lord Browne, concluded that languages should be a strategic priority for public investment. Yet the changes in the funding system threaten the survival of modern languages degrees at just the time when we need to safeguard and strengthen them. Several universities have already cut back or scrapped language courses, including the University of Westminster, which has scrapped its flagship MA in conference interpreting, which had been a key recruitment ground for the native English speakers sought after by the EU and the United Nations. There is a desperate shortage of native English speakers in these services, and I would like to know what support the Government can offer to British students who wish to train as interpreters and translators.

At undergraduate level, the funding problem relates partly to the fact that language degrees are four-year courses, including a year abroad. Without this year, the quality and value of a modern language degree would be severely undermined. My understanding is that the fee waiver to universities for students taking their year abroad will continue for students who started their course in 2011 or earlier, but that after that there is currently no fee compensation built into the plans. Will the Minister review this situation as a matter of urgency, with a view to reassuring universities and prospective students that the fee waiver for the year abroad will remain? Will she also confirm that the specialist PGCE course for language teachers will continue to include funded teaching practice in a foreign country?

Languages, along with the STEM subjects, are defined as strategically important and vulnerable and, as such, receive some additional support, for example through the funding of the routes into languages programmes and the language-based area studies programme. Will the Minister say whether this additional support will continue and how the Government intend to develop their support for languages, given their status as SIV subjects?

Finally, and despite the fact that the Minister is replying today as BIS Minister, I want to draw attention to the important impact that government policy on the school curriculum has on universities, and to ask the Minister whether she will undertake to speak with her colleagues in the Department for Education about the place of modern languages in the national curriculum. Universities cannot produce sufficient numbers of linguists unless schools are producing enough pupils with a language GCSE and A-level. Numbers here are in serious decline. The English bacc has boosted languages in year 9 to a very modest extent, but we will not see the level of improvement we need unless the Government reverse the current disastrous policy whereby languages after key stage 3 are optional.

Restoring modern languages to the core part of the national curriculum until the age of 16, which I hasten to add is not the same thing as forcing every child to do a GCSE in a language, is also important for social mobility because it is, of course, only in state schools that there is such a dramatic decline in modern languages. This is a very good example of how what goes on in schools has a significant impact on what goes on in universities. About a quarter of those applying to do language degrees are from independent schools compared with only about 9 per cent across all subjects. Can the Minister reassure me that she will set up early and focused discussions between her department and the DfE on the way in which language policies across the school and university sectors can be consistent and integrated?

My Lords, I, too, am grateful to my noble friend Lord Giddens for having given us the opportunity to have this important debate today. I have the good fortune to be involved in three very different universities: LSE, where I am active as a governor; Newcastle University, where I am a member of court; and De Montfort University, where I do a small amount of advisory work.

I, like others, find the Government’s policy sad and ill-judged. It is diminishing the concept and ideal of a university and, indeed, of education as an end in itself. It has huge implications for the future of the United Kingdom. What had come to be seen as an inspiring public good—my noble friend Lord Morgan referred to this—in which the nation as a whole could take pride is being ideologically changed into the concept of higher education being all about private benefit. Of course there is a balance to be struck, but that balance is now being heavily weighted in the direction of private benefit. More and more is measured by utilitarian, commercial considerations alone. As for the talk of markets and of students as customers, I find it vulgar. What of the aspiration of a university being a community of scholars?

There are contradictions in the policy of opening up a market by stimulating competition on AABs while at the same time stressing the importance of greater access. Of course we should all want more and more people to have the experience of university, but if we are genuine about this, that means that in our admissions policy we must look for potential that may not yet have had an equal opportunity to express itself in AAB terms. We should be looking for the future Einsteins trapped out there in relatively disadvantaged areas, but not just for Einsteins; we should be looking at the many who could make a powerful contribution to the future well-being of the UK if given the chance to develop intellectually. Many vice-chancellors are concerned that the number of students from disadvantaged areas will inevitably drop in the long run.

I am also concerned about perceived pressures, however much it is argued that there is no logical foundation for them, that lead students to pursue studies leading to a demonstrable and immediate material plus in the marketplace as distinct from the studies that they really want to undertake. This is part of shooting ourselves in the foot. A strong future for Britain will need not just scientific, technological, engineering and vocational skills, but intellectual originality, values and ethics and the perspective and wisdom of the humanities, without which all could repeatedly go terribly wrong. Our recent massive economic crisis is a good illustration of this. In any case, as we build material wealth, we surely know that a society worth living in will not be characterised by its quantity of wealth alone but also by its quality.

The Government’s approach to the funding of arts and humanities is myopic, demoralising and dangerous for our future. What has just been said about languages is another good example. The vindictive approach to the social sciences is totally irrational. Technological and scientific advance generates immense challenge in its social consequences and in the organisation of society. The social sciences deserve priority in funding.

Do we believe in informed, critical citizens as central to a global democracy or not? If we do, the quality and wider life of university are crucially important. By the same token, the policy towards university museums smacks of a short-sighted cheapness—“nasty” is a good way to describe it. We need to see ourselves in perspective, to appreciate the diversity of humanity, to understand from where we came and the context of where we are.

The other evening I saw a TV report on the Conservative Party conference in which the Minister, Mr Hammond, made an impassioned speech about the indispensability and imperative of infrastructure for our future. Exactly the same analysis applies to our universities with their world-leading research—indeed, they are part of that infrastructure. The Minister said that we cannot afford not to make infrastructure a priority. Against the price of Trident, for example, just why has the concept of free education at all levels including university disappeared from the radar screen?

I have one last plea: whatever the merits or demerits of all the activity that the present Secretary of State for Education likes to generate, can the Government please take next year to pause, take stock, and analyse the impact and consequences of their ill-chosen route? It is far too important to be left to ideological fundamentalism.

My Lords, I thank the noble Lord, Lord Giddens, for initiating this debate. However, I cannot share what I thought was the general pessimism of his contribution. I am the Chancellor of Teesside University and we have to make this new regime work. We cannot afford closures or failures. We have to keep widening access and raising aspirations because the people of our region have a right and a need to continue to grow and develop.

We should absolutely be focusing on ensuring that higher education is funded sustainably; that is, delivering a quality student experience and increasing social mobility. However, there are genuine concerns about mechanisms being proposed that could have very real consequences for universities such as Teesside that are playing the critical role that I have already mentioned. It is of concern to me, as it obviously is to my noble friend Lady Howells, that the “core plus margin” approach might have the unintended consequence of forcing many full-time students away from areas of need and the provision of their choice in high-demand, high-quality institutions, towards provision elsewhere.

We are all aware that there are many complex reasons why students choose the university they wish to go to, yet we are in danger of introducing mechanisms that will vastly restrict this choice through moving numbers to places where there is no evidence of demand. I am conscious of this point particularly in my own area, where Teesside University is the only independent higher education institution in the conurbation. A reallocation of 8 per cent of places leaves nowhere for those qualified students to study. I would add that in areas where moving home to go to university is not an option for many potential students, including many mature students and women returning to study, I worry deeply about this aspect of government policy.

In my Teesside area, we have an excellent further education sector in the context of a partnership with five excellent colleges. It is a partnership of exceptional strength and mutual respect, with a successful track record of providing ladders of opportunity to people across the community served by my university. It is a partnership in which my own university has invested significant sums in building higher education centres on the premises of all the five colleges, and my great concern is that, because of the average fee restrictions such partnerships could be undermined in respect of the founding universities, which have striven to create a genuinely rounded higher education experience in a purpose-built-environment but now will be unable to bid for additional full-time student numbers. I would like the Minister to look at that issue very carefully. I do not believe that that consequence is desired by Ministers, and it is certainly not desired by the principals of the colleges to which I have referred. I would welcome clarification in this regard.

Both Houses have given consent to the new funding regime but my own experience and that of my university is very much that prospective students, their parents and advisers do not yet fully understand that this being free at the point of entry, with enhanced student support and a progressive repayment regime, means that higher education should still be for all those who are qualified to enter. It is my fear therefore that student recruitment in 2012 might not be a realistic indication of the long-term recruitment pattern of a university. I strongly encourage Ministers to ask the HEFCE to maintain student number controls for 2013 at the level set for 2012 so that short-term shortfalls in student participation can be recovered without major and damaging turbulence in the higher education sector.

It is also my expectation that changes in support funding for full-time students will result in a step change in the take-up of part-time and distance learning study opportunities. I hope that the Minister will recognise that significant clarity is yet to be brought to the long-term funding that will support such a crucial part of our higher education landscape.

I want to emphasise that the continued success of universities such as Teesside University in areas of high unemployment is essential, not just for the education of young people and returning learners but also for the economy of the region. In the 10 years since I looked at education with any kind of a serious eye, it has changed dramatically, beyond my expectations. Middlesbrough was a steel town, a shipyard town and full of factories. Now, there are no factories left. In the middle of the town there is now a university, and it is to the university that people look not just for education but for employment.

As the university becomes successful, student numbers will grow and it will get a worldwide reputation. In 2010, it won the award for the best university in the country, against all comers, including, let me say, the Russell group. As it does that, it becomes a focal point for innovation, excellence and jobs growth. We must really understand the importance of these universities for the future. It is about higher education but also about something much more in terms of the economy, jobs and the future of the people who live and work in those regions. I hope that the Minister and her colleagues in the other place will take these things into careful consideration.

My Lords, I, too, thank the noble Lord, Lord Giddens, for securing this important debate. I declare my interests as a working professor at a Russell group university and an honorary fellow of Pembroke College, Cambridge. When my noble friend Lord Luce secured a debate on higher education in June 2008, it was before the collapse of Lehman Brothers and the onset of the serious world economic crisis, which is obviously still with us. Even at that date, it was clear that the relatively golden era of higher education financing was coming to an end.

In the early summer of 2008, Professor Geoff Crossick, chairman of the long-term strategy group of Universities UK, had already said that a much bumpier ride was on the horizon. He drew attention to the significant underlying demographic and financial trends that were already in play. Although that was true, we do not speak at the moment of crisis in the success of our higher education system. In figures for the past week in the Times Higher Education Supplement, there is no evidence of a decline in UK standings. We can see, for example, that the UK has almost three times as many universities in the top 200 as Germany; more than four times as many as Australia; and more than six times as many as Japan. All that is while spending only 1.2 per cent of GDP on higher education, which is less than the 1.5 per cent average across the OECD.

I had a private bet with myself that before I would speak today at least one noble Lord would make the comparison not with the countries that I have mentioned but with the United States. Indeed, my noble friend Lord Krebs made the point admirably that if you control for population and expenditure, there is a case for saying not that we are second to the United States but that we have a stronger system in higher education. People in the higher education sector want to make that point about America due to a perception of government policy. To use the words of the Minister, Mr David Willetts, in a brave letter in the London Review of Books earlier this year, it is a “crude caricature” that the Government’s approach to higher education is dominated by market fundamentalism plus an infatuation with the US. The fact is that that is how it is perceived within the higher education world.

To add a personal note, about a year ago, the Department for Education asked me to take on an independent review of a very controversial issue in our schools system—SATs testing. I was told that our teachers are very angry about SATs; that it is a very fraught topic; and that I would find it very hard. I accept that there was much tough debate. But my guess is that our university senior common rooms are probably angrier than I found our schoolteachers to be during that long year of reviewing policy in that area. Let there be no doubt that SATs testing was and is a very controversial issue among many teachers. There is a mood of exasperation in common rooms.

Perhaps I may offer some help to the Government in this matter. In this economic context, there is relatively little to be done. We face a serious crisis in higher education. However, there is a question of mode of address. On one area, which is not dominated by the economic question and has already been dealt with by the noble Lord, Lord Krebs—immigration of talent into our country and into our academic system—I have nothing to add to what he so eloquently said.

Let me take another issue: the research assessment exercise, now the REF. It is vital to the competitiveness of our system. The Government are quite right to have such a system in place. I know I speak on these Benches on which we have a number of distinguished philosophers, the impact of whose work is in the public domain. However, to ask, for example, certain branches of philosophy to deliver an impact assessment and to demonstrate a broader public impact is fundamentally unreasonable. What it leads to is meretricious behaviour, the puffing out of CVs and bogus claims by academics—all types of things that the Government quite rightly are very sceptical and critical of. These areas of policy are not determined by the economic crisis. Sensitivity to the particular position of academics would do a great deal to improve the quality of debate because frankly I am concerned about the quality of debate that is flowing between academe, universities and the Government at the present time.

I thank the noble Lord, Lord Giddens, for securing this debate and introducing it with the insight and wisdom that we have come to expect of him. When we discuss education policy, we need to ask ourselves by what criteria are we judging it. In the context of this country, two criteria are absolutely relevant. First, is the government policy likely to safeguard the high quality of our university education and research? As the noble Lord, Lord Krebs, has already reminded us, we are not just second in the international league, but, allowing for the all the variables, we might come top.

The second criterion that we need to take into account is whether the policy makes this high quality of education and research available to whoever is capable of benefiting from it and maximises the use of talent available in the country? These are the two criteria: does the policy maintain and safeguard the high quality of our education and research and does it make it available to all?

Noble Lords have so far concentrated by and large on the first. I want to concentrate on the second because it is in danger of getting neglected. Fifty per cent of the British population belong to a lower socio-economic background. However, they represent just 26 per cent of university students. Obviously, much work needs to be done at the school level. However, financial considerations also play an important part. If fees are to be paid—and fees are fairly high—they act as a deterrent. As well as introducing high fees, the Government are trying to support people from lower socio-economic backgrounds through the scheme of bursaries. A bursary in a Russell group university comes to something like £1,764. In a million+ universities, it comes to be about £714. These amounts are hardly enough to encourage people from lower socio-economic backgrounds to enter university. Either, therefore, they will not enter the university or they will have to do part-time work in order to maintain themselves, which would badly affect their academic achievement.

I am particularly worried about the national scholarship scheme. The Government have set aside £155 million for helping people from lower socio-economic backgrounds. The amount is too small. If the fees are £9,000 a year, the amount will only be able to maintain about 5,500 students. If the fees average at about £7,200, the £155 million would only take care of just under 7,000 students. Contrast this with the fact that last year alone 10,670 students were in receipt of free school meals. The amount of £155 million therefore is not good enough and at best can only guarantee a free first year. I am particularly worried about the impact of this on ethnic minorities, especially Afro-Caribbeans and Pakistanis, because by and large Indians are in a position to take care of themselves.

Huge sums of money have to be repaid as the fees range between £7,000 and £8,000 a year, which comes to around £25,000 for a three-year course. The hope of getting a job and earning around £25,000 a year in order to start repaying the loan is slim in a situation like ours. There is also a great danger that students from the Afro-Caribbean and Pakistani communities might stay away from courses of a longer duration, such as medicine and management. Unwittingly, we may create a situation of occupational apartheid, in that on certain courses you will not see a black face, a face from Pakistan or a Muslim face; that would be extremely dangerous. If we are really concerned to make education available to all and to create a genuine sense of community in our country, those from extremely disadvantaged backgrounds should not have to pay fees at all. If they do have to pay fees, the value of bursaries should be increased, on a rough calculation, to something like £475 million from the proposed £155 million.

As other noble Lords have pointed out, we must recognise that education is a public good. It benefits not only the individual, but also the community at large by raising the quality of life and its consequences in almost all spheres, including which newspapers you read and the television programmes you watch. It is also a prized good in the sense that those who are deprived of it build up resentment and anger, as we have seen from time to time in the kinds of turmoil that have taken place. If it is regarded as a public good and not just as an individual good, and if we see people not just as consumers but as citizens, the public contribution has to be much higher than is currently the case. In the mid-1990s the public contribution to higher education was in the vicinity of 40 per cent to 42 per cent. It began to go down and stands today at somewhere around 32 per cent. If the Government’s policy is carried out, we are told that by 2014-15, the teaching grant to universities will decrease by 60 per cent. That simply cannot be right. If we really value education as we should, the Government contribution must be better than it is.

My Lords, I, too, thank my noble friend Lord Giddens for introducing this debate. I declare an interest as the chair of the board of governors of Leeds Metropolitan University, and in a former existence I was Dean of the Business School at the University of Leeds, of which my noble friend Lord Bragg is the distinguished Chancellor. It is a pleasure to follow him today.

It seems that the Government have two objectives in their policy, one largely talked about in the debate—the fiscal objective, ensuring that students pay the full cost of their teaching at university, and the objective of increasing competition. It is not entirely clear whether the intention behind that is to drive down price or to improve quality. Before I go any further I shall say a word about Leeds Metropolitan University by way of background to one or two of my comments. It has some 27,000 students and almost 2,500 staff. It plays a major part in and makes a major contribution to the Yorkshire region, and of course complements the strengths of the University of Leeds, which also has a wide national and international reputation. The university is very important to the region and works closely with employers and industry, as well as with professional associations. It offers a vast range of professional and related degrees.

I sense from our discussions that we do not really know what is going to happen. The Government have increased fees by between 200 per cent and 300 per cent. We all have a view on what might happen, but chairing a board of governors is a bit like chairing the board of a company, and the truth is that we do not know; there is an awful lot of uncertainty. What I can say is that in the universities that I experience, people are getting on with the job. They are not feeling sorry for themselves. They are addressing the challenges and uncertainties and they are preparing for potentially very substantial change, but we do not know what the consequences will be. I will turn to one or two of those now.

I will touch only briefly on students from overseas and India because other noble Lords mentioned it but it is so important. The contribution of overseas students —India is a good example but there are others too—is important not only to our relationships abroad and our business relationships, but it is important to our UK students. It helps them to learn in an international, global environment. They learn an awful lot from international students. It is extremely important for the culture of undergraduate and postgraduate learning. I cannot emphasise how important it is. What assessments have the Government made to date—I realise that it is very early in the ball game—of the impact on Indian students’ entry to our universities this year? In the light of that assessment, if it does reveal a major fall, are the Government open to looking again at policy in that area?

On widening access, it is as plain as a pikestaff to anybody that if you almost triple the price it will affect demand. No matter how you dress it up, somewhere along the line people will pay more, whether now or later in life. The people affected will inevitably be those at the bottom end of the income scale and those from low-aspirational households. I will be delighted if that is not true, but good sense says that it is. I ask the Government again, if good sense turns out to be right, what do they intend to do about that? There is a great deal of hypocrisy about the widening access agenda. You almost triple fees and then you say that you want to widen access. There is a conflict in that and I hope that the Government are open to addressing that issue.

Then there is the question of competition and the introduction of the contestable margin of 20,000 students. Have the Government stated clearly what are the objectives of that policy? What are the measurable outcomes of those objectives so that we can assess whether introducing this contestable margin, the marketplace, is successful or not? If those objectives are not met, what is the Government’s intention? Will the contestable margin of 20,000 be stable for four years? As the energy policy shows, what business, universities and long-term institutions need is confidence in the framework of policy. What will happen to the contestable margin? Will it remain for the rest of this Parliament and can universities plan on that? Universities in operation are not sitting back feeling sorry for themselves, but they want the Government to be willing to address success or failure and to be willing to change policy if some of the worst fears are borne out.

My Lords, I add my thanks to my noble friend Lord Giddens for securing this debate, which has given us a long overdue opportunity to discuss the future of our universities. It has been an excellent debate, with expertise, history and passion, including, in the evocative words of my noble friend Lord Bragg, several thoughtful contributions from the men who “cut the hay”, who we are of course adjured to listen to very carefully.

In that context, it is very sad that we have not had the benefit of contributions from the Conservative Back Bench today. That is obviously a huge vote of confidence in the policies that they are pursuing.

My Lords, it is a reflection of what a hard time the Opposition have given us over the past three days and the general state of exhaustion on our Benches.

My heart bleeds.

In his contribution the noble Lord, Lord Krebs, quoted extensively from John Masefield. In fact he must have been reading my speech over my shoulder, because I was also going to quote John Masefield, although I was going to use a quotation that the noble Baroness, Lady Wilcox, gave about a year ago. There were additional lines from where the noble Lord ended up:

“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”.

The noble Baroness, Lady Wilcox, went on to say:

“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”.

She confirmed that the Government would,

“never lose sight of the wider purposes of higher education”.—[Official Report, 27/10/10; col. 1222.]

Given what has been said today in this debate, perhaps the Minister could confirm when she responds that this remains the position of Her Majesty’s Government.

What are our universities for? We know, first of all, that the recent report of the noble Lord, Lord Browne of Madingley, confirms that we currently have one of the best, and certainly one of the most cost-effective systems of higher education in the world. We can contest exactly where we are in the rankings but we are certainly near the top. As the noble Lord, Lord Bragg, said, like the cultural industries, this is one of the things that Britain does best and it is something that we should cherish. So the first question is whether the changes now being proposed will assist us to retain and improve our higher education system. It is hard to believe, as the noble Lord, Lord Morgan, reminded us, that the decision to cut the block grant, to cut science funding by 10 per cent in real terms over this CSR period, to curtail overseas student visas and to make university fees three times more expensive is indeed the right way to build on the presently successful system. Indeed, it may get worse.

As my noble friend Lady Howells of St Davids said, the Government’s proposals will undoubtedly create three categories of degree-awarding institutions: an elite group, with almost all their students in the high-achieving category, defined as AAB or better, which will charge headline fees of £9,000 and will be allowed to grow; a large number of perceived second-rank institutions, which will charge £7,500 in order to be eligible to bid for those students that they lose to a pool through the “core and margin” reduction mechanism; and, as the noble Lord, Lord Smith of Clifton, predicted, a third group of private degree-awarding institutions, FE colleges and others, which will bid at very low fee levels to the pool, but which will have to provide a lot more for less if they are going to survive as universities. The experiences that the third group offer, including shorter programmes and minimal contact time, will not begin to match the experience offered at the other two groups.

If that turns out to be the long-term position, I have grave doubts about whether it will build on where we are today. The Russell Group universities—though not all of them—will prosper, but these changes clearly threaten the coverage, resilience, capacity and effectiveness of the sector. Like the noble Lord, Lord Krebs, I do not see a growth in the overall contribution that science and technology needs to make to our economy; and it will surely reduce the capacity to civilise our society that several noble Lords mentioned. We cannot rule out some closures of good and long-established institutions, with all that that implies. This strategy could destabilise the higher education sector and damage quality.

Related to this point, several noble Lords have mentioned postgraduate courses, a matter unaccountably omitted from the Browne review and the White Paper. It is of course inevitable that the postgraduate landscape will shift significantly as a result of the withdrawal of most central funding without any compensatory student loan support, and, as the noble Lord, Lord Krebs, said, because of the heavy indebtedness of future undergraduates. The changes in the visa system referred to by the noble Baroness, Lady Brinton, are also affecting the flow of potential overseas postgraduate students, with a knock-on adverse effect on teaching on undergraduate courses. Urgent work is now needed to develop a response to these pressures, and perhaps the Minister could respond on this point.

My second point is whether the new voucher scheme, which underpins the assertion that students will be at the heart of the system, will deliver a better and more cost-effective system going forward. It may well be that putting the student at the heart of the system—with good information, allowing them to make a rational decisions on what course they want to follow—could create a market in undergraduate course provision, and hence improve standards of teaching. The noble Lords, Lord Giddens, Lord Bilimoria, Lord Morgan and Lord Judd, have rather demolished that canard. Even so, it seems to be based on a wrong premise. According to the supporting analysis provided by BIS, high entry qualifications is one of the two key indicators that many universities try to maximise. High entry qualifications enhance an institution’s reputation, which further attracts entrants with high entry qualifications. The result is a large degree of rigidity in the ranking of universities by reputation and prestige. This in turn creates a large number of small markets, with products defined by entry qualifications and subjects, so that each institution or department is effectively in competition with a very small number of others. It is this product differentiation that restricts competition. Most students, after all, will make only one purchase and will not be able to compare different providers directly, and even an improved information system will not entirely compensate for this. In any case, how are prospective students going to get better informed so that, in the words of the White Paper, they will drive teaching excellence,

“by taking their custom to the places offering good value for money”?

This is cod market orthodoxy. But nevertheless, the more students know about what to expect, the better prepared they ought to be.

However, despite appearing to recognise the importance of accurate and meaningful information, the Government proposals do not provide this. The BIS impact assessment says:

“The Government does not have the resources to develop commercial standard information tools (such as consumer price comparison websites) .... so our long-term strategy is to ensure that relevant student data is made available to third party providers, so that they can turn the raw data into meaningful information, innovatively presented”.

Don’t you just love that “innovatively presented”?

Perhaps we can persuade the Government to think again on this point. I cannot see that British analogues of what is already on the market will take the trick here. Take, for example, the US-produced ratemyprofessors, a website which boasts that it has 10 million student comments, and no doubt a huge hit list. Promoted,

“as a fun way to choose the best courses and professors”,

it includes ratings of a professor’s appearance as “hot” or “not”, and ratings of “easiness”—said to be useful for finding a module which will not involve hard work. David Mease, of San Jose State University, currently tops the list with a 4.8 score out of 5 and, you might not be surprised to know, a chilli pepper for “hotness”. There is no photo so I cannot enlighten the House further, but you get the message. For completeness, Brigham Young University, with an average professor score of 3.62 out of 5, tops the college lists. Surely this is not the way to go.

My third point, which has been widely raised already in the debate, is about social mobility. The new methods of allocating resources and controlling student numbers look likely to reinforce relative disadvantage rather than remove it. The removal of the need to pay fees up front for both full and part-time courses, the provision of maintenance loans, and the bursaries and scholarships that may be available to students from low-income backgrounds, should make participation in higher education a more attractive proposition—I accept that. On the other hand, and crucially, we simply do not know whether, and to what extent, the likely assumption of increased debt will reduce participation in general, and by those from low-income backgrounds, women and ethnic minorities in particular. As my noble friend Lady Howells said, the effect of the “core and margin” system will be very likely to create a race to the bottom, bringing in third-tier institutions that are much less attractive to students, which is where many students from disadvantaged backgrounds will end up, because, as we have heard, they are less likely to have good qualifications and will be obliged to accept a place at a third-tier institution; or if they are unwilling to do that, will miss out on higher education completely.

The impact of Government policies is making the future of our universities very uncertain. As we have heard in this high-quality debate today, the restructuring of university funding, which passes the state’s contribution largely on to the student, undermines the compact between student, state and employers that has long been the basis for our university system.

Universities are not an extension of school or, as my noble friend Lord Giddens said, utilitarian providers for people to receive training in the limited range of disciplines for the workplace. They have other noble missions which, to our mind, requires that the state ought to be a major stakeholder in higher education, not merely a provider of off balance-sheet loans at penal rates of interest.

Whereas the Government’s early rhetoric, and clear ideological preference, was to rely on market forces and students exercising choice to create competition that would hold down fees, these aspirations have had to be emasculated in favour of a much more direct control over the level of fees that are charged. The result is not a proper market but even heavier-handed state control, effectively controlling how much the majority of universities can charge and how many students they can take.

I predict that there will be chaos and confusion as universities have to make up their minds about how to play the game without knowing the rules. Will the Government keep cutting their core? What further changes will they make to the AAB regime? The arrangements they have introduced, removing a large group and a growing number of students each year from the majority of institutions, is hugely destabilising. They clearly have no regard for the health of a vital component of our public realm.

From what has been said in this debate today it is hard not to feel that we are at the brink of a major experiment in social policy. As my noble friend Lord Judd said, so much of what is being proposed is untested and the impacts unknowable and the costs of what is being proposed are still in dispute. Like the health service, a major reform is being pushed through with very little understanding of the impact it will have on individuals, institutions, intergenerational relationships and society as a whole.

In closing, I make a rather unusual suggestion to my noble friend Lord Giddens. This debate has succeeded in covering the ground in this policy area, and it has also revealed a large number of flaws in the arguments that have been made. I know that part of the process in these debates is to withdraw the Motion, but the second part of the Motion also says that it is moving for papers. It would be jolly interesting to see the papers supporting these policy initiatives. I therefore suggest that he might leave the Motion in place.

My Lords, I am grateful to the noble Lord, Lord Giddens, for giving this House the opportunity to discuss higher education once again. I feel quite a sense of trepidation, being surrounded by so many learned and well versed noble Lords. Clearly, the contributions that we have heard today from our colleagues, and the universities where they serve, serve this House incredibly well.

The first thing that I emphasise is that the Government value the autonomy and excellence of all our higher education sector. Allow me to quote my right honourable friend the Minister for Universities from last week. He said that universities were,

“amongst our greatest national assets”,

and said how we value how they change people’s lives. He went on to say:

“Our universities must always have space for the free spirit, the eccentric, the blue skies researcher … Without that our national life, however prosperous, would be grey and diminished”.

Universities are not just places of teaching and learning. I agree completely with the noble Lord, Lord Giddens. They are world leaders in innovation and research. Their breakthroughs regularly dominate the news. You may have seen the recent announcement on Beneforte broccoli, where research funded by the Government’s Biotechnology and Biological Sciences Research Council has led to the development of a highly commercial food product that will be both grown and sold in the UK. It will give a real boost to our agriculture, our personal health and, of course, the economy. Then there is graphene, the world’s toughest and thinnest substance, which was developed at Manchester University. To help to capitalise on its discovery, the Government announced earlier this month an investment of £50 million to develop a graphene global research and technology hub to translate this discovery into wealth and job creation for the UK.

Such achievements are vital to the reputation of our universities and the investment that they attract. Indeed, they represent a key export sector, worth around £8 billion, which lures business to the UK as well as the world’s most gifted researchers. According to the most recent international rankings, only the United States has more universities in the top 200, as has already been mentioned, but the UK has a greater impact relative to its investment. For all these reasons, the Government could not allow the financial crisis and the urgency of reducing the deficit to imperil these essential institutions. That is why we are introducing a different funding system.

The universities that we have today are teaching more than 2.4 million students, a substantial increase over the 171,000 students of 1962. From the next academic year, funding and more of it will flow into universities according to the choices made by students. Universities can go a long way to maintaining their incomes, provided that they remain attractive to prospective students—a point to which I shall return in a moment. Some talk as if the shift to student fees and loans will mean a loss of Exchequer support for our universities and, indeed, for beloved subject areas, but that is wrong. Even after 2012, the contribution from the taxpayer to the higher education sector will be very substantial. For one thing, it will cover the upfront fees for the vast majority of domestic students, as well as providing grants and loans. We are looking at around £6.5 billion in tuition loans on top of the £2 billion of remaining teaching grant going to subjects that are costly to deliver. We estimate that the cash going to universities in grants and fee loans combined could be 10 per cent higher by 2014-15 than it is now. We can afford this only because we will get a lot of it back, eventually, from higher paid graduates who will repay their loans.

In addition, the Government will spend £4.6 billion on research programmes every year until 2015 within a ring-fenced budget. We will spend over £600 million on capital for research in 2011-12. Shortly, we will also publish an innovation and research strategy to ensure that we maintain and strengthen our position as one of the most forward-thinking countries in the world. The strategy will set out how the UK can build on its existing strengths to become the most productive research base, globally, and high levels of investment in intangible assets to underpin sustainable private sector-led economic growth.

I return to the teaching mission of colleges and universities, which is sometimes overshadowed by the national interest in research. As we ask students to invest more in their personal futures, universities must focus even harder on the quality of the educational experience that they provide. The Government are introducing reform so that students can select the best institution for them from a sector which offers a greater range of provision, in which institutions are competing for applicants on both quality and cost. It will be vibrant, efficient and responsive—a sector with students at its heart. We want university to be available to the brightest, including those who can demonstrate that they have the potential to succeed. It has always been the case that not every applicant can secure a place. Going to university must remain a competitive process, with institutions retaining their autonomy and continuing to decide who they admit.

At the same time, the Government will always have to control the amount of public funding spent on higher education. In the past, they have done this by restricting the numbers of students each university can recruit annually. This has meant that there are lots of students every year who achieve the highest grades but cannot secure a place at the university of their choice. We want to change that, while ensuring that the overall cost to the public purse remains affordable. For university entry in autumn 2012, institutions will be able to recruit as many students as they can with the AAB grades or better at A-level, or the equivalent in other exams. This will allow more high-achieving students to attend the institution of their choice, and will allow institutions which can attract more of those students to expand. It will not prevent students with lower grades or alternative qualifications getting a place at university. This is simply the first step in freeing up student number controls.

Alongside this, we plan to create a flexible margin of 20,000 places in 2012-13, which will enable FE colleges and other providers to combine good quality with value for money. We know that there are providers which can offer a good learning experience for less than £7,500, and this will offer a wider choice for students.

Before concluding, I turn to some of the points that have been raised by noble Lords. I am mindful of the time, so if I curtail this I will write to noble Lords to whom I have not managed to respond.

In response to the opening remarks of the noble Lord, Lord Giddens, I agree that some things are yet to be seen through, reviewed and monitored. However, I dispute his point that the universities are becoming marketplaces for the sake of marketplaces. We are trying to ensure that, at long last, students have greater opportunity and choice in the sort of subject matters that higher education institutions are able to produce, and to enable those who have never thought of going into higher education to see it as a conduit to going in with those choices, knowing that their loans and student fees will be paid up front. The noble Lord failed to accept this in his speech. He is stuck with the concept that he has over the years. I am not trying to downgrade the noble Lord’s point. I am just trying to say that the world has moved on. The way in which institutions respond must also be more responsive.

My noble friend Lady Brinton reminded me and the House that I will arrange for her to meet my right honourable friend David Willetts to discuss the repayment of loans and fees for part-time students. I extend that invitation to noble Lords who have taken part in the debate today. My right honourable friend is very happy to meet people to discuss part-time students’ repayments.

A number of noble Lords mentioned social mobility. I accept that social mobility has stalled, as I know do most noble Lords. It had also stalled over the 12 to 13 years that the previous Government were in place. That is why we have to introduce this important programme of widening participation. We want to ensure that everybody is able to benefit from the great lifetime benefits that graduates can enjoy once they have participated in further education. The participation rate of disadvantaged young people at institutions requiring higher entry tariffs has remained almost flat over recent years. We need to see progress on fair access, especially at our most selective institutions. That is why the Government have introduced a new framework which places increased responsibility on universities to widen participation. It is extremely important to ensure that no person who has the ability and the potential should be deterred from going to university simply because they feel that they would not be able to afford it. The Office for Fair Access will be strengthened. Annual access agreements have been put in place and there will be tougher sanctions on universities that fail to meet the access targets that they have agreed with OFFA. From the first round of new access agreements for 2012-13, OFFA estimates that by 2015-16 universities will be spending around £600 million on supporting fair access and widening participation.

Noble Lords spoke about overseas lecturers and overseas students. My officials and I are working very closely with the Home Office and the UK Border Agency to ensure that the needs of both the public and private education sectors are fully articulated and their interests are properly represented in all immigration policy-making decisions. We have made good progress on tackling the hurdles that institutions can face in bringing foreign academics over as guest lecturers and external examiners by expanding the terms of the tier 5 government-authorised exchange scheme. We have had success in raising the status of scientists and researchers, many of whom will take jobs in universities. Exceptional academics can apply via the new tier 1 exceptional talent route—a route that takes account of the expert views of the national academies. Ministers will continue to work with the UK Border Agency and with universities on removing obstacles to the essential business of the global intellectual exchange.

The noble Lord, Lord Faulkner, asked about the numbers of midwives and nursing graduates. This is an issue for the Department of Health but I will take it back to that department for him.

Noble Lords talked about postgraduate study. We will continue to monitor the impact of our student finance reforms on postgraduate studies. In cash terms, HEFC is maintaining its research degree programme supervision funding, which will support the next generation of researchers, at £205 million for 2011-12. HEFC has recently consulted on its proposals for reforming the allocation method for postgraduate research funding from 2012-13 and aims to publish its response by the end of 2011.

A number of noble Lords, including the noble Baroness, Lady Coussins, spoke about modern languages. I will take back to my right honourable friend the Secretary of State her concerns about languages in schools. However, I can tell her that since 2005 in higher education modern foreign languages have been classified as strategically important and vulnerable subjects, which means that via the Higher Education Funding Council the Government have provided additional support to ensure the continued availability of language places. The European Commission’s Erasmus programme and fee waiver provided by HEFC will continue for 2012-13 but we are working on options beyond that. That discussion is still going on and if I hear any further progress I shall inform the noble Baroness.

Noble Lords mentioned the impact on ethnic minority groups and here the Government have a good story to tell. There is a higher proportion of students from minority ethnic communities going into higher education than is represented in the working population. Research indicates that coming from a minority ethnic group seems to have a positive impact on a young person’s aspiration to enter higher education, even compared with those with the same prior attainment. Minority ethnic young people are also more likely to enter higher education than their white peers.

BIS undertook an equality impact assessment of the higher education funding reforms and changes to student finance in November 2010. The overall assessment was that the proposals would not have an adverse effect on minority ethnic groups. Another finding was that we expected the changes to the maintenance packages to benefit those in low-income households. Therefore people from minority ethnic backgrounds were more likely to benefit from the more generous packages that we were proposing.

As for how much students will pay and access agreements, the Government have already agreed a £6,000 threshold from 2012, but we have also insisted that institutions do more to promote fair access and widen participation. Those universities wishing to charge up to the maximum threshold of £9,000 will have to work under some stringent and strict frameworks and ensure that they are doing everything possible not to exclude people from poorer backgrounds. We know that OFFA is going to be rigorous in ensuring that this happens, but the Government, as always, will monitor the outcomes and respond if we feel that progress is not being made.

I know there is some concern about arts and humanities. Humanities and social sciences are, in some cases, losing their teaching grant, but funding will flow into arts and humanities courses via student tuition fees and the Government-subsidised student loan. So even when there will be no teaching grant for a discipline, it does not mean that there will be no Exchequer contribution. There are some disciplines that are officially recognised as strategically important and vulnerable and HEFCE is consulting on how the remaining teaching grant should be allocated. We will present final proposals for this in autumn 2012-13.

I would like to congratulate the noble Lord, Lord Sawyer, on his university being awarded the university of the year title for 2010. I will read carefully the questions that he put to me, but I absolutely agree with him that universities change the shape the cultures of communities, and Teesside has shown that. It is a good model for universities to look at when they feel they are under threat. Teesside has changed to meet the evolving needs of the student population, but also that of the community of Teesside.

I say to the noble Lord, Lord Bew, that I am new to this department, so in some of my responses I might need to beg the patience of the House in taking away some of his questions. However, I agree that rigid equality assessments are needed and if they have been done, I will make sure that the information is passed through to the noble Lord. If they have not, I will make sure that I relay the question to my right honourable friend.

The noble Baroness, Lady Howells, asked about degree-awarding powers and university titles. The White Paper said that we would review the use of the title “university” so there are no barriers to smaller institutions being classified as a university. The White Paper also undertook to decouple degree-awarding powers from teaching in order to facilitate externally assessed degrees by non-teaching bodies. These proposals are currently being consulted on via a new fit-for-purpose regulatory framework for the higher education sector which will be due to close on 27 October. We will then consider the responses.

I say to my noble friend Lord Smith of Clifton that the Government will still achieve savings of £36 billion by 2014-15 from the HE budget to contribute to lowering the deficit. The long-term cost to Government of student loans depends on the average amount borrowed by students rather than the fees charged, and additional contributions by graduates who benefit from higher education will result in a long-term saving to the Government.

I have run out of time. I have several responses to get through, but I would like to finish with my conclusion, so I shall read Hansard and respond in writing to the points that I have not answered. Although our reforms are often presented in the context of serious financial challenges, they nevertheless represent a significant opportunity—the opportunity for the student to have a stronger voice. Over the years, universities have had such strong incentives to focus on research that we believe that the role of teaching has been undervalued. That has got to change. Putting financial power in the hands of students will help to put them at the heart of the system. I am sure that no one would disagree with that. It is our ambition to lift the burden of centrally imposed bureaucracy on the higher education system. Freeing up student numbers, for example, will give institutions more flexibility. We are also looking at other ways of removing impositions over time.

This has been a really important debate. Your Lordships have brought real wisdom, expertise and, of course, challenges to the discussion. That is right and necessary. I did not go to university because I was not allowed to. I have fought a lifetime to ensure that those who want to and are able to should be able to go. I hope that we will have constructive discussions in the future so that no one has to be in my position, where culture and not potential stops someone going to university. I thank the noble Lord, Lord Giddens, for this debate.

My Lords, I thank all noble Lords who have participated in this debate. It has been of a level commensurate with the distinguished nature of contributors. I ask the Government to think seriously about their policies on universities, which, in my view, will be seriously damaging and counterproductive for our society as a whole. I beg leave to withdraw the Motion.

Motion withdrawn.